401(k) Specialist Issue 2 - 2016 - 21

ROLLOVERS
" Most advisors
don't realize
rules change
almost weekly.
Even if they are
up to speed,
some of the
bills read like
they're written
in Sanskrit. "
2). Not knowing and keeping up
with rollover rules- " Most advisors don't
realize rules change almost weekly. Even if
they are up to speed, some of the bills read
like they're written in Sanskrit. We now
have the one rollover annually rule. If you
do a second rollover, the client will lose
their money. I've polled advisors and I said
'How many of you are aware of this new
law?' And the best I ever got is maybe a
third of the audience raised their hands.
3). Inherited IRAs- " This is where
some of the biggest mistakes are made;
people don't know how to handle inherited
IRAs. They're subject to different and harsher
rules over and above those for regular IRAs.
For example, one of the biggest rules blown
is the one that says a non-spouse beneficiary
cannot do a rollover. If a spouse inherits an
IRA she could roll it over to her own IRA;
no problem. But let's say a dad dies and leaves
his IRA to his son. Well, sonny boy can't wait
to get his hands on the money so the attorney
puts the son's name on it and that's the
end of the account-game over. It's a taxable
distribution because a non-spouse beneficiary
cannot do a rollover. It has to be set up as
a properly titled and inherited IRA. If it goes
to the beneficiary's own IRA, it's taxable
and a fatal error. The dad spent a lifetime
accumulating a $600,000 rollover and now a
big chunk is gone. "
Slott ends each rapid-fire horror story the
same way, " I mean, I could go for days ..., "
and we believe him. He's trying to pound
it into our brain, the same way he pounds
it into the advisor's brain, and after hearing
one anecdote stacked atop another anecdote
stacked atop yet another, they (and we)
willingly submit.
" It's two sides of a coin; opportunity and
the negligence. And those are the only two
ways to go. Either be a hero or the opposite,
which in this case isn't zero, but defendant. "
He should know; part of his job description
we didn't mention at the top is " expert
witness, " and business is only getting better.
And now, of course, 401(k)s are added to
the mix.
" We're seeing the first major wave of
401(k) transitions, and I mean major as
being those 401(k)s that have built up for
30 years. It's time to pull the trigger on
this 401(k) experiment and see if it's really
worked. The year 2013 was the first that we
saw more going out of 401(k)s than going
in, so we're turning the corner and it affects
more people. I said it 20 years ago and people
said 'I'll worry about that in 10 years,'
like it's global warming or something. Well,
good luck with that. "
The firehose that is Ed Slott is almost
exhausted, but he ends on a final note, one
that appears to have no hint of hyperbole.
" It's the opportunity of a lifetime for the
advisor who wants to get educated, stand
out from the crowd and have that competitive
edge to really build a business. And it's
the tragedy of a lifetime for the advisors
who don't, because without a doubt, somewhere
it's gonna bite them. "
ISSUE 2 2015 | 401kSpecialistmag.com 21
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401(k) Specialist Issue 2 - 2016

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