Manage Individual Retirement Accounts | American Funds

How-To Guides

Manage Individual Retirement Accounts

Your IRA clients have real-life planning concerns. The service you provide to alleviate these concerns can help differentiate you from your competitors.

Step
1

Review your client’s life events

Speak with your client to determine if he or she has experienced any recent life events. These could include:

  • Marriage or divorce
  • New baby or dependent
  • Disability
  • Retirement
  • Job change or loss

Depending on your client’s situation, you may need to help your client roll money over from a retirement account, update beneficiary designations or take a distribution.

Step
2

Assist with rollovers, beneficiary updates or distributions

Roll money over from a retirement account

Understanding the rollover process can help you guide your client and reinforce their trust in you.

  • Set up a traditional or Roth IRA if your client doesn’t have one to receive the rollover.
  • With your client’s help, get the employer’s distribution form and request a direct rollover.
  • Mail the completed form to the plan sponsor for authorization.
  • Follow up to ensure the plan sponsor mails the distribution form and other necessary paperwork to the third-party administrator (TPA) or recordkeeper.
  • Once the rollover is complete:
    • The TPA and/or recordkeeper will send a distribution confirmation to the plan sponsor.
    • The IRA custodian will send confirmation of the IRA deposit to the client.
Manage beneficiary designations

Knowing the ins and outs of beneficiary designations can help you fully satisfy your clients’ planning objectives, extend income from an IRA and create a new generation of clients.

Conduct a beneficiary review

  • Order a report listing the beneficiaries for your clients’ IRAs.
  • Send your clients a beneficiary review letter and follow up with phone calls.
  • Ask for introductions to the beneficiaries when appropriate. Meeting the beneficiaries can help you create a relationship with the next generation and make them future clients.
  • Discuss stretching the IRA if your clients want to leave their IRAs for future generations.
  • Offer free beneficiary reviews for prospective clients. Your attention to details like wealth transfer could help convince them to move their IRAs to you.
Take a distribution

Help your clients make distribution decisions that will help their money last throughout their retirements.

Normal Distributions

For clients age 59-1/2 or more.

  • Consider depleting taxable accounts first to extend the advantage of tax-deferral as long as possible.
  • Set up a systematic withdrawal for retirees or other clients who need a steady stream of income from the IRA now.

Early Distributions

Distributions from an IRA before age 59-1/2 will normally incur a 10% tax penalty in addition to income taxes (the tax penalty is increased to 25% for those who participated in a SIMPLE IRA plan for two years or less). However, under section 72(t) of the Internal Revenue Code, the penalty doesn’t apply to distributions resulting from:

  • Death
  • Disability
  • Catastrophic medical expenses
  • Health insurance premiums during long-term unemployment
  • First-time home purchases, up to $10,000
  • Qualified higher education expenses
  • Substantially equal periodic payments

Required Minimum Distributions

Required minimum distributions (RMDs) begin April 1 of the year following your client’s 70-1/2 birthday. Here’s how to make RMDs easy for your American Funds clients:

  • Order an RMD report that shows your American Funds IRA clients who should be taking RMDs. (Your firm may be able to provide a similar report for non-Capital Bank & Trust IRAs.)
  • Send annual RMD reminders to those clients that haven’t set up automatic distributions.
  • Mail 70th birthday cards and remind those clients of their upcoming RMDs.
  • Follow up on the RMD mailing that we send when traditional or SIMPLE IRA owners turn 70 according to our records.
  • Use our RMD Planner to determine the amount your client will need to withdraw.
  • Consolidate your client’s accounts to simplify the RMD process.
  • Reinvest the distribution if your client doesn’t need the money now.

Beneficiary distribution options

The beneficiary’s relationship to the account owner determines the rules and restrictions for beneficiary distributions.

Refer to our A Time of Change brochure to help explain the distribution options available for each type beneficiary.

Tips From Top Sellers

Financial advisors who do a lot of rollover business have told us that tracking the paperwork through each stage of the rollover process is a key client service.

Some advisors have designated one person in their office to handle all rollover paperwork and follow-up phone calls. One advisor even gives a bonus if that person is able to complete the rollover within one month.


Other Resources

Order IRA Reports
Order reports to find out which clients:

  • haven't updated or made a beneficiary designation in the past five years
  • haven't contributed the maximum amount for the current and previous tax year
  • may be required to take distributions this year

 


This material is intended for use by financial professionals or in conjunction with the advice of a financial professional.

Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing. 

Content contained herein is not intended to serve as impartial investment or fiduciary advice. The content has been developed by Capital Group, which receives fees for managing, distributing and/or servicing its investments.