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New 401(k) rule may help estate planning

As individuals approach retirement age, conversations about estate planning necessarily include a projection of retirement expenses. In a recent post, we noted that defined contribution plans, like 401(k) plans, might not encourage long-term projections because they result in a lump sum accumulation.

Fortunately, a new rule by the Internal Revenue Service may make planning a little easier. Specifically, the IRS recently issued Notice 2014-66, which expressly authorizes employers to include annuities within a common 401(k) investment called a target-date fund for certain employees. 

An income annuity can operate to provide a guaranteed payment amount for life. For many retirees concerned about exhausting their savings, an income annuity can provide additional security. In addition, that locked-in income can also allow retirees to estimate the size of the estate that they might leave to their heirs. 

Regardless of an estate’s size, every individual can benefit from drawing up an estate plan. Even for an average household, there can be a variety of asset types, including equities, retirement accounts, real estate, insurance policies and personal property. Furthermore, each asset type may require special considerations. Although retirement accounts may name specific beneficiaries, other assets may require an heir to be specifically named.

As this story suggests, financial planning is a practical part of any estate planning. Before an individual can plan inheritances, he or she needs to protect assets needed during retirement. Our firm focuses on estate-planning tools, including various types of wills and trusts. Our expertise can help you navigate the wealth of choices available.

Related post: “Ways retirement spending might impact estate planning,” Oct. 10, 2014

Source: Market Watch, “IRS 401(k) ruling aims to boost retirement income,” Anne Tergesen, Oct. 29, 2014



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