Total U.S. retirement asset values are down over 20% in the last two years. With interest rates at historic lows and inflation and taxation on the rise, I would think that the primary objective should be on educating plan holders on the profound effect that these variables have on their plan balances and future income streams.

Retirement assets are, by their very nature, self depleting. By that, I mean that plan owners will begin some kind of amortization process at retirement. Whether they own a traditional account, a Roth or both, these funds will more than likely be consumed by most owners during retirement.

The Investment Company Institute’s 2009 Investment Company Fact Book, sites that over $390 billion of IRA deposits were held in bank and thrift accounts at the end of 2008. According to bankrate.com, the average Jumbo IRA Money Markets APY is less than 1.10% as of 01/20/2010.

Plan owners need to understand that without careful and well thought-out planning now, they could very well find themselves with less income in later years than at the beginning of retirement.

Consider the following traditional plan owner who has a $100,000 plan balance and will begin taking required minimum distributions (RMDS) at the end of the year. A 25-year amortization of the plan, calculated at a 1.8% APY, shows that, at age 94, the RMD will be $3,689, which is less than the $3,716 RMD taken in the first year. The IRA plan’s balance at the end of 25 years will be down to less than $30,000.

If we contrast these values with an APY of 3.8%, the age 94 RMD of $6,000 will be more than the $3,789 RMD taken in the first year. Also, the plan’s balance at the end of 25 years will be more than $48,500. Taking on the risk required to earn another 2.0% can mean tens of thousands in additional retirement benefits.

Most people wouldn’t take out a mortgage without a detailed amortization schedule being provided. Why, then, wouldn’t they want one for their IRA?

The focus should be on educating retirees on the management of their qualified plan balances and income streams, by providing and comparing IRA amortization schedules that reflect the profound difference just a few percentage points in rates of return can have on their plan values. Conduct a web search for “IRA management software” (including quotes) to find software programs that provide traditional IRA planning tools.

Qualified plan owners who are near or at retirement and have estimated marginal tax rates above 25% should consider that the break- even point of a Roth IRA conversion may exceed life expectancy. Conduct a web search for “Roth conversion software” (including quotes) to find software programs available that can make the determination if a conversion is the right course of action.

Gina Gwozdz, a certified public accountant, is hosting the thirteenth edition of the Carnival of Tax. Gina has done a great job of highlighting tax-saving ideas from around the Web. I particularly liked the article on organizing your tax documents from…