WRITTEN BY JOHN N. KALIL JR., LUTCF

All investing involves risk, including the possible loss of principal, and there can be no assurance that any investment strategy will be successful.

Investments offering the potential for higher rates of return also involve higher risk.

Because employer-sponsored retirement savings plans benefit from tax deferral and are designated for retirement, certain rules apply. Distributions of tax-deferred contributions and earnings prior to age 59ó (55, or even 50, in some cases) will be subject to a 10% penalty tax, in addition to regular income taxes, unless an exception applies. Due to the Coronavirus Aid, Relief, and Economic Security (CARES) Act, penalty-free withdrawals of up to $100,000 may be allowed in 2020 for qualified individuals affected by COVID-19. Individuals will be able to spread the associated income over three years for income tax purposes and will have up to three years to reinvest withdrawn amounts.

Asset allocation and diversification do not guarantee a profit or protect against investment loss. They are methods used to help manage investment risk.

When investing for retirement, you're likely to hear a lot of well-meaning guidance from family, friends, and others offering advice — even the media. As you weigh the potential benefits of any commonly cited investment rules, consider that most are designed for the average situation, which means they may be wrong as often as they're right. Although such guidance is usually based on sound principles and may indeed be a good starting point, be sure to think carefully about your own personal situation before taking any tips at face value.

Following are several general retirement investing rules and related points to consider.

Pay yourself first

It's hard to argue with this conventional wisdom, which helps make saving a habit. To determine how much you may be able to save and invest, develop a written budget. In this way, you can assess how much discretionary income is available after other necessary obligations are met. If finding extra money to save is difficult, track every dollar you spend for a week or two to see where your money goes. You may surprise yourself by identifying several areas where you can cut spending. Better yet, most employer-sponsored retirement savings plans help you pay yourself first through payroll deductions. This is perhaps the easiest way to save money. Having the money automatically deducted from your paycheck and invested in your plan eliminates the temptation to spend before you save.

Your stock allocation should equal 100 (or 120) minus your age

A widely accepted retirement savings principle states that the younger you are, the more money you should put in stocks. Though past performance is no guarantee of future results, stocks have typically provided higher returns over the long term than other commonly held securities. As you age, you have less time to recover from downturns in the stock market; therefore, the principle states, as you approach and enter retirement, you should invest some of your more volatile growth-oriented investments in fixed-income securities such as bonds.

A commonly cited guideline for determining an appropriate allocation of stocks in your retirement portfolio is to subtract your age from 100 (some iterations of this rule use 120). For example, if you followed this rule at age 40, you would invest 60% to 80% (100 or 120 minus 40) of your portfolio in stocks. However, a more thorough approach would likely account for a host of other factors, including your tolerance for risk, long-term savings goals, family situation, any assets you have already accumulated, whether you have access to a pension or other type of retirement income, and your overall health (and your spouse's, if married).

When it comes to investing, a "one formula fits all" strategy may be a good place to start, but be sure to also consider it in light of your own unique circumstances.

You will need 70% to 100% of your pre-retirement income

You've probably heard this many times before: that you should calculate a goal based on replacing at least 70% of your pre-retirement income each year during retirement. But this may not be very helpful because it doesn't take into consideration your individual needs, expectations, and goals.

Instead of basing an estimate of your annual income needs on a percentage of your current income, focus instead on your actual expenses today and think about whether they'll stay the same, increase, decrease, or even disappear by the time you retire.

While some expenses may disappear, others, such as health care, travel, and hobbies, may rise. You may also want to hire help for yard care, snow removal, or other home maintenance that you previously did yourself.

Focusing on your projected expenses can help you determine a more realistic picture of how much annual income you'll need and help you hone in on a target accumulation amount.

Save 10%, 12%, or 15% of your current income for retirement

While the advice to contribute a certain percentage of your income to your retirement savings plan probably falls into the "smart rule" camp — particularly if the target rate is 10% or higher — it may not be appropriate for everyone.

For example, if you start saving for retirement in your 40s or 50s, you may need to shoot for the absolute maximum allowable amount (including catch-up contributions if you're age 50 or older) to make up for lost time. On the other hand, if you are in your 20s and facing a mountain of school loans, you may want to start at a lower percentage of pay — say 5% or 6% — and increase your contribution amount gradually as your income rises and your overall debt level decreases. Some employer-sponsored plans offer auto-escalation features that increase your contribution amount automatically over time.

Try to accumulate 20 times your current annual income

This alternative accumulation rule also doesn't take into account your age and personal circumstances. Although it be may helpful to keep a large ballpark total in mind, many other factors weigh into the equation. And let's face it: If all goes well, your annual income will likely rise through the years, so a total accumulation goal based on "current income" would therefore become a continually moving target.

Contribute enough to receive the full employer match

Regardless of your age or financial situation, this tip has benefits that are hard to deny: If your employer-sponsored plan offers a match, contribute at least enough to receive the full amount. This is essentially free money that your employer gives you for your future. Don't neglect this potentially valuable opportunity to help build your retirement savings. (Note: Employer contributions are often subject to a vesting schedule, which means you earn rights to the contributions and any earnings over time.)

A "smart" withdrawal rate is 4%

If you're approaching retirement, an important consideration is how much you can withdraw from your account each year. The sustainability of your savings depends not only on your asset allocation and investment choices, but also on how quickly you draw down the account(s). Basically, you want to withdraw at least enough to provide the income you need, but not so much that you run out of money quickly, leaving nothing for later retirement years. The percentage you withdraw annually from your savings and investments is called your withdrawal rate. The maximum percentage that you can withdraw each year and still reasonably expect not to deplete your savings is referred to as your "sustainable withdrawal rate."

A common rule states that a withdrawal amount equal to 4% of your savings each year in retirement (adjusted for inflation) will be sustainable. However, this method has critics, and other strategies and models are used to calculate sustainable withdrawal rates. For example, alternatives include:

• withdrawing a lower or higher fixed percentage each year;
• using a rate based on your investment performance each year; or
• choosing a rate based on age.

Factors to consider include the value of your savings, the amount of income you anticipate needing, your life expectancy, the rate of return you expect from your investments, inflation, taxes, and whether your retirement income needs to provide for one or two retired lives.

Determine which is right for you

The bottom line? Although all of these tips offer varying levels of retirement savings wisdom, think. carefully about how they might apply to your personal needs, goals, and circumstances before making any decisions.

John N. Kalil, Jr., is a Registered Representative of Hazard & Siegel, Inc. Securities are offered through Hazard & Siegel Inc., 5793 Widewaters Parkway, Syracuse, New York 13214. Member FINRA/SIPC. Advisory Services are offered through Hazard & Siegel Advisory Services, LLC, an SEC Registered Investment Advisor.

WRITTEN BY JOHN N. KALIL JR., LUTCF

All investing involves risk, including the possible loss of principal, and there can be no assurance that any investment strategy will be successful. Investments offering a higher potential rate of return also involve a higher level of risk.

Asset allocation, diversification, and dollar cost averaging are methods used to help manage investment risk; they do not guarantee a profit or protect against a loss.

There is no assurance that working with a financial professional will improve your investment results.

By investing for retirement through your employer-sponsored plan, you are helping to manage a critically important financial risk: the chance that you will outlive your money. But choosing to participate is just one step in your financial risk management strategy. You also need to manage risk within your account to help it stay on track. Following are steps to consider.

Familiarize yourself with the different types of risk

All investments, even the most conservative, come with different types of risk. Understanding these risks will help you make educated choices in your retirement savings plan mix. Here are just a few.

• Market risk: The risk that your investment could lose value due to falling prices caused by outside forces, such as economic factors or political and national events (e.g., elections or natural disasters). Stocks are typically most susceptible to market risk, although bonds and other investments can be affected as well.
• Interest rate risk: The risk that an investment's value will fall due to rising interest rates. This type of risk is most associated with bonds, as bond prices typically fall when interest rates rise, and vice versa. But often stocks also react to changing interest rates.
• Inflation risk: The chance that your investments will not keep pace with inflation, or the rising cost of living. Investing too conservatively may put your investment dollars at risk of losing their purchasing power.
• Liquidity risk: This is the risk of not being able to quickly sell or cash-in your investment if you need access to the money.
• Risks associated with international investing: Currency fluctuations, political upheavals, unstable economies, additional taxes--these are just some of the special risks associated with investing outside the United States.

Know your personal risk tolerance

How much risk are you willing to take to pursue your savings goal? Gauging your personal risk tolerance--or your ability to endure losses in your account due to swings in the market--is an important step in your risk management strategy. Because all investments involve some level of risk, it's important to be aware of how much volatility you can comfortably withstand before you select investments.

One way to do this is to reflect on a series of questions, which may include the following:

• How much do you need to accumulate to potentially provide for a comfortable retirement? The more you need to save, the more risk you may need to take in pursuit of that goal.
• How well would you sleep at night knowing your investments dropped 5%? 10%? 20%? Would you flee to "safer" options? Ride out the dip to strive for longer-term returns? Or maybe even view the downturn as a good opportunity to buy more shares at a value price?
• How much time do you have until you will need the money? Typically, the longer your time horizon, the more you may be able to hold steady during short-term downturns in pursuit of longer-term goals--and the more risk you may be able to assume.
• Do you have savings and investments outside your employer plan, including an easily accessed emergency savings account with at least six months worth of living expenses? Having a safety net set aside may allow you to feel more confident about taking on risk in your retirement portfolio.

Your plan's educational materials may offer worksheets and other tools to help you gauge your own risk tolerance. Such materials typically ask a series of questions similar to those above, and then generate a score based on your answers that may help guide you toward a mix of investments that may be appropriate for your situation.

Develop a target asset allocation

Once you understand your risk tolerance, the next step is to develop an asset allocation mix that is suitable for your investment goal while taking your risk tolerance into consideration.

Asset allocation is the process of dividing your investment dollars among the various asset categories offered in your plan, typically stocks, bonds, and cash/stable value investments. Generally, the more tolerant you are of investment risk, the more you may be able to invest in stocks. On the other hand, if you are more risk averse, you may want to invest a larger portion of your portfolio in conservative investments, such as high-grade bonds or cash.

Your time horizon will also help you determine your risk tolerance and asset allocation. If you're a young investor with a hardy tolerance for risk, you might choose an allocation with a high concentration of stocks because you may be able to ride out short-term swings in the value of your portfolio in pursuit of your long-term goals. On the other hand, if retirement is less than 10 years away and you can't afford to risk losing money, your allocation might lean more toward bonds and cash investments. (However, consider that within the bond asset class, there are many different varieties to choose from that are suitable for different risk profiles.)

Be sure to diversify

All investors--whether aggressive, conservative, or somewhere in the middle--can potentially benefit from diversification, which means not putting all your eggs in one basket. Holding a mix of different investments may help your portfolio balance out gains and losses. The principle is that when one investment loses value, another may be holding steady or gaining (although there are no guarantees).

Let's look at the previous examples. Although the young investor may choose to put a large chunk of her retirement account in stocks, she should still consider putting some of the money into bonds and possibly cash to help balance any losses that may occur in the stock portion. Even within the stock allocation, she may want to diversify among different types of stocks, such as domestic, international, growth, and value stocks, to reap any potential gainsfrom each type.

What about more conservative investors, such as those nearing or in retirement? Even for these individuals it is generally advisable to include at least some stock investments in their portfolios to help assets keep pace with the rising cost of living. When a portfolio is invested too conservatively, inflation can slowly erode its purchasing power.

Understanding dollar cost averaging

Your employer-sponsored plan also helps you manage risk automatically through a process called dollar cost averaging (DCA). When you contribute to your plan, chances are you contribute an equal dollar amount each pay period, and that money is then used to purchase shares of the investments you have selected. This process--investing a fixed dollar amount at regular intervals--is DCA. As the prices of the investments you purchase rise and fall over time, you take advantage of the swings by buying fewer shares when prices are high and more shares when prices are low--in essence, following the old investing adage to "buy low." After a period of time, the average cost you pay for the shares you accumulate may be lower than if you had purchased all the shares in one lump sum.

Remember that DCA involves continuous investment in securities regardless of their price. As you think about the potential benefits of DCA, you should also consider your ability to make purchases through extended periods of low or falling prices.

Perform regular maintenance

Although it's generally not necessary to review your retirement portfolio too frequently (e.g., every day or even every week), it is advisable to monitor it at least once per year and as major events occur in your life. During these reviews, you'll want to determine if your risk tolerance has changed and check your asset allocation to determine whether it's still on track. You may want to rebalance--or shift some money from one type of investment to another--to bring your allocation back in line with your original target, presuming it still suits your situation. Or you may want to make other changes in your portfolio to keep it in line with your changing circumstances. Such regular maintenance is critical to help manage risk in your portfolio.

When developing a plan to manage risk, it may also help to seek the advice of a financial professional. An experienced professional can help take emotion out of the equation so that you may make clear, rational decisions.

John N. Kalil, Jr., is a Registered Representative of Hazard & Siegel, Inc. Securities are offered through Hazard & Siegel Inc., 5793 Widewaters Parkway, Syracuse, New York 13214. Member FINRA/SIPC. Advisory Services are offered through Hazard & Siegel Advisory Services, LLC, an SEC Registered Investment Advisor.

WRITTEN BY JOHN N. KALIL JR., LUTCF

Asset allocation and diversification are methods used to help manage investment risk; they do not guarantee a profit or protect against investment loss.

The decision of when and how to tap your Social Security benefits can be complicated. You might want to review your options long before your planned retirement date to be sure you fully understand the pros and cons of each.

You've worked hard your whole life anticipating the day you could finally retire. Congratulations — that day has arrived! But with it comes the realization that you'll need to carefully manage your assets to give them lasting potential.

Review your portfolio regularly

Traditional wisdom holds that retirees should value the safety of their principal above all else. For this reason, you may assume your investment portfolio should be shifted to all fixed-income investments, such as bonds and money market accounts. The problem with this approach is that you'll effectively lose purchasing power if the return on your investments doesn't keep up with inflation. While generally it makes sense for your portfolio to become progressively more conservative as you grow older, it may be wise to consider maintaining at least a portion of your portfolio in growth investments.

Spend wisely

Don't assume that you'll be able to live on the earnings generated by your investment portfolio and retirement accounts for the rest of your life. At some point, you'll probably have to start drawing on the principal. But you'll want to be careful not to spend too much too soon. This can be a great temptation, particularly early in retirement.

A good guideline is to make sure your annual withdrawal rate isn't greater than 4% to 6% of your portfolio. (The appropriate percentage for you will depend on a number of factors, including the length of your payout period and your portfolio's asset allocation.) Remember that if you whittle away your principal too quickly, you may not be able to earn enough on the remaining principal to carry you through the later years.

Understand your retirement plan distribution options

Most traditional pension plans pay benefits in the form of an annuity. If you're married, you generally must choose between a higher retirement benefit paid over your lifetime, or a smaller benefit that continues to your spouse after your death. A financial professional can help you with this difficult, but important, decision.

Historically, other employer retirement plans, such as 401(k)s, typically haven't offered annuities; however, this may change as a result of legislation passed in 2019 that makes it easier for employers to offer such products. If your plan offers an annuity as a distribution option, you may want to consider how it might fit in your long-term plan.

You might also consider whether it makes sense to roll your employer retirement account into a traditional IRA, which typically has flexible withdrawal options. If you decide to work for another employer, you might also be able to transfer assets you've accumulated to your new employer's plan, if allowed.¹

Finally, you may also choose to take a lump-sum distribution from your work-based retirement plan; however, this could incur a substantial tax obligation and a possible 10% penalty on the tax-deferred portion of the amount if you are under age 59.5, unless an exception applies.

Plan for required distributions

Keep in mind that you must generally begin taking required minimum distributions (RMDs) from employer retirement plans and traditional IRAs after you reach age 72, whether you need them or not.² If you own a Roth IRA, you aren't required to take any distributions during your lifetime. Your funds can continue to grow tax deferred, and qualified distributions will be tax free.³ Because of these unique tax benefits, it may make sense to withdraw funds from a Roth IRA last.

Know your Social Security options

You'll need to decide when to start receiving your Social Security retirement benefits. At normal retirement age (which varies from 66 to 67, depending on the year you were born), you can receive your full Social Security retirement benefit.

You can elect to receive your Social Security retirement benefit as early as age 62, but if you begin receiving your benefit before your normal retirement age, your benefit will be reduced. Conversely, if you delay retirement, you can increase your Social Security retirement benefit.

Consider phasing

For many workers, the sudden change from employee to retiree can be a difficult one. Some employers, especially those in the public sector, have begun offering "phased retirement" plans to address this problem. Phased retirement generally allows you to continue working on a part-time basis — you benefit by having a smoother transition from full-time employment to retirement, and your employer benefits by retaining the services of a talented employee. Some phased retirement plans even allow you to access all or part of your pension benefit while you work part time.

Of course, to the extent you are able to support yourself with a salary, the less you'll need to dip into your retirement savings. Another advantage of delaying full retirement is that you can continue to build tax-deferred funds in your IRA or employer-sponsored retirement plan. As mentioned earlier, however, you generally will be required to start taking RMDs from most employer-sponsored plans and traditional IRAs once you reach age 72, if you want to avoid substantial penalties.²

If you do continue to work, make sure you understand the consequences. Some pension plans base your retirement benefit on your final average pay. If you work part time, your pension benefit may be reduced because your pay has gone down. Remember, too, that income from a job may affect the amount of Social Security retirement benefit you receive if you are under normal retirement age. But once you reach normal retirement age, you can earn as much as you want without affecting your Social Security retirement benefit.

Facing a shortfall

What if you're nearing retirement and you determine that your retirement income may not be adequate to meet your retirement expenses? If retirement is just around the corner, you may need to drastically change your spending and saving habits. Saving even a little money can really add up if you do it consistently and earn a reasonable rate of return. And by making permanent changes to your spending habits, your savings could last even longer. Start by preparing a budget to see where your money is going.

Here are some suggested ways to stretch your retirement dollars:

• Refinance your home mortgage if interest rates have dropped since you obtained your loan, or reduce your housing expenses by moving to a less expensive home or apartment.
• Access the equity in your home. Use the proceeds from a second mortgage or home equity line of credit to pay off higher-interest-rate debts, or consider a reverse mortgage. (Consider these strategies very carefully before making any final decisions.)
• Sell one of your cars if you have two. When your remaining car needs to be replaced, consider buying a used one.
• Transfer credit card balances from higher-interest cards to a low- or no-interest card, and then cancel the old accounts.
• Ask about insurance discounts and review your insurance needs (e.g., your need for life insurance may have lessened).
• Reduce discretionary expenses such as lunches and dinners out.

By planning carefully, investing wisely, and spending thoughtfully, you can increase the likelihood that your retirement will be a financially comfortable one. 

¹ When considering a rollover, to either an IRA or to another employer's retirement plan, you should consider carefully the investment options, fees and expenses, services, ability to make penalty-free withdrawals, degree of creditor protection, and distribution requirements associated with each option.

² If you are still employed and own no more than 5% of your company, you may be able to delay RMDs from your current employer's plan until after you actually retire. You will have to take RMDs from IRAs and plans from former employers.

³ To qualify for tax-free and penalty-free withdrawal of earnings, a Roth IRA must meet a five-year holding requirement and the distribution must take place after age 59.5, with certain exceptions.

John N. Kalil, Jr., is a Registered Representative of Hazard & Siegel, Inc. Securities are offered through Hazard & Siegel Inc., 5793 Widewaters Parkway, Syracuse, New York 13214. Member FINRA/SIPC. Advisory Services are offered through Hazard & Siegel Advisory Services, LLC, an SEC Registered Investment Advisor.

WRITTEN BY JOHN N. KALIL JR., LUTCF

A word of caution

The SECURE Act ushered in changes that could have a dramatic impact on IRA estate strategies. Account owners may want to review their beneficiary designations with their financial professionals and consider how the new rules may affect inheritances and taxes.

Spouses can elect to treat an inherited IRA as their own. By becoming the account owner, the surviving spouse can make additional contributions, name new beneficiaries, and wait until age 72 to start taking RMDs. (Roth IRAs do not require RMDs during the lifetime of the owner.)

At the end of 2019, President Trump signed a federal spending package that included the Setting Every Community Up for Retirement Enhancement (SECURE) Act. A provision in this legislation effectively eliminated the "stretch IRA," an estate-planning strategy that allowed an IRA to continue benefiting from tax-deferred growth, potentially for decades. Most nonspouse beneficiaries, including children and grandchildren, can no longer "stretch" distributions over their lifetimes.

Individuals who plan to leave IRA and retirement plan assets to heirs — and individuals who stand to inherit retirement assets — should understand the new rules and distribution options.

The old "stretch" rules

For retirement assets inherited before 2020, a nonspouse beneficiary had to begin required minimum distributions (RMDs) within a certain time frame after inheriting the account. However, annual distributions could be calculated based on the beneficiary's life expectancy. This ability to stretch taxable distributions over a lifetime helped reduce the beneficiary's annual tax burden and allowed large IRAs to continue benefiting from potential tax-deferred growth.¹

Example: Consider the hypothetical case of Margaret, a single, 52-year-old banking executive who inherited a million-dollar IRA from her 85-year-old father. Margaret had to begin taking RMDs from her father's IRA by December 31 of the year following his death. She was able to base the annual distribution amount on her life expectancy of 32.3 years. Since she didn't really need the money, she took only the minimum amount required each year, allowing the account to continue growing. Upon Margaret's death at age 70, the remaining assets passed to her 40-year-old son, who then continued taking distributions over the remaining 13.3 years of Margaret's life expectancy. The account was able to continue growing for many years.2

The new rules

Beginning in January 2020, most nonspouse beneficiaries are required to liquidate inherited accounts within 10 years of the owner's death. This shorter distribution period could result in unanticipated and potentially large tax bills for nonspouse beneficiaries who inherit high-value IRAs. There are no RMDs during the 10-year period, so beneficiaries can take distributions in any amount and any time frame they choose, provided the assets are completely exhausted at the end of the period. Any funds not liquidated by the 10-year deadline will be subject to a 50% penalty tax.

Example: Under the new rules, Margaret would have to empty the account, in whatever amounts she chooses, within 10 years of her father's death. Since she stands to earn her highest-ever salaries during that time frame, the distributions could push her into the highest tax bracket at both the federal and state levels. Because the account would be depleted after 10 years, it would not eventually pass to her son, and her tax obligations in the decade leading up to her retirement would be much higher than she anticipated.

The beneficiary of a traditional IRA might want to spread the distributions equally over the 10 years in order to manage the annual tax liability. By contrast, the beneficiary of a Roth IRA — which generally provides tax-free distributions — might want to leave the account intact for up to 10 years, allowing it to potentially benefit from tax-free growth for as long as possible.

Notable exceptions

The new rules specifically affect most nonspouse designated beneficiaries who are more than 10 years younger than the original account owner. However, key exceptions apply to those who are known as "eligible designated beneficiaries" — a spouse or minor child of the account owner; those who are not more than 10 years younger than the account owner (such as a close-in-age sibling or other relative); and disabled or chronically ill individuals, as defined by the IRS. (Note that the 10-year distribution rule will apply once a child beneficiary reaches the age of majority and when a successor beneficiary inherits account funds from an initial eligible designated beneficiary.)

Eligible designated beneficiaries may use the old stretch IRA rules and take RMDs based on their own life expectancies.³ In these cases, RMDs must begin no later than December 31 of the year after the original account owner's death. However, if the original owner was of RMD age and failed to take the required amount in the year of death, the beneficiary must take the RMD by December 31 of that year.⁴ Failure to take the appropriate amount can result in a penalty equal to 50% of the amount that should have been withdrawn.

Spouse as beneficiary

Spousal beneficiaries can roll over the IRA assets to their own IRAs, or elect to treat a deceased account owner's IRA as their own (presuming the spouse is the sole beneficiary and the IRA trustee allows it). By becoming the account owner, the surviving spouse can make additional contributions, name new beneficiaries, and wait until age 72 to start taking RMDs.⁵ (A surviving spouse who becomes the account owner of a Roth IRA is not required to take distributions.)

Note that RMDs for 2020 have been waived by the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

Beneficiaries may take a pass

A beneficiary may also disclaim an inherited retirement account. This may be appropriate if the initial beneficiary does not need the funds and/or want the tax liability. In this case, the assets may pass to a contingent beneficiary who has greater financial need or may be in a lower tax bracket. A qualified disclaimer statement must be completed within nine months of the date of death.

Impacts on trust planning

Prior to 2020, individuals with high-value IRAs often used conduit — or "pass-through" — trusts to manage the distribution of inherited IRA assets.

The trusts helped protect the assets from creditors and helped ensure that beneficiaries didn't spend down their inheritances too quickly. However, conduit trusts are now subject to the same 10-year liquidation requirements, so the new rules may render null and void some of the original reasons the trusts were established.

Planning tips

Retirement account owners should review their beneficiary designations with their financial or tax professional and consider how the new rules may affect inheritances and taxes. Any strategies that include trusts as beneficiaries should be considered especially carefully. Other strategies that account owners may want to consider include converting traditional IRAs to Roths; bringing life insurance, charitable remainder trusts, or accumulation trusts into the mix; and planning for qualified charitable distributions.⁶

¹ For account owners who died before January 1, 2020, the old rules apply to the initial beneficiary only. Under these rules, a beneficiary also generally had the option to take distributions sooner than required.

² This hypothetical example is used for illustrative purposes only and does not represent the performance of any specific investment. Fees, expenses, and taxes are not considered and would reduce the performance shown if they were included. Actual results will vary. All investing involves risk including the possible loss of principal and there is no guarantee that any investment strategy will be successful.

³ If the original account owner dies on or after the required beginning date, an older eligible designated beneficiary can take RMDs over the remaining life expectancy of the original account owner if it is longer than the beneficiary's life expectancy.

⁴ The surviving spouse of an original account owner who was under RMD age at the time of death can wait until December 31 of the year in which the deceased would have had to take RMDs, or the spouse can take actions as discussed under the "Spouse as beneficiary" section.

⁵ For an account owner born prior to July 1, 1949, RMDs would start at age 70.5.

⁶ Other trusts are generally subject to RMDs based on the owner's life expectancy if the owner had reached the required beginning date; if the owner died before the required beginning date, the account must be emptied by the end of the fifth year after the owner's death. There are costs and ongoing expenses associated with the creation and maintenance of trusts.

John N. Kalil, Jr., is a Registered Representative of Hazard & Siegel, Inc. Securities are offered through Hazard & Siegel Inc., 5793 Widewaters Parkway, Syracuse, New York 13214. Member FINRA/SIPC. Advisory Services are offered through Hazard & Siegel Advisory Services, LLC, an SEC Registered Investment Advisor.