April 18, 2005 -- Most investors understand the importance of saving for a comfortable retirement, and most contribute, at least in part, to their retirement savings through an IRA or employer-sponsored retirement plan. But not all investors understand the rules of Minimum Required Distributions.

Did you know that following the year in which you reach age 70½, the IRS generally requires you to withdraw a minimum amount of money from your tax-advantaged retirement accounts each year? This amount is called a Minimum Required Distribution ( MRD ). The MRD rule applies to Traditional IRAs, Rollover IRAs, SIMPLE IRAs, Keoghs, and SEP-IRAs, as well as most 401(k) and 403(b) plans. Roth IRAs are the exception to this law. In addition, did you also know that if you fail to make this MRD , on top of regular federal income tax, you may face an IRS penalty of 50 percent on the amount that should have been withdrawn?

Until recently, the MRD rules for retirement accounts were a bit complex. There were approximately a half dozen different methods to calculate the MRD , and selecting the wrong method could have resulted in unfavorable tax consequences for the account owner and beneficiaries. New rules issued by the Treasury Department on January 12, 2001 , greatly simplify the process and provide retirees with more flexibility and the potential to take smaller MRDs, thus saving more of their tax-deferred retirement assets.

In addition to simplifying the calculation process, the new rules have also altered how and when you must name a beneficiary. You no longer have to name a beneficiary before you begin taking the MRD . In fact, you can now designate a beneficiary or change a designation after you reach age 70½ without affecting your MRD calculation. Although the importance of your beneficiary in your lifetime MRD calculations has been reduced, it is still extremely important to always have a designated beneficiary on all retirement accounts for other planning purposes.

Key Benefits to the IRS Rule Change:

• Simplified method of determining Minimum Required Distributions (MRDs)

• Potentially lower MRDs for many investors

• Ability to save more of the tax-deferred retirement assets

• Extended period to name beneficiary

• Enhanced planning opportunities for beneficiaries to maximize the 
  advantages of tax-deferred savings

Overall, these IRS rules have made a significant impact on retirement savings. There are many details in the new proposals that could affect your financial or estate planning strategies. Talk to your financial advisor to discuss how these changes can affect your financial future, and be sure to consult your advisor when determining your MRD or any distributions from your retirement accounts.

Call Doug Hall or Vicki Dworski, Asher Financial Advisors, at 215-564-1900 for more information.

Securities offered through1st Global Capital Corp. Member NASD, SIPC.  8150 N. Central Expressway, Suite M-1000, Dallas , TX 75206 , 1-800-959-8440 .  Asher Financial Advisors, LLC is not affiliated with 1st Global Capital Corp.

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