Pub. 9 2019-2020 Issue 5

O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S — H E L P I N G C O L O R A D A N S R E A L I Z E D R E A M S March • April 2020 13 • If the Roth IRA assets are not needed for an emergency, the Roth IRA owner is ahead on retirement saving. Of course Roth IRA owners should avoid dipping into these funds for entertainment and nonessentials. Withdrawing only theminimumamount needed for emergencies is best so that the remaining assets continue to build for retirement. Individuals may even be able to roll over their emergency withdrawal back into the Roth IRA if other money becomes available to reimburse it, but they must meet certain requirements (i.e., 60-day and one-per-12-month rollover restrictions). Consider other key facts as you discuss the option of using the Roth IRA for emergency saving with your clients. • Money is contributed to a Roth IRA on an after-tax basis; the individual paid taxon themoneybefore itwent into the Roth IRA. Thus, these contributions are not taxed again when they are distributed, regardless of the reason for the withdrawal. In other words, Roth IRA distributions are tax-free and penalty-free until the owner has withdrawn all of the contributions made to his Roth IRAs. • Unlike other retirement accounts, the Roth IRA has certain distribution ordering rules. The first money distributed from the Roth IRA comes out of the contribution assets. If accessing more than the contributions — any conversion or retirement plan rollover assets and earnings — the remaining funds could be subject to federal income tax and the early distribution penalty tax when distributed. • If the Roth IRA owner has a qualified distribution, all of the assets — contribution, conversion, plan rollover, and earnings assets—aredistributed taxandpenalty free. The owner has a qualified distribution if he’s had a Roth IRA for five years ormore, and is either age 59½, a beneficiary of the Roth IRA, or he meets certain qualifications for disability or for first-time homebuyer expenses. • Anonqualifieddistributionof noncontribution assetsmay be subject to tax, but the early distribution penalty tax (if underage59½)won’tapplyifthewithdrawalisforqualified education expenses, healthcare expenses that exceed 10% of adjusted gross income, or certain other exceptions. Your clients may want to review the Roth IRA tax rules with a competent tax advisor. IRS Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs), is another good source of information. n B anks have always wrestled with one main issue when it comes to tracking insuranceontheir loancollateral: having adequateprotectionat anaffordableprice. Sinceuninsured lossesarerare, especially large losses, lenders try tospendas littleas possible on staff tasked with keeping track of insurance. However, the risk of a large uninsured loss and the regulations dictating that loans be properly tracked lead to costs that are much higher than desired, aswell asnegativecustomer interactions, all ofwhichcould be avoided. Costs include the following tracking expenses: • Employee pay, taxes and benefits • Management time and expense • System costs of tracking • Postage and phone expense • Letterhead and envelope costs for notification letters • Training expense • Examiner scrutiny The vast majority of your customers (typically 98 or 99%) have protection on their collateral at any given time. That means you are incurring the tracking expenses listed above for 1%-2% of your portfolio, and as you know, the process is very time consuming and costly. BlanketMortgage couldbe the answer to thesehighcostswhile still properly protecting your portfolios. With Blanket Mortgage coverage, youhave the same typeof protection that a lender-placed policy would provide. Additionally, Blanket Mortgage coverage is superior to typical lender-placed insurance because it’s automatic. You don’t have to take any steps to get it, you don’t have to depend on employees to catch a lapse of coverage on a borrower’s loan, and the protection is in place 24/7 year-round regardless of what actions your staff does or doesn’t take. It eliminates the risks associated with human error. Furthermore, all of us have seen the endless series of legal challenges and settlements involving traditional lender-placed/force-placed insurance tracking programs. Blanket Mortgage eliminates the types of legal risks that come with the traditional use of force-placed coverage. Keep in mind that Blanket Coverage is not just for mortgage loans. Blanket Equipment andBlanket VSI protect collateral that is not real estate. For more information, visit: • https://www.goldeneagle-insurance.com/blanket- mortgage • www.goldeneagle-insurance.com/blanket-equipment-0 • www.goldeneagle-insurance.com/vsi-vendors-single- interest • www.goldeneagle-insurance.com/what-is-blanket- insurance-for-lenders. n More information can also be found on Blanket Mortgage Protection in our ebook, "An introductory guide to Blanket Mortgage Insurance Coverage and how it can reduce costs while fully protecting your mortgage portfolio," which is available at www. goldeneagle-insurance.com/blanket-mortgage-eboo. The High Cost of Tracking Insurance