Pub. 1 2020 Issue 1

www.cbak.com 22 In Touch basic IRA questions and as a guide for consistency in IRA operations. If your organization doesn’t want the responsibility of opening and maintaining IRAs, consider using a third-party vendor to do it for you. This way you can enjoy the best of both worlds—you can grow your IRA business with little to no extra work for your associates. PROMOTE IRAS IRA assets are growing for a variety of reasons— rollovers from retirement plans, generational savings trends, higher interest rates—and all of them present ways for your financial organization to gain new deposits. But just reacting to the marketplace isn’t enough. To capitalize on these opportunities, you must take affirmative steps—starting with promoting IRAs to the right audience. RETIRING BABY BOOMERS As far as IRA contributions go, rollovers are king. The “U.S. Retirement Markets 2018” Cerulli Report shows that from 2012 to 2017, rollovers from employer- sponsored retirement plans accounted for almost 96% of total Traditional IRA contributions. Rollovers will continue to grow as more workers retire. Over the next 10 years, 10,000 baby boomers will turn 65 every day. Many of them will be looking for somewhere to put their employer plan savings. According to an Investment Company Institute research report, in 2016, the average Traditional IRA rollover amount for individuals ages 65-69 was $183,041. Knowing the portability rules and their potential consequences can aid your organization in capturing these large rollover amounts. JOB CHANGERS Most U.S. workers no longer spend their entire career at the same company. In fact, many workers change jobs—or even careers—several times before retiring. According to a Bureau of Labor Statistics Economic News Release, the median employee tenure was 4.2 years in January 2018. At that time, only 30% of male workers and 28% of female workers had been with their current employer for 10 years or more. If a client mentions that she is relocating or changing jobs, take advantage of the opportunity by discussing her rollover options. Simply let her know what her options are and suggest she talk to a tax adviser to decide which option (if any) is right for her. CHILDREN AS IRA OWNERS Right now you may be thinking “children can’t have IRAs.” But it is possible. The IRS sets very few restrictions on IRA contributions. For a Traditional IRA, an individual need only have earned income and be underage 70½; a Roth IRA also requires an individual to have earned income, but it must be below a certain threshold. Consider the case of a child with a summer job. (Let’s assume that the child’s pay is reported on an IRS Form W-2. In other words, there is proper documentation that the pay qualifies as eligible compensation— instead of a series of cash transactions.) The child contributes $250 each month ($3,000 annually) to an IRA from age 14 to age 18. If the IRA has an average 5% rate of return, the child could earn up to $358,450 by age 65. And if the child contributed to a Roth IRA, all the money could come out tax free. Obviously not all children can contribute to an IRA. But for those who are eligible, Traditional and Roth IRAs are smart choices for long-term, tax-deferred growth. Consider sending information (e.g., brief articles, flyers, emails,) to the parents of children who already have savings accounts at your organization. Even if their children can’t contribute to an IRA now, they may be able to in a few years—and your organization will be the one they turn to. SEE AN INCREASE IN BUSINESS $9.4 trillion in assets. That’s a considerable amount of money—some of which could be coming to your organization. If you’re not currently doing everything you can to expand your IRA business, don’t wait any longer. Use the tips discussed in this article to come up with new ways to increase the number of IRAs at your organization. Then watch your profits grow.  Jennifer Bassett is a Senior Editor in the ERISA department at Ascensus. As a Senior Editor, Jennifer contributes to many of Ascensus’ printed and online publications, education materials, and client communications. Since joining Ascensus in 2004, Jennifer has specialized in various employer- sponsored retirement plans, Traditional and Roth IRAs, health savings accounts, and Coverdell education savings accounts. She also answers client inquires through Ascensus’ 800 Consulting service. IRA assets are growing for a variety of reasons— rollovers from retirement plans, generational savings trends, higher interest rates—and all of them present ways for your financial organization to gain new deposits. But just reacting to the marketplace isn’t enough.