Tag Archives: Assets

Your Rollover Options

ira rollover 3Untitled-logoLeaving your job can be hectic, whether you’re retired, laid off or moving to a new company.  It may not cross your mind to take care of your previous employer-sponsored retirement plan, but this is an important box to check during your transition.


You have four options when it comes to your retirement assets: leave them with your former employer, roll them over into your new employer’s retirement plan, roll them over into an IRA or cash out. As with most financial decisions, there are pros and cons to each choice, and your specific circumstances may make one choice more appealing than the others.

Leave assets in your former employer’s plan

You can choose to leave your investments where they are when you leave your job, though you will not be eligible to continue making contributions. This is the default option if you choose to do nothing. However, if simplifying your retirement savings is your goal, this is probably not the route for you. If you leave your investments behind at each company, you’ll have various accounts to keep track of throughout your career and distributions to take from each during retirement. Keeping in touch withCapture roll.JPG former employers can be difficult. Your old plan may also have high fees, limited flexibility or poor allocation options when compared with an IRA or your new employer’s plan. If your retirement account has less than $5,000, your former employer has the option of cashing you out of the plan, incurring taxes and penalties. Avoid getting cashed out by rolling the money over when you leave the company.

There are some advantages to leaving your money with your former employer. For instance, some large companies have access to lower-cost institutional funds that your new employer might not offer. In this case, it would be cheaper for you to stay with the old plan than to roll over into a new plan or IRA. Additionally, if you’re 55 or older when you leave your job, you may be eligible for penalty-free withdrawals (though income tax would still apply), so keeping your investment in your former plan could give you access to money sooner.

Rollover into new employer’s plan

A rollover is moving assets from one account to another while avoiding taxes and penalties. You can move your assets from your old employer’s plan to your new employer’s plan seamlessly without losing any money. Choosing this option is advantageous because your assets will continue to grow in a tax-advantaged account, and you won’t have to start over at each new company. You can rollover assets from a Roth 401(k) to a traditional 401(k) and vice versa, as long as both plans allow for it. If your new company has a better selection of investments or lower prices than your previous employer, it makes more sense to do a rollover. This way, you can also avoid having to keep track of old accounts with former employers.

Rollover into an IRA

In general, an IRA will offer you the most versatility and flexibility, so if you’re unhappy with either your former or current employer’s plans, an IRA may be a better bet. An IRA can also be more convenient, because you won’t have to worry about rolling it over again if you leave your job in the future. One feature unique to IRAs is the ability to take penalty-free distributions early (before the age of 59 ½) in order to pay for your first home or qualified higher education expenses. You’ll still pay income tax on the distributions, but you’ll avoid the fees that you’d accrue if you cashed out of an employer plan. An IRA can also be a great vehicle for your heirs, who have the option of stretching out required minimum distributions with a traditional IRA, or avoiding them altogether with a Roth IRA.

There are two types of rollovers, whether you’re rolling your money into a new employer plan or an IRA. A direct rollover is from plan to plan. No taxes are withheld, no penalties are owed and no money crosses your hands. For an indirect rollover, your previous plan administrator writes a check to you, withholding 20 percent for taxes. You’ll have 60 days to transfer it to your new plan or IRA. If you exceed 60 days, you won’t get the 20 percent in taxes back when you file a return, and you’ll owe an additional 10 percent penalty for early withdrawals. A direct rollover is a simpler, safer route, but you’ll have to make sure you have an IRA or new employer plan established first.

Cash out

This is the option least likely to be recommended to you, but it can be useful in certain circumstances. It’s important to know that cashing out a retirement plan incurs a 20 percent tax and a 10 percent penalty for early withdrawal, so you won’t actually get the amount listed in your account. If you’re truly strapped for cash, or if you’re over age 55 when you leave your employer (thus avoiding the early withdrawal penalty), you may want to consider cashing out. However, cashing out is generally not advisable. In addition to the taxes and penalties, your money will lose its tax-advantaged growth, and you may be damaging your future financial security. Cashing out in order to reinvest in a new employer plan or IRA is a costly mistake many workers make each year.

Now that you know your options, you can make an informed decision about your retirement assets. Leaving your job for any reason can be stressful, but jeopardizing your retirement security would be even worse.

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This article was written byAdvicent Solutions, an entity unrelated to Stock Yards Bank & Trust Company.  The information contained in this article is not intended to be tax, investment, or legal advice, and it may not be relied on for the purpose of avoiding any tax penalties.  Stock Yards Bank & Trust Company does not provide tax or legal advice. You are encouraged to consult with your tax advisor or attorney regarding specific tax issues. © 2013 Advicent Solutions. All rights reserved.

 

6 Money Tips for Family Caregivers

According to the Caregiver Action Network, more than 90 million Americans care for a loved one living with a disability, disease or experiencing reduced financial capability as a result of aging. Financial caregivers, such as those with a power of attorney, trustee or a federal benefits fiduciary, play an important role in ensuring that all finances – from routine to complex – are managed wisely, helping their loved ones maintain the best quality of life possible. In recognition of National Family Caregiver Month, Stock Yards is helping financial caregivers better understand their role.

  • Learn the rights and restrictions that apply to your role. Financial caregivers, such as those with a power of attorney, trustees, and federal benefits fiduciaries, are fiduciaries with a duty to act and make decisions on their loved one’s behalf. Learn the legal responsibilities of your assigned authority in order to better execute your role.
  • Manage money and other assets wisely. Financial caregivers may be in charge of daily, unexpected and future expense their loved one may incur. Especially if the beneficiary has a fixed income or limited finances, it is extremely important that caregivers minimize unnecessary costs and budget accordingly to ensure that all money is properly allocated.
  • Recognize danger signs. Seniors have become major targets for financial abuse and fraud. Make sure to stay alert to signs of scams or identity theft that may put your loved one’s assets in peril.
  • Keep careful records. When acting as a financial agent, proper documentation is not only encouraged but required. Make sure you keep well-organized financial records, including up-to date lists of assets and debts and a streamline of all financial transactions.
  • Stay informed. Monitor changes in financial status of the beneficiary and take appropriate action, as needed. Also, be sure to stay up to date on changes in the laws affecting seniors.
  • Seek professional advice. Consult a banker or other professional advisors when you’re not sure what to do.

Stock Yards Bank is also providing an explanation of the various roles and responsibilities of three types of financial caregivers: power of attorney, trustee and federal fiduciary.

Understanding your role as a power of attorney.

POA is designated by your loved one and gives you the authority to act and make decisions on their behalf, including managing and having access to their bank and other financial accounts. Authority continues if loved one becomes incapacitated and ends when power is revoked or loved one dies.

Understanding your role as a trustee.
Authority is given once you are named as trustee or co-trustee of a revocable living trust. As a trustee your authority applies only to the property noted in the trust, authorizing you to protect, manage and distribute the trust’s assets as directed in the trust document. Authority continues after the death of the trust creator or grantor.

Understanding your role as a federal benefits fiduciary.
A federal benefits fiduciary is appointed to accept and delegate federal government benefit payments, such as Social Security and Veterans Affairs benefits, in the beneficiary’s best interest. Funds for the beneficiary are received through an account set up solely for this purpose. As a representative payee for Social Security benefits or a VA fiduciary for VA benefits, you are required to keep detailed records of all transactions related to the beneficiary and file annual reports detailing how benefits were used.

The Caregiver Action Network (the National Family Caregivers Association) began promoting national recognition of family caregivers in 1994. President Clinton signed the first NFC Month Presidential Proclamation in 1997 and every president since has followed suit by issuing an annual proclamation recognizing and honoring family caregivers each November.

To learn more information about National Family Caregiver Month and your role as a financial caregiver, visit www.caregiveraction.org. For tips and additional resources, visit aba.com/seniors.

Resource Information Provided by the American Bankers Association