This document provides an overview and summary of preserving retirement assets through IRA rollovers. It discusses the options available when changing jobs, including taking a lump sum distribution, leaving funds in the previous employer's plan, or rolling funds over to a new employer's plan or a traditional IRA. It notes that taking a lump sum distribution can result in taxes and penalties that reduce the available retirement funds. The document then provides examples showing how much more money could be available in retirement by rolling funds over instead of taking a lump sum. It discusses the details and benefits of direct and indirect IRA rollovers.
Changing Jobs? Take Your 401(k) and ... Roll It!Dolf Dunn
If you have recently lost your job, or are changing jobs, you may be wondering what to do with your 401(k) plan account. It is important to understand your options
A special report that discusses what to do with your tax refund, specifically strategies to optimize the use of your income tax refund; saving for your future, improving your financial well-being, addressing risk management strategies, education savings, reducing non-deductible debt, RRSP or non-registered savings, contributing to a Tax-Free Savings Account (TFSA), building an emergency fund and receiving your tax fund earlier than expected.
As a result of RRSP contributions, interest expenses, tax shelter deductions or various other tax deductions and credits, your clients may be expecting, or have recently received, an income tax refund from the Canada Revenue Agency (CRA). If they have received a tax refund, it may be a good opportunity to determine if they can use some or all of it to improve their financial well-being. This special report will discuss some strategies that may help them use their income tax refund more wisely and assist them in meeting their financial goals.
Changing Jobs? Take Your 401(k) and ... Roll It!Dolf Dunn
If you have recently lost your job, or are changing jobs, you may be wondering what to do with your 401(k) plan account. It is important to understand your options
A special report that discusses what to do with your tax refund, specifically strategies to optimize the use of your income tax refund; saving for your future, improving your financial well-being, addressing risk management strategies, education savings, reducing non-deductible debt, RRSP or non-registered savings, contributing to a Tax-Free Savings Account (TFSA), building an emergency fund and receiving your tax fund earlier than expected.
As a result of RRSP contributions, interest expenses, tax shelter deductions or various other tax deductions and credits, your clients may be expecting, or have recently received, an income tax refund from the Canada Revenue Agency (CRA). If they have received a tax refund, it may be a good opportunity to determine if they can use some or all of it to improve their financial well-being. This special report will discuss some strategies that may help them use their income tax refund more wisely and assist them in meeting their financial goals.
The CARES Act: A Simple Summary for InvestorsSusan Langdon
Sweeping legislation to respond to COVID-19 pandemic was cleared by Congress and signed into law on March 27, 2020. The Coronavirus Aid, Relief, and Economic Security Act (“the CARES Act”) authorizes more than $2 trillion to battle COVID-19 and its economic effects. The law is wide-ranging from support to the health care system’s fight against the coronavirus, as well as direct payments to individuals, expanded unemployment insurance, loans to small and large businesses, and support for state and local governments.
This document provides an overview on retirement investor’s relief in the government’s stimulus bill to help alleviate the financial strains from the coronavirus.
http://ekinsurance.com/financial/what-are-annuities/
Annuities can be a great way to make your money work, but many people may not understand the risks, rewards, or the workings of their annuities.
Michael Silver & Company CPAs has recently published an article on the benefits of retirement plans. Whether you have a small, independent business or a large company, we describe the advantages and disadvantages of each possible plan for each possible business.
A presentation from Gwen Becker (RBC Private Banking), Rhoda Dobler (Best & Blocksom) and Allison Maher (Family Wealth Coach) about what to explore in succession planning for transitioning a family business.
IntroductionComment by Exploring Series This is listed as a Head.docxvrickens
Introduction Comment by Exploring Series: This is listed as a Heading 2, but it should be Heading 1. Please change this heading to a Heading 1 style.
It is never too early to save for your retirement. For a start, you can estimate the amount that you need to have before you can retire comfortably using financial calculators found on sites such as CNN Money, Kiplinger, Motley Fool, and TIAA-CREF financial services. The good part is, there are many different types of retirement plans that you can participate, individually or with your employers. To help you save for retirement, there are many government-regulated and government-approved retirement accounts that you can contribute a certain amount to annually. Why should you enroll in a retirement plan NOWnow? Did you know that your retirement can last for 30 years or more? A common rule to follow is that a retiree will need up to 80% of his/her annual income today to retire comfortably. Unfortunately, the average benefit amount paid monthly by the Social Security Administration is only $1,177.
Below are many advantages why you should start saving NOWnow:
· Tax on employee and employer contributions is deferred until distributed.
· Investment gains in the plan are not taxed until distributed.
· Retirement assets can be carried from one employer to another.
· Contributions can be made easily through payroll deduction.
· Saver’s Credit is available.
· Flexible plan options are available.
· Better financial security at retirement.
Future Retirement Savings Value - Assuming 6% annual return Comment by Exploring Series: You need to insert a caption for this table and the next table.
Monthly Savings
5 years
15 years
20 years
$50
$3,506
$14,614
$23,218
$200
$14,024
$58,456
$92,870
$500
$35,059
$146,136
$232,176
Source: http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics-Benefits-of-Saving-Now
A contribution is defined as the amount that an employee and an employer can put into a retirement plan. There are, however, varying limits on how much we (including both employers and employees) can contribute to any of the retirement plan. Each plan has its own rules and criteria, and must specifically state that contributions or benefits cannot exceed certain limits. Employees can participate in contributions via salary reduction. Employers can match employees’ contributions or contribute outright a certain amount into the employees’ retirement account.
Traditional Individual Retirement Arrangements (IRAs) Comment by Exploring Series: Please change all headings formatted with Heading 3 to Heading 2 style.
There are two major kinds of IRAs – traditional and Roth. A traditional IRA is a way to save for retirement that gives you tax advantages. It allows you to make tax-deferred investments to provide financial security when you retire. Your traditional IRA contributions may be tax-deductible. The deduction may be limited if you or your spouse is covered by a retirement pla ...
The CARES Act: A Simple Summary for InvestorsSusan Langdon
Sweeping legislation to respond to COVID-19 pandemic was cleared by Congress and signed into law on March 27, 2020. The Coronavirus Aid, Relief, and Economic Security Act (“the CARES Act”) authorizes more than $2 trillion to battle COVID-19 and its economic effects. The law is wide-ranging from support to the health care system’s fight against the coronavirus, as well as direct payments to individuals, expanded unemployment insurance, loans to small and large businesses, and support for state and local governments.
This document provides an overview on retirement investor’s relief in the government’s stimulus bill to help alleviate the financial strains from the coronavirus.
http://ekinsurance.com/financial/what-are-annuities/
Annuities can be a great way to make your money work, but many people may not understand the risks, rewards, or the workings of their annuities.
Michael Silver & Company CPAs has recently published an article on the benefits of retirement plans. Whether you have a small, independent business or a large company, we describe the advantages and disadvantages of each possible plan for each possible business.
A presentation from Gwen Becker (RBC Private Banking), Rhoda Dobler (Best & Blocksom) and Allison Maher (Family Wealth Coach) about what to explore in succession planning for transitioning a family business.
IntroductionComment by Exploring Series This is listed as a Head.docxvrickens
Introduction Comment by Exploring Series: This is listed as a Heading 2, but it should be Heading 1. Please change this heading to a Heading 1 style.
It is never too early to save for your retirement. For a start, you can estimate the amount that you need to have before you can retire comfortably using financial calculators found on sites such as CNN Money, Kiplinger, Motley Fool, and TIAA-CREF financial services. The good part is, there are many different types of retirement plans that you can participate, individually or with your employers. To help you save for retirement, there are many government-regulated and government-approved retirement accounts that you can contribute a certain amount to annually. Why should you enroll in a retirement plan NOWnow? Did you know that your retirement can last for 30 years or more? A common rule to follow is that a retiree will need up to 80% of his/her annual income today to retire comfortably. Unfortunately, the average benefit amount paid monthly by the Social Security Administration is only $1,177.
Below are many advantages why you should start saving NOWnow:
· Tax on employee and employer contributions is deferred until distributed.
· Investment gains in the plan are not taxed until distributed.
· Retirement assets can be carried from one employer to another.
· Contributions can be made easily through payroll deduction.
· Saver’s Credit is available.
· Flexible plan options are available.
· Better financial security at retirement.
Future Retirement Savings Value - Assuming 6% annual return Comment by Exploring Series: You need to insert a caption for this table and the next table.
Monthly Savings
5 years
15 years
20 years
$50
$3,506
$14,614
$23,218
$200
$14,024
$58,456
$92,870
$500
$35,059
$146,136
$232,176
Source: http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics-Benefits-of-Saving-Now
A contribution is defined as the amount that an employee and an employer can put into a retirement plan. There are, however, varying limits on how much we (including both employers and employees) can contribute to any of the retirement plan. Each plan has its own rules and criteria, and must specifically state that contributions or benefits cannot exceed certain limits. Employees can participate in contributions via salary reduction. Employers can match employees’ contributions or contribute outright a certain amount into the employees’ retirement account.
Traditional Individual Retirement Arrangements (IRAs) Comment by Exploring Series: Please change all headings formatted with Heading 3 to Heading 2 style.
There are two major kinds of IRAs – traditional and Roth. A traditional IRA is a way to save for retirement that gives you tax advantages. It allows you to make tax-deferred investments to provide financial security when you retire. Your traditional IRA contributions may be tax-deductible. The deduction may be limited if you or your spouse is covered by a retirement pla ...
Retirement Presentation For Small Businessguest4a21e5
Prepare for your future today with the right type of tax advantage savings plans. offer your employees the benefit of a retirement plan. Learn from this presentation what you can do today to make a bettewr tomorrow.
The Tax Diversify Your Retirement Income with Life Insurance sales presentation will help you understand the importance of tax diversification and the benefits that a Custom Whole Life (CWL) policy can provide. In addition to the traditional benefit of death benefit protection, the cash value of the CWL policy accumulates tax-deferred and can generally be accessed on a tax-free basis*.
Use the concept presentation and other materials to discuss how life insurance not only provides death benefit protection, but can also be a tax diversification tool.
Contact me if you would like to discuss
*The cash value is accessed through policy loans, which accrue interest at the current rate, and cash withdrawals. Loans and withdrawals will decrease the total death benefit and total cash value. The supplemental retirement income is not guaranteed.
Helping You Avoid IRA Distribution Mistakesfreddysaamy
http://ekinsurance.com/financial/what-are-ira-distributions/
You own two pots of money: The money that has already been taxed (let's call it "regular money") and the money that has not been taxed (let's call this "retirement money" such as IRA, 401k, 403b, etc.).
To paraphrase Dickens, there’s a lot of controversy today about whether we live in the best of times or worst of times concerning retirement. On the one hand, many Americans generally have some kind of retirement support, if you include Social Security, Medicare, private and public pension plans, and the many types of pre-tax retirement plans, such as IRAs and 401(k)s.
On the other hand, demographic and economic forces are making retirement itself a much bigger challenge, primarily because people live longer now. That means you need to work and save enough today to somehow pay for later without employment — a tall order. And recent market upheavals have demonstrated that you may not be able to rely on the stock market in the short term to pay the bill.
This presentation will introduce you to strategies that could help you to potentially build a bigger nest-egg during your working years, make it last longer in retirement, and even pass on more to your heirs.
Because, after all, retirement should be a time to finally relax, stop worrying and enjoy life. But you can’t escape the daily grind until you are financially independent, which in the end is what retirement is all about. So bottom line, let’s talk about working toward financial independence.
Michael Silver & Company CPAs recently published an article on retirement plans for businesses. Whether you have a small, independent business or a large company, we discuss the advantages and disadvantages for each plan available.
The world of search engine optimization (SEO) is buzzing with discussions after Google confirmed that around 2,500 leaked internal documents related to its Search feature are indeed authentic. The revelation has sparked significant concerns within the SEO community. The leaked documents were initially reported by SEO experts Rand Fishkin and Mike King, igniting widespread analysis and discourse. For More Info:- https://news.arihantwebtech.com/search-disrupted-googles-leaked-documents-rock-the-seo-world/
Improving profitability for small businessBen Wann
In this comprehensive presentation, we will explore strategies and practical tips for enhancing profitability in small businesses. Tailored to meet the unique challenges faced by small enterprises, this session covers various aspects that directly impact the bottom line. Attendees will learn how to optimize operational efficiency, manage expenses, and increase revenue through innovative marketing and customer engagement techniques.
Tata Group Dials Taiwan for Its Chipmaking Ambition in Gujarat’s DholeraAvirahi City Dholera
The Tata Group, a titan of Indian industry, is making waves with its advanced talks with Taiwanese chipmakers Powerchip Semiconductor Manufacturing Corporation (PSMC) and UMC Group. The goal? Establishing a cutting-edge semiconductor fabrication unit (fab) in Dholera, Gujarat. This isn’t just any project; it’s a potential game changer for India’s chipmaking aspirations and a boon for investors seeking promising residential projects in dholera sir.
Visit : https://www.avirahi.com/blog/tata-group-dials-taiwan-for-its-chipmaking-ambition-in-gujarats-dholera/
RMD24 | Debunking the non-endemic revenue myth Marvin Vacquier Droop | First ...BBPMedia1
Marvin neemt je in deze presentatie mee in de voordelen van non-endemic advertising op retail media netwerken. Hij brengt ook de uitdagingen in beeld die de markt op dit moment heeft op het gebied van retail media voor niet-leveranciers.
Retail media wordt gezien als het nieuwe advertising-medium en ook mediabureaus richten massaal retail media-afdelingen op. Merken die niet in de betreffende winkel liggen staan ook nog niet in de rij om op de retail media netwerken te adverteren. Marvin belicht de uitdagingen die er zijn om echt aansluiting te vinden op die markt van non-endemic advertising.
RMD24 | Retail media: hoe zet je dit in als je geen AH of Unilever bent? Heid...BBPMedia1
Grote partijen zijn al een tijdje onderweg met retail media. Ondertussen worden in dit domein ook de kansen zichtbaar voor andere spelers in de markt. Maar met die kansen ontstaan ook vragen: Zelf retail media worden of erop adverteren? In welke fase van de funnel past het en hoe integreer je het in een mediaplan? Wat is nu precies het verschil met marketplaces en Programmatic ads? In dit half uur beslechten we de dilemma's en krijg je antwoorden op wanneer het voor jou tijd is om de volgende stap te zetten.
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
Discover the innovative and creative projects that highlight my journey throu...dylandmeas
Discover the innovative and creative projects that highlight my journey through Full Sail University. Below, you’ll find a collection of my work showcasing my skills and expertise in digital marketing, event planning, and media production.
What are the main advantages of using HR recruiter services.pdfHumanResourceDimensi1
HR recruiter services offer top talents to companies according to their specific needs. They handle all recruitment tasks from job posting to onboarding and help companies concentrate on their business growth. With their expertise and years of experience, they streamline the hiring process and save time and resources for the company.
Kseniya Leshchenko: Shared development support service model as the way to ma...Lviv Startup Club
Kseniya Leshchenko: Shared development support service model as the way to make small projects with small budgets profitable for the company (UA)
Kyiv PMDay 2024 Summer
Website – www.pmday.org
Youtube – https://www.youtube.com/startuplviv
FB – https://www.facebook.com/pmdayconference
3.0 Project 2_ Developing My Brand Identity Kit.pptxtanyjahb
A personal brand exploration presentation summarizes an individual's unique qualities and goals, covering strengths, values, passions, and target audience. It helps individuals understand what makes them stand out, their desired image, and how they aim to achieve it.
Unveiling the Secrets How Does Generative AI Work.pdfSam H
At its core, generative artificial intelligence relies on the concept of generative models, which serve as engines that churn out entirely new data resembling their training data. It is like a sculptor who has studied so many forms found in nature and then uses this knowledge to create sculptures from his imagination that have never been seen before anywhere else. If taken to cyberspace, gans work almost the same way.
Implicitly or explicitly all competing businesses employ a strategy to select a mix
of marketing resources. Formulating such competitive strategies fundamentally
involves recognizing relationships between elements of the marketing mix (e.g.,
price and product quality), as well as assessing competitive and market conditions
(i.e., industry structure in the language of economics).
Memorandum Of Association Constitution of Company.pptseri bangash
www.seribangash.com
A Memorandum of Association (MOA) is a legal document that outlines the fundamental principles and objectives upon which a company operates. It serves as the company's charter or constitution and defines the scope of its activities. Here's a detailed note on the MOA:
Contents of Memorandum of Association:
Name Clause: This clause states the name of the company, which should end with words like "Limited" or "Ltd." for a public limited company and "Private Limited" or "Pvt. Ltd." for a private limited company.
https://seribangash.com/article-of-association-is-legal-doc-of-company/
Registered Office Clause: It specifies the location where the company's registered office is situated. This office is where all official communications and notices are sent.
Objective Clause: This clause delineates the main objectives for which the company is formed. It's important to define these objectives clearly, as the company cannot undertake activities beyond those mentioned in this clause.
www.seribangash.com
Liability Clause: It outlines the extent of liability of the company's members. In the case of companies limited by shares, the liability of members is limited to the amount unpaid on their shares. For companies limited by guarantee, members' liability is limited to the amount they undertake to contribute if the company is wound up.
https://seribangash.com/promotors-is-person-conceived-formation-company/
Capital Clause: This clause specifies the authorized capital of the company, i.e., the maximum amount of share capital the company is authorized to issue. It also mentions the division of this capital into shares and their respective nominal value.
Association Clause: It simply states that the subscribers wish to form a company and agree to become members of it, in accordance with the terms of the MOA.
Importance of Memorandum of Association:
Legal Requirement: The MOA is a legal requirement for the formation of a company. It must be filed with the Registrar of Companies during the incorporation process.
Constitutional Document: It serves as the company's constitutional document, defining its scope, powers, and limitations.
Protection of Members: It protects the interests of the company's members by clearly defining the objectives and limiting their liability.
External Communication: It provides clarity to external parties, such as investors, creditors, and regulatory authorities, regarding the company's objectives and powers.
https://seribangash.com/difference-public-and-private-company-law/
Binding Authority: The company and its members are bound by the provisions of the MOA. Any action taken beyond its scope may be considered ultra vires (beyond the powers) of the company and therefore void.
Amendment of MOA:
While the MOA lays down the company's fundamental principles, it is not entirely immutable. It can be amended, but only under specific circumstances and in compliance with legal procedures. Amendments typically require shareholder
2. Your Earning Power
2Preserving Retirement Assets: An IRA Rollover Review
$ 50,000 $ 100,000 $ 250,000 $ 500,000
$ 2,000,000 $ 4,000,000 $ 10,000,000 $ 20,000,000
$ 1,500,000 $ 3,000,000 $ 7,500,000 $ 15,000,000
$ 1,000,000 $ 2,000,000 $ 5,000,000 $ 10,000,000
$ 500,000 $ 1,000,000 $ 2,500,000 $ 5,000,000
$ 250,000 $ 500,000 $ 1,250,000 $ 2,500,000
Your Future Earning Power
If Your Family Income Averages:
Years to
Age 65:
40
30
20
10
5
How will you replace your income
at retirement?
What will happen
to your standard of
living when your
income ceases at
retirement?
Few people realize that a 30-year-old couple will
earn 3.5 million dollars by age 65 if their total
family income averages $100,000 for their entire
careers, without any raises.
Your Income
Spouse’s Income
Other Income
Investment Income
Your ability to earn an income is your most valuable asset.
3. Failing to Plan
3Preserving Retirement Assets: An IRA Rollover Review
They Simply Fail to Plan and Set Goals.
The fact is that,
once retirement is reached, it does not matter how much you earned during your
working years.
What does matter is how much money you have saved and accumulated, as well as
what you choose to do with those funds during retirement.
The biggest financial risk that anyone faces during retirement is the risk that savings
will be depleted... the risk that income will be outlived!
Most People Do Not Plan to Fail.
4. When You Change Jobs
4Preserving Retirement Assets: An IRA Rollover Review
When you change jobs, you may have an important decision to make...what to do with your
money in an employer-sponsored retirement plan, such as a 401(k) plan. Since these funds were
originally intended to help provide financial security during retirement, you need to carefully
evaluate which of the following options will best ensure that these assets remain available to
contribute to a financially-secure retirement.
Take the
Funds
You can withdraw the funds in a lump sum and do what you please with them. This
is, however, rarely a good idea unless you need the funds for an emergency.
Consider:
A mandatory 20% federal income tax withholding will be subtracted from the lump sum you
receive.
You may have to pay additional federal (and possibly state) income tax on the lump sum
distribution, depending on your tax bracket (and the distribution may put you in a higher
bracket).
Unless one of the exceptions is met, you may also have to pay a 10% premature distribution
tax in addition to regular income tax.
The funds will no longer benefit from the tax-deferred growth of a qualified retirement plan.
continued on next slide
5. When You Change Jobs
5Preserving Retirement Assets: An IRA Rollover Review
Leave the
Funds
You can leave the funds in your previous employer's retirement plan, where they
will continue to grow on a tax-deferred basis.
If you're satisfied with the investment performance/options available, this may be
a good alternative. Leaving the funds temporarily while you explore the various
options open to you may also be a good alternative.
Note: If your vested balance in the retirement plan is $5,000 or less, you may be
required to take a lump-sum distribution.
Roll the
Funds Over
You can take the funds from the plan and roll them over, either to your new
employer's retirement plan (assuming the plan accepts rollovers) or to a
traditional IRA or a Roth IRA, where you have more control over investment
decisions.
This approach offers the advantages of preserving the funds for use in
retirement, while enabling them to continue to grow on a tax-deferred basis.
6. Lump-Sum Distribution Results
6Preserving Retirement Assets: An IRA Rollover Review
Why Taking the
Funds May Be a
Bad Idea:
While a lump-sum distribution can be tempting, it can also cost you
thousands of dollars in taxes, penalties and lost growth opportunities…
money that will not be available for future use in retirement.
Let's assume that you're under age 59-1/2 and in the 28% federal income tax bracket. For each
$100,000 you have in a retirement plan with a former employer, these are the hypothetical results
of rolling the funds into a traditional IRA or of taking a lump-sum distribution.
Taxes and penalties if you…
roll $100,000 into a
traditional IRA
take a lump-sum
distribution
20% mandatory withholding at the time of distribution $0 $20,000
8% additional income tax due at filing $0 $8,000
10% premature distribution penalty tax $0 $10,000
Ending Balance: $100,000 $62,000
continued on next slide
7. Lump-Sum Distribution Results
7Preserving Retirement Assets: An IRA Rollover Review
Cost to Take the Funds Today: $38,000
Value of $38,000 in… 5 years 10 years 15 years 20 years
5% Return $48,499 $61,898 $78,999 $100,825
8% Return $55,834 $82,039 $120,542 $177,116
10% Return $61,199 $98,562 $158,735 $255,645
The above is a hypothetical example for illustration purposes only and assumes that one of the exceptions to the premature
distribution penalty tax is not available. In addition to the federal taxes illustrated above, state tax may also be payable. This
example is not indicative of any particular investment or performance and does not reflect the fees and expenses associated with
any particular investment, which would reduce the performance shown above if they were included. In addition, rates of return
will vary over time, particularly for long-term investments.
8. A Potential Solution Using a Traditional IRA Rollover
8Preserving Retirement Assets: An IRA Rollover Review
When you change employment or an employer-sponsored retirement plan is terminated, a special type
of IRA called a rollover can be used with a qualified plan distribution in one of two ways:
The qualified plan distribution is transferred to a traditional IRA
rollover, where it is held and maintains its tax-deferred status until it is
transferred into the retirement plan of a new employer (assuming the
plan allows it).
As a Qualified Plan
Conduit
The qualified plan distribution is transferred to a traditional IRA rollover,
where the funds are invested and enjoy tax-deferred growth in a
traditional IRA until needed for retirement income purposes.
As a Retirement
Accumulation Vehicle
Let's take a closer look at the two different IRA rollover methods.
Qualified Retirement
Plan Distribution
Conduit IRA
Rollover
New Qualified
Retirement Plan
Qualified Retirement
Plan Distribution
Traditional
IRA Rollover
9. IRA Rollover Methods
9Preserving Retirement Assets: An IRA Rollover Review
Indirect Rollover In an indirect rollover, the distribution is first paid to the employee, who then
has 60 days following receipt of the distribution to roll the funds over to the
trustee of the new employer-sponsored retirement plan or to a traditional IRA.
Under federal tax rules, however, if the distribution is first paid to the employee,
the plan administrator is required to withhold 20% of the distribution. This
requirement can cause problems:
While you receive only 80% of the distribution, you are required within 60 days to roll over 100% of
the distribution to a new qualified retirement plan or to a traditional IRA in order to avoid income
and, possibly, penalty taxes.
This means that you must make up the 20% that is withheld out of other funds.
When you file your tax return for the year, you can then request a refund of the 20% that was
withheld at the time of the distribution.
continued on next slide
In order to avoid the mandatory 20% withholding
requirement, a direct rollover should be used.
10. IRA Rollover Methods
10Preserving Retirement Assets: An IRA Rollover Review
Direct Rollover With a direct rollover, the funds are transferred directly from the trustee of the
original qualified retirement plan to the trustee of the new qualified retirement
plan or to the traditional IRA trustee (a trustee-to-trustee transfer).
By arranging for a direct transfer of funds between qualified plan trustees, you
avoid the 20% federal income tax withholding requirement.
Bankruptcy
Protection
The funds in an employer-sponsored retirement plan are protected from the
reach of creditors in the event of a bankruptcy. Whether IRA assets enjoyed this
same protection had been questionable.
With passage of the Bankruptcy Abuse Prevention and Consumer Protection Act
of 2005, however, effective October 17, 2005, up to $1 million of traditional and
Roth IRA assets in the aggregate became protected from bankruptcy creditors.
The $1 million exemption does not apply to rollover IRA assets, which retain their
unlimited exemption.
For this reason, it is generally preferable to segregate rollover IRA assets in a
separate IRA account.
11. Additional IRA Rollover Information
11Preserving Retirement Assets: An IRA Rollover Review
The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA 2001) increased the
portability of retirement plan assets by allowing rollovers between all types of retirement plans.
Certain rollover restrictions were eased as well. The Pension Protection Act of 2006 made these
changes permanent.
Eligible Plans Eligible rollover distributions from qualified plans, 403(b) annuities and
Section 457 plans may be rolled over to any of the other types of plans that
will accept such rollovers. A Section 457 governmental plan must separately
account for funds received from qualified plans, 403(b) annuities or IRAs, or it
may not accept such funds.
Spousal
Rollovers
Distributions from a qualified plan paid to the surviving spouse of a deceased
participant may be rolled over within 60 days to another qualified plan, a
Section 403(b) annuity, a traditional IRA or a Section 457 plan.
After-Tax
Employee
Contributions
After-tax employee contributions distributed from a qualified plan after
December 31, 2001 can be rolled over to a traditional IRA or to a defined
contribution plan in a direct trustee-to-trustee transfer, if separately
accounted for.
continued on next slide
12. Additional IRA Rollover Information
12Preserving Retirement Assets: An IRA Rollover Review
IRA rollover requirements can be complex. Depending on the original source of the funds and
the objectives of the IRA rollover, different requirements may apply.
In order to avoid unforeseen and/or negative tax consequences, you should seek professional
tax advice before implementing an IRA rollover.
Roth
Accounts
If you have a designated Roth account in a qualified plan, you should roll that
Roth account over into a Roth IRA in order to maintain the income tax free
character of Roth distributions.
Hardship
Exception
The Act gave the Secretary of the Treasury the authority to waive the 60-day
rule for rollovers where failure to comply is due to casualty, disaster or events
beyond the reasonable control of the taxpayer.
13. Traditional IRA Rollover Taxation
13Preserving Retirement Assets: An IRA Rollover Review
During Life:
Distributions IRA distributions are taxed under the rules of IRC Sec. 72. This means that
the taxpayer is entitled to recover any after-tax employee contributions that
were rolled over into the IRA tax-free when distributions begin. Other than
this tax-free return of the “investment in the contract,” all traditional IRA
distributions are includable in gross income in the year received. In addition:
continued on next slide
Premature
distributions
Premature distributions made prior to age 59-1/2 are subject to a 10% excise
or “penalty” tax, in addition to the regular income tax on the amount of the
distribution. (Exceptions to the penalty tax include payments made on
account of death, disability, to cover certain medical expenses, to pay
qualified higher education expenses, for the purchase of a first home
($10,000 lifetime limit), or in a series of substantially equal periodic
payments over the taxpayer’s life expectancy.)
Growth IRA earnings accumulate tax-deferred until distributed.
14. Traditional IRA Rollover Taxation
14Preserving Retirement Assets: An IRA Rollover Review
Minimum
distributions
Minimum distributions from an IRA must begin by April 1 of the year after
the year in which the taxpayer attains age 70-1/2, or a 50% excise tax is
levied on the difference between what was paid out and what should have
been paid out under IRA minimum distribution rules.
At Death:
Estate Taxation The value of the IRA is included in the gross estate of the deceased owner.
Income Taxation Traditional IRA distributions to a beneficiary are taxed in the same manner
as if received by the IRA owner.
15. Roth IRA Rollovers
15Preserving Retirement Assets: An IRA Rollover Review
Roth Account Rollovers:
Certain qualified plans, such as 401(k) plans, 403(b) TDA plans and section 457(b) governmental
plans, have the option of allowing plan participants to elect to have all or a portion of their
contributions placed in a designated Roth account in the plan.
When a plan participant selects this option, contributions made to the designated Roth account
are not tax deductible for federal income tax purposes. Growth on contributions in the Roth
account, however, is free of federal income tax and, assuming certain requirements are met,
distributions from the Roth account are received free of federal income tax.
If you receive a distribution from a Roth account in a qualified plan, you will need to roll that
distribution into a Roth IRA in order to maintain the tax-free status of future distributions. In
addition, a distribution from a designated Roth account in an employer plan is not taxable when
rolled into a Roth IRA, regardless of whether the distribution is a qualified distribution at the time
of the rollover.
continued on next slide
16. Roth IRA Rollovers
16Preserving Retirement Assets: An IRA Rollover Review
Roth IRA Rollovers:
Qualified plan distributions can be rolled over into a Roth IRA, where they continue to grow free
of federal income tax and, assuming certain requirements are met, distributions from the Roth IRA
are received income tax free. While the availability of tax-free distributions in the future is
attractive, there is an important consideration in evaluating this option.
A rollover to a Roth IRA of distributions not made from a designated Roth account are includible in
gross income in the year of the distribution. The amount included in gross income is equal to the
amount rolled over, reduced by the amount of any after-tax contributions that are included in the
rolled over amount. This means that, for example, a $100,000 qualified plan distribution
consisting entirely of pre-tax contributions and rolled into a Roth IRA will generate a $25,000
income tax bill for someone in the 25% tax bracket plus a possible 10% penalty tax.
continued on next slide
17. Roth IRA Rollovers
17Preserving Retirement Assets: An IRA Rollover Review
In deciding whether to make a rollover to a Roth IRA, consider if:
You can pay the tax on the rollover with funds other than those from the retirement plan. If
you use a portion of the plan distribution to pay the tax due on the rollover, you'll then have
less money building up tax-free within the Roth IRA.
You anticipate paying taxes at a higher tax rate in the future than you are paying now. If not, a
traditional IRA rollover may make more sense.
You have a number of years to go before you might need to take withdrawals from the Roth
IRA, giving you an opportunity to recoup the taxes paid on the rollover.
In order to avoid unforeseen and/or negative tax
consequences, you should seek professional tax advice before
implementing a Roth IRA rollover.