Financial Tips to Maximize Your Accounts During Retirement

Here are some tips that will make managing your retirement income easier.

Individual Retirement Savings

  • For tax purposes, you should separate deductible from non-deductible IRAs.
  • Consider consolidating your Traditional IRAs into these two types of accounts.
  • Keep any Roth IRAs separate from Traditional or Rollover IRAs.
  • If your IRA accounts are at different financial institutions transferring them to one institution will make managing your accounts easier.

Workplace Retirement Savings

  • Consolidate workplace retirement savings.
  • Consider moving eligible assets out of your employer-sponsored retirement plan to a single Rollover IRA. Be careful though, since IRAs are not protected from creditors as qualified retirement plans are.
  • If you don't consolidate, you may be required to take minimum withdrawals from each plan when you reach age 70½. You can't aggregate them.

IRA Roll Over

You can roll money from one Traditional IRA into another. You can also roll money from a qualified retirement plan into a Traditional IRA, if you are eligible to receive a distribution from the plan due to retirement, separation of service, plan termination, or if another event makes it possible to take a distribution from the plan. Additionally, the Economic Growth and Tax Relief Reconciliation Act of 2001 allows any eligible rollover distribution, pre-tax/deductible IRA contributions, plus any earnings, to be rolled from an IRA into a qualified plan that accepts rollovers. This law also allows employee after-tax contributions from a qualified plan to be rolled over into an IRA or a 401(a) defined contribution plan as well, provided the after-tax contributions can be accounted for separately.

There are two ways to rollover from an existing retirement plan—a direct rollover into an IRA or accept payment and roll the money over yourself. With a direct rollover, the money is transferred directly into an IRA. There are no withholding requirements, no penalties, and no portion of the rollover will be included in income in the year the money is transferred.

If you accept payment, you have 60 days to roll the money over into an IRA. Regardless of whether you do so, however, income tax of 20% must be withheld on the taxable part of the distribution. Any taxable part of the distribution that is not rolled over will be included in income in the year it is received and may be subject to a 10% early withdrawal penalty if you are under age 59½. To make a complete rollover, you need to supply from your own funds an amount equal to the 20% withheld by the payer. For this reason, a direct rollover may be a more convenient and cost-effective way to roll over retirement plan assets.

Employer's Stock

  • If the company stock in your retirement plan has multiplied in value, you may be eligible for a special tax treatment that could leave you with a lower tax bill—but only if your plan allows you take the entire account in an "in-kind" lump-sum distribution. That means you take your company stock balance in the form of a stock certificate—you don't sell it; you still own it AND you take all of it with you when you leave the company.
  • You may need an investment advisor to help you figure out what to do with your company stock and when to do it.
  • You may need to get help before you take any money at all from your accounts or you could risk losing your eligibility.
  • Keep in mind that if you have an outstanding loan from your retirement plan when you retire, you may be required to pay it off in a lump sum or it may count as a distribution. Be sure to consult your plan administrator regarding your company’s loan requirements.

Review Your Portfolio Allocation

  • It should reflect both your risk tolerance and your future income needs.
  • You may want to be more conservative than before you retired.
  • But careful not to be so conservative that you will miss out on the opportunity for future growth.

Create a Separate Retirement Spending Account

  • Pay yourself a monthly income from this account.
  • Don't mix your investment accounts and your spending account.
  • Don't collect all your dividends and interest income and deposit them into your spending account.
  • Do give yourself a raise so that you can keep up with inflation.


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