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IRA FAQ



What are the different types of IRAs?

How do Rollover IRAs help me avoid paying taxes on my distribution?

Can I reinvest the check my current plan sponsor sends me?

I already received a check made payable to me - and 20% was withheld. If I reinvest my money now, can I get that 20% back?

Can I roll over all the money in my retirement plan account to a Rollover IRA?

Can I roll over my employer-sponsored plan or Traditional IRA to a Roth IRA?

I'm over age 70. Can I roll over my IRA to a Trust Rollover IRA?

Can I leave my investments in my current plan indefinitely?

What is a RMD?

What if I withdraw money from my Rollover IRA before age 59?


What are the different types of IRAs?
Traditional IRA: The Traditional IRA allows individuals to make an annual contribution of $3,000 or 100% of compensation or whichever is less. The contributions may be tax deductible depending on several factors. Any earnings in the IRA grow tax-deferred, meaning you do not pay current tax on account earnings until you take the money out.
Roth IRA: The Roth IRA allows individuals to make an annual contribution of $3,000 or 100% of compensation, whichever is less, as long as your income doesn't exceed a certain level. Although you can't deduct contributions to a Roth IRA, this type of IRA offers the possibility of receiving the earnings tax-free as long as you have met specific requirements.
Rollover IRA: If you retire or change jobs, you may be eligible for a distribution from the employer-sponsored retirement plan of your former employer. Or, you may have an IRA with another IRA provider. Both of these assets can be transferred into a Rollover IRA.
Spousal IRA: A non-wage earning spouse can contribute up to a full $3,000 to his or her own Roth IRA or Traditional IRA, if the couple files a joint federal income tax return. This type of account is commonly referred to as a Spousal IRA.

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How do Rollover IRAs help me avoid paying taxes
on
my distribution?
Rolling over your eligible distribution directly to a Rollover IRA allows you to avoid a possible 10% early withdrawal penalty, mandatory 20% withholding for federal income taxes, and to postpone paying taxes on the amount rolled over until it is withdrawn from your IRA. It also enables your eligible rollover assets to continue to accumulate earnings on a tax-deferred basis.

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Can I reinvest the check my current plan sponsor sends me?
Yes. However, if the resigning trustee or plan sponsor makes the check payable to you, they must withhold 20% for federal income tax. To avoid having taxable income, you would have to use out-of-pocket funds to accomplish a tax-free rollover. If you don't have the cash to make up for the 20% withheld, the IRS will consider that 20% as a distribution, making it subject to taxes and a possible 10% early withdrawal penalty. You can avoid this inconvenience by having us help you with a 1035 tax free exchange.

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I already received a check made payable to me - and 20% was withheld. If I reinvest my money now, can I get that 20% back?
Yes. You will have to replace the 20% that was withheld from out-of-pocket personal savings. However, when you file your tax return you will receive credit for the amount withheld.

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Can I roll over all the money in my retirement plan
account to a Rollover IRA?
Yes, if the assets are eligible for a rollover. Some employers may limit access to retirement plan dollars. You can roll over all tax sheltered contributions and all earnings. After-tax contributions cannot be rolled over to your IRA account this year. However, you could invest these assets in a non-retirement personal investments account through RubyGold Financial, LLC.

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Note: Minimum required distributions and distributions of substantially equal periodic payments are not eligible to be rolled over to an IRA.

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Can I roll over my employer-sponsored plan or Traditional IRA to a Roth IRA?
You cannot roll over your employer-sponsored plan assets directly to a Roth IRA. However, you may roll over these assets to a Traditional IRA and convert all or part of the assets to a Roth IRA. You should be aware that the amount converted would be taxable income in the year of conversion.

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I'm over age 70. Can I roll over my IRA to a Trust Rollover IRA?
Yes. However, you must first satisfy any required minimum distributions from your current custodian or plan sponsor. After your required minimum has been distributed, you may roll over the remaining assets.

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Can I leave my investments in my current plan indefinitely?
No. The federal government will allow you to put off paying taxes on this money only for so long. Generally, you must begin to take withdrawals no later than April 1st of the year following the year in which you turn age 70 or April 1st of the year following the year in which you retire if you are in an employer's plan, or whichever is later. Of course, your company's plan may have different restrictions. Check with your accountant or tax advisor.

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What is a RMD?
RMD stands for "required minimum distribution." The federal government requires minimum distributions from an IRA (excluding the Roth IRA, for which RMDs are not required during the account owner's lifetime) to ensure that you actually use your IRA savings for retirement (and not, for example, to pass on to your beneficiaries). The IRS will only allow you to defer paying taxes on this money for so long. There are two dates to remember for RMDs. Your first RMD generally must be taken by April 1 of the year after the year in which you attain age 70. Subsequent withdrawals must be taken from your account at least once a year, on or before December 31.
If you do not take your total RMD each year, the Internal Revenue Service may impose a 50% penalty tax on the amount that should have been withdrawn in the calendar year. This penalty is in addition to regular income taxes.

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What if I withdraw money from my Rollover IRA
before age 59?
In addition to owing regular income tax, you may also have to pay a 10% early distribution penalty tax on withdrawals before attaining age 59. There are several exceptions under which you would not be required to pay the additional 10% tax:
• Disability
• Death
• Substantially equal periodic payments. This method allows you to avoid the penalty by making annual withdrawals based on your life expectancy.
•Medical expenses that exceed 7.5% of your adjusted gross income.
•Payment of health insurance premiums for unemployed individuals.
• Post-secondary education expenses.*
• First time home purchase ($10,000 maximum withdrawl for life) and subject to IRS requirements.*

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* These exceptions to the premature distribution penalty are not applicable for distributions from employer-sponsored retirement plans. For example, under an employer-sponsored retirement plan you would not be able to avoid the 10% penalty on a distribution used for a first home purchase of $10,000.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 








 

 

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