Retiring or leaving the company - How to Properly do an IRA Rollover

Retiring or leaving the company - How to Properly do an IRA Rollover

Whether you are retiring or changing jobs, you need to know what to do with your employer sponsored retirement plan before your leave. Once you leave a job for whatever reason, you can choose to:
•Rollover the money into an IRA (IRA rollover)
•Take the lump sum and pay the income tax and potential penalties
•Leave the money at the company if the company offers that as an option
•Rollover the money into your new employer's plan, if that plan accepts rollovers

Realize that the above are options offered by IRS. However, your employer's rules may be more restrictive and if so, there's nothing you can do. For example, if you have a pension plan that offers payout options over your lifetime or jointly over the lifetime's of you and your spouse, but there is no option to rollover a lump sum to an IRA (IRA rollover), than the rollover option isn't available to you. In other words, the "summary plan document" rules. You may want to get a copy of that now and have your financial advisor review it so that you know what options you have.

So the starting point is to get the information from your employer plan as to the options available to you.
What is an IRA Rollover?

IRA rollover means to move money from a retirement plan such as a 401(k), 403(b) (tax sheltered annuity) or 457 (municipal deferred compensation) into an IRA or other plan. If you receive a payout from your employer-sponsored retirement plan, a rollover IRA could be to your advantage. You will continue to receive the tax-deferred status of your retirement savings and will avoid penalties and taxes.

There are two reasons that rollovers are favored over other options:
•You have virtually unlimited investment selections. Unlike your employer's plan which may have six investment options or even 50 investment options, in a self-directed IRA, you can choose any stock, any mutual fund and a host of other options listed later.
•Company plans often can restrict choices for non-spouse beneficiaries. Specifically, they may not be able to stretch IRA distributions over their lifetime. The benefit of this "stretch" is it defers taxes and allows the funds to potentially grow longer and larger in a tax-deferred environment.
The reason to leave your retirement plan with your company (if they permit this) is because your company plan is covered by ERISA and is protected from creditors. However, under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, the creditor protection will follow the money if it is rolled into an IRA and not commingled with other IRA money (from annual contributions).

Combining with Other Retirement Accounts
The rollover IRA is usually funded by the eligible distributions from a company sponsored retirement plan. These distributions can be combined with your existing IRA(s) or placed into a separate IRA, but see the new creditor protection rule mentioned above. In fact, the IRS permits these funds to be combined with other types of retirement accounts. For example, say you have been self- employed and you have a one-person profit sharing plan (often referred to as Keogh plans), you could rollover the employer-plan assets into your profit sharing plan. Or, if you have a second job and that employer has a 403(b) plan and also accepts IRA rollover contributions, you could rollover your 401(k) balance into that 403(b) plan.

Completing your IRA Rollover
When it's time to retire, you have a few options on moving the money from your employer's plan.

Direct IRA Rollover:Your employer can directly rollover your retirement plan payout into a Rollover IRA and you will avoid the 20% IRS withholding tax. This is exactly what you should do by providing your employer the name, address and account number for your new Rollover IRA custodian. For example, you give your employer instructions to send your retirement account to ABC securities, account #8889999. Funds are sent directly to the IRA account and you never touch them. This is the preferred method of moving retirement funds.

Payout by Check: If your employer hands you a check for your retirement funds, the employer must withhold 20% for potential taxes. You can avoid the 20% IRS withholding tax on a payout by check from your employer if you deposit the check plus 20% into a rollover IRA within 60 days. In order to complete the tax free rollover, you now have 80% of your IRA rollover in your hand and you must take the other 20% out of your pocket so that you have a completely tax free rollover (you will get the 20% income tax withheld as a refund after you file your tax return). Don't allow your employer to give you a check, as this requires you to take money out of your pocket to complete your rollover.

Taking a lump sum distribution: This is typically not a wise option because you will pay income tax on the distribution and a 10% penalty if under age 59 ½. However, there may be reasons to take a taxable distribution. If you are set on buying a $300,000 boat (there are people who can do this) and spending the rest of your life floating about the globe, then you may need to take your retirement funds now and pay tax. However, if you can avoid using these funds currently, you'll hopefully have a nest egg when you're older and ready for that next stage of life.

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9 Places You Can Save Money For Your Family

Most families are spending more and more money every year (and not just because the cost of living rose) while also saving less and less. One reason is that few household managers spend much time reviewing expenses and expenditures to find ways they can save money. However almost every family has places where costs can be cut and pennies can be pinched -- and if those freed up funds are then used to pay down debt and save for the future it could have a dramatic impact on their quality of life.

Food is one big area where many families could be more thrifty. Families spend an average of $2,434 on food away from home, according to the Consumer Expenditure Survey from the U.S. Bureau of Labor Statistics. If you (and your spouse and your children) eat lunch out every day of the week then try brown-bagging at least one of those days. If just one of you does it you may save up to $400 a year and if you can double or triple that savings you could finance a family vacation with it.

Another major expense is your home. When was the last time you looked at refinancing? Can you find a lower interest rate? Can you renegotiate to a shorter time frame? Even if you can't change your mortgage payment you may be able to pay a bit extra each month which over time will help pay down your mortgage faster. Also, don't overlook your utilities. There are ways to save in this area as well including updating your insulation and weather stripping, keeping up-to-date with maintenance and cleaning of your furnace and air conditioner or using a programmable thermostat to take advantage of those times when your house is empty or the family is asleep.

Transportation is another major expense for many families. Not only are vehicles expensive to buy but also to maintain and operate especially with gasoline prices at such high levels. Is carpooling an option for any members of the family on at least a part-time basis? Make sure to combine errands and trips to cut down on your travel and save money when buying gasoline by taking advantage of special programs and discounts and remaining vigilant about gas prices. In addition, following a regular maintenance schedule and proper tire inflation can also help you achieve maximum gas mileage for your vehicle.

Choosing your bank wisely can be another way to save money. Make sure the bank you use offers free (or at least low cost) checking as well as electronic bill-paying. Electronic bill-paying and a debit card can cut down on your need to use checks and postage which will save you in the long run as well as help you better manage payments so you will avoid fees, penalties, and higher interest rates.

Cutting your credit card costs can be another major savings. This means making sure you are using the best possible credit card with a low interest rate and low or no annual fee. Shop around until you find your perfect match and don't forget to cancel and cut up those rejected suitors.

Health care is not really an area where you can cut expenses but you can save money by taking advantage of special offers and programs. For example, many employers offer a Flexible Spending Account where you can save money before taxes for out-of-pocket medical expenses for prescription and nonprescription drugs, dental expenses, and eye care.

Tuning up your insurance policies can also help you save money. When did you last compare rates for your home, your vehicles, and yourself? Some other ways to cut costs are to raise your deductible level or using the same company for multiple coverage (your home and vehicles). When you are shopping around make sure to give your current company a shot at keeping you. Sometimes they can offer a better rate too.

Another major expense for many families is the cost of communication including local and long distance phone service, cell phones, cable or satellite television, and Internet access. Review your expenditures and cut out the services you don't need. Can some of these expenses be bundled to save money? Are there better plans for your needs?

When looking to save money it is important to become an aggressive shopper. The Internet makes it possible today to compare prices and product reviews while not spending a lot of time and money driving from store to store. Any big ticket item (and that includes your weekly groceries, cleaning products and health and beauty aids) deserves a closer study.

Over the next, month take time to review your family expenses and expenditures in each of these nine areas. Making a few alterations in your family's spending habits will soon make a difference in the overall household budget. You can raise your family's quality of life by making just a few changes in your monthly budget.

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You SIMPLY must have a Plan!

How that is some people can retire at 50? Or not lose their shirt when there’s a stock market “crash”?

Why are some people able to earn high incomes or even have “multiple streams of income?

How come some people retire to a life of luxury and world travel, while others barely have enough to feed and house themselves?

Of course, one part of it the answer is that some people are more intelligent and industrious than others. No matter what anyone says, we are not all the same. We may have been created equal, but no one has ever guaranteed us equality of results. That depends on our own efforts.

Another part of the answer is that some people consider the risks they will face and do something before  they occur to mitigate the damages. One obvious way of doing this is by buying the proper kinds and amount of insurance to protect your home, health and life – if you have an income stream to protect.

Less obvious, but still a very helpful plan is to become an expert at whatever you choose to do  –  to make yourself indispensable to your employer.

If you work for yourself, you want to be the best at whatever it is you’re doing, from practicing medicine to baking bread. You also have to have the will to persevere and work long hours at making yourself a success.

Yet another part of the answer is having a plan. Some people get up in the morning and let events carry them along through their day. Others plan what they will do with their life and stick to it.

They will learn about investments and how to diversify, so that when one asset goes down another holds its own or goes up. Or they will hire financial professionals to do the work for them.

They save as much money as possible, using every tax sheltered vehicle allowed, including 401-K’s, IRA’s, Health Savings Plans and 529 educational savings plans. And then they will invest even more in taxable accounts.

They live well within their means. Some like Warren Buffet, one of the world’s richest men, lives well under theirs. They will use credit judiciously or not at all.

Successful people will invest in businesses, rental real estate or work part time, while maintaining their full time job  just so they have many streams of income. If one is lost, their world does not come to an end.

Many people play the lottery and hope they will strike it rich. The sad fact is that many think this is the only way get rich. But anybody with the will can find the way.

Our public libraries are filled with books on how to invest, how to insure yourself, how to set up a financial plan or how to open and run a business.

Some employers have tuition reimbursement plans – they will pay your way if you want to better yourself. Or community organizations offer free adult education courses to help you learn new skills or improve on the old.

The internet now makes it easy to set up an online business while you continue with your day job.

The bottom line is you have to rely on yourself to earn and save as much as possible. If you do you can be one of the “lucky” ones who retire young with lots of money to spend.

If you don’t you’ll be living hand to mouth on social security, disability or even un-employment.

The choice is yours.

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4 Money-Saving Tips For Every Homeowner

Losing weight. Finding a new job. Spending more time with the family. A new year means setting new goals. Why not make saving money one of them?

If you're a homeowner, there are many ways you can cut costs and still live comfortably. The following tips will help lead you to financial success.

* First, set a budget. Figure out exactly how much you spend on the upkeep of your home. Compare each month's expenses with the previous month's to get a better idea of how much to budget for each necessity. Then, see what costs you can cut. Once you set a budget, stick to it.

* Save energy. You might be losing a substantial amount of energy dollars during the winter and summer because of air leaks. By caulking, sealing and weather-stripping all cracks and openings, you can save 10 percent or more on your energy bill.

Also, look into replacing older appliances with newer, more energy-efficient alternatives. Your light bulbs can make a difference, too. Fluorescent bulbs are four times more energy efficient than incandescent bulbs.

* Refinance. Shop around to see if you can replace your existing home loan with one that has a lower interest rate. You can easily save hundreds of dollars each month by refinancing your home.

* Purchase a home warranty. Most homeowners don't account for possible repairs in their annual budget. There is a 68 percent likelihood of a home system or appliance failure in a given year. The average replacement cost of one of these systems or appliances is $1,085. A home warranty is your best defense against unexpected and costly repairs to your home's appliances and mechanical systems.

The American Home Shield Home Warranty, for example, ensures you get the best possible service through the company's network of pre-screened technicians. The minute something breaks down, you can contact American Home Shield and a local service technician will schedule an appointment that fits your schedule. The warranty covers a multitude of household systems and appliances, regardless of age.

The American Home Shield Home Warranty is a one-year contract that requires no home inspection to enroll. Several affordable plans are available to fit every budget.

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How Important Is Credit Card APR?

As with most financial products, credit cards are usually heavily promoted on their interest rate, or APR. The lower the APR, the more attractive it's supposed to be to potential customers. But is APR really the most important feature of a credit card?

Firstly, a sizable minority of people use their cards purely as a convenient method of paying for goods or services, and clear their balances in full every month. For this kind of card use, the standard interest rate charged is fairly irrelevant. It's more important that you have an interest-free period long enough to cover the time between spending and settling your account, so you'll avoid paying any interest at all whatever the rate. An interest free period should always be more than 50 days, with 55-60 days being common these days.

If you're one of this group of card users, and you make a substantial number of purchases with your card every month, then you should be going for a card that rewards you in some way for using it. One of the most common kinds of reward program lets you build up points with each purchase, that can later be redeemed as discounts against purchases made in certain stores, or for receiving free gifts, wine, or dining.

Another way of being rewarded for using your card is cashback. Cards offering this feature effectively give you a discount of around 1% on everything you buy using the card, with the discounts being stored up and credited to your account usually annually. For heavy spenders who clear the majority of their debt every month, a scheme such as this may be worth more than a percentage point or two off your standard rate.

Another group of card users for whom headline APR is not too important is those who are making use of a balance transfer feature to move debt from a high interest card to a 0% introductory offer or longterm low rate deal. If you're transferring a balance onto a card, it's advisable not to use that card for purchases at all in order to maximise the benefit of the balance transfer offer, so again, you shouldn't be paying any interest on purchases at all and therefore it's irrelevant what figure the APR is set at.

So is APR completely unimportant? Not at all! Most people do in fact carry some debt on their cards from month to month, and obviously a lower interest rate means your debt will be costing you less. However, before plumping for the card with the lowest rate it's a good idea to think about how you plan to use your new card, and whether features such as rewards, cashback, or deals on purchases or balance transfers will outweigh the benefits of an eyecatchingly low standard rate.

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Basic Tips on Personal Finance

Do you ever wonder where your money goes every month? Does it sometimes seem as though you cannot afford to do things because your financial obligations are holding you back? If you find that you are asking yourself these sorts of questions, perhaps you should take a look at your financial situation and assess whether you are practicing good personal finance management or not. Good personal finance management spends within their income, plan for the future and solve financial problems as they arise. Poor personal finance management pay more, do without and fall behind. If you find yourself in the second category, you can do something about it. You can learn to take charge of your finances by planning your personal finances.

Planning your personal finances doesn’t always come naturally, and even if you’re just beginning to take your financial matters seriously, then you likely need a few personal finance tips.

Evaluate your current financial situation. One of the most important goals for most people is financial independence. Collect accurate information about your personal financial situation. Calculate your net worth which includes the real estate, saving and retirement accounts, and all other assets. This will help you decide how much money you can set aside for meeting future needs and goals.

A basic personal finance tip is to make a budget. A personal finance budget is information made up of your income and expenses and the more accurate this information is, the more likely you are be able to meet your goals and realize your dreams. A personal finance budget should be made for at most one year at a time and include a list of your monthly expenses.

All expenses must be included. To be sure of that go through all your paid bills, check register and credit card receipts to find expenditures that recure every month and expenditures that happen less frequently. Personal finance budgeting requires some small sacrifices. To be able to make good personal financial decisions and set priorities, you must know where your money is actually going. Start your budget and accomplish your goals.

Get an electronic bill pay. This is a very convenient way to pay your bills. You pay them electronically, by direct withdrawal from your bank account. The transaction is processed immediately. You can even link your bill pay service to your personal finance budget, so that your expenditures are automatically entered in the appropriate category. Personal financial management can be really easy.

Make an investment and finance plan. Now that the fundamental state of your personal financial security has been established, the time has come for the more prosperous part of your personal financial life. You need to make a personal finance plan of what you really want in life that money can buy. Your personal financial plan can be as simple or as detailed as you want it to be. Find out how to finally start to implement this plan and get the money to finance it. This is the long term part of your financial. This journey is the most interesting and exciting part of personal financing you can have toward financial freedom.

You can prepare for a secure personal financial future by following these simple tips. When you take control with your money, you don’t have to worry about debt taking control of you.

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5 Simple Ways To Lower Your Monthly Bills – And Save Lots Of Money!

Here you're going to learn several ways to save money every month by lowering your monthly bills.

There are lots of ways to save money, no matter how much of it you have - or don't have!

Having struggled for many years paying my own bills, I learned many ways to save money. From simple things like food, gas, and clothing, to bigger expenses, like insurance and your mortgage.

All you need to know is where to look to find the savings.

Several Ways To Save Money

The first thing you need to do is eliminate ALL of your unnecessary expenses:

• eating out on the weekends
• buying lunch at work every day
• magazine and newspaper subscriptions (especially those you can get online and at the local library)
• cable TV (you'd be amazed at how many other ways you'll find to spend your time once you get rid of cable TV)
• groceries (you can save lots of money with coupons and specials.)

It's OK to reward yourself once in a while, but if you are really looking to get out of debt faster, you owe it to yourself to save every single penny you can!

To find other ways to reduce your expenses, take a close look at your checkbook and credit card statements. You should also call your credit card companies to see if they will lower your interest rates, even if it is only for a short time.

You'll be amazed at how many ways you can save money, especially once you start looking carefully at how you spend your money every month.

Shop Around For The Lowest Prices

For those expenses you can't eliminate, it's time to start shopping around for the best prices.

Once I realized you can shop around for just about ANYTHING you spend money on every month, I learned how to save myself SEVERAL HUNDRED DOLLARS each and every month!

In fact, by shopping around I ended up saving myself more than $750 a year on car insurance alone!

The same is true of many of your monthly expenses - like long distance telephone service, internet service, all types of insurance, mortgages, and in some places even your utility bills.

It DOESN'T take any special skills. All it takes is a few clicks and you can save yourself a bunch of money in no time at all!

So, if you’d like to save yourself lots of money every month - and who doesn’t - start shopping around and looking for ways to lower your monthly bills as soon as possible. By this time next year, those dollars could add up in a way that you could begin an investment plan.

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