http://www.erollover.com/education/retirement-accounts-section/403b/28-403b-rollover-to-ira
When person leaves a company, they rollover their 403b retirement, into a Rollover IRA, or Roth IRA Rollover. 403b retirement planning to IRA accounts
Showing posts with label IRA Rollover. Show all posts
Showing posts with label IRA Rollover. Show all posts
Tuesday, June 2, 2009
Saturday, September 13, 2008
Watch out for these Retirement Scams!
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Watch out for these Retirement Scams!
By: Joshua Lipton, Forbes Magazine
After reading about it in the local newspaper, you decide to attend a seminar at a neighborhood steakhouse where a broker will offer a lecture on how to retire early, earn high investment returns and enjoy steady annual cash withdrawals, all while you finish off that complimentary, medium-rare T-bone.
The broker is dressed sharp while pitching his difficult-to-resist game plan. The catch of course is that you will have to roll over your 401(k) plan and open an individual retirement account at his firm. There is brief mention of risk associated with stock market volatility and of fees, but you focus on the promise of capital growth and juicy annual withdrawals of 9%. Sounds too good to be true. And it is.
According to securities regulators, these types of luncheon pitches are rampant across America. But they warn that, in most cases, the safe and secure annual withdrawal amounts too often assume stock market returns that aren't realistic. As a result, many investors find that in the end their nest egg has been fried. Instead of pursuing leisurely passions, these "free lunches" wind up leaving would-be retiree's scanning the local newspaper for job listings.
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The oldest baby boomers turn 62 this year, and more than 70 million of them will likely enter retirement over the next 20 years, says T. Rowe Price. Retirement assets in the U.S. topped $17.6 trillion in 2007, up 7% from 2006, according to the Investment Company Institute. But the current retiring crop of boomers is faced with the misfortune of ending their income accumulation years during a bear market. Moreover, after a "lost decade", when the S&P 500 barely advanced, many feel like they need to make up for lost capital fast. That fear, coupled with a general lack of financial education, makes them easy targets for hustlers looking to make a quick buck.
These days, retirement scams range from the out and out fraud, where scammers intentionally separate seniors from their capital, to the more benign cases such as employers misusing or squandering the assets in a 401(k) plan.
"It is a concern", says Fred Joseph, the Colorado Securities Commissioner. "Some investment promoters tell people they can retire and make more money than they did when they were working. So they encourage people to take money out of the company pension plan or the 401(k) and give it to them."
Adds Joseph, "If they are legitimate, they will put it in an annuity, for example, that has high costs, high surrender charges and high up-front fees. That's if they are legitimate. If they are not legitimate, they will just spend your money. Then you're broke."
Although individuals aged 60 or older make up just 15% of the U.S. population, they account for 30% of fraud victims, according to the North American Securities Administration Association. The oldest ripoffs still remain the most popular, regulators say: Ponzi and pyramid schemes, pump and dumps, and high-return or "risk free" investments. Other common cons include "prime bank" fraud.
This is a scheme in which a "prime bank note" is supposedly issued or traded by some of the world's biggest banks. Joseph explains how they work: The transactions involve notes, guarantees, letters of credit, debentures or other seemingly legitimate types of financial instruments being issued by an unidentified "prime" bank. Of course, it's all a fairy tale: Neither the prime bank note nor the secret bank trading program exists.
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Joseph says these schemes have been around since the 1980s, but investors still manage to get taken by the scams, year in and year out.
Last year the U.S. Attorney's office, the FBI, IRS and the Colorado Securities commission convicted a Denver-based high-yield/prime bank investment scheme of mail fraud, wire fraud, securities fraud and money laundering. The too-good-to-be-true investments were sold using names like "Capital Holdings", "Reserve Foundation Trust" and "Fast Track". And, in the end, hundreds of investors were defrauded of more than $50 million. Between 1999 and 2003, Norman Schmidt of Denver, the scheme's leader, his wife Jannice, along with five other co-conspirators promised prospective investors rates of return from 2% to 400% per month.
Impressive-looking monthly statements were sent out like clockwork and investors were encouraged to let their profits ride and invite friends into the deal. Investors were also assured that a prominent insurance company would cover them from losses. In the meantime, the funds held in more than 60 bank accounts, were used in part to support the promoter's lavish lifestyle, including the purchase of eight NASCAR race cars, and Aspen's Redstone Castle, an Italianesque mansion built in 1901 that spans 20,000 square feet and has 42 rooms and 11 bathrooms.
But prime bank scams are yesterday's news. The new game plays off skyrocketing oil prices and $4 per gallon gas. According to Joseph, oil and gas scams have become the "fraud de jour". He is currently dealing with about 24 such fraud cases in Colorado. "It's one of my biggest issues right now", he says.
Last spring, for example, Joseph's office settled an enforcement action against a Wichita, Kan., operation going by the name of Key Resource Companies along with its president, Dale Lucas and vice presidents Russell Kilgariff and Michael McNaul. Oil and gas wells gushing profits was the lure and the investments were peddled between 2003 and 2006.
What the promoters failed to tell the suckers, say regulators, was that they were paying these sales agents up to 50% of the invested amount in commissions and that at least one of their agents was a convicted felon. In the end, the defendants had to pay $300,000 in restitution to 15 Colorado investors, and were barred permanently from the security industry in Colorado. Investors, of course, lost most of their money.
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According to regulators, there are a number of ways investors can protect themselves against retirement scams.
First, remember these four basic red flags, says the U.S. Securities and Exchange Commission: If it sounds too good to be true, it is; guaranteed returns aren't; beauty isn't everything (a fancy looking Web site doesn't mean the party behind the site is credible); pressure to send money right away. If you spot any one of these themes in the sales pitch, the SEC says, be skeptical about the legitimacy of the investment.
Equally important: Know the salesperson. The Financial Industry Regulatory Authority is the largest non-governmental regulator for all securities firms doing business in the United States. You can verify registration and disciplinary information about an individual broker or brokerage firm by using FINRA BrokerCheck or calling them toll-free at 800-289-9999. If that broker is registered, check to see if there is any kind of employment or disciplinary history.
To double-check the background of an investment adviser, contact your state securities regulator or call 202-737-0900.
Another common sense tip: Before committing to any kind of retirement strategy, FINRA recommends consulting with a financial professional of your choosing instead of immediately signing on with someone who "found you".
"Make sure that you don't isolate yourself from people that you would usually get advice from, like your attorney or accountant", says John Gannon, FINRA's Senior Vice President for Investor Education. "The person who is going to commit fraud is usually someone you just met, who persuades you to do something that, if you thought logically about it, you probably wouldn't do. It is very important to get a second opinion".
Another smart move: Cut back on unsolicited phone calls. Put your name on the national Do Not Call Registry: 1-888-382-1222. "I consider the phone to be a weapon", says Joseph. "It can be used just like a gun to steal money".
Finally, be cautious about those ever-popular "free lunch" seminars, where finance "experts" arrive, dish out free eats and tout schemes promising early retirement with no deduction in income.
Regulators conducted 110 examinations between April 2006 and June 2007 of these seminars. The result: 57% of the firms used advertising and sales materials that were misleading, exaggerated or included unwarranted claims. Joseph offers this guidance: "My own advice is to be skeptical. The motive for these guys, remember, is to sell you something".
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Related: retirement scams, retirement, personal finance, ira rules, ira rollover, ira, investments, investing, asset allocation, 401k-scams, 401k
Thursday, September 4, 2008
What is a “401k ROLLOVER into an IRA”?
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by Mike Rowan www.Erollover.com 2008
What is a “401k ROLLOVER into an IRA”?
Generally, after a person leaves the employment of a company, they are given the
option to roll their 401K or other plans into a new company’s plans, if available, or into
a Rollover IRA.
Frequently, the choice is made to roll into an IRA because of the flexibility and vast array
of investment choices available. Once in an IRA, the owner is no longer restricted to the
investment choices offered by their employer plan, nor is the participant subject to any
potential future restrictions imposed by the new employer, if any.
Most retirement plans can be easily rolled into either a variety of mutual funds, stocks,
bonds within a roth IRA, rollover IRA, or existing contributory IRA account, provided that you have separated service with the company where the plan is held.
However, there may be some costs to do this, as well as other ongoing expenses that
should be considered as well. In addition, there may be surrender charges when you want to move
some or part of your money as well. Check with your Financial Advisor and read the
prospectus regarding any investments you might be considering to insure that you aren’t hit with any type of penalty or fee.
What are your OPTIONS when dealing with former 401k plans?
1. You can move/rollover, all or PART, of your 401k into a rollover IRA account.
2. You can move/rollover, all or PART, of your 401k into your next employer’s 401k or retirement plan.
3. You can move/rollover, all or PART, of your 401k into a Roth IRA if you are in an income bracket that will be able to let you do so.
4. You can leave the funds with your past employer’s plan.
5. You can do any of the above while taking a full or partial distribution from your plan. Please keep in mind that this will trigger a taxable event of your income tax bracket, plus a 10% early withdrawal penalty on the amount that is taken.
NOTE: Most 401k plan administrators do NOT allow partial rollovers. It’s all or nothing
in most cases. However, if you want to move your retirement money into more than one
place, please contact a qualified advisor to assist you with this transaction.
There are virtually unlimited numbers of possible combinations. It takes the
experience of a knowledgeable Financial Advisor to know what is best in each particular
scenario. Everyone is different and so are their needs and desires! Please log onto our site at www.erollover.com to find an advisor or service that can cater directly to your needs.
We also go further in depth on our blog and site with regard to the types of investments available, and which ones may suit you best. Please read the following article, Mutual Funds vs. Stocks, EFT’s, and Bonds, to get a better feel for these vehicles, and which may be best for your situation.
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Wednesday, September 3, 2008
Fewer Americans Expect a Comfortable Retirement
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Fewer Americans Expect a Comfortable Retirement
by Dennis Jacobe, Chief Economist www.Erollover.com 2008
Fifty-five percent fear they won’t be able to continue their current lifestyles
Sixty-nine percent of Americans say they are living comfortably right now — down four percentage points from last year and six points from 2002. However, the percentage of those yet to retire who think they’ll be able to live comfortably in retirement fell even more precipitously, dropping to only 46% from 53% a year ago and 59% in 2002.
Many Worried About Having Enough Money for Retirement
When asked about their financial worries in Gallup’s April 6-9 Economy and Personal Finance poll, 63% of Americans say they are worried they will not have enough money for retirement — exceeding the 56% who are worried about not being able to pay the medical costs associated with a serious illness or accident and the 55% who are afraid they will not be able to maintain the standard of living they now enjoy. Even as Americans are bombarded by a wide range of immediate-term economic concerns ranging from surging gas, food, and healthcare costs to a decline in jobs and a debacle in housing, their most prevalent fear seems to be centered on not being able to achieve a comfortable retirement.
In part, this may be an often-unnoticed result of today’s economic turmoil. Not surprisingly given the soaring cost of everyday essentials, the percentage of Americans saying they have enough money to live comfortably right now is 69%, down from the 75% of 2002 as well as the 73% of last year. With incomes stagnating and prices surging, fewer Americans have enough income to live comfortably.
In this context, it seems reasonable for fewer Americans to feel confident they will have enough money to live comfortably in retirement, when their incomes are not only generally lower but also relatively fixed. Add in today’s comparatively low interest rates, and one might argue that many of the 46% of Americans who think they’ll be able to live comfortably in retirement are being somewhat optimistic. Of course, this does represent a 13-point drop from the percentage of Americans holding this view in April 2002 and a seven-point decline from just last year. Note also that the gap between the percentage of Americans feeling they have enough money to live comfortably now compared to those having similar expectations for when they retire has increased from 16 points in 2002 to 23 points today.
Economy Affecting Retirement Income Expectations
Fifty-four percent of those who have yet to retire say they expect their 401(k), IRA, Keogh, or other retirement savings accounts to be a major source of income for them in retirement. This is up two points over the past year, despite the losses some people have experienced in their tax-favored accounts during the recent past. Social Security is mentioned second most frequently, with 31% seeing it as an expected major source of retirement income — up from 27% a year ago — and not necessarily good news given the current condition of the Social Security system.
One reason more future retirees fear they will not be able to live comfortably in retirement may have to do with the impact of recent economic trends on their financial well-being. For example, only 17% of future retirees expect individual stocks or mutual funds to be a major source of their retirement income, down by nearly one-third from the 24% who thought these investments would be a major source for them a year ago. There has been a similar six-point drop, from 23% to 17%, in the percentage expecting their regular savings accounts or CDs to fill this role. At the same time, the percentage of those looking to a work-sponsored pension plan as a major source of retirement income has fallen five points, from 31% last year to 26% this year, while those looking to the equity in their homes is down four points, and is now also at 26%.
Commentary
Today’s economic stagflation has one in four Americans “very worried” that they will not be able to maintain the living standard they now enjoy. But with many baby boomers approaching retirement age, the full impact of today’s economic woes may not be fully realized for several years.
For example, the home has traditionally been the average American’s primary source of wealth. However, the current residential real estate debacle now threatens the value of that asset for many. Not only are many Americans experiencing foreclosure, but their neighbors are seeing their housing values plunge as potential purchasers hesitate to buy and as foreclosed properties drive down the value of nearby properties.
At the same time that their real estate values are declining, Americans see the interest rates on their savings deposits at low levels while the risks in the equity markets seem high. And while one in five Americans who have not yet retired now say they expect a part-time job to be a major source of their retirement income — double the level of 2001 — this number could grow as an increasing number of baby boomers find that today’s economy will make it hard to retire comfortably.
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Tuesday, August 26, 2008
Five professional tools to see how the funds in your 401(k) measure up
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Five professional tools to see how the funds in your 401(k) measure up
By Jonathan Burton, CBSMarketWatch
How good are the mutual funds in your 401(k)?
It would be nice if there were a scorecard. But rating the investments you hope will glitter in your golden years can be confusing. That’s one reason why so many investors have embraced so-called target-date or life-cycle funds, which take care of the guesswork.
Those who still want to pick their own 401(k) investment lineup often don’t know how, or where, to start. So they wind up defaulting to funds with the best track records.
That’s not strategy, it’s performance chasing — buying high and selling low — and it leads investors nowhere, says David B. Armstrong, managing director at Monument Wealth Management in Alexandria, Va.
“They’re picking mutual funds that have been doing very well and not giving proper consideration to the appropriate allocation,” he says.
To tell which stock funds in your retirement account are right for you, look beyond performance. Take a page from the methods investment experts likely used for your own company’s 401(k) plan. Here are five things to keep in mind:
1. Expenses
In many cases, 401(k) plans offer one actively managed fund and one indexed alternative. Since indexed management is usually cheaper, make sure you’re getting your money’s worth from an actively run choice.
Costs matter. An index fund that charges one-tenth of a percentage point in yearly management fees, for example, has a full percentage point head-start over a fund that takes 1.1%. Accordingly, the manager of the more expensive portfolio has a steep hurdle in order to deliver above-average returns over time. Don’t pay top dollar for mediocre results.
2. Risk-adjusted return
You can’t judge a fund by its advertised performance.
Understand the risks a manager took to generate those returns. Maybe the fund loaded up on a hot stock or market sector, or the manager traded frequently, playing the market’s momentum.
Otherwise, you run a risk too — that you’ll fork over good money to a fund that exposed you to more volatility that you can comfortably handle.
“Big stakes in any one sector is good reason to dig deeper,” says Christine Benz, director of personal finance at investment researcher Morningstar Inc. “How does that fit with the manager’s strategy, and how has that played out for the fund?”
One key measure of a fund’s risk-adjusted return is a technical term called standard deviation. It shows how much a fund’s performance varies, or deviates, from its expected normal return.
You won’t need a slide rule. Web sites such as Morningstar.com do the math for you. Click on “Risk Measures”: The bigger the number, the more risky the fund.
So if Fund A gained 11% with a standard deviation of 18, and Fund B rose 10% with a standard deviation of 12, then Fund B achieved almost the same results with two-thirds of the volatility and would have a better risk-adjusted return.
“Standard deviation can help you see which fund has had higher volatility and has probably been taking more risks,”
3. Results versus peers
You also want to look at a fund’s performance relative to its category. Investors frequently make the mistake of comparing funds to “the market,” which usually means the benchmark Standard & Poor’s 500 Index (SPX:
S&P 500 Index
But the S&P 500 is a large-company U.S. stock index. The only funds to rate against it are large-cap U.S. stock funds; anything else is simply misplaced. A small-cap stock fund may look great compared to the S&P 500, but it may have underperformed the more fitting Russell 2000 Index benchmark. Similarly, an international small-cap stock fund has no business in the same pool as its U.S. small-cap counterpart.
Again, Morningstar.com makes this information readily available. Click on “Total Returns” to see how a fund stacks up in its category.
Be sure that all of your fund choices are related, says Armstrong, the Virginia financial adviser. If they’re not, “you really can’t determine if the portfolio manager is doing a good job” or if you should just buy an index fund.
4. Portfolio yield
Performance-chasing is bad enough, but investors also reach for yield — the dividend income that can provide a cushion in difficult markets.
“I’ve seen clients get stars in their eyes over a high yield,” Armstrong says. They forget there’s a reason for this excess payout — and not always a good one.
Beware of a fund with a yield that’s out of synch with its peers. Maybe the high yield comes from a heavy dose of financial-services stocks or lower-quality investments. In that case, not only is the yield shaky — some banks have cut or eliminated their dividends, for example — but even the most generous dividend won’t offset major declines.
5. Manager tenure
The big consulting firms that cobble 401(k) plans together grow cautious when a fund switches managers, and you should too.
Fund companies will protest to the contrary, but new managers are game-changers. While the fund’s investment style might not be drastically altered — and if it is you have another problem — you can bet the portfolio itself will get a makeover.
If a fund manager has been on the job for only a year, then the fund’s three- and five-year performance belong mostly to someone else. You can be more charitable when a new manager is a veteran who has experienced bull and bear market cycles. On the other hand, if a longtime manager is retiring soon, find out when the junior managers joined the fund.
Says Lou Stanasolovich, president of Legend Financial Advisors in Pittsburgh.: “If a manager changes, you’re in effect starting a new fund.”
Jonathan Burton is an assistant personal finance editor for MarketWatch, based in San Francisco.
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Sunday, August 24, 2008
New Job? The 401k Options that you must know!
By Mike Rowan, www.Erollover.com 2008
Congratulations! You have taken the plunge and have taken that new job that you have sought over for so long! Then, all of the sudden, you think of your 401k and may wonder, “What on Earth am I supposed to do?”.
There are many options for your existing 401k or retirement plan when you change jobs. For the most part, it opens up many options with regards to moving your plan and customizing it according to your individual retirement goals and needs. However, there are several 401k stipulations with which an investor must be very aware. If not followed exactly, it could possibly result in some major penalties for your 401k or retirement plan.
401k Rollover Options :
1. Rollover your 401k over into a personal retirement account (IRA)
2. Leave your 401k with your current employer
3. Rollover all or a portion of your 401k to your new employer
4. Take a full or partial withdrawal
Roll your 401k over into a personal retirement account (IRA).
Advantages :
Gain full control of your retirement plan
Gain full control of your investment options
Access to fully customizable asset allocation models
Easy and inexpensive access to professional investment advice
Flexibility in executing your decisions
Disadvantages :
None
Leave your 401k with your current employer: Rules and limitations apply depending on your employers specific retirement savings plan rules.
Advantages :
Convenience
Disadvantages :
Current employer retains control over your investment options.
You may not have access to the investment vehicles appropriate for you.
Limited access to professional investment advice.
Roll over all or a portion of your 401k to your new employer. Rules and limitations apply depending on your new employers specific retirement savings plan rules.
Advantages :
None
Disadvantages
New employer gains control over your investment options.
You may not have access to the investment vehicles appropriate for you.
Limited access to professional investment advice.
Continues circle of having to roll over accounts as you change jobs.
Take a full or partial withdrawal with the check payable to you. Beware of withdrawing money from your retirement savings plan account because you will owe current income taxes on the eligible portion of your withdrawal. In addition, if you take the withdrawal before age 59 1/2, you may also owe an additional 10 percent early withdrawal penalty.
Advantages
Instant access to a small portion of your funds.
Disadvantages
Taxes are payable, either 20 % instantly through withholding or Income taxes.
10 % penalty tax will apply to most withdrawals before age 59 ½
Your financial independence might be in jeopardy.
As you can tell, rolling over your 401k, 403b, or retirement plan, can be either the best or worst thing that you did for your retirement planning. Generally, moving your 401k to an IRA tends to be the most favorable action. However, as previously stated, you must know the 401k guidelines, or you may face severe penalties!
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Wednesday, August 20, 2008
Saving Now instead of Saving Later
By Mike Rowan
Saving now vs. Saving later.
I speak with numerous young adults in their 20's who just are not too concerned about their 401k, IRA, or investment accounts. In their minds, their retirement is a long, long way away. While that may be true, the ability to retire will be much further away for each passing year that they neglect their 401k and IRA accounts.
Saving today is worth a lot more than saving later, and I can prove it. I am going to assume you are thinking about saving for retirement at age 65, and that you will invest well enough to get a return over the years of 10 percent annually.
FACT: Albert Einstein is widely regarded as one of the brightest people to ever walk the planet.
Albert Einstein once said compounding [interest] is the most powerful force in the universe.
Here is what he means:
If you save $100 when you are 25, at a growth rate of 10 percent your money will be worth $4,526 when you are 66. That's $45.26 for every dollar you save. If you wait until you're 30, you'll have $28.10 for every dollar you save. If you wait to age 40, your $1 will grow to only $10.83. Wait until you're 50? Forget it: $4.18.
Let's say you get a job and you can invest $4,000 a year. If you start at age 25 and put money in for only 10 years, stopping when you're 35, at a 10 percent rate of return you'll have $690,709 when you're 60. Your out-of-pocket cost: $40,000.
But if you wait until you're 35 to start putting away that $4,000 a year, you'll have to keep adding $4,000 every year until you're 60. Although you will have put in a total of $100,000 instead of $40,000, your account will be worth only $393,388.
Here is a prime example that 20 somethings give for not investing in their 401k or IRA.
I've finally got a job, and I work hard. I deserve to have some fun and get a cool car. I don't see why I should have to deny myself. Next year I'll get a raise, and then I can start saving for the future.
Carpe diem! Seize the day!!! Just understand that by neglecting your 401k, IRA, and retirement planning, you are setting up yourself for a lifetime of hard work instead of financial independence.
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Monday, August 18, 2008
Now Is The Time To Open Your 401k For Retirement
Filed Under (401k) by mikerowan on 18-08-2008
Now Is The Time To Open Your 401k For Retirement
Submitted By: Rebecca Game
What is a 401(k) plan?
The name is derived from the Internal Revenue Code established in 1978. It’s presently administered by the government section called the Employee Benefits Security Administration, also known as the EBSA.
A 401(k) plan is a plan usually used for retirement and is funded by an employee contribution. Some companies will match the contributions up to 100% of the employee’s contribution and yet some companies do not offer any matching funding. The BNSF Railroad is one of these such companies that does not offer even a $1 match for their employees.
The funds are contributed from the employee’s paycheck BEFORE taxes. The fund will accumulate completely tax free until it is withdrawn. Most businesses or companies have these retirement plans in place or they can create them.
There are a lot of advantages of having a 401K plan:
1. Employees can contribute pre-tax money which helps reduce the tax owed from their paychecks.
2. Any company contributions are also tax free until withdrawn.
3. As the funds are compounding, you are attaining a good profit on your invested funds.
4. The money you have funded in the plan can be moved around from one company to another. This isn’t available in a pension.
5. Your 401K is also protected from garnishments and is protected by pension laws because it is a personal investment plan. The only time it is not protected from garnishments is in domestic caes or cases of child support, but it IS protected from creditors.
6. You can borrow against your own 401(k) and the payments you make are put back into your own account along with the interest. The interest you pay on the loan is paid to you as well. You are actually borrowing the money from yourself and paying yourself back with interest. Most plans only allow you to borrow up to 50% of your fund account and only 2 loans at a time. You can borrow more than once if you find yourself in a financial hardship.
You should note that it is hard to get your contributions, (aside from a loan), before the age of 60 without paying a lot of penalty fees. The penalty fees can take a lot of the interest profit you may have received over the years. The plan is not insured by the Pension Benefit Gauranty Corporation, also known as the PBGC.
You do have many options for investing in your 401K plan. You will usually be investing in mutual funds. This helps protect you from having all your eggs in one basket. Mutual funds can consist of:
Money market funds
Treasuries
Stock funds
Bond funds
Since the 401K plan is a long term investment, it should be able to handle market fluctuations without damage to your fund. Since stocks usually outperform other types of investment this is a great option for retirement security.
About the Author
Rebecca Game is the founder of Digital Women ®, an online community for women in business. A 30 year entrepreneur and dedicated to helping other women find business loans and business grants. Visit her site: http://www.digital-women.com Loans for Women http://www.digital-women.com
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