Financial advisors don’t usually think of people in their 70s and 80s in terms of finding investment assets to position. For the most part, these retirees are liquidating and spending assets, not looking for new investment opportunity. But there is a big driver of advisor-driven investment dollars among this crowd.

It is required minimum distributions (RMDs) from traditional IRAs. Here are key points to know:

Sixty-one percent of all withdrawals are made by all traditional IRA-owning households (of any age) are based on RMDs.
Among people age 70 or older, 89 percent of all withdrawals made by traditional IRA-owning households are based on RMDs.
Sixty-nine percent of households taking withdrawals from traditional IRAs use a professional advisor to determine the amount.
Thirty-seven percent of traditional IRA-owning households that take withdrawals reinvest part or all of the money in another account.

These statistics are from the Investment Company Institute (ICI) research report "The Role of IRAs in U.S. Households’ Savings for Retirement, 2015." Adding up the statistics, it becomes clear that: 1) RMDs are forcing huge amounts of assets out of traditional IRAs of people over age 70; 2) the account owner’s goal often is to reinvest these assets wisely somewhere else; and 3) professional advice is needed to set up a new investment program, which (in many cases) will continue for life.

RMDs are really just tax toll booths. After the tax is paid, there is no reason why remaining money must be spent, rather than invested. Each RMD event (and especially the first one, in the year after turning age 70 ½) can be an opportunity to help clients evaluate personal investment objectives, risk tolerance, and asset allocation.

How can you seize the opportunity? First, offer everyone in your market a free hour for education and evaluation of RMD requirements. If possible, help clients and prospects determine the amount of their first few RMDs, keeping in mind that: 1) the IRA valuation date is December 31 of the prior year; 2) values of all traditional IRAs are combined; 3) the RMD may be taken from any one traditional IRA or a combination of several.

Then, help each client understand options to keep the after-tax distribution working in other investments, including those that are tax-deferred. Finally, create an investment plan that meets personal objectives for risk, income, growth and other factors.

Want more info? Look at these IRS publications on RMDs to brush up your knowledge.

Instant Insights /

The key to unlocking new investable assets after 70

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