Investments and IRA Rollovers

Everyone has a dream retirement in mind: travel around the world, launch a new career, spend time with family and friends. At Thesco Retirement Planning Services, we understand that a big part of that dream is making sure of your financial security.  

Whatever your retirement plan is, we will work with you to develope a long-term plan that can help you live your dream - without losing sight of today's concerns, such as sending a child or grandchild to college or growing your business.

 If your thinking about changing jobs or retiring, or your company is terminating its retirement plan, and you're expecting to receive a distribution from your employer's plan, rolling over your distribution into a traditional IRA might be appropriate for you.

 Here's why you may want to consider rolling over your distribution into an IRA:  

  • Your employer is required by law to automatically withhold 20% of your distribution unless you elect to roll it over directly into a traditional IRA or other eligible retirement plan.
  • If you take your distribution before you reach age 59 1/2, or as a result of seperating from service before age 55, you may also be subject to an additional 10% tax penalty for an early withdrawal.

 The rules regarding distributions can significantly impact your retirement nest egg. So, take the time to understand these rules to help keep your retirement money intact.

 Distributions Made Directly to You.  

  • Generally, any part of your plan distribution that is paid directly to you is subject to the 20% tax withholding. This means that you would receive a check for 80% of your account balance. If you decide to roll over your distribution after receiving your money, the following options are available:  
  • You may roll over the 80% that you received within 60 days. The remaining 20% would be considered taxable income.  
  • You may roll over 100% of your distribution within 60 days by coming up with the amount to replace the 20% withheld, which would be credited toward your current year's tax liability. 

How to Avoid the 20% Withholding With a Direct Rollover  

From a tax perspective, a direct rollover is perhaps one of the best ways to keep your distribution working for your retirement. With a direct rollover, you instruct your employer to transfer your distribution into an existing traditional IRA or a newly established traditional IRA. (You may also be able to roll over your distribution into a new employer's retirement plan, if permitted by the plan). In either case, no tax withheld, and your money can continue to grow tax-deferred until you take it out of your account.  

Rollover to a Traditional IRA - Other Features  

There is no limit on the dollar amount that can be rolled over into an IRA. (This is in contrast to the dollar limits on contributions to an IRA: a maximum of $5,000 per individual [$6,000 for those age 50 or older.  And the funds in the IRA can grow on a tax-deferred basis. Finally, you can choose from a wide range of investment options and may begin taking penalty free withdrawals when you reach age 59 1/2.

For additional information, contact Paul Pucilowski. at (212) 603-0365.

 

Walnut Street Securities, Inc.,(WSS) and its representatives do not provide tax or legal advice.  Consult with your tax professional or attorney for such guidance.  Thesco Retirement Planning Services and WSS are not affiliated.