Ed Slott - The Retirement Savings Time Bomb . . . and How to Defuse It

PENGUIN BOOKS

THE RETIREMENT SAVINGS TIME BOMB AND HOW TO DEFUSE IT

Ed Slott is a highly sought-after professional speaker, CPA, and tax advisor. His diverse client list includes major corporations such as Fidelity Investments, American Express, Merrill Lynch, Nationwide Insurance, and Oppenheimer Funds. Slotts writing frequently appears in national publications such as The Wall Street Journal, The New York Times, and USA Today, and he has appeared on broadcast television and radio stations nationwide. He is publisher of the popular monthly newsletter Ed Slotts IRA Advisor. For more information, visit his Web site: www.irahelp.com.

Praise for
The Retirement Savings Time Bomb and How to Defuse It

Unless you consider cat food a viable dinner option, its wise to take action now to bulletproof your retirement assets. Sooner or later, we pay taxes. But why allow your retirement savings to become a windfall for Uncle Sam when the money should go to you and your heirs? Slotts book will show you how to keep your cash all in the family.

USA Today

Ed Slotts advice could save your retirement plan from something worse than a Bear Marketthe tax collector!

Terry Savage, author of The Savage Truth on Money and personal finance columnist for the Chicago Sun-Times

Ed Slotts easy-to-understand tax strategies mean money in your bank account, not the IRSs.

Jan M. Rosen, coauthor of Wall Street Secrets for Tax-Efficient Investing and financial columnist for The New York Times

Ed Slott knows his stuff. If you want your retirement savings to stay in the family and not go to Uncle Sam, READ THIS BOOK!

Grace W. Weinstein, columnist for the Financial Times and author of J.K. Lassers Winning with Your 401(k)

Ed Slott guides you through the maze of retirement-plan rules with a sense of humor and a firm grasp of the costly pitfalls that await the unwary.

Priscilla Brandon, editor, Kiplingers Retirement Report

If you have questions about IRAs or other retirement plans, youll find every last answer in this easy-to-understand and hugely informative book. Ed Slott is truly Mr. IRA.

Lynn OShaughnessy, author of The Retirement Bible

Ed Slotts blueprint for protecting your retirement savings shouldnt be missed.

Karin Price Mueller, writer of the Money Manager column for The Boston Herald and author of Online Money Management

If you have assets in a retirement plan The Retirement Savings Time Bomb will save you money.

Natalie B. Choate, author of Life & Death Planning for Retirement Benefits: The Essential Handbook for Estate Planners

A book on retirement plan distributions thats easy to followand this is even more amazingfun to read . This is an eye-opening take-action book directed at those who have saved their money and now risk losing most of it . Rich in context but written in an easy-to-follow, engaging style, the book tells readers how to keep the tax man at bay and take advantage of the most recent tax law and IRA rule changes . We highly recommend Slotts book to those who are serious about protecting their retirement savings.

Diane Lade and Humberto Cruz, The Sun-Sentinel

THE RETIREMENT
SAVINGS TIME BOMB
AND HOW TO DEFUSE IT

A Five-Step Action Plan for Protecting
Your IRAs, 401(k)s, and Other Retirement Plans
from Near Annihilation by the Taxman

BY ED SLOTT

PENGUIN BOOKS

PENGUIN BOOKS

Published by the Penguin Group

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Penguin Books Ltd, Registered Offices:

80 Strand, London WC2R 0RL, England

First published in the United States of America by Viking Penguin,

a member of Penguin Putnam Inc., 2003

Published in Penguin Books 2004

First revised edition published 2007

This second revised edition published 2012

10 9 8 7 6 5 4 3 2 1

Copyright Ed Slott, 2003, 2007, 2012

All rights reserved

Grateful acknowledgment is made for permission to reprint Tips for Achieving NUA Success and Sample NUA Information Request Letter by David A. Foster. Used by permission of David A. Foster.

This publication seeks to provide the most accurate and up-to-date information available about complicated tax topics. However, this information may be changed, become outdated, or be rendered incorrect by new legislation or official rulings. Therefore, neither the author nor the publisher assumes liability or responsibility for any losses that may be sustained or alleged to be sustained, directly or indirectly, by the use of the information contained in this book, and any liability is hereby expressly disclaimed.

LIBRARY OF CONGRESS CATALOGING-IN-PUBLICATION DATA

Slott, Ed.

The retirement savings time bomband how to defuse it : a five-step action plan for protecting your IRAs, 401(k)s, and other retirement plans from near annihilation by the taxman / by Ed Slott.

p. cm.

Includes bibliographical references and index.

ISBN: 978-1-101-58996-0

1. Pension trustsUnited States. 2. Pension trustsTaxationUnited States. 3. Retirement incomeUnited StatesPlanning. 4. Finance, PersonalUnited States. I. Title.

HD7105.45.U6S486 2012

332.0240145dc23 2011042971

Printed in the United States of America

Set in Sabon

Designed by BTD Design

Except in the United States of America, this book is sold subject to the condition that it shall not, by way of trade or otherwise, be lent, resold, hired out, or otherwise circulated without the publishers prior consent in any form of binding or cover other than that in which it is published and without a similar condition including this condition being imposed on the subsequent purchaser.

All rights reserved. No part of this book may be reproduced, scanned, or distributed in any printed or electronic form without permission. Please do not participate in or encourage piracy of copyrighted materials in violation of the authors rights. Purchase only authorized editions.

While the author has made every effort to provide accurate telephone numbers and Internet addresses at the time of publication, neither the publisher nor the author assumes any responsibility for errors, or for changes that occur after publication. Further, publisher does not have any control over and does not assume any responsibility for author or third-party Web sites or their content.

ALWAYS LEARNING

PEARSON

To my dad, who truly lived a wonderful life

To my wife, Linda,

and our children, Rachel, Ilana, and Jennifer

This book is about the jeopardy youand everyone you knowwill face when the taxman shows up at distribution time, regardless of the type of tax-deferred retirement savings plan you have. Every type of plan is affected, be it an Individual Retirement Account (IRA), a Roth IRA, a 401(k), a Roth 401(k), a 403(b), a Roth 403(b), a 457, a Keogh plan, a SEP-IRA, a SIMPLE IRA, or a mixture of accounts. Ill be using the term