403B Rollover – Is it possible?

Short answer is yes.  Similar to a 401k rollover, a 403b can also be rolled over.  You have the right to do a direct rollover from one 403b to another 403b without much problems.  It is also very possible to do a transfer from one 403b to a traditional IRA.

The biggest thing to consider and remember to do is to find out whether there is any penalty or fees that can effect your account prior to doing the rollover.  Often times you’ll realize that your 403b happens to be a tax sheltered annuity.  In which case, like I mentioned before… to verify the surrender fees and the remaining time left on your annuity.

Looking for a penalty free option?

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Binh Nguyen

(832) 273-3392

admin@401krollovers.info

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What are defined contribution retirement plans?

I’m sure you’ve heard of some of the most common used terms for defined contribution plans such as the 401(k)s, the 403(b)s, the 457′s, and the “Thrift Savings Plans.”  These retirement plans are offered through the employer as a way you can save for your retirement.  Technically speaking they are “sponsored” by the employer.

The main reason these plans are called “defined contribution retirement plans” is because you are the one contributing your own money into them.  This does not necessarily mean you are the sole contributor to the plans.  Often employers will match a certain percentage to let’s say a 401k plan.

The breakdown is as follows:

• 401k’s are classified as contribution plans offered by companies and corporations to their employees.  By far this is the most common of the plans.  Another subgroup to the 401k is the roth 401k which has a different tax treatment.
• 403b’s are often set up for teachers, staff of public education, nonprofit organizations, nurses and hospital workers.
• 457s are setup for state and municipal employees.  Examples include judges, police officers, firefighter, and sometimes for employees of qualified nonprofit organizations.
• Thrift Savings Plans also called “TSPs” are designed for federal employees such as postal workers.

Participation in 401k’s plans are the highest; therefore you will often hear about them and may understand them better than the other three.  Which one do you have?

Need Help Rolling Over Your Defined Contribution Retirement Plans?

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Binh Nguyen

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admin@401krollovers.info

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I always like to laugh when clients ask, “why is there a RMD or required minimum distribution for taking money out of my IRA if I don’t want to?”  I’ll reply, “…because the IRS has to get paid one of these days and they had to wait almost 71 yrs in your case.”

I never understood why there’s so many different taxations.  In addition to all of the state, federal, income, sales taxes, etc., they then throw in tax deductions, tax incentives, tax deferrals.  Wouldn’t it just make more sense to reduce overall taxes, thus getting rid of the need for tax incentives and deductions? No wonder America goes crazy around April 15th.  Let’s get back to what the RMD is all about.

All retirement accounts such as 401k, IRA’s, 403b’s, etc. were originally created to encourage individuals to plan for their own future, in hopes of reducing the financial dependency on our government.  For that reason, the government has allowed retirement accounts to grow tax-deferred up to age 70 1/2.  By that time, if a client has never withdrew monies out of their retirement account, they are required to start doing so.

We all understand that any withdraws or distributions from these accounts are considered taxable income.  This is where Uncle Sam is able to impose income taxes so he can get paid.  By age 70 1/2 there is a chart or table which can be found on the IRS website, that illustrates the percentage factor of what the minimum required distribution is every year thereafter.  The RMD chart will change from time to time, so it’s a good idea to check at the beginning of each year.  See below for the chart.

I then get asked, “What happens if I miss the RMD for the year or decide I don’t want to take a distribution?” Excellent question!  Let’s say you have a required minimum distribution you have to take out and that equals to $5,000.  This is just for illustrative purposes.  If you did not take out the $5,000, then the IRS can impose a tax on 50% of that amount.  This means, you didn’t take anything out, and are required to pay taxable income on the $2,500.   Depending on your tax rate at that age, it could be 10%, 15%, or 20%.   It’s just better in my opinion to take that out the $5,000 and enjoy that vacation you’ve always wanted.  After all… any year after 71 is a good year!

RMD Chart

Required minimum IRA distributions

We’ll go over how to calculate the RMD in the next post.

Need Help With  Calculating Your RMD?

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Binh Nguyen

(832) 273-3392

admin@401krollovers.info

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