Sofa understanding 401 k rollovers

THANK
YOU FOR
JOINING US!
OUR HOPE TODAY IS TO PROVIDE YOU WITH
SOME VALUABLE INFORMATION, HAVE SOME
FUN, AND ENJOY THIS NEXT HOUR.
WE WOULD LIKE TO WELCOME
YOU TO TODAY’S WORKSHOP
2
2016 | The Society for Financial Awareness

3
EVALUATION FORM
Please review this
form. I will be picking
these up at the end
of the workshop.
Do note – the
backside is to be used
for your specific
questions and issues.

Contents:
4
• Why is this so important?
• Evaluating and understanding the
options.
• Building your retirement plan…

Why is this so important?
5

Where Will Your Money Come From?
6

How Much Income Will You Need?
7
*Source: Mouton & Co..2016 | The Society for Financial Awareness

Evaluating and Understanding the Options
8

The Choices You Face – When Changing Jobs
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• Take the cash
• Leave the money in your current plan
• Move the money to your new
employer’s plan
• Roll your money into a rollover IRA

Take the Money…
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• Immediate access to the
money
PROS CONS
• Lose tax-deferred savings
potential
• May incur penalties for early
withdrawal if you are under
59½
• Loss of retirement savings
income (spent now instead
of saving for retirement)

What Happens When You Take the Money?
11
Retirement Plan Distribution $100,000
Federal IncomeTax (25%) $25,000¹
State and Local IncomeTaxes (8%) $8,000²
EarlyWithdrawal Penalty (10%) $10,000³
$57,000
EXAMPLE
You pay out $43,000 in taxes and penalties $43,000
1.Assumes 25% federal tax bracket.
2.Assumes 8% state and local income tax rate.
3.Applicable if you’re under age 591/2 and left your employer before
the year you reached age 55.

Leave the Money Where It Is….
12
• Tax-deferred
compounding continues
PROS CONS
• Investment choices
limited to those offered
by your old employer’s
plan
• Less flexibility for future
distributions/withdrawals
• No Stretch Options
Available

Move the Money to Where Ever You Go- Your New
Employer’s Plan
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• Tax-deferred
compounding continues
• Loans available for
selected purposes
PROS CONS
• Investment choices limited to
those offered by your new
employer’s plan
• Not eligible for substantially
equal periodic payments*
• Unable to convert assets to
Roth IRA
• Less flexibility for future
distributions/withdrawals
• No Stretch Options
Available*This is a provision within Section
72(t) of the Internal Revenue Code.

Leave the Money Where It Is….
14
PROS CONS
* First allowed under the provisions of the
Economic Growth and Tax Relief
Reconciliation Act of 2001, which contains a
“sunset provision.” Unless renewed or
changed by Congress, the Act will not apply
for tax years beginning after December 31,
2010. Please consult a tax advisor regarding
your specific tax and financial situation.
** Stretch IRAs are only appropriate for
investors that will not need the money to fund
their retirement. 72(t) programs are
complicated and are not appropriate for all
investors.
• Maximum flexibility of
investment choices
• Ability to consolidate
retirement savings
• Ability to roll over after-tax
contributions from your
retirement plan*
• Roth Conversion option may be
available
• Availability of 72(t) distributions
• Stretch OptionsAvailable
 Loans not available

72(t) Distributions- What Are They?
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• Substantially equal periodic payments made at
least annually
• Calculated over life expectancy according to an
IRS-approved method
• Taken for at least five years or until age 59½,
whichever is longer
• Early access to funds without penalty
* 72(t) programs are complicated and are not appropriate for all investors. It is recommended that investors seek the advice of a professional tax preparer prior to setting up distributions to determine
suitability. Once established, changes or modifications to a 72(t) program may incur severe penalties from the IRS. 72(t) distributions from a qualified plan are still subject to normal taxation. Investors should
note that distributions taken under a 72(t) program may be subject to surrender charges and/or early redemption fees based upon the type of investments held within the qualified plan.

Your Choices
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• Direct Rollover if:
– You’re changing jobs or retiring and want to move
your retirement plan money directly to an IRA
• Indirect or 60-Day Rollover if*:
– You recently received a retirement plan distribution
and want to avoid tax consequences*
* Investors may petition the IRS for a waiver to the 60-day rollover rule if their failure to meet the
deadline was due to certain circumstances beyond their control.

Building Your Plan…
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The Benefits of Asset Allocation
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Hypothetical Asset Allocation Portfolios
• Assets
• Income
• Age
• Investment Objective
• Risk Tolerance
What You
Should Consider:
Stock investments are represented by equal investments in the S&P 500, Russell 2000, and MSCI EAFE indexes, representing large U.S. stocks, small U.S. stocks and foreign stocks, respectively. Bonds are
represented by the Lehman Brothers Aggregate Bond Index. Cash equivalents are represented by P&R 90-day U.S. Treasury bills. Asset allocation strategies are for illustrative purposes only, and do not
represent the past performance of any investment. Past performance does not guarantee future results. No investment strategy, such as asset allocation, can guarantee a profit or protect against loss in periods
of declining values.

Potential Accumulation…
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This example is for illustrative purposes only and is not meant to represent the performance of any investment. The example assumes an 8% fixed rate of return compounded
monthly, and no fluctuation of principal. Distributions of deductible contributions and all earnings are taxed as ordinary income for the year in which the money is withdrawn.
Withdrawals received prior to age 591/2 may be subject to a 10% federal penalty.
 Balance at Age 65
 $206,954
from first $10,000

Review:
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• Why is this so important?
• Evaluating and understanding the
options.
• Building your plan…

21
EVALUATION FORM
Please take a
moment to
complete. I will be
collecting these
in a moment.
If you need a pen,
please let me know.

Thank you for your time!
Please complete your Program Evaluation.
We will be picking them up shortly.
Now would be a good time for me to answer
any particular questions you may have.

Sofa understanding 401 k rollovers

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