Retirement Planning

As the baby boom generation enters into retirement, retirement planning is suddenly a major topic of discussion among those at or nearing retirement and even those who are many years away from retirement.

Retirement planning poses different challenges to each of these groups. For baby boomers, a great deal of them will have already reached retirement age and will be living in retirement during the next ten years. Hence, there is very little retirement planning that can be done. Although this might sound too pessimistic but it is not really the case because Social security is still available and according to different studies, more than 75% of baby boomers are planning to work past age 60.

Although those two points might be considered positives for those who are about to retire, the reality is that more needs to be done for those that are a few years away from retirement because the luxury of social security may not be there a few years from now.

What needs to be done and should you hire a retirement planner?

Whether you hire a retirement planner or not depends on how comfortable are you with terms like IRA, 401k, investing and asset allocation. But regardless if you hire a retirement planner or not, most retirement planners agree that you should be taking the following steps regardless of how old are you:

1- Take advantage of employer retirement plans such as a 401k, or 403b and contribute the most you can. Many employers offer matching contributions and it is just a lost opportunity not to take advantage of these retirement plans.

2- If you have an employer provided 401k plan make sure the funds are invested in a diversified portfolio particularly if you have a large portion of it in company stock.

3- If you don’t have an employer provided retirement plan look into establishing an IRA or a Roth IRA. Saving for retirement in an IRA gives you tremendous tax advantages as your money grows tax deferred in an IRA, while it grows completely tax free in a Roth IRA.

4- Consolidate your plans: Many employees have changed jobs one or more time during their career. Many often leave their 401k at a previous employer and thus after a few jobs end up having several 401k plans at different places. One good move is to consolidate these former 401k plans into one rollover IRA that can be invested with your goals, objectives, and risk tolerance in mind.

5- Before taping an IRA or a 401k or other qualified retirement plan, make sure you seek expert advice regarding your distribution options. 401k Distribution options from retirement plans can be very complex, and making the wrong decision might mean hefty penalties and a large tax bill.

401k Withdrawal

401K Retirement Plan was created in order for those working individuals to have a good substantial amount to have with when they retire. Yes, you have set aside a part of your income in order for you to live a life you want to live when you reach the age of retirement or when you want to retire from working. However, what if you are into a financial emergency, you need a substantial amount to pay for your medical bills and other expenses, what you should do? It is suggested that you should only withdraw money from your 401K only when you do not have any option left. Remember, you are slashing money out from your future, and if you will always do this withdraw and withdraw money from your retirement plan you will be shocked, there is no money left for you when you retire. Be sure you know the 401K withdrawal rules before withdrawing the money. It is not as simple as withdrawing money from the atm machine.

You should be familiar with 401K withdrawal rules before you decide on withdrawing money from your retirement plan. Most likely, the retirement plans of which working individuals have will only allow withdrawal only if it is under the so-called term financial hardships. What are these? Most of the reasons that are classified under such term are: death of the workers spouse or a big medical bill.

Most of the employers set up 401K withdrawal rules based on the guidelines that the Internal Revenue setup. This means that when you are in dire need of cash immediately, then supported with a reason under financial hardship, you are eligible for such withdrawal.

Here are four reasons that under 401K withdrawal rules that would allow you to make a withdrawal:

1. When you incur a surmountable amount for medical bills either for your spouse, family or even you.

2. Preventing the foreclosure of your home.

3. Purchasing a house which will become your primary residence, this excludes paying your mortgage.

4. Paying for school fees either for post-secondary or university for your dependents, spouse and children.

One of the 401K withdrawal rules that you should remember is that when you withdraw money based on the reasons mentioned above you will be suspended from making any annual contributions for the period of 6 months. Remember, when you need cash that getting money out from your 401K retirement plan will affect your future. It should be your last resort.

401K Contribution Limit 2008

The IRS maximum contribution limits for defined contribution plans allow individuals and their employers to contribute more than ever before to a 401(k) plan. In addition to the opportunity to shelter from taxes a big portion of income, many 401(k) plans have a loan feature that can let its owners withdraw cash in times of need.

401(k) Contribution Limits for 2008
Salary Elective Deferral Limit $15,500
Maximum Employer + Employee Defined Contribution Plan Limit $46,000
Catch-Up Contribution Limit For Age 50+ $5,000

401(k) Contribution Limits for 2009
Salary Elective Deferral Limit $16,500
Maximum Employer + Employee Defined Contribution Plan Limit $49,000
Catch-Up Contribution Limit For Age 50+ $5,500

Source: www.irs.gov/retirement/article/0,,id=96461,00.html

401k Rollover

Let's face it. With the current economic situation, many investors have realized that they are going to have to retire later. So many people incurred big losses on their 401k plans and are wondering how they are going to recuperate all of the funds they have lost. There are big reasons to rollover a 401k to an IRA and they all have to do with maximizing your returns and getting back some of what you have lost.

Here are 5 of those reasons that you should take some time to ponder.

1. 401k plans are controlled by your employer so inevitably the investment venues chosen are going to benefit the company more than you. One of the biggest reasons to rollover a 401k to an IRA is to be able to choose your own investment venues in order to maximize your returns.

2. 401k plans cannot be truly self-directed. You may have heard that the best way to increase your returns is through self-directing your account and while self-directed 401k plans do exist, they are not nearly as flexible as self-directed IRAs. For example, employers commonly only allow a portion of a 401k plan to be self-directed. Furthermore, it's up to your employer to change plans or companies whenever they want and you are forced to bite the bullet if you don't agree with those changes.

3. One of the other big reasons to rollover a 401k to an IRA is to increase your investment options. With 401k plans you are limited to stocks and mutual funds chosen by your employer but when you self-direct your account you have a much wider range of options. You can invest in real estate, partnerships, franchises, gas and oil fields, private equity, tax liens, and more.

4. When you self-direct your account, you are ultimately in control of your investments. You will make the decisions that matter and not just have to wait for the quarterly reports to come in. That doesn't mean however that you alone will be solely responsible for the account. You will be helped every step of the way by an account custodian of your choosing.

5. The big reasons to rollover a 401k to an IRA mostly have to do with increasing returns. The hands down best way to maximize your investment returns is by investing in real estate. It's not smart for someone who is not versed in real estate investment to delve into it. That's why you need to find a company that can help you. There are companies out there that can help you get the most out of your retirement investments and guarantee to double your returns or pay the difference.

Your next step? Take this information and start looking for a company that will help you roll over your 401k to an IRA and invest in real estate.

As you may have gathered, there are big reasons to rollover a 401k to an IRA.

If you want to maximize the returns on your investment and build a financially secure retirement, your best bet will be to rollover to a self-directed IRA.

401k plans simply don't offer the necessary flexibility and options to help you achieve your financial goals.

401K Rollover

Rollover USA would like to provide a list of 401K Rollover topics that will be discussed in this blog going forward. Rollover USA will be providing a forum for education, discussion, and links to financial professionals who specialize in the rules pertaining to 401K Rollovers. Please feel free to comment with questions on your own specific situation if you are a terminated or retiring participant with a 401k or Pension Plan balance. Rollover USA will answer your questions within 24 hours of posting and welcomes input from readers as well.

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New Job, Old 401K? Why You Should Consider a Rollover IRA

Below you have a very insightful article pertaining to the reasons one would want to rollover their 401K plan to a rollover ira when they separate from service and/or retire from their jobs. I have spent many years at Fidelity handling questions and making suggestions relating to this topic.

I believe Cathy has hit the nail on the head with many of her points and I wanted to share them with you. Please feel free to comment.

Thank you,

RolloverUSA



At some point or another in our lives, we have left a job to move on to another company. But too often, we forget to pack one our most important personal items in our moving box, our 401k! It's easy to do really, given the comfort that someone, somewhere is taking care of our money for us, right? Not quite. The truth is, nobody cares more about your money than you do. Leaving your money in your old 401k plan is wrought with challenges and pitfalls. In most cases, your best bet is to rollover the assets into a rollover IRA. Here's why.

Few investments are more important than your retirement plan. Unfortunately, many Americans are regrettably "stuck" in outdated, high cost plans that offer little if any diversification opportunities to grow their account successfully. Historically, company retirement plans (this includes 401k/403b/457 plans) are plagued with many challenges that might dampen the growth of your assets: high cost products, proprietary funds, hidden fees, lack of fiduciary oversight and limited investment categories.

Investment Costs

Retirement plan participants often give up more than 2% per year in returns to cover fund expenses and they don't even know it! Compare that to a cost of less than 0.25% for an index fund. For every dollar you save on expenses or administrative costs, that's an extra dollar (plus compounding) in your nest egg. According to the Department of Labor, fees can diminish your lifetime 401k/403b accumulations by as much as 30%.

Let's put this statistic to the test. After 30 years worth of saving $500 a month into a plan, a participant with a rate of return of 8% over the period will have accumulated $745,179. Using the same scenario, but factoring in 2% of fund fees will only generate $502,257; that's a 32% reduction. Lesson learned: every penny counts!

Investment Choices

I've seen this time after time as I review clients' portfolios. 401k plan choices tend to limit your available investment universe to only a few U.S. based, large or mid cap mutual funds. If you're lucky, you might get the choice of a small cap or even an international fund, but not much else. That limitation of choices is a huge impediment on your wealth.

My point is, often times, the investment offering within a 401k plan is pretty abysmal and limited. As an active employee, you have no choice but to stay within the confines of that plan. However, as a departed employee (retired or otherwise), you have the right to liberate yourself from those constraints by rolling the assets into a self directed or managed IRA rollover. You are free to buy virtually any security in that IRA, as long as you keep it on a platform that allows that (i.e. at a
discount brokerage firm like Schwab, E*TRADE, etc). After all, diversification and asset allocation is what will drive your investments returns. So, shouldn't you want to optimize what you already have?

Orphan 401k's and Investment Strategy

A key to your financial success is to make sure that your asset allocation strategy is appropriately implemented across all your various investment accounts. Casual investors tend to have multiple accounts, managing each in isolation of other accounts they might own. This can invite investment overlap, portfolio concentration and poor diversification. What type of investment strategy could you possibly have if you have accounts scattered around everywhere? From an investment strategy perspective, all of those accounts really ought to be tied together with an investment strategy for maximum efficiency.

Think of the following scenario, Maria is 56 and has changed jobs frequently throughout her career. As a result, she has numerous 'orphan' 401K accounts. The paper statements are unread, user names and passwords forgotten, and there has been no rebalancing for years. In fact, with so many accounts, she does not even know what the overall investment allocations are of her retirement funds.

Why not include in your 2008 New Year's goals the consolidation of your orphan accounts into a rollover IRA? That way, you can keep better track of retirement funds and ensure that they are properly balanced.

IRA Rollover Process

A rollover can be done one of two ways. At your request, the former employer will typically redeem the securities held in your account. Then they may distribute a check of the proceeds directly to you, for deposit to your new IRA Rollover. You then have 60 days to deposit those proceeds into your new IRA without taxes or penalty. Unfortunately, this method leaves too much room for human error. What if (oops) you forgot you only had a 60 day window to do this and deposit the check too late. Or, you could easily misplace the check in your pile of unopened mail.

The most efficient way conduct a rollover is to request that your plan administrator initiate a "direct rollover" or "trustee to trustee transfer" as to avoid the chance of incurring an unforeseen tax or penalty. This means the check for the balances of the old 401Ks will be payable to and sent directly to the trustee of the new account. You don't ever see or touch the money-probably a good thing. Obviously, you then receive account statements from your new IRA provider.

Advantages and Disadvantages of 401k and IRA's

Where you decide to keep your retirement funds is really a personal choice. Armed with information on the advantages and disadvantages of both 401k's and IRA's you should be able to make a more informed decision. Here are a few to consider:

1. A traditional IRA can offer almost unlimited investment options; a 401(k) plan limits you to the investment options offered by the plan

2. A traditional IRA offers easier access to retirement funds than a 401(k)

3. A traditional IRA can be converted to a Roth IRA if you qualify

4. A 401(k) offers the highest level of protection from creditors (the protection afforded to IRA funds depends on state law). Note: Florida state law does allow IRA creditor protection, so this is a non-issue.

5.A 401(k) may allow you to borrow against the value of your account, depending on plan rules. Note: I do not recommend you use your 401k as a piggy bank.

6. An IRA may provide more flexible distribution rules.

In closing, whether you're changing jobs or retiring, it's important that you make the right decision regarding your old 401(k) or 403(b) plan. As you see, the process is quite simple. Keeping your assets in your old employer's plan may or may not be the most optimal solution for you. In either case, consider your options and the impact of your decision, or lack of decision. But, remember, you gain incredible control and flexibility once you unlock your old plan. Consult with your financial professional to ensure which choice is right for you.

Cathy Pareto, CFP, AIF, MBA

Cathy Pareto and Associates, Inc. http://www.cathypareto.com

401K Rollover to IRA Rollover Account

401k rollovers allow you as an employee to shift your eligible retirement funds which remained with a previous employer into your own individually controlled IRA Rollover Account.

Most commonly, you'd do a rollover when you either leave a job or start something new. In addition, if you are actually retiring, then you are entitled to make a rollover if you so desire. In this way you can take your retirement assets with you when leaving your current position.

Naturally this should assist you in making sure that your funds are reasonably invested and managed and will continue to grow on an on-going tax deferred basis.

You'll find that there of number of pluses that allow you to benefit from using 401k rollovers.

1. It should secure your funds for you in case the original organization ends up merging with another.

2. It permits to work directly on constructing your own diversified investment portfolio.

3. If you tend to change jobs frequently, it can become a real mess trying to track and manage scattered assets, so doing 401K rollovers allows a central management point and helps you keep both manage and track your funds easily.

4. It can also provides you the option of withdrawing some, or all of the funds, if you wish. Just be very aware that you may have to pay penalties and/or taxes on amounts actually withdrawn. Check carefully because there are provisions in the law under which penalties are waived.

So let's examine the available options for someone who is looking at doing a 401k rollover:

1. They can move or rollover all or part of their 401k plan funds to one or more IRA's. They may decide that they would prefer to put it all in one IRA or perhaps they would rather move it to multiple IRA accounts.

2. If you have 401K plans with several different companies which you have worked for, you can also rollover part or all of your funds into plans with those companies as well as into a variety of IRS accounts.

3. It also permits you to rollover all or part of your funds into stocks held in a particular IRA account.

However, despite the rules in the law, most 401K plans also have administrative regulation controlled by the company and 401k plan administrators. In many cases, a partial rollover is disallowed and they discourage people from moving funds to more than one place. They would prefer you move everything to a single location. If you run into that kind of situation you may want to do some searching on the internet for specific sites which can assist you with more complicated 401K rollovers.

Since you'll almost certainly want to retire someday, looking into 401K plans and IRAs makes good sense. And the sooner the better, since counting on Social Security or an employer pension can be a major mistake. Visit http://401k-and-ira.com now.

Article Source: http://EzineArticles.com/?expert=Richard_Keir http://EzineArticles.com/?401K-Rollovers-to-an-IRA-Rollover-Account&id=578095