Get a jump on rolling workplace dollars to an IRAPaul RycroftDoes the money you are accumulating in your employer-sponsored retirement plan have to stay there until you leave your job or retire? You may be surprised to find that in some cases, the answer is no. You might already have the opportunity to roll money from your 401(k) or 403(b) retirement plan to an IRA even though you are still employed with the company. These “early rollovers” are known as in-service distributions. The term refers to the ability to roll money out of your workplace plan while you are still working (in service) for the employer. The option is not available to everyone. Your employer-sponsored plan must include provisions that allow for in-service distributions. If the plan does allow it, participation may be restricted to those who are 59-1/2 or older. Check with your plan administrator or review the Summary Plan Document for your specific situation. Take more ownership of your retirement savings If you have the opportunity to pursue an in-service distribution, some of the benefits include:
One key to an in-service distribution is to make sure the rollover is executed in accordance with the rules. Just like any rollover of retirement plan dollars, the money must be moved directly from the workplace plan to the custodian of your IRA. If the money is first sent to you instead, an automatic 20 percent tax withholding applies and there is a risk that the distribution will be subject to additional taxes and a penalty. If money is transferred directly between the plan and the IRA custodian, the tax-deferred status of the dollars accumulated in your retirement plan stays in tact and will continue within the IRA. Also, it’s important to note that some employer plans may temporarily prevent new contributions by participants who take an in-service distribution that exceeds a specified amount. Be sure to thoroughly discuss the implications of any withdrawals with the plan administrator. It’s important to make sure the money is invested in a way that is consistent with your long-term goals and risk tolerance level. Keep in mind that your retirement savings represent your future financial security. This money needs to be managed effectively and protected from unnecessary risks. There can be complexities involved in choosing an in-service distribution. Discuss your IRA options and tax considerations with your financial and tax advisors. ### Paul F Rycroft CPA, is a Financial Advisor with Ameriprise Financial Services, Inc. in Alice, Texas. He specializes in fee-based financial planning and asset management strategies and has been in practice for 16years. To contact him please call 361.668.1212. Paul F Rycroft is located at 604 E. Second St. Alice, Texas 78332 Advisor is licensed/registered to do business with U.S. residents only in the states of Texas, Oklahoma, West Virginia, New Mexico. Ameriprise Financial and its representatives do not provide tax or legal advice. Consult with your tax advisor or attorney regarding specific tax issues. Ameriprise Financial Services, Inc., Member FINRA and SIPC © 2014 Ameriprise Financial, Inc. All rights reserved. File # 887582 | |
2014 Alice Business Today - May 2014 |