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Financial Planning

Roll Over Your Money into an IRA

 

Recent research suggests that retirees may need 70-80% of their pre-retirement income to maintain their standard of living in retirement. However, healthcare expenses can pose a significant burden on retirees' budgets. A Fidelity study found that a 65-year-old couple retiring in 2021 can expect to spend $300,000 on healthcare costs in retirement. It's important for retirees to factor in healthcare expenses when considering retirement plans, such as IRA rollovers. (Source: Fidelity, "How to plan for rising healthcare costs," published on February 17, 2021).

Choosing an IRA rollover keeps your funds tax-advantaged and growth-capable, similar to an Fortune 500-sponsored plan. You may also obtain access to more investment options than were available through your Fortune 500-sponsored plan. You may also obtain oversight of the management of these vital retirement assets from your dependable Advisor.

If you roll over your retirement plan assets into an IRA account you already own through your Advisor, you will also receive combined statements and comprehensive investment planning, making it simpler to monitor your overall financial situation.

"Receive the benefit of combined statements and holistic investment planning, making it easier to track your overall financial situation." brown rocky mountain beside blue sea during daytime

Some of the benefits of rolling your money into an IRA include:

Tax-deferred growth potential: This generally avoids current income tax and distribution penalties when funds are withdrawn from a retirement plan sponsored by Fortune 500.

More investment choices: This allows for eligible additional contributions. IRAs can be consolidated and managed by a single provider, reducing fiduciary expenses and consolidating statements. The bankruptcy process provides protection from creditors. Required minimum distributions (RMDs) can be withdrawn from any of your Traditional, SEP, or SIMPLE IRAs.

Prior to turning over their funds into an IRA, Fortune 500 must also take into account the following factors:

  • There may be larger internal management fees than in Fortune 500-sponsored retirement plans.
  • Fees and expenses are heavily dependent on the investments you select.
  • Loans against an IRA are prohibited.
  • In addition to income tax, early distributions may be subject to a 10% IRS tax penalty.
  • RMDs commence on April 1 of the year following your 7012th birthday and annually thereafter; leaving the funds in the former Fortune 500 plan may permit RMDs to be delayed until separation from service.
  • IRAs are subject to state laws regulating malpractice, divorce, creditors (outside of bankruptcy), and other lawsuits; leaving the money in the former Fortune 500-plan may offer additional protection from creditors.
  • Net unrealized appreciation (NUA) is the difference between the purchase price and the increase in value of employer securities. If the funds are transferred into an IRA, the favorable tax treatment of NUA will be lost.
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Hopefully, these insights will be helpful as you plan your retirement from Fortune 500. 

Conclusion

Rolling over your retirement plan assets into an IRA is like moving into a new home with more space, better amenities, and more customization options. Just like how you can choose the layout and decor of your new home to fit your lifestyle, rolling over to an IRA gives you more investment choices and control over your retirement savings. And just like how you'll want to consider the costs and benefits of moving, it's important to weigh the fees and expenses associated with an IRA rollover and factor in potential healthcare costs in retirement. Overall, an IRA rollover can provide a fresh start for your retirement savings journey.

This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, Alcatel-Lucent, AT&T, Apache Corporation, Altria, Avaya, Baker Hughes, Bayer, Boeing, BP, Bristol Myers Squibb, Chevron, Concho Resources, Hughes, fidelity.com, Wyeth, Northrop Grumman, Merck, Raytheon, Coca-Cola ,Qwest, Pfizer, Caterpillar, ConocoPhillips, ExxonMobil, Sempra Energy, San Diego Gas & Electric Company, Southern California Gas Company, Ameren, Anheuser-Busch, APL, Bank of America, Blackhawk Networks, Caterpillar, CenturyLink, Chevron, Citigroup, Clorox, Coca-Cola, Colgate, Con Edison, ConocoPhillips, Dexone, ExxonMobil, GlaxoSmithKline, Halliburton, Hewlett Packard Home Depot, Honeywell, HP, IBD, Johnson Controls Kaiser Permanente, Kimberly-Clark, Kinder Morgan, Lockheed Martin, McCormick Spice, Merck, Monsanto, Northrop Grumman, Occidental Petroleum, Pepsi, Pfizer, PG&E, Phillips 66, Phillip Morris, Qwest, Raytheon, Royal Dutch Shell, Safeway, San Diego Gas & Electric, Schlumberger, Scotts Miracle Gro, Sempra, Siemens, SoCal Edison, Sony, Southern California Edison, Teradata, Toyota Motor Corporation, Tropicana, United Parcel Service, Verizon, We Energies Group, Wisconsin Energy, Wyeth, Verizon or by your employer. We are an independent financial advisory group that focuses on  transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

The Retirement Group is a Registered Investment Advisor not affiliated with FSC Securities and may be reached at www.theretirementgroup.com.

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