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Roth 401(K) Powerpoint Roth 401(K) Powerpoint Document Transcript

  • The Roth 401(k)
    Presented to:
    Georgia Power Employees
    Jan 26th
    At Banning Mills
  • Roth 401(k) Overview
    What is a Roth 401(k)?
    How much can I contribute?
    Should I make pretax or Roth 401(k) contributions?
    Are distributions really tax free?
    What about employer matching?
    What else do I need to know?
    What about Roth conversions?
  • What is a Roth 401(k) ?
    The Roth 401(k) is simply a traditional 401(k) that accepts Roth 401(k) contributions.
    Contributions are made on an after tax basis
    Earnings and growth are federal tax free if certain conditions are met.
    Also are Georgia and Alabama state income tax free
  • How much can I contribute?
    Current maximum is 25% of compensation or $16,500 whichever comes first.
    Also can contribute up to $5500 as “catch up” contribution at or over age 50.
  • Should I make pretax or Roth 401(k) contributions?
    Depends on several factors:
    1)Current income tax bracket
    2)Tax bracket in retirement
    3)Growth of assets over time
    4)Planned distributions from accounts
    5)Desire to pass assets on to heirs.
  • Are distributions tax free?
    Your contributions are always tax free. In order for the earnings and growth to be tax free, they need to meet 2 stipulations:
    1)5 year waiting period
    2)Age 59 ½, disability or death (heirs)
    Otherwise, income tax + 10%
  • Employer Matching
    • Your company still matches Roth 401(k) contributions just like traditional contributions.
    • They will remain in a pre-tax basis
  • What else do I need to know?
    Split funding with traditional 401(k) is permitted
    Roth 401(k) has mandatory age 70 ½ withdrawals – Roth IRA does not
    Think multi-generational
  • Roth IRA conversions
    TIPRA 2005 eliminates $100k ceiling for 2010 and beyond
    Income tax on conversions in 2010 only can be spread out over following 2 tax years (2011&2012)
    Must maintain 5 year holding period before taking distributions
    Advantageous to have funds already set aside to pay the tax on conversion.
  • After-Tax Account Roth Conversion Example
    After-tax account balance = $50,000
    Contributions (basis) = $35,000
    Earnings and growth = $15,000
    If converted to Roth status and rolled into Roth IRA:
    Income added to 2011 AGI =$7500
    Income added to 2012 AGI = $7500
    End result is $50,000 Roth IRA growing tax-free for paying tax on $15,000!
    Note: These figures are a hypothetical example. Before engaging in this strategy you must find out your basis from the Southern Company Savings plan, and you should consult a tax advisor.
  • Who We Are
    The Signature Financial Group was formed in 2008 to provide independent and objective advice to Southern Company employees, retirees, and friends.
    Over 15 years direct experience advising on Southern Company Benefits.
    Offering retirement plan analysis, comprehensive financial planning and investment advice.
  • Who is Raymond James?
    Founded in 1962
    2000 Offices Worldwide
    Ranked Highest in Investor Satisfaction with Full Service Brokerage Firms in 2008 by J.D. Power and Associates ™
    Employer and partner with the Signature Financial Group
  • Disclaimer (legal stuff!)
    This information was pulled from material developed by Forefield, inc, an independent third party. It is general in nature, is not a complete statement of all information necessary for making an investment decision, and is not a recommendation or a solicitation to buy or sell a security. Investments and strategies mentioned may not be suitable for all investors. Past performance may not be indicative of future results. Raymond James and Associates, Inc. does not provide advice on tax. Legal, or mortgage issues. These matters should be discussed with an appropriate professional.
    Neither Signature Financial Group nor this presentation have been endorsed or approved by Southern Company, Georgia Power, or any of its affiliated operating companies.