Know The 60 Day Rule For 401k Rollovers

It is often difficult what option you should use to get your funds out of your existing 401k account. One of the major stresses of this process is the uncertainty of what exactly you should be doing. Add this stress to already existing stress of managing your retirement account and the whole process can be rather overwhelming.

Because of the importance of this decision, it is critical that you take the necessary time to research and explore the different options you have to make this 401k transfer. Consulting your financial consultant or tax advisor is always a good idea.

A good financial advisor can direct you towards the type of retirement vehicle that will be best for your account. You can transfer your account to another 401k, a Roth IRA, a traditional IRA, or other retirement vehicle. Your advisor will also know the latest tax laws you should be aware of.

The Internal Revenue service had complicated the rules for 401k rollovers, making the transfer rather daunting for the average investor. One of the more burdensome rules they have implemented is called the 60 day rule.

The 60 day rule is in reference to the allocated time available to transfer the funds out of your existing account into your new retirement account. Once you have determined to transfer your 401k, they expect you to take care of the transaction. You should be prepared to make the decision and take action on the account.

Despite the simplicity of this rule, the tax implications of it are very present. The best way to avoid this penalty is to determine where the funds are going well before ever transferring them in the first place. A good advisor will help you get your ducks in a row before making the transfer. This allows you sufficient time to fill out everything that is required to move the funds.

Don’t assume that the IRS will be lenient on this rule whatsoever. Even cases involving the transfer happening a day or two late have been rejected by the IRS. They are notorious to sticking to this deadline.

The only scenario in which the Internal Revenue Service is willing to consider a late transfer is in the case of unusual personal circumstances. These include death, disability, hospitalization, and incarceration. This compassion ruling is not really a good substitute for getting your transfer done in time, and is often associated with a fine for the waiver. The fine is wholly dependent upon the size of the transfer between accounts.

Roger Harrison is an experienced financial planning enthusiast that has extensively studied how to do a 401k ira rollover and the best ways to transfer your money. Visit him online at the The 401k Rollover Guru for more information on these and other related topics.

Beneficiary IRA Recipients – Read This Crucial Information

A Beneficiary IRA or an Inherited IRA, as it is sometimes known, is when the account is transferred to a spouse or other beneficiary after the death of the account holder. The funds from an existing Traditional, Simple or Roth IRA are transferred into an Inherited IRA. This allows the funds to remain tax-free until the IRS requests that the funds are released.

The account holder must name the beneficiary which can be a spouse or another person, such as other family members. If there is no beneficiary named a Beneficiary IRA cannot be opened. If the beneficiary is the account holder’s spouse, then the Beneficiary IRA can be opened in that person’s name and they can treat the account as if it were their own.

Other beneficiaries cannot treat the new account as their own and they cannot add the funds to any other accounts in their name. It is also a fact that the original account must be closed. The Beneficiary IRA can either be a Simple, Roth or Traditional IRA and can be the same type as the original; it should be noted that extra payments cannot be made into a Beneficiary IRA. Until a Required Minimum Distribution request is received the contributions can be deferred.

The beneficiary of an Inherited IRA is subject to certain rules regarding the new account. These are based on the type of Beneficiary IRA the person has, as well as the age of the account holder when the passed on and the kind of IRA that was inherited by the beneficiary.

There were new rules brought out in 2001 which makes the whole process and the advantages of a beneficiary IRA a lot clearer and simpler. Previously the funds in an Inherited IRA had to be depleted within a 5 year period. It is now the case that the funds can be distributed over a period of many years, frequently over many decades. This way the funds can continue to be tax deferred which is an advantage for the beneficiary.

The rules also mean that the account holder could take smaller Required Minimum Distributions which meant there was a greater chance of a higher value remaining in the original IRA. Spouses of the original account holder could also use the Beneficiary IRA for their own means or add names to it so that they would then leave the funds for named beneficiaries upon their death.

Choosing the best retirement plan for you is crucial to ensure tat you are well catered for after you retire. The best retirement plan will have all the benefits you need to be able to survive after you stop working. It is not easy to live on just a basic pension so a boost is a bonus.

The world of the Beneficiary IRA may be puzzling but any queries you have can be answered by browsing the internet. If you have a financial professional who deal with all of you finances you can also talk to them about these accounts.

Plan401kRetirement.com has the answers to all the questions that you were afraid to ask about best retirement plan! To make sure that you won’t settle for anything less than the full story on supplemental retirement income, check out the site right away !

Important Information Relating To IRA Rules

One of the most common retirement options in the United States is the Individual Retirement Account (IRA) which is governed by various IRA rules. There are three kinds of accounts, namely the Traditional IRA, the Roth IRA and the Simple IRA. Some of the IRA rules are the same for each of the accounts but there are certain differences in relation to eligibility, limits for contributions and withdrawals.

To have a Traditional IRA account you must be under the age of 70. It is also necessary for you to be able to make contributions from methods such as wages, bonuses and commissions. The exiting contribution limit is $5,000, with a catch up contribution figure of $6,000 (if you are over the age of 50). Unless you are fifty-nine and a half, a penalty will apply for early withdrawal.

The Roth IRA places no age restriction on eligibility like the Traditional IRA does. It only stipulates that you can pay contributions to the account. The contribution limit for 2008/2009 is also $5,000. Again, the catch up contribution of $6,000 applies. You can withdraw funds from a Roth IRA 5 years after the first contribution was made. A qualified distribution is applicable at the age of fifty-nine and a half. The Roth IRA also allows you to make withdrawals if you become disabled or are a first time home buyer.

The main difference with a Simple IRA plan is that it has to be offered to employees by their employer. You are not allowed to have any other kinds of plan and the company has to have less than 100 employees. This IRA is designed with small businesses in mind. Workers who join the plan must have earned at least $5,000 in one year. A deferment amount of $11,500 applies and catch up contribution for the over 50’s if $2,500.

The withdrawal rules are for the Simple IRA are the same as the Traditional IRA, except there is the addition of the “2 year period rule”. This means that any withdrawal within the first two years of an employer’s first contribution being made, a penalty of 25% instead of 10% may apply.

If you have a 401k plan you can use the 401k rollover options with the IRA accounts, with the exception of the Simple IRA. If you change your job, then this is when the 401k rollover comes into play.

The choices given by the 401k rollover mean that funds can be transferred from your old employer to your IRA account before or soon after you leave that employer. This does not attract any penalty fees or tax charges.

If you are interested in getting an IRA or want to know more about IRA rules, you can find plenty of material on the internet. If it seems a bit confusing you could ask a finance professional to help you with your questions.

Plan401kRetirement.com is the Internet’s premier resource for best retirement plan, with facts and articles on topics such as ira rules, and much more. Click the links above for more information !

Some Great Facts About The 403b Retirement Scheme

A 403b retirement plan is a good option to help you save for retirement years. It is primarily designed for employees of tax-exempt organizations, public schools and for ministers. The 403b plan has a range of options for these types of people and has various benefits to both employer and employee.

Firstly, the employer can take advantage of sharing the cost of the contributions with the employee. In some cases the employee is the only one who can make contributions into the retirement account. Happy workers who benefit greatly from a 403b retirement plan also means that the company is going to be able to keep them from moving to another job.

Workers will love the range of advantages that this plan has to offer them. Firstly, they can revel in the fact that they will get a reduction of tax on their income as pre-tax payments are already made. Earnings on the plan contributions can also be tax deferred. Employees can also make use of the loan or “hardship withdrawal” facility that comes as part of the 403b retirement plan. If no withdrawals are made before the adult retirement age stipulated, then it is more likely that they will not have to pay tax on their assets.

The employers will have a list of investment companies that can be used to start this plan. If an employee has a certain investment organization in mind they can request that the employer adds them to the list. It should be noted that employers can sometimes dictate which institutions an employee can use.

Payments made to the 403b retirement plan can be cancelled at any time and if you need to change the amount you are paying, this is also possible. It may be that the employer will restrict the amount of times you can change the amount. It is best to check this out before starting the plan.

It is normal for an employee to have to pay fees when the take out a 403b plan. These will be administrative costs and an investment company fee. The investment company fees will differ depending on the company that you use. The outlay that you will be required to pay will be worked out based on the amount of cash you have in the account. As an example, if you have $200 in the account and the investment company fee is 3%, you will have to give them $6.

The 403b plan was introduced to ensure that workers in the occupations mentioned above were catered for after the adult retirement age. Employees of educational institutions and non-profit companies are provided with a pension plan, but the amount does not generally equal their salary. The 403b retirement plan therefore gives a supplemental income upon retirement.

If you want to find out more about the 403b retirement plan or its options you will find a myriad of information available on the internet. Alternatively you can speak to a financial advisor who will be able to help you further.

No site but Plan401kRetirement.com gives you all the tips and info on 401k rollover and related subjects. Whether you are a newbie or an expert, make sure to check out self employed retirement plans by following the links above !

Tax Protection for your IRA

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This solution can work with any tax qualified account including all IRAs, 401Ks, 457s, 403bs, SEPs, ESOPs, etc. Give us a call for a no a no obligation analysis of your tax risk and potential solutions to protect you and your family.

2008 IRA Contribution and Deduction Limits – IRS

April 15th is around the corner.  In case you are still wondering what the 2008 contribution limits are for ROTH and Traditional IRA’s, here it is verbatim from irs.gov.  Keep in mind that if you have both a ROTH and Traditional IRA, the limits apply when combined.  You cannot exceed the limit. 

2008 Combined Traditional and Roth IRA Contribution Limits:

If you are under 50 years of age at the end of 2008: The maximum contribution that you can make to a traditional or Roth IRA is the smaller of $5,000 or the amount of your taxable compensation for 2008. This limit can be split between a traditional and a Roth IRA but the combined limit is $5,000. This maximum contribution to a Roth IRA and the maximum deductible contribution to a traditional IRA may be reduced depending upon your modified adjusted gross income (AGI).

If you are 50 years of age or older before 2009: The maximum contribution that can be made to a traditional or Roth IRA is the smaller of $6,000 or the amount of your taxable compensation for 2008. This limit can be split between a traditional and a Roth IRA but the combined limit is $6,000. This maximum contribution to a Roth IRA and the maximum deductible contribution to a traditional IRA may be reduced depending upon your modified AGI.

See Publication 590, Individual Retirement Arrangements (IRAs), for additional information.

One Year’s IRA Contribution Can Really Make a Difference in Savings

(NewsUSA) – New data from Fidelity Investments found that more  than eight out of 10 Americans have cut back on discretionary purchases because of the recent economic crisis, and nearly half of respondents are now saving money. But many are unsure where to place the savings for the greatest benefit.

“After maximizing workplace savings plans and paying off credit card debt, investors should consider saving more for retirement using an Individual Retirement Account or IRA,” said John Ragnoni, senior vice president, Fidelity Investments. “Even though Americans are facing a challenging economic environment, it’s important to prepare for the future by making annual contributions.”

For example, an investor who makes a single contribution of $5,000 to a Roth IRA now could see that amount potentially grow to more than $53,000 in 35 years, assuming an annual rate of return of 7 percent.

Additionally, consolidating old workplace savings accounts at former employers into an IRA may offer the most compelling benefits for managing one’s retirement savings, including a broader range of investment choices.

This hypothetical example assumes the following: (1) one annual $5,000 Roth IRA contribution made on January 1 of the first year, and (2) an annual rate of return of 7 percent, and (3) no taxes on any earnings within the IRA. The ending values do not reflect taxes, fees or inflation. If they did, amounts would be lower. Earnings and pretax (deductible) contributions from a Traditional IRA are subject to taxes when withdrawn. Earnings distributed from Roth IRAs are income tax-free, provided certain requirements are met. IRA distributions before age 59 1/2 may also be subject to a 10 percent penalty. Systematic investing does not ensure a profit and does not protect against loss in a declining market.

The Security or Insecurity of Retirement

There has been much written about the affect of the current storm of financial issues and its impact to what I call personal economies.  Recently in the newspaper a feature was written highlighting local citizens.  The article found two particular individuals of retirement age who are working not just because of tough economic times to make ends meet, but also for the fact that they enjoy working and have no intentions to quit yet.  They are fortunate to have the choice so to speak.  Everyone regardless of their age is feeling the pinch.  Not everyone works because they like to, as these individuals.

Their experience is confirmed by a study conducted by AARP in 2007.   Over 2/3 of seniors indicated  that they planned to continue at least part time, even after they reached retirement age.  This study  attributed the reasoning to enjoyment of work – which is good news, and also needing to meet financial needs.  The latter is not so good because this study named ‘Work and Career Study’ was done in the spring 2007 when the market and economy were buzzing.

What is distressing is, now, according to the AARP report released in October called ‘Retirement Security or Insecurity’ it is revealed that due to the current economic climate, 20 percent of those interviewed have stopped contributing to their retirement savings, and over 10 percent are having to take money from their retirement savings to meet daily expenses.   AARP telephone surveyed over 1600 participants aged 45 and older who are currently employed.

Some KEY findings in the October report are that respondents -

• will work more hours and stop contributing to retirement accounts such as IRAs and 401Ks.
• will work longer, delay retirement, and spend less money in retirement.
• feel that their retirement efforts are/were not on track BEFORE the economy slowed down.
• are not saving enough for retirement, due to lack of money or not starting a plan.

For details and actual percentages, the study can be found here – http://assets.aarp.org/rgcenter/econ/retirement_survey_08.pdf.

As one lady quipped while lamenting the decline of her retirement balance, and having to work longer, “it is all in God’s plan and she’ll take life as it comes”.  We all can take comfort in that. Amen, sister.

It is hard to imagine anyone in the modern world not affected by today’s money headlines and whose experiences are not confirmed by the AARP study.  If your personal economy and retirement are threatened by assets in your portfolio that have lost money, then your current and future retirement security can perhaps benefit from a second opinion by giving us a call on 304-267-9797.