Changing Jobs? Check Your 401k Rollover Choices

One of the most popular pension plans in the U.S is the 401k retirement scheme which also features the 401k rollover options. The 401k allows employees to make contributions from their wages to a retirement fund which can then be cashed in when they retire. The advantage of this plan is that employers can also pay money in to this fund and the savings are free from tax. What happens if you choose to move jobs? This is the time that the 401k rollover options can be implemented.

If you change jobs there are several options relating to the 401k rollover facility. A direct IRA Rollover means that the contributions held in your retirement account can be transferred into an Individual Retirement Account. The money does not come into your hand as your old employer will wire it straight into your personal account. This method has benefits by way of no penalties and the taxes are not withheld.

If you have stocks in your last employer’s company your contributions can be handled one of two ways. The first is that you can transfer the stocks directly into your Individual Retirement Account without the stocks being liquidated. The second option is that you sell the stocks and pay the rollover into your account within a 60 day period. If you fail to place the cash in the account within the 60 days then you will have to pay tax on it.

Alternatively you can move your exiting 401k plan to your new employer, if they accept the 401k rollover. This only usually works if you have a new job before you leave your old one. Take the time to check out the new employer’s investment options to decide if this is the best option for you.

Finally, you can opt to withdraw your funds from the 401k plan. It is worth remembering that employers have to hold 20% of the funds for tax purposes and you may have to pay income tax and a penalty fee. This could mean that you walk away with less than you had anticipated.

One of the big questions facing many people today is the options for self employed retirement plans. There are many more freelancers and self-employed people than there were ten years ago. There is a 401k option for self employed people so that they can save for their retirement too.

The 401k(Solo) is one of the self employed retirement plans available and it has many advantages. You can pay in as much as 100% on the first $15,500 that you earn in a year. You can then add or deduct contributions over this first amount by up to 25%. Should you find yourself reaching the cap amount of $225,000 per annum, then it is worthwhile looking at other self employed retirement plans. Another option with this plan is that you can choose not to pay anything if you are having a tough year. It is possible to borrow money from the retirement fund without being penalised.

401k rollover choices should be fully looked at if you are about to change employer. If it seems like a confusing task, employ the services of a professional financier to help you.

More interesting stuff on adult retirement and similar subjects is available at Plan401kRetirement.com – click a link and you will be in the right place for all saving for retirement queries and related matters. Click on a link now !

Retire With An Internet Business At Home

When planning for early retirement many are concerned about having enough money to retire the way they want. Extra income is the answer. An internet business is a great way to earn extra money.

For example right now you are looking for information on the internet. You have life experiences, hobbies and interests that somebody somewhere is looking for and can use. If you think you have to write a book to let people know about yourself…you are wrong. You can start and profit online from people wanting to hear your unique interesting story.

An online business based upon your experiences is more enjoyable than just working for a paycheck. Sadly most people, including me at one time, work at jobs they do not like. Why not turn the information you possess into cash? Think there is no way to make money on information?

Then why does the largest search engine online…rhymes with bugle…have a stock selling for over $500 a share? They are providing information to people…why can’t you turn your unique information into cash for you?

An online business based upon your sharing the information you possess can bring more rewards than just the cash. It is a wonderful feeling to wake up…check your computer and discover you have been earning…by other folks finding your information online…while you were sleeping.

You do not have to wait until retirement to start this online business. When you do prove to yourselves that you can retire early…since extra money is coming in…it is a great feeling.

If the internet seems to complicated do not let that hold you back…I knew less than zero when I started less than a year ago…now I am earning hundreds each week sharing my unique retirement experiences. You need to partner with a company that handles all the technical stuff while you create the information folks want.

start further information on how you can start a Internet business up and going to help you retire. Gary Pierce has been retired for 15 years, he shares with you the various lifestyles has experienced in frugal retirement living. Grab a totally unique version of this article from the Uber Article Directory

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 !

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.

Is Your Annuity Safe?

He is an article that you assist you in determining whether you are comfortable with your current arrangement. Either way, if you want to ensure that you have the optimal income solution that enables guaranteed principal protection, income for life where you never run out of money, and your original starting balance is recovered, give us a call. Read on…

Is your annuity safe?

By Walter Updegrave, Money Magazine senior editor

October 10, 2008 5:18 pm

Question: I have $100,000 in an annuity with AIG that my mom and I depend on for income to live. Should I cash it out even though I would suffer a loss, or do you think I should hold onto it? It’s so hard to know what to do. —Kitty Schwartz, Plano, Texas

Answer: Most people buy an annuity at least in part because they see it as a refuge, an investment they can count even if the financial markets are spiraling downward. But that faith has been tested in recent weeks.

The government needed to step in to cover the debts of AIG, the nation’s largest insurer, and the health of many other major insurers has been called into question.

So it’s no surprise that I have been inundated with questions from people worried about the security of money they have in annuities.

I would love to be able to give a simple reassurance.

But annuities are often complicated products. I’ll try to lay out the most important issues surrounding that choice as best I can.

To do that, however, you first must understand the safety mechanisms that are in place for annuities so you can better gauge the risk you actually face (which for many people will be a lot less than they fear). And you must also understand the possible consequences of withdrawing your money from an annuity.

3 lines of defense

Basically, there are three lines of defense that protect the money you have in an annuity.

The first is oversight. Insurance companies are regulated at the state level, and the main job of each state’s insurance commissioner is to assure that the companies headquartered in that state have enough reserves, or capital, to meet their obligations to annuity owners and other policy holders.

The second line of defense becomes a factor when insurers run into trouble despite the oversight. Specifically, the state insurance commissioner steps in, do anything from arranging for a takeover of the ailing insurer to transferring annuities and other policies to a healthy insurer.

The third line of defense is the network of state guaranty funds, a factor if a failed insurer doesn’t have enough in assets to cover obligations annuity holders. Most states cover up to $300,000 for life insurance death benefits, $100,000 in cash surrender values for life insurance and $100,000 in withdrawal and cash value for annuities, although some states have higher limits.

This coverage is per person per insurance company. So if the state limit for annuities is $100,000 and you have a $100,000 annuity with one insurer and another $100,000 with a different insurer, you would receive $100,000 of coverage for each annuity.

A quick note about variable annuities. Most people who own variable annuities have their money invested in one or more “subaccounts,” or mutual fund-like stock or bond funds. The money in these subaccounts is segregated from the insurer’s assets and cannot be tapped by the insurer or its creditors. So while the market value of your variable annuity may decline, the money you’ve invested in a variable annuity would be safe should the insurer fail. (If you have invested in the variable annuity’s “fixed” account, that money is part of the insurer’s assets and would be covered by the guaranty fund.)

So if your annuity’s value is within your state guaranty fund’s coverage limit, you don’t need to bail out to protect yourself from a loss. That’s not to say you might not want to get out at some point in the future for peace of mind or if you decide annuities aren’t for you. But you don’t have to exit in a rush, which might trigger taxes and penalties. Your money is secure.

What if the value of your annuity exceeds these limits? In that case, you’ve got a few factors to consider.

Consider your insurer’s financial strength

Assessing the financial strength of your insurer is difficult if you’re not an insurance analyst. But you can get a feel for it by checking how highly your insurer is rated by ratings companies like A.M. Best, Standard & Poor’s and Moody’s. (It’s important that you have the exact name of your insurer, as there may be multiple subsidiaries with similar-sounding names, each of which is rated separately. The name of the insurer that issued your annuity should be on your contract.)

Granted, these ratings are hardly foolproof. Rating agencies can get it wrong. And rapidly deteriorating markets can make what was a sound company weeks ago vulnerable today.

It’s hard to draw a dividing line between what rating represents an acceptable level of safety and what rating doesn’t. But I think it’s reasonable that someone relying on an annuity for security would want to see a rating of A or better. (The rating scales vary somewhat between companies, but A is usually the third highest rating, after AAA and AA.).

Weigh the taxes and penalties

You’ve also got to consider withdrawal penalties. Most annuities carry surrender charges that typically start at 7% or so and decline gradually each year until they disappear after seven years. In some cases, however, surrender charges can run as high as 20% and last 20 years. If you pull money out early, you could take a sizeable hit.

There is a bit of a loophole here, though. Most insurers allow you to withdraw a small amount – usually 10% of your balance – free of surrender charges each year.

Taxes are another consideration. If you withdraw money from an annuity, you’ll owe tax at ordinary income tax rates on any gains (and on your original investment if your annuity is held within an IRA account funded with tax-deductible or pre-tax dollars.) If you’re under age 59 ½, you’ll pay an additional 10% early withdrawal tax.

There is a way around the tax hit. Instead of just pulling your money out of the annuity, you can do what’s called a 1035 exchange into another annuity. In fact, you can do a 1035 exchange and split your money among two or more insurers with good ratings to diversify your exposure. You’ll still be in an annuity, of course. So if your goal is to exit the annuity altogether, this tactic wouldn’t help. A 1035 exchange also doesn’t exempt you from any surrender charges that may apply. And, indeed, by moving to a new annuity, you would likely start the clock again on a new set of surrender fees, which could make a future exit more costly than getting out today.

Bottom line: If your annuity’s value is over your state’s guaranty fund limit, you’ve essentially got to weigh the cost of getting out vs. the risk of staying in.

If you have an annuity with a highly rated insurer and the surrender charges are still quite high, you might prefer to just hold on at least for now, especially if your annuity’s value isn’t that far above the guaranty fund’s limit. You can always pull money out later on or move it to another insurer via a 1035 exchange after the surrender charge has fallen.

You could even reduce your exposure above the guaranty limit gradually by taking advantage of the annual surrender-free withdrawal provision.

If, on the other hand, the insurer has a low rating or you’re really worried about a loss and the surrender penalty isn’t too severe, you might want to switch via a 1035 exchange to an annuity with a highly-rated insurer, especially if the annuity’s value is well above the guaranty coverage.

If the insurer’s rating is low and the surrender penalty is still high, you could also consider doing a partial 1035 exchange – that is, move enough of your current annuity to an annuity with one or more highly rated insurers so that each annuity falls within or at least not too far above your state’s guaranty fund limits. You would still have to pay a surrender charge, but at least it would be on only a portion of your annuity’s value.

All this comes down to a personal judgment. But I think that ultimately, if you’re going to own annuities, you want to have your money spread among two or more insurers and, to the extent possible, below the guaranty fund limit for your state. You don’t have to get to this position overnight. But the weaker your current insurer is and the higher above the guaranty limits you are, then it seems to me the sooner you want to do this.

Are annuities for you?

One final note: I think this is a good time for people who own an annuity – or are considering buying one – to ask themselves whether they really ought to be in an annuity at all. I’ve long recommended a particular type of annuity – an immediate annuity – as a way to convert a portion of your savings to a lifetime income once you’ve retired.

But immediate annuities represent a very small portion of annuity sales. Most of the annuities that are sold fall into two categories: fixed deferred annuities, which are sold to older investors, most of whom I think would likely be better off in bank CDs and bonds; and variable annuities, which are touted as mutual funds that can shelter their gains from taxes and often sold (usually inappropriately in my opinion) as investments for IRAs and 401(k) rollover money to people who are still years away from retirement.

If nothing else, I hope the attention that insurers and annuities are getting will lead investors to re-assess (ideally with the help of a financial adviser who doesn’t depend primarily on annuity sales for his or her livelihood) whether they really belong in annuities.

As I said at the beginning of this column, annuities can be complicated. But there’s one aspect of them that’s become painfully obvious: Getting into them is a lot easier than getting out.