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Frequently asked questions about 401k rollovers and IRA’s. and other
retirement plan rollovers including 403(b)/TSA’s, Profit Sharing Plans,
governmental 457(b) plans, Thrift Savings Plans, etc. Answered by Financial
Advisor Anne Hasbrook,

1. What does IRA stand for? Individual Retirement
Arrangements.(IRS Publication 590)

2. What if I missed the deadline for my rollover paperwork and my old
company just sent me a check?
The IRS gives you 60 days to get that money
into a “Rollover IRA.” Since your company probably withheld 20% for taxes,
you’ll have to add that amount into your rollover IRA to avoid paying tax at
the end of the year. Call the IRS for clarification if you need it. If you’re
really short on time with the 60-day deadline, go into a bank or a credit
union and ask that the money be put immediately into a short-term Rollover IRA
account. This will satisfy the 60-day window and you can meet with a financial
professional later and see about transferring your IRA to a more appropriate
account when you have time.

3. What can I roll my retirement account into? You can do a
rollover into numerous products including but not limited to mutual funds, variable and fixed annuities, stocks,
bonds, real estate investment trusts, bank and credit union IRAs, etc. It depends on your needs and what
features and benefits you’re looking for.

4. Where’s the best place to put my retirement money? Since
everybody has a different “risk tolerance” and “time frame” and goals for
retirement, it’s best to meet with an experienced financial professional who
will help you find a diversified portfolio with your best interest and
objectives in mind. It’s also a good idea to meet with your financial
professional at least annually to review your investments and goals. Be very cautious of someone who gives blanket
advice to everyone regardless of their specific circumstances and needs. I’ve
heard more than one financial talk show host repeatedly tell listeners to buy
a ‘no load index fund’ for their IRA. If the listeners did that from year 2000
through 2002, they could have lost more than 40% of their retirement money in
3 years without having any idea of what they bought and why it happened or how
to recover their loss – let alone whether it fit in with their personal
financial plan. That’s kind of like a doctor prescribing the same pill for
everyone without asking you where it hurts and what other medications you’re
on and what your health history has been. You owe it to yourself to get good
advice and help with something as important as your retirement money.

5.My husband recently died. Can I roll his employers’ retirement plan
into my name?
Usually Yes. Assuming you are the named beneficiary and the
plan allows for rollovers to an IRA, you can fill out the appropriate
paperwork to have the money moved to a “Spousal Rollover” IRA. Call the human
resources department of his employer and ask them to send you a packet with
your options. You will probably need a certified copy of a death certificate
to send in with the paperwork.

6. My mother died and left me her IRA. Can I roll it into another IRA
in my name to avoid tax?
No. If you’re not the spouse, you cannot roll
over the IRA to your own account to avoid current tax. But there is good news. If you check with the IRS about a "beneficiary IRA "(section 72,)
there have been some new tax law changes that allow you to “stretch” the death
proceeds over your life expectancy and spread the income-tax burden over a
long time period. It will be taxed as ordinary income in your current tax
bracket when you take money out. Then when you die, your beneficiary can
stretch the proceeds over their lifetime if they choose. Contact the company
that your mother’s IRA is with and ask for the beneficiary options. They will
most likely require a certified copy of the death certificate and want to
verify who the named beneficiary is before they give you any information on
the account.

7. I just changed jobs. Can I withdraw some of the money from my old
employer’s retirement plan and roll over the rest?
Yes if the plan
allows for it. You will pay ordinary income tax on the amount you withdraw and
pay a 10% penalty if you’re under the age 59 and a half and additional
withholding may apply - see IRS Publication 560. (Note: There are exceptions
for withdrawals from IRA’s for first time home buyers, disabled people and
other special circumstances. Check with the IRS.)

8. What happens if I change jobs and I want to roll over my 401k plan
but I have a loan?
Generally, you will have to pay off the loan or it will
count as a premature distribution and you will pay income tax and a 10% IRS
penalty. Check with your plan administrator for your options.

9. What happens at age 59 and a half? That’s the age the IRS lets
you withdraw money from your IRA account without having to pay the 10% penalty. You may be eliglble for an "in service distribution" at age 59 and a half or older - which would allow you to roll over some of your vested retirement account money to an IRA of your choice without the 10% IRS penalty while you're still working for your current employer. If you're not happy with your current retirement plan options - this could give you more control and choice of investments. Check with your current retirement plan administrator for any fees and restrictions. They can also send you the required "distribution paperwork."

10. What happens at age 70 and a half? That’s the age the IRS
says in effect “Hey, we want some of your tax dollars so start taking a
minimum amount out each year from your traditional IRA or we’ll charge you a
penalty in addition to the taxes.” I’m paraphrasing here - but you get the
idea. You’ve had the luxury of tax-deferral for all these years and now they’d
like you to pay taxes.

11. I want to retire early (before age 59 and a half). Can I take
monthly income from my retirement plan and NOT pay the 10% penalty to the IRS?

Yes! There’s a little known tax code called “72t” that allows you to take
income every year for 5 years or until age 59 and a half – whichever is
longer. The calculation is based on the plan amount, interest rates and your
life expectancy. If you use this rule, you will still pay ordinary income tax
on your withdrawals but avoid the 10% penalty. This coul be an option for
people who are retiring early.

12. Can I roll my retirement account from my employer into a ROTH IRA?
No and yes. You have to roll it to a “rollover IRA” first and then later
“convert” it to a ROTH IRA and pay current income tax on the amount that you
convert. Evaluate your tax situation before you do this. Will converting to a
Roth IRA push you into a higher tax bracket this year and is it worth it?

13. I rolled over my 401k plan when I retired and I don’t like where
it is. Can I roll it over again to something else?
Yes. You can do a
“trustee to trustee transfer” where you don’t touch the money but just fill
out the paperwork to move it from one IRA to another or you can do an
“indirect rollover” where you withdraw the funds and have 60 days to move it
into an IRA. Before you move it, evaluate all of your current investment
options and see if there are any fees and charges to move it. Make sure the
benefits of where you’re moving it to – outweigh any costs associated with
moving it.

14. Can I have more than one IRA? Yes.

15. Can I name more than one beneficiary on my IRA? Yes.

16. What is a “Stretch IRA”? A “Stretch IRA” is a new
concept regarding the beneficiaries where the IRS lets you extend the life of
your retirement money over generations of life expectancies. You can take
distributions based on your life expectancy in your lifetime, then when you
die, your beneficiary can continue to take distributions based on their own
life expectancy, and when they die, their beneficiary can withdraw the funds
based on their life expectancy. In theory, your grandchildren could continue
to enjoy your retirement money as an income stream in their lifetime. Your
beneficiaries could also opt for a lump sum distribution at any time and spend
it all. It’s a good idea to write a letter to your beneficiaries telling them
you’d like them to “stretch” the IRA after your death so they understand your

17. I haven’t changed jobs or retired but I want to roll some of my
retirement money out of my employer’s plan into something I like better. Can I
do that?
There have been new tax law changes allowing for “in service
distributions” where you can roll some or all of the money to a different IRA
account. Call your plan administrator for specifics to your own retirement
plan’s rules.

Copyright© 2005- 2012 Anne Hasbrook, Sacramento, California. All rights reserved. Re-prints allowed with written permission from Anne. This information is designed to help people make better decisions with their retirement money. This is not designed to replace good tax or legal advice. Consult a competent tax or legal advisor for specific tax and legal advice as laws change regularly. Securities offered through Investors Capital Corporation, MemberFINRA/SIPC, WWW.SIPC.ORG. www.SIPC.ORG
6 Kimball Lane, Lynnfield, MA 01940, (800)949-1422 Investment Advisory Services offered through Investors Capital Advisors, Inc. Anne Hasbrook Smith, California Insurance License #0827440. Licensed to do securities business in California. For an appointment call Anne @ (916) 454-2663