Decide What to Do with Your IRA Assets

Physician's Money DigestJuly15 2004
Volume 11
Issue 13

Whether retiring, changingpractices, or unemployed dueto other factors, physiciansentering a new walk of life have todecide what to do with their retirementsavings. Whether you cash it in, leave itwhere it is, or roll it over into a newaccount, there are advantages and disadvantagesto each scenario. By using anIRA for consolidation of retirement planassets, physicians can use the IRA as aconduit to hold retirement plan assetsuntil they can be rolled into anotherretirement plan, and also plan for lifetimeand post-death distributions byusing distribution rules associated withIRAs to minimize taxes.

Unrestricted Control

Participants rolling retirement planassets into an IRA can shop for a providerthat best suits their needs, taking intoconsideration various matters, such asspecific terms of the IRA document, feescharged, services provided, and investmentoptions offered. Plus, with themoney in an IRA, there is unrestrictedaccess to assets. If money is left in anemployer plan, partial distribution of theaccount may not be permitted and theformer participant may be forced towithdraw the entire balance or elect anirrevocable distribution option.

Perhaps the most compelling reasonto take money out of an employer planand deposit it into an IRA is the ability tomake plans for assets that remain afterdeath. An employer plan may restrictbeneficiaries named and require animmediate lump-sum distribution to thebeneficiary upon the participant's death.A spouse beneficiary has the option ofmaking an IRA rollover of any plan'sdeath benefits, but other beneficiariesare not eligible for a rollover, so their distributionoptions will be restricted towhatever the plan provides.

Fortunately, physicians are free toshop for IRAs that meet their needs.With the right IRA, an owner can set upbeneficiary designations and allow assetsto remain tax-deferred for generations.

Beneficiary Management

Generally, distributions from an IRAupon the owner's death are made accordingto the required minimum distributionsrules. A beneficiary may elect an immediatepayout, or choose regular paymentsbased on life expectancy and name anotherbeneficiary to receive remaining paymentsupon death. Taxation of assets isthen spread out over the payout period. Aspouse beneficiary can step into the shoesof the deceased owner and take distributionsbased on their own life expectancyand name a younger beneficiary who,upon the spouse's death, could receiveremaining assets over their own longerlife expectancy.

Some issues may compel a doctor touse a retirement plan instead of an IRAfor retirement plan assets. Qualifyingplan participants born before 1936 havethe opportunity to use special plan distributiontax rules. An eligible participantwho has been in a plan for at least5 years and receives a lump-sum distributionmay elect 10-year averaging, whichallows taxes to be calculated as if theamount had been paid over 10 years.


Long-term capital gains treatmentallows eligible participants to figuretaxes on amounts that accumulated inretirement plans prior to 1974 at a flat20% rate, rather than the participant'sincome tax rate. Once any portionhas been rolled over, it is too late toelect any of the special provisions.

Bruce Harrington is vice president,product marketing and servicesof MFS Investment Managementand product manager ofits 529 college savings plans andretail retirement products. Hewelcomes questions or comments at 866-637-7526, or visit

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