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You can take it with you: Rollover planning


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You can take it with you: Rollover planning

  1. 1. EO033 270091 11/11 |1
  2. 2. Your career may take manytwists and turns Americans, on average, have worked 11 different jobs by the time they turn 42 years old.Source: Bureau of Labor Statistics, National Longitudinal Survey of Youth 1979, 2008, which is the most recent data available. EO033 270091 11/11 |2
  3. 3. Which road will you follow? 1. Stay put: leave it in the plan 2. Convert it to cash 3. Move it to your new employer’s plan 4. Take it with you with a Rollover IRA EO033 270091 11/11 |3
  4. 4. Option 1:Stay putYou can often keep your retirementsavings invested in your old plan afteryou leave your job. EO033 270091 11/11 |4
  5. 5. You may want to leave yourmoney in the plan Pros Cons• Tax-deferred compounding • Your investment choices may• No taxes or IRS penalties be limited• Some plans offer special • You may not be allowed to make investment options such as additional contributions or employer stock take loans • You could have recordkeeping headaches if you change jobs frequently • The plan controls access to your savings EO033 270091 11/11 |5
  6. 6. Option 2:Convert your savings to cashWithdrawing your assets in a lump sumis an option, but it’s rarely the bestchoice for pursuing your retirementsavings goals. EO033 270091 11/11 |6
  7. 7. Avoid detours!Taking a cash distribution can have a significantimpact on your ability to meet your savings goals Pros Cons• Immediate access to your • Distribution may be subject to savings taxes and penalties • The money can never be rolled over to another IRA or employer retirement plan • If you don’t invest the money, it could derail your retirement savings plan EO033 270091 11/11 |7
  8. 8. Cashing out could mean paying a hefty toll Tax consequences:• Income taxes due at current rate• 20% mandatory withholding• 10% additional tax on early withdrawals*• Loss of tax-deferred status * Most withdrawals made before 59½ are subject to a 10% additional tax penalty. EO033 270091 11/11 |8
  9. 9. Cashing out could mean paying a hefty toll Take it now Roll it over Retirement plan $50,000 $50,000 account balance 25% federal –$12,500 –$0 income tax 10% early withdrawal –$5,000 –$0 penalty Remaining balance $32,500 $50,000* Most withdrawals made before 59½ are subject to a 10% additional tax penalty. EO033 270091 11/11 |9
  10. 10. There’s no substitute for timeon the road to retirementInvestor A stays investedRolls over a $50,000 Total Totalportfolio, which earns invested $367,0098% a year for 25 years $50,000Investor B cashes out,then five years later triesto catch up Total Total invested $245,425Contributes $5,000 a $100,000year for 20 years, alsoearning 8%Illustrative purposes only. EO033 270091 11/11 | 10
  11. 11. Option 3:Move your savingsIf you are changing jobs, you may beable to move your savings to your newemployer’s retirement plan. EO033 270091 11/11 | 11
  12. 12. Moving your savings can get youfurther down the road to retirement Pros Cons• Tax-deferred compounding • Investment options may of assets be limited• Retirement assets under one roof • Rules governing withdrawals are• Some plans offer special based on the plan’s provisions investment options, such as • New plan may not be available if employer stock purchase programs you’re starting your own business or loan provisions or taking a part-time job EO033 270091 11/11 | 12
  13. 13. Option 4:Take it with you!Transfer your savings to a Rollover IRAwithout taxes or penalty. EO033 270091 11/11 | 13
  14. 14. A Rollover IRA offers a range ofbenefits, wherever your careertakes you Pros Cons• Wider range of investment choices • Does not offer loans• Option to make withdrawals before • Special tax advantages for assets age 59½ without IRS penalties held in employer stock are not• Ability to convert assets to a available Roth IRA • May offer less protection• Easier recordkeeping and from creditors management EO033 270091 11/11 | 14
  15. 15. Two ways to roll overyour savings1. Direct rollover• Retirement assets are transferred directly from former employer’s plan to: –A Rollover IRA, or –A new employer’s plan• No income taxes due• No mandatory 20% federal income tax withholding• No IRS penalty for early withdrawal EO033 270091 11/11 | 15
  16. 16. Two ways to roll overyour savings2. Indirect rollover• Distribution check is made payable to participant• 20% is withheld for federal income tax purposes• Participant has 60 days to reinvest distribution (including amount withheld) in a new employer’s plan or in a Rollover IRA• IRS penalty for missed deadline is severe –Cannot shelter those assets from taxes in the future –Income taxes must be paid on full distribution –10% additional tax if distribution is made before age 59½ EO033 270091 11/11 | 16
  17. 17. Keep your eyes on the road• Remember, cashing out can cost you• Compounding can help grow your savings• A Rollover IRA may offer more flexibility EO033 270091 11/11 | 17
  18. 18. Need directions? Talk to your financial advisor Call Putnam Investments EO033 270091 11/11 | 18
  20. 20. Investors should carefully consider the investmentobjectives, risks, charges, and expenses of a fundbefore investing. For a prospectus, or a summaryprospectus, if available, containing this and otherinformation for any Putnam fund or product, callyour financial representative or call Putnam at1-800-225-1581. Please read the prospectuscarefully before investing.Putnam Retail EO033 270091 11/11 | 20
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