Charting Today's Investment Environment
Tuesday, May 12, 2015
20100 Magnolia Street
Huntington Beach, CA 92646
Questions? Please contact:
Craig Fein, LPL Financial Consultant
CA Insurance License #0E56240
Leaving the Company? Know Your Retirement Plan Options
Your retirement plan may offer you several options for managing your retirement plan assets when you change jobs or retire. Understanding these choices will help you make the right decision.
Following are the choices that may be available to you. Note that these selections apply to your contributions, the vested portion of your employer's contributions, if any, and the earnings attributed to both.
Avoiding an Immediate Tax Bite
- Keep your money in the plan. You may be able to leave your savings in your employer's retirement savings plan. Usually, minimum distributions must begin after you reach age 70 1/2. This option allows you to continue deferring taxes on the account.1 Although you can no longer make contributions, you can still control how the money is invested.
- Roll over your money to another retirement account. You can move your money into an individual retirement account (IRA) or, if you are changing jobs, into your new employer's retirement plan, if allowed. With a "direct rollover," the money goes directly from your former employer's retirement plan to an IRA or to your new plan -- you never touch the money. This option also allows you to continue deferring taxes.1
- Take a cash distribution. You can choose to have your money paid directly to you in a lump sum or in installments (if you are retiring). However, you will be subject to income taxes, and if you are younger than age 59 1/2, a 10% additional tax. In addition, your employer will withhold 20% of your distribution to put toward your federal income tax obligation. Therefore, if you are under age 59 1/2, the amount you receive could be significantly less than you expect.
If you receive a distribution, you can avoid an immediate income tax bite and the penalty if you roll over the entire amount into an IRA or a qualified employer plan within 60 days. You will receive your distribution minus 20% in withholding for federal income tax, but you can make up the withdrawal amount from your own pocket. The withheld amount will be recognized as taxes paid when you file your regular income tax.
Think carefully before making any decisions about the money in your retirement plan. It may also be a good idea to discuss your options with a tax advisor.
1 Withdrawals will be taxed at then-current rates. Withdrawals prior to age 59 1/2 are subject to a 10% additional tax.
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Dwight Lee and Craig Fein are LPL Financial Consultants located at NuVision Federal Credit Union. If you have any questions or would like to make an appointment, please call Dwight Lee at 714.375.8227 or Craig Fein at 714.375.8222.
Representatives are not tax advisors or legal experts. For information regarding specific tax situations, please contact a tax professional. For legal advice, consult an attorney. Securities offered through LPL Financial, Member FINRA/SIPC. Insurance products offered through Kinecta Financial & Insurance Services, a subsidiary of Kinecta Federal Credit Union. CA Insurance License #0E24631. Insurance and investment products: 1) are not NCUSIF insured; 2) are not obligations of or guaranteed by the credit union or any affiliated entities; 3) involve investment risk, including possible loss of value. Kinecta Financial & Insurance Services and Kinecta Federal Credit Union are not affiliated with LPL Financial. Some insurance products available to California residents only.
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