Your Retirement Plan Distribution How Your Decisions Today Affect Your Future
Who Is Stifel Nicolaus? <ul><li>National Headquarters - </li></ul><ul><li>St. Louis, MO </li></ul><ul><li>Full-Service Bro...
Three Retirement Plan Distribution Questions <ul><li>1) What are my distribution alternatives? </li></ul><ul><li>2) What a...
Distribution Alternatives Lump-   Sum   Distribution Roll Over to   IRA Leave $$  in the Plan Ten-Year  Averaging
Distribution Options: Leave $$ in Plan <ul><li>>$5,000 balance = Can’t be forced out </li></ul><ul><li>Sever ties with for...
Total Distribution <ul><li>Withdraw entire balance </li></ul><ul><li>Pay ordinary income tax </li></ul><ul><li>10% Penalty...
Income Tax <ul><li>Withdrawal amount added to your other income </li></ul><ul><li>Taxed at your current rate </li></ul><ul...
Premature Distribution Penalty   <ul><li>10% pre-59½  </li></ul><ul><li>Exceptions: </li></ul><ul><ul><li>55 years and sep...
20% Tax Withholding <ul><li>Distributions made payable to participant’s name </li></ul><ul><li>Automatic withholding to IR...
Distribution Example <ul><li>Distribution: $100,000 </li></ul><ul><li>Tax Withheld (20%):   - 20,000 </li></ul><ul><li>Che...
Lump-Sum Distribution/ Forward Tax Averaging   <ul><li>Favorable method of calculating taxes due </li></ul><ul><li>Taxes d...
To Be Eligible for  Tax Averaging <ul><li>Age 59½ </li></ul><ul><li>Plan participant for 5 years </li></ul><ul><li>One-tim...
Forward Averaging Example
Distribution Options Roll to IRA <ul><li>Advantages: </li></ul><ul><ul><li>Avoid current taxation </li></ul></ul><ul><ul><...
Indirect Rollover <ul><li>Take possession of $$ </li></ul><ul><li>20% Withholding </li></ul><ul><ul><li>either repay this ...
Direct Rollover <ul><li>$$ sent directly to new IRA custodian </li></ul><ul><li>Continue tax-deferred savings </li></ul><u...
How to Do a Direct Rollover <ul><li>Determine where you want to invest </li></ul><ul><li>Before you receive your check </l...
Portability <ul><li>QP distributions may be rolled to: </li></ul><ul><ul><li>IRA </li></ul></ul><ul><ul><li>another qualif...
Tax Benefits of a Rollover $100,000 for 10 years with a 10% Return Distribution Reduced by Taxes Annual Earnings Reduced b...
IRA Distributions <ul><li>Ordinary income on distributions </li></ul><ul><li>Penalty pre-59½  (exceptions) </li></ul><ul><...
Should I Convert IRA  to Roth IRA? <ul><li>Eligibility = < $100k  AGI </li></ul><ul><li>Pay ordinary income tax now for en...
Employer Stock <ul><li>Special taxation if distributed in-kind </li></ul><ul><li>Do not roll to IRA </li></ul><ul><li>10% ...
Employer Stock <ul><li>Basis = taxed as ordinary income in year of distribution </li></ul><ul><li>Net Unrealized Appreciat...
Investing Your Distribution Analyze  Your Situation See Your Tax Advisor What is a Stock? Bond? Mutual Fund? Investment Se...
What is a Stock? <ul><li>Ownership </li></ul><ul><li>Appreciation </li></ul><ul><li>Yield (dividends) </li></ul>
What is a Bond? <ul><li>Loan (Debt) </li></ul><ul><li>Interest Rate </li></ul><ul><li>Return of Principal </li></ul><ul><l...
What is a Mutual Fund? <ul><li>Diversified portfolio </li></ul><ul><li>Professionally managed </li></ul><ul><li>Various Ob...
<ul><li>Investors should consider a fund’s investment objectives, risks, and charges and expenses carefully before investi...
Selecting Investments <ul><li>Balance risk and rate of return </li></ul><ul><ul><li>Be realistic in return assumptions </l...
Risk and Reward <ul><li>The more risk taken, the greater the  potential  reward or loss.  </li></ul><ul><li>Risk and rewar...
Risk Categories <ul><li>Conservative </li></ul><ul><li>Moderate </li></ul><ul><li>Aggressive </li></ul>
91.5% of Portfolio Variance is Determined by   Asset Allocation Strategic Asset Allocation 91.5% Security Selection 4.6% O...
Stocks, Bonds and Inflation $15,091.10 $3,246.39 $78.78 $20.19 $11.72 $0.10 $1.00 $10.00 $100.00 $1,000.00 $10,000.00 1925...
Short-Term Performance   is Hard to Predict . . . Source: Stocks, Bonds, Bills, and Inflation 2008 Yearbook, ™ Ibbotson As...
. .  . But Over Time, Stocks Tend to  Out Perform Other Investments Source: Stocks, Bonds, Bills and Inflation 2008 Yearbo...
Benefit of Time in the Stock Market
The above Asset Allocation Models are intended to provide a guide in the allocation of your total financial assets. The ac...
Stifel Nicolaus Can Help You Assess  Your  Situation <ul><li>The Asset Allocation Analysis Report </li></ul>
Take the Next Steps <ul><li>Plan early </li></ul><ul><li>Consult with your tax advisor </li></ul><ul><li>Free consultation...
Member SIPC and NYSE Questions? This presentation is for educational purposes only. It is  recommended that you seek the a...
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401K Rollovers

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Brief overview of options for corporate retirement plans when separating from service or retiring.

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  • 401K Rollovers

    1. 1. Your Retirement Plan Distribution How Your Decisions Today Affect Your Future
    2. 2. Who Is Stifel Nicolaus? <ul><li>National Headquarters - </li></ul><ul><li>St. Louis, MO </li></ul><ul><li>Full-Service Brokerage/ Investment Banking Firm </li></ul><ul><li>Founded in 1890 </li></ul><ul><li>1,220 Financial Advisors, 193 branches, in 35 states * </li></ul><ul><li>Member SIPC & NYSE </li></ul><ul><li>* including our affiliates </li></ul>
    3. 3. Three Retirement Plan Distribution Questions <ul><li>1) What are my distribution alternatives? </li></ul><ul><li>2) What are my tax and penalty consequences? </li></ul><ul><li>3) How should I invest my distribution? </li></ul>
    4. 4. Distribution Alternatives Lump- Sum Distribution Roll Over to IRA Leave $$ in the Plan Ten-Year Averaging
    5. 5. Distribution Options: Leave $$ in Plan <ul><li>>$5,000 balance = Can’t be forced out </li></ul><ul><li>Sever ties with former employer </li></ul><ul><ul><li>Gain control </li></ul></ul><ul><ul><li>Greater flexibility </li></ul></ul>
    6. 6. Total Distribution <ul><li>Withdraw entire balance </li></ul><ul><li>Pay ordinary income tax </li></ul><ul><li>10% Penalty if less than 59½ years of age </li></ul><ul><li>20% Withholding when paid directly to you </li></ul>
    7. 7. Income Tax <ul><li>Withdrawal amount added to your other income </li></ul><ul><li>Taxed at your current rate </li></ul><ul><ul><li>current rate = 10% - 35% </li></ul></ul><ul><ul><li>state & local taxes </li></ul></ul>
    8. 8. Premature Distribution Penalty <ul><li>10% pre-59½ </li></ul><ul><li>Exceptions: </li></ul><ul><ul><li>55 years and separation from service </li></ul></ul><ul><ul><li>Death </li></ul></ul><ul><ul><li>Disability </li></ul></ul><ul><ul><li>Deductible medical expenses </li></ul></ul><ul><ul><li>QDRO </li></ul></ul>
    9. 9. 20% Tax Withholding <ul><li>Distributions made payable to participant’s name </li></ul><ul><li>Automatic withholding to IRS </li></ul><ul><li>Prepayment of potential taxes due </li></ul><ul><li>Roll over 80% of distribution or replace the 20% with your own funds </li></ul><ul><li>If not replaced: </li></ul><ul><ul><li>20% withheld amount is considered a distribution </li></ul></ul><ul><ul><li>taxable </li></ul></ul><ul><ul><li>10% penalty if less than 59½ </li></ul></ul>
    10. 10. Distribution Example <ul><li>Distribution: $100,000 </li></ul><ul><li>Tax Withheld (20%): - 20,000 </li></ul><ul><li>Check Received: $80,000 </li></ul><ul><li>Rollover: $80,000 </li></ul><ul><li>Subject to Tax: $20,000 </li></ul><ul><li>Tax (28% + 10% penalty): - 7,600 </li></ul><ul><li>Tax Refund: ($20,000 - $7,600) $12,400 </li></ul>
    11. 11. Lump-Sum Distribution/ Forward Tax Averaging <ul><li>Favorable method of calculating taxes due </li></ul><ul><li>Taxes due in year of distribution </li></ul><ul><li>Other ordinary income calculated separately </li></ul><ul><li>10-Year averaging </li></ul><ul><ul><li>uses 1986 income tax rates </li></ul></ul><ul><li>20% capital gains treatment </li></ul><ul><ul><li>applies to pre-1974 balances </li></ul></ul>
    12. 12. To Be Eligible for Tax Averaging <ul><li>Age 59½ </li></ul><ul><li>Plan participant for 5 years </li></ul><ul><li>One-time election </li></ul><ul><li>Distribute entire balance (Lump Sum) </li></ul><ul><li>and… </li></ul><ul><li>For 10-year averaging: Born before January 1, 1936 </li></ul>
    13. 13. Forward Averaging Example
    14. 14. Distribution Options Roll to IRA <ul><li>Advantages: </li></ul><ul><ul><li>Avoid current taxation </li></ul></ul><ul><ul><li>Avoid penalty </li></ul></ul><ul><ul><li>Tax-deferred compounding </li></ul></ul>
    15. 15. Indirect Rollover <ul><li>Take possession of $$ </li></ul><ul><li>20% Withholding </li></ul><ul><ul><li>either repay this or consider it a distribution </li></ul></ul><ul><li>Deposit into an IRA </li></ul><ul><ul><li>within 60 days of receipt </li></ul></ul><ul><li>Direct Rollover is smarter </li></ul>
    16. 16. Direct Rollover <ul><li>$$ sent directly to new IRA custodian </li></ul><ul><li>Continue tax-deferred savings </li></ul><ul><li>No current income tax </li></ul><ul><li>No 10% penalty </li></ul><ul><li>No 20% withholding </li></ul><ul><li>Taxed only at time of distribution from IRA </li></ul>
    17. 17. How to Do a Direct Rollover <ul><li>Determine where you want to invest </li></ul><ul><li>Before you receive your check </li></ul><ul><ul><li>Open your IRA </li></ul></ul><ul><ul><li>Sign the current plan’s distribution paperwork </li></ul></ul><ul><ul><li>Plan makes check payable to IRA custodian </li></ul></ul>
    18. 18. Portability <ul><li>QP distributions may be rolled to: </li></ul><ul><ul><li>IRA </li></ul></ul><ul><ul><li>another qualified plan which accepts rollovers </li></ul></ul><ul><ul><li>403(b) plan </li></ul></ul><ul><ul><li>457 plan for a state governmental entity </li></ul></ul>
    19. 19. Tax Benefits of a Rollover $100,000 for 10 years with a 10% Return Distribution Reduced by Taxes Annual Earnings Reduced by Taxes 100 % of Distribution Invested No Taxes on Annual Earnings Note: Taxes will be due on the Direct Rollover upon withdrawal. The above is a hypothetical illustration only and is not intended to reflect actual investment performance.
    20. 20. IRA Distributions <ul><li>Ordinary income on distributions </li></ul><ul><li>Penalty pre-59½ (exceptions) </li></ul><ul><li>Mandatory distributions age 70½ </li></ul>
    21. 21. Should I Convert IRA to Roth IRA? <ul><li>Eligibility = < $100k AGI </li></ul><ul><li>Pay ordinary income tax now for entire amount </li></ul><ul><li>Can do partial conversion </li></ul><ul><li>Tax-free growth </li></ul><ul><li>Tax-free distributions for life </li></ul>
    22. 22. Employer Stock <ul><li>Special taxation if distributed in-kind </li></ul><ul><li>Do not roll to IRA </li></ul><ul><li>10% penalty does apply </li></ul>
    23. 23. Employer Stock <ul><li>Basis = taxed as ordinary income in year of distribution </li></ul><ul><li>Net Unrealized Appreciation (NUA) </li></ul><ul><li>– taxed at 15% long-term capital gain rate </li></ul><ul><li>(5% if in 10% or 15% bracket) </li></ul><ul><li>– at time of sale of shares </li></ul><ul><li>– ordinary income if less than one year </li></ul>
    24. 24. Investing Your Distribution Analyze Your Situation See Your Tax Advisor What is a Stock? Bond? Mutual Fund? Investment Selection & Asset Allocation
    25. 25. What is a Stock? <ul><li>Ownership </li></ul><ul><li>Appreciation </li></ul><ul><li>Yield (dividends) </li></ul>
    26. 26. What is a Bond? <ul><li>Loan (Debt) </li></ul><ul><li>Interest Rate </li></ul><ul><li>Return of Principal </li></ul><ul><li>Maturity Date </li></ul>
    27. 27. What is a Mutual Fund? <ul><li>Diversified portfolio </li></ul><ul><li>Professionally managed </li></ul><ul><li>Various Objectives </li></ul>
    28. 28. <ul><li>Investors should consider a fund’s investment objectives, risks, and charges and expenses carefully before investing. The prospectus, which contains this and other important information, can be obtained by contacting your Financial Advisor and should be read carefully before investing. The investment return and principal value of an investment will fluctuate, so that an investor’s shares, when redeemed, may be worth more or less than the original cost. Mutual funds are not FDIC insured and may lose value. </li></ul>
    29. 29. Selecting Investments <ul><li>Balance risk and rate of return </li></ul><ul><ul><li>Be realistic in return assumptions </li></ul></ul><ul><li>Every person has different risk concerns and income needs </li></ul><ul><li>Stifel Nicolaus has numerous options available to meet your needs. </li></ul>
    30. 30. Risk and Reward <ul><li>The more risk taken, the greater the potential reward or loss. </li></ul><ul><li>Risk and reward are directly related . </li></ul>RISK REWARD more less less more
    31. 31. Risk Categories <ul><li>Conservative </li></ul><ul><li>Moderate </li></ul><ul><li>Aggressive </li></ul>
    32. 32. 91.5% of Portfolio Variance is Determined by Asset Allocation Strategic Asset Allocation 91.5% Security Selection 4.6% Other Factors 2.1% Market Timing 1.8% Source: Brinson, Singer, and Beebower, “Determinants of Portfolio Performance II”: An Update, “ Financial Analysts Journal”, May-June 1991.
    33. 33. Stocks, Bonds and Inflation $15,091.10 $3,246.39 $78.78 $20.19 $11.72 $0.10 $1.00 $10.00 $100.00 $1,000.00 $10,000.00 1925 1935 1945 1955 1965 1975 1985 1995 2000 2002 2007 Large Company Stocks Small Company Stocks Long-Term Government Bonds Treasury Bills Inflation 1925 - 2007 Source: Stocks, Bonds, Bills and Inflation 2008 Yearbook, ™ Ibbotson Associates, Chicago. Large Company Stocks represented by S&P 500 (a registered trademark of Standard & Poor’s Corporation). Small Company Stocks are from an index of the 9th & 10th (lowest) capitalization stocks of the NYSE. Long-term U.S. government bonds represented by the Salomon Brothers Long-Term Government Bond Index, cash as measured by 30-day Treasury bills and inflation measured by the Consumer Price Index for all urban consumers (CPI-U). Dividends are reinvested. Past performance is no guarantee of future results. Indices are unmanaged and are not available for direct investment.
    34. 34. Short-Term Performance is Hard to Predict . . . Source: Stocks, Bonds, Bills, and Inflation 2008 Yearbook, ™ Ibbotson Associates, Chicago. Bonds as represented by the Salomon Brothers Long-Term Government Bond Index, Stocks are measured by the S&P 500® (a registered trademark of Standard & Poor’s Corporation) and Cash as measured by 30-day Treasury bills. The indices are unmanaged and are not available for direct investment. The S&P 500 includes dividend reinvestment. Past performance is no guarantee of future results. Stocks Cash Bonds
    35. 35. . . . But Over Time, Stocks Tend to Out Perform Other Investments Source: Stocks, Bonds, Bills and Inflation 2008 Yearbook, Ibbotson Associates, Chicago, IL. Long-term U.S. Government bonds represented by the Salomon Brothers Long-Term Government Bond Index, common stocks are measured by the S&P 500® (a registered trademark of Standard & Poor’s Corporation) and Cash as measured by 30-day Treasury bills. The indices are unmanaged and are not available for direct investment. The S&P 500 includes dividend reinvestment. Past performance is no guarantee of future results.
    36. 36. Benefit of Time in the Stock Market
    37. 37. The above Asset Allocation Models are intended to provide a guide in the allocation of your total financial assets. The actual allocation of all or any portion of your financial assets may not correlate to the percentages shown for the applicable Model. Stifel does not predict nor guarantee actual results of an asset allocation or investments made in connection with a suggested allocation. Any changes in your financial situation should be reviewed with your Stifel Financial Advisory for a determination of whether changes in your portfolio allocation are necessary. Stifel also encourages you to periodically review your allocation with your Stifel Financial Advisor. Small company stocks may be riskier and more volatile than larger, more established company stocks. International investing is subject to the risk of currency fluctuations and political and economic events. Sample Asset Allocation Models Cash Fixed Income Large Cap Stocks Mid Cap Stocks Small Cap Stocks International
    38. 38. Stifel Nicolaus Can Help You Assess Your Situation <ul><li>The Asset Allocation Analysis Report </li></ul>
    39. 39. Take the Next Steps <ul><li>Plan early </li></ul><ul><li>Consult with your tax advisor </li></ul><ul><li>Free consultation & analysis </li></ul><ul><li>Determine which tax strategy is best for YOU </li></ul>
    40. 40. Member SIPC and NYSE Questions? This presentation is for educational purposes only. It is recommended that you seek the aid of a competent tax advisor or tax attorney to assist you with tax advice and guidance.

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