Probably no other single investment effects more people
457 plans, 401k's & 403(b)'s.
Do you have a 401(k), 403(b), TSA or a Government retirement 457 plan? Then a "ROLLOVER"
is something you need to know ALL
Let's cover the BASICS of 401k's and other similar retirement plans, such as 403(b) TSA or
· Money contributed into these plans are "pre-tax dollars," meaning, you don't pay
taxes on that money UNTIL you withdraw the money from the retirement plan. It also
means that this
money grows "tax-deferred".
Contributions to plans can come from employee salary reduction or from the employer,
If your income is under $200,000, each individual employee can defer up to $14,000
per year of their pre-tax income for those under age 50 and $14,000 per year, for those
over the age of 50 (for the year of 2006) this is adjusted annually for inflation.
Employees are immediately 100% vested with their own tax deferred contributions,
and when, and if they leave their company employ, they can ROLL their account into
an individual personal IRA, or to a new company's 401K.
Investment choices in 401k's may offer a limited number of investment choices to
Some plans offer MATCHING contributions from their employer. This is often
misunderstood. If they say they will match 5%, that means, they take your annual
income X 5% and that amount is the maximum they will put in, if you make your
contributions! In other words, if you earn $50,000x5%=$2,500, but you put in
$4,000, they will only match up to the first $2,500, if it is a dollar-for-dollar match.
Some only match .50 cents for each dollar.
Some 401k's allow investment changes about once a quarter, others may allow
more frequent changes.
Some plans offer direct loans, hardship loans and disability loan provisions, but not
If they wish, the employer can restrict individuals with less than 1 year of service,
union members, non US citizens, part-time workers etc., from being eligible for
Withdrawals from any retirement plan: 401k, 403b, 457 plan or IRA 's are income
taxable when you take the money OUT! If, you are UNDER age 59 ˝, (except
hardship cases and other special situations) there may be an "IRS Early withdrawal
10% PENALTY" as well.
To AVOID the above mentioned additional 10% penalty see "What is a 72t?"
Retirement plans are established by your employer, but are managed by a
"Third-Party Administrator", not your employer (except some governmental plans).
The company chosen as the "Administrator" can, and may change, from time to time.
What is a "ROLLOVER into an IRA"?
Generally, after a person leaves the employ of a company, they are given the
option to roll their 401K plans into a new company's plans, if available, or into
a Rollover IRA.
Frequently, the choice is made to roll into an IRA because of the flexibility and vast array
of investment choices available. Once in an IRA, the owner is no longer restricted to the
investment choices offered by their employer plan, nor is the participant subject to any
potential future restrictions imposed by the new employer, if any.
Most retirement plans can be easily rolled into either a variety of mutual funds, stocks,
bonds or into either a Fixed IRA annuity or an Indexed IRA annuity or a variable annuity.
However, there may be some costs to do this. There may be other ongoing costs that
should be considered as well. There may be surrender charges when you want to move
some or part of your money as well. Check with your Financial Advisor and read the
prospectus regarding any investments you might be considering.
are your OPTIONS when doing a ROLLOVER?
You can move/rollover, all or PART, of your 401k into one, or more IRA's.
2. You can move/rollover, all or PART, of your 401k into one, or more companies
and multiple IRA's..
3. You can move/rollover, all or PART, of your 401k into one, or more IRA
mutual funds and/or IRA annuities.
4. You can move/rollover, all or PART, of your 401k into stocks within an IRA
NOTE: Most 401k plan administrators do NOT allow partial rollovers. It's all or nothing
in most cases. However, if you want to move your retirement money into more than one
place I’d be
pleased to show you a
way to do it.
There is an almost unlimited number of possible combinations possible. It takes the
experience of a knowledgeable Financial Advisor to know what is best in each particular
scenario. Everyone is different and so are their needs and desires! E-MAIL me if you like
and we can discuss YOUR SPECIFIC NEEDS!
§ NOTE: All Guarantees are based on the financial strength and claims paying
abilities of the
457 PLAN "Rollovers"!
What are 457 plans? City, state, local and most any governmental qualified deferred
compensation plans. YES, as of January 1st, 2002 (due to the 2001 Tax Reconciliation
Act) may also be rolled into an IRA. AFTER YOU LEAVE THEIR EMPLOYMENT!
I said ALMOST. You have to check with your plan administrator and have them check
the "WORDING" of your specific plan (they differ widely). But in most cases, these plans
can be rolled into an IRA for potentially increased investing options and continued
growth, distributions and possibly better control
Taking CONTROL of your 403(b)!
What is a 9024 transfer?
NOTE: Generally, individuals "currently employed" cannot move their retirement plan
to another company/administrator, or to an IRA; however, some major companies do
permit active 403(b) participants to roll all or part of their 403(b) money into an individual
Also note that those who have 403(b)'s (also commonly called TSA accounts) may be
able to MOVE their plans almost anytime they desire (even if still currently employed
with their employer). It's very easy to ROLL a 403(b) (which is a variable annuity in
most cases already, into a PRIVATE IRA Variable Annuity, which may offer more
investment options and control BY YOU, the 403(b)/IRA owner. NOTE: once you roll
(convert) a 403(b) into an IRA. You can not make future contributions to the new
IRA plan but you can continue making contributions to
the OLD 403(b) plan, if desired.
are your OPTIONS?
· Cash it in! (Pay the income taxes on any amount withdrawn and kept,
PLUS, if you are under age 59 1/2 there will be the additional 10% IRS early
withdrawal penalty mentioned
for a way to avoid this additional 10% early withdrawal penalty.
· Move it- to a NEW employers 401k plan. (If that is allowed.) You may be
better off rolling it into a private 403(b) or an IRA. However, it must be noted that
IRA's do not have the ability to take loans against those funds. For this reason, often
people choose to move their old 403(b) money into a new employers 401k plan
which may allow loans. This would then allow them to make loans on their retirement
money, if needed. Some do, some don't! Check with your plan administrator before
· A ROLLOVER! (as detailed in this article) is often the most preferred
option of all....
NOTE: annuities are NOT used for their tax-deferred growth when combined
with an IRA. There are many other reasons (as described here) for using an
annuity, since an IRA already offers tax-deferred growth without the use of an
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Phone (480) 641-9361
FAX (480) 641-9365
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