PensionBee noted that it helps with making it simpler to consolidate older 401(k)s and IRAs into a more transparent account so clients are able to see exactly where they might stand. According to an update from PensionBee, many rollovers tend to occur automatically, but if a client needs some extra attention, their personal rollover managers (called BeeKeepers) can guide you at every step.
PensionBee further noted that with diversified portfolios powered by ETFs like SPY and MDY from State Street Investment Management, one of the world’s largest asset managers, clients may focus on what matters: growing their savings and preparing for retirement.
PensionBee also pointed out that some potential issues such as the early withdrawal penalty, the missed RMD penalty, or the excess contribution tax that compounds on an annual basis. These penalties can “take a serious bite out of your retirement savings.”
Retirement account penalties cost US consumers billions every year. Most can be completely avoidable, PensionBee claims while noting that the good news is that once clients know the rules, most penalties are actually quite avoidable.
PensionBee also stated that the early withdrawal penalty is the one most people know about. For instance, if you take funds out of your retirement account before you turn 59½, the IRS typically “hits you with a 10% early withdrawal penalty on top of the regular income taxes you’ll owe.”
But generally speaking, retirement funds are meant to grow until you reach retirement age. So if you’re under 59½ and need some extra cash, then clients may carefully consider the potential “consequences before accessing your retirement accounts.”
PensionBee added that once you reach a particular age, the IRS expects clients to start pulling “money out of your retirement accounts, even if you don’t need it yet.” These are referred to as Required Minimum Distributions (RMDs).
For the current financial year, the age to begin RMDs is 73. That means the year a person turns 73, they need to take their “first distribution by April 1 of the following year.” And after that, they have to take “one every year by December 31.”
Should investors miss the RMD deadline, then the IRS charges “a penalty of 25% of the amount you should have withdrawn.” This can drop to “10% if you correct it within two years, but that’s still a massive hit.”
To avoid this, one should consider setting reminders well before the scheduled RMD deadlines. Many retirement account providers will automate RMDs for clients and can set up automatic withdrawals. Also, PensionBee noted that if clients wait until April 1 to take their first RMD, they will have to take two RMDs that year (one for the prior year by April 1, and one for the current year by December 31). This could push client sinto “a higher tax bracket.”
According to the update from PensionBee, the way to stay on top of these rules is to keep your retirement accounts organized in one place.
And when older 401(k)s and IRAs are scattered across various employers and providers, it’s not that hard to lose track of contribution limits. The online pension provider also pointed out that it can be easier to miss RMD deadlines; forget about small accounts; trigger penalties you didn’t anticipate coming.