Creative LTC Planning:  Maximizing Required Minimum Distributions

While 10,000 Americans continue to turn 65 year old every day, we also have 10,000 Americans turning age 70 ½  every day.  This is important because once someone reaches 70 ½ years of age and he/she MUST begin withdrawing money from their IRAs and/or other pretax qualified plans?   This is known as Required Minimum Distributions (RMD) and can significantly impact your clients and their retirement income plans. 

Those who fail to withdraw their RMD by the deadline will get hit with one of the largest penalties in the entire tax code: 50%!!   For example, if your client doesn't take their calculated $10,000 RMD, they will be required to pay a tax penalty of $5,000.  Add it up and your clients need to plan for eventual RMDs, as the cost for not taking one could become very expensive. 

Something else that could be expensive, and should also be addressed by planning, is the potential need for Long-Term Care (LTC).  Thus, an effective way to implement a LTC plan may be making efficient use of retirement plan dollars and RMDs.   

It's important to recognize that advisors would be wise to broaden their understanding of the various concepts surrounding the planning required with this approach.