Can I File a FINRA Claim for Bad Advice on Required Minimum Distributions?
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As reported in InvestmentNews, three Raymond James entities have agreed to pay over $15 million to resolve an investigation by the SEC. The settlement and SEC order focused on Raymond James’s actions in improperly charging certain clients advisory fees when the...read more
Properly managing your IRA or other retirement accounts means following a series of rules. You face limits on contributions, you can’t withdraw funds early without taking a penalty, and once you can withdraw funds, you may be required to withdraw certain minimum amounts. Ultimately, the account holder is the one who pays for penalties or suffers the tax consequences of failing to follow the rules, but the broker or banker that manages your account should be counseling you and warning you of potential problems. If you suffered penalties or tax consequences because of rules on your account, you may be able to file a claim against the broker or financial advisor who gave you bad advice. For a free consultation on your FINRA claim, contact the FINRA arbitration lawyers at Epperson & Greenidge today.
IRA and 401(k) Rules and Required Minimum Distributions
An IRA (Individual Retirement Account) is one of the most common retirement accounts used in the US. Many banks and brokerage firms recommend these accounts as retirement investments, since they let you control when the account is taxed. The money put into traditional IRAs is all pre-tax, meaning you don’t include it as income or pay any tax on the money until you withdraw it from the account. Alternatively, Roth IRAs allow you to put after-tax money into the account now, and it can grow without accumulating more tax, allowing tax-free withdrawal during your retirement.
401(k) and 403(b) accounts are employer-sponsored retirement plans. Many employers match your contributions, up to certain limits. This helps you grow your retirement funds beyond what you would be able to with an IRA or simple savings account. These plans may also give you plenty of options to be hands-on with your investments, but also have limitations for how much you can put into your account.
One of the most particular rules with retirement accounts are the “required minimum distribution” (RMD) rules. Once it comes time to start withdrawing your funds, the rules for these accounts require you to withdraw certain amounts each year. Once you turn 70 1/2 years old, many of these accounts require you to take a minimum amount from the account every year.
For the year you turn 70 1/2, you must make your first withdrawal by April 1 in the following year. After that, including the first year after you turn 70 1/2, you must make a withdrawal by December 31. But how much must you withdraw?
The IRS has a worksheet to help you calculate how much you need to withdraw from your IRA, based on your age. Essentially, the rules in IRS Publication 590-B and the worksheet make an (often inflated) assumption of what your life expectancy will be, and presume you will withdraw the same amount each year to stretch your funds as far as they will go. This sets the minimum amount that you must withdraw, or else face tax consequences.
Typically, you can withdraw more funds if you want. Additionally, some accounts, like Roth IRAs, may not require any minimum withdrawals. Understanding your requirements is part of properly managing your account – something your financial advisor or broker should help you with.
Can I Sue My Broker for Charges on My Retirement Accounts?
If your broker or financial advisor is properly managing your account, you should have any questions answered and get guidance in making the proper decisions for your account. You always have the right to override your financial advisor’s advice and face penalties if you decide to – but if your financial advisor fails to give you the information you need to understand required minimum distributions, they may have committed financial negligence.
Your financial advisor is bound by the brokerage agreement or other contracts you sign detailing the services they will provide. Much of this involves giving you proper disclosures and federally mandated information to help you run your account yourself. They may also have certain duties to you, based on this agreement. Failing to properly provide these services may constitute a breach of contract. This could justify a claim against the broker.
Additionally, if they should have warned you against early withdrawals or told you what your RMD amount is, they may be responsible for the consequences. If you face tax penalties or other account penalties on your IRA or 401(k) because your broker allowed you to make a bad decision without warning you against it, they may have breached the duties they owe you. This could justify filing a claim through the Financial Industry Regulatory Authority (FINRA) and seeking arbitration to decide the claim.
FINRA Claims Lawyers
If your broker or financial advisor failed to give you the advice you need to follow the rules on your IRA or 401(k), you may be entitled to file a claim through FINRA. This could help compensate you for tax or account penalties you faced for failing to follow RMD rules. For a free consultation on your case, call the FINRA claims lawyers at Epperson & Greenidge today at (877) 445-9261.