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Can You Move Retirement Plan Assets ?

by Kristin P. Sinclair   A Accu Tax   March 10, 2020  

Your retirement plans should be both tax-favored retirement assets which should be portable.  Normally you may easily move these assets to your Traditional IRA Rollover or other retirement plan.  You should be able to do a direct transfer from one trustee to another; a direct or indirect IRA Rollover; or transfers incident to a divorce.  You may also want to consider how you may even be able to move these retirement plan assets to your Roth IRA.

Trustee-to-Trustee Transfers move your funds directly from one like-type account to another.  An example is from a former 401(k) to your new 401(k).  You normally can also move Traditional IRA funds via a Trustee-to-Trustee Transfer from one IRA to another like-kind IRA.  This is one of the most convenient ways to move funds between IRAs and other retirement accounts.  Your current trustee may actually send you the check; however, in this case the check is normally payable to your new trustee for your benefit.  You then should forward that check to your new trustee.      

IRA Rollovers are tax-free distributions to you normally from non-like retirement accounts.  For example from your 401(k) or 403(b).  The check may be sent to you, or sent directly to your chosen retirement plan.  Chosen retirement plans include: IRA Rollovers, your current employer’s qualified retirement plan; a state or local government’s deferred compensation plan, or a tax-shelters 403(b) annuity plan.  

Some rollover limitations include that you normally may only make one tax free indirect IRA Rollover in any 1-year period.  This restriction will apply no matter how many IRAs you own.  Direct IRA Rollovers are frequently exempt from this limitation.  A direct IRA sends the funds directly from one custodian to your new custodian.  Also note that you must complete any indirect IRA Rollover within 60 days from when the funds left your former trustee.  That is, they should arrive at your new trustee within the 60 day rollover period.  

Example: Anna recently left her Charlotte NC job for a shorter commute with an employer in Fort Mill SC.  She is going to grad school at Winthrop University and wanted a shorter commute from her Rock Hill SC home.  Anna had worked at the Charlotte firm for five years and had saved over twenty thousand dollars in her former employer’s 401(k) program.  Anna has decided rather than leave her funds at the old 401(k), or move them to the 401(k) at her new employer, she will start an IRA Rollover.  Anna plans to do a direct rollover and have her funds sent directly from her old 401(k) to her new IRA Rollover.   This should be a non-taxable event, and there will be no taxes withheld from her old 401(k) distribution in the direct rollover to her new IRA Rollover.  The check will be payable to her new IRA rollover and mailed to Anna.  She will still need to forward the check to her new IRA Rollover.  The rollover check is made to her new IRA Rollover, and therefore this is still a direct rollover.  

 

Kristin P. Sinclair: A Accu Tax

Updated in Charlotte NC and Rock Hill SC

March 10, 2020   (803)329-0609

KPS: More information is available at IRS.gov

See Publication 590-A and Publication 590-B.  

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What is a Traditional IRA?

by Donn J. Sinclair MBA   March 5, 2020

A Traditional IRA is an Individual Retirement Account that permits you to set aside funds in a tax-favored retirement savings/investment program.  One of the two most important IRA advantages is that you may be able to fully or partially deduct your contributions from your current tax year federal and state taxable income.  If so, then your IRA contribution should reduce your current tax year federal and state taxes.  This should leave you more money in your Traditional IRA account to earn you more money in the years ahead !

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What is a Traditional IRA?

by Donn J. Sinclair MBA   March 5, 2020

A Traditional IRA is an Individual Retirement Account that permits you to set aside funds in a tax-favored retirement savings/investment program.  One of the two most important IRA advantages is that you may be able to fully or partially deduct your contributions from your current tax year federal and state taxable income.  If so, then your IRA contribution should reduce your current tax year federal and state taxes.  This should leave you more money in your Traditional IRA account to earn you more money in the years ahead !

The second important Traditional IRA advantage is that generally any IRA earnings, gains, and or interest inside your IRA are not taxable until you redeem funds from your IRA.  Once again, these potential IRA earnings represent more money in your IRA that might earn you more money in the years ahead.  

Remember that the Traditional IRA purpose is to allow you to save money for your retirement years.  In retirement many people have lower or no net taxable income.  So IRA money redeemed in retirement may be at lower tax rates, and potentially with no taxes due at all.

So far we have focused on the tax deductible Traditional IRA contribution.  Nondeductible IRA contributions can also be made into your Traditional IRA.  These nondeductible contributions are not deducted from your current tax year income for federal or state income tax purposes.  Thus these nondeductible IRA contributions should not directly reduce your current tax year income taxes.

The tax advantage to a nondeductible IRA contribution is that these nondeductible contributions can grow tax-deferred inside your Traditional IRA.  Tax-deferred of course meaning that no taxes are due on any interest, earnings or gains inside your nondeductible IRA.  If you make any nondeductible IRA contributions, then it may be best to open a separate Traditional IRA account for only your nondeductible IRA contributions.    

Now is a great time to discuss with your tax advisor whether you qualify for a fully or partially deductible Traditional IRA contribution.  Your household income, whether you or your spouse have access to an employer sponsored retirement account, help determine whether you qualify for a fully or partially Traditional IRA deductible contribution.  Employer sponsored retirement accounts include 401k plans, 457 plans, and 403b plans.  

Please note that your Traditional IRA is intended to be a long-term savings and or investment program for your retirement years.  Generally  prior to your age 59.5 there is a potential 10% penalty for funds redeemed from your IRA.  Please consult IRS.gov or your tax advisor for more information.

 

Donn J. Sinclair, MBA   (803)329-0609

Updated in Charlotte NC and Rock Hill SC  

March 5, 2020

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2018 Roth and Traditional IRA Considerations

by Kristin P. Sinclair, A Accu Tax

This article is to be updated by April 26, 2020. Please check back again later.

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