Retirement planning can be a tricky area to navigate because it involves hundreds of rules, and violating them can result in unnecessary taxes and penalties. It's no surprise that many retirees have made costly errors in their golden years. It's just another reminder about the benefits of an independent, fee-only, fiduciary financial planner.

Here are some of the most common errors you can avoid:

1. Not having beneficiaries on a retirement plan or IRA. Always be sure that your beneficiaries are in place and that they are correct. It simplifies estate processing since accounts with beneficiaries do NOT need probate. And it offers heirs valuable tax-savings options.

2. Missing out on Net Unrealized Appreciation. If your 401(k) includes employer stock, you might be eligible for important tax savings. If you qualify, the stock in your 401(k) can be removed with only the original value of the stock treated as ordinary income. The balance of the value of the stock is treated as capital gains. This can substantially reduce the total tax on the part of the 401(k).

3. Indirectly rolling over more than one IRA within a 12-month period. You are permitted one indirect rollover per year in ALL your IRAs. If you have multiple 401(k) accounts or multiple IRAs and you wish to consolidate them you should be sure to use a trustee-to-trustee transfer. An independent financial planner can help you sort this out and s/he can execute the transfers on your behalf.

4. Not paying back a loan from your 401k before rolling it over to an IRA. In this case, the loan will be treated as a taxable distribution, and if you're under age 59½ it will also trigger a 10% early withdrawal penalty.

5. Forgetting your age. For employer-sponsored plans and IRAs, you must be age 59½ before you can take a distribution without a 10% early penalty, unless you have an exception. And remember, the exceptions only apply to IRAs. AND, at age 70½ you must start taking annual required mandatory distributions from your traditional IRA. Failing to do so triggers a 50% penalty on the missed required distribution

6. Rolling over a company retirement plan to an IRA incorrectly. If the rollover check is made out to the employee instead of the IRA custodian, the IRS requires that 20% of the distribution be withheld. This is another good reason to have an independent advisor help you with this process. If the 20% is withheld, it's treated as taxable income, and if you're younger than 59½ there is an additional 10% penalty.

Mistakes can be expensive when it comes to retirement planning. An independent, fee-only fiduciary financial planner will protect your interests and simplify the process.

If you have questions about your retirement accounts contact me to talk about it HERE. I am always happy to meet people to talk about retirement plans. Dunncreek Advisors does not provide legal or tax advice, nor is this article intended to do so.

The opinions of the author are not necessarily those of Farm Futures or Penton Agriculture.