Can IRA Money Be Lost?

Can IRA money be lost

There’s an age-old saying that savings for retirement is a marathon, not a sprint. By investing wisely over several decades, it is possible to amass an impressive nest egg by the time it comes time for you to retire.

Your IRA investments can be susceptible to market fluctuations. Therefore, many experts advise leaving them alone when their value declines.

1. Lost Funds

There’s a reason retirement savings is often described as a marathon, not a sprint. By saving consistently over several decades and investing wisely, your nest egg could become quite substantial by the time you retire.

But IRAs are just investments accounts like any other, and their values will fluctuate with market shifts. You might notice your IRA balance declining during a market downturn; that is to be expected and nothing to worry about.

An IRA that declines can provide you with an incredible opportunity to capitalize on lower prices and ultimately reap even greater gains down the line. But if you lose track of it – perhaps due to statements being returned or calls going unanswered or your financial circumstances changing and you switch banks or brokerages – then your money could be lost forever as per current law: unclaimed accounts that go three to five years unclaimed get turned over to state treasurer.

2. Lost Accounts

Your IRA investments may experience ups and downs, which is part of investing over an extended period. What’s important, though, is not making hasty decisions that could cost you dearly.

Saving for retirement requires disciplined savings over many years; many people use an IRA account as part of their plan and aim to amass an impressive nest egg by the time they retire.

But, if your life changes drastically, you could easily lose track of your IRA balance. Capitalize estimates that as many as 24 million IRAs have been “forgotten,” with many ending up transferred to state unclaimed property agencies before their owners ever claim them back.

3. Lost Custodians

Basis can easily be lost if a Traditional IRA owner passes away without filing Form 8606. As these filing requirements only become necessary when after-tax money enters or exits an account, months could pass without any such trigger events happening.

If the owner hasn’t accessed his IRA for some time, state laws may deem the account abandoned and turn over assets back to them. In such an instance, check with your state’s unclaimed property department or search online for “abandoned IRA”.

Custodians also serve an additional role: verifying investments as legitimate. This can be especially challenging in self-directed IRAs where investors may invest in alternative assets like real estate, precious metals or private equity; should the custodian fail to perform its due diligence duties effectively then investors may lose considerable amounts to scams.

4. Lost Taxes

Many clients make after-tax contributions to IRAs without realizing it is posttax and do not properly record them on tax returns, potentially losing IRA basis and incurring double taxation upon distributions taken without accounting for these contributions. When clients die, their beneficiaries could easily lose this tax basis when changing preparers or financial advisors.

Early withdrawal from an IRA will incur a 10% penalty and ordinary income taxes, in addition to other penalties related to contributions and earnings that were once tax deductible. It’s wise to plan early withdrawals and execute strategies such as withdrawing first from Roth IRAs, then nondeductible IRAs, and finally any tax deductible IRAs as needed if necessary – that way your penalties should be lower and not incurrable at once! It is common for your balance in an IRA account to fluctuate as part of investing, so staying diversified while not selling during market declines is essential in preventing penalties from accruing.

Raymond Banks Administrator
Raymond Banks is a published author in the commodity world. He has written extensively about gold and silver investments, and his work has been featured in some of the most respected financial journals in the industry. Raymond\\\'s expertise in the commodities market is highly sought-after, and he regularly delivers presentations on behalf of various investment firms. He is also a regular guest on financial news programmes, where he offers his expert insights into the latest commodity trends.

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