Congress has removed, for three years, the limit on amounts which may be withdrawn from a qualified retirement plan or IRA without incurring the 15% penalty tax. This is a good occasion to look at the many options for withdrawing retirement accounts.

There are three main taxes which may apply to your retirement account: income tax (when you make withdrawals), estate tax (when the account is left to spouse or other designated beneficiary upon your death), and the 15% penalty tax (when you take out too much in one year, or leave too much to beneficiaries upon your death). The top income tax rate is 39.6%, the estate tax goes as high as 60%, and the penalty tax, again, is 15%. The three should never add up to 100% in a given instance, but a person with a large estate which includes a significant retirement plan balance, faces a likely tax of 75% or 80% on the latter.

We are developing strategies for dealing with these rather shocking tax rates. We have given generalized advice to some of you, in connection with the preparation of your Wills, to gain some tax benefit and cause the retirement plan to flow consistent with your Wills. However, there are a number of additional strategies which may provide further tax benefit, upon a closer review of your situation, and the terms of your plan.

If you would like to learn more about tax-saving strategies for your retirement account, please call the lawyer with whom you work, or Bill Whitman of our Tacoma office. Our toll-free number is (800) 240-5051.

Best wishes for an enjoyable Spring and Summer.