Financial Planning

Individual Retirement Accounts (IRAs) are a great way to save for retirement and accumulate wealth. However, when it comes to preserving your legacy and passing on your wealth to future generations the way you wish, there are options to consider.

Both a Traditional IRA and a Trusteed IRA are personal savings tools to help you save for retirement. A Trusteed IRA is different from a traditional IRA in that it incorporates estate planning components. This way, you can have greater control over the distribution of your wealth, even after you’ve passed.

A Trusteed IRA names a trustee to manage your assets for your beneficiaries, while with a traditional IRA you name the beneficiaries who can receive the assets outright. With a traditional IRA, beneficiaries can choose to name their own beneficiaries for those assets, which may not have been what the IRA owner wanted. This gives traditional IRA beneficiaries more control over IRA assets passed on to them but it may not be in line with IRA owner’s intentions or wishes. Likewise, traditional IRA beneficiaries can choose to withdraw any amount from the IRA and spend down the money quickly. With a Trusteed IRA, you can maintain control even after you’ve passed away, ensuring that your loved ones can receive regular distributions and also name how, when, and to whom you would like your IRA assets to be distributed.

Additionally, there are Required Minimum Distributions (RMDs) that must be taken out yearly after reaching the age of 70 ½, which have severe penalties if they are missed. With a traditional IRA, it is the IRA owner’s responsibility to ensure that yearly RMDs are withdrawn. With a Trusteed IRA, the trustee ensures annual RMD requirements are met, even without direction from the IRA owner.

A Trusteed IRA also protects in times of incapacity. In the event that the Trusteed IRA owner becomes incapacitated, the trustee assures the continuity of proper IRA administration. With a traditional IRA, there are additional legal hurdles one must go through in order to ensure RMDs are met if the traditional IRA owner becomes incapacitated.

Overall, one IRA option isn’t necessarily better over the other, but there are different types of IRAs to suit your retirement savings and planning needs.

Consult with an attorney or a tax or financial advisor regarding your specific legal, tax, estate planning, or financial situation.

Manning & Napier provides investment advisory services to Exeter Trust Company (ETC), Trustee of the Manning & Napier Trusteed IRA.