So, good afternoon or actually good evening everyone. My name is Baptiste Brunner and I’m one of Alliance financial consultants based here in the great state of Texas. I’m part of a team of financial professionals with the credit union who just give regular educational webinars, help out our members, uh, you know, broaden your knowledge, help you understand more about the ins and outs of retirement. And again, I’d like to just start by thanking all of you for taking the time to learn about, you know, becoming rollover ready and finding out the options available to you with your workplace retirement plans and you maybe learn about which option might be best for you depending on your situation. And of course, as always, we will reserve time at the end to answer any questions you may have. And when that time comes, you may ask your questions in the chat section or the Q&A section. Go ahead and identify those now if you’d like, and I’ll be sure to get to them then.
And here’s a new disclaimer that we have. Um, just please don’t put any AI note takers in here. This is apparently proprietary. Uh, so please don’t do that. If you want to take photos, I can’t stop you from doing that, but just please don’t put any AI note takers in here.
And my next webinar that I have coming up will be on Thursday, August 6 at 2 p.m. You can be covering life insurance. Bunch of different types of life insurance out there. Everyone should have some form of life insurance. Whether it be your workplace plan, and if your workplace plan isn’t enough, maybe getting a term policy. Uh whole life and universal is a different story, but maybe that might be what’s best for you. But join us for this one. It’s a great webinar. And then for the next evening webinar, mark your calendars for this one, especially if it’s coming up soon. Becoming savvy on your social security. It’s going to be t Tuesday, August 18th at 6:00 in the evening, Central time, 7:00 Eastern. Go ahead and put this down in your calendar. This is a great webinar here.
And of course, our team at Alliant Retirement Investment Services. We’re focused on helping you understand the ins and outs of investing, you know, saving for retirement and much, much more. But go ahead and take a look at our website. That’s a ris.allcreditun.com
uh/events to check out our webinar schedule. It’s not just me giving these webinars. We have a team of 12 folks with the with the credit union who are doing these regularly. We have a podcast which we will be updating again soon. great topics there. And then website, our blog, resource center, a lot of information. And it’s a free service. It’s a free resource center available to you, our members. Excuse me.
Pardon me. I might need to do that a few times today. I have a frog in my throat today.
And many people may be telling you how easy it is to do a rollover. But what they may not be telling you or even be aware of for that matter is the many options and the rules governing the how, where, and when you can perform a rollover and the wrong choices or timing. They can create very, very costly taxes or penalties. So, I’m here today to explain to you some of your options and help you to understand the consequences of certain decisions. And when you’re officially retired or started work at your new job and you complete your rollover, assuming that that’s the path you decide to choose, my goal here today is for you to look back and say, “Wow, that was pretty easy.” You may have heard of something called the DO fiduciary rule, Department of Labor Fiduciary Rule. It was passed with the intent of protecting investors best interests when an adviser makes a recommendation on an IRA roll over from retirement plan. And when deciding to perform a rollover, there are many things that should be considered. And when you’re working with a financial adviser, you should ensure that they are serving in a fiduciary capacity, which means that they must put your interest first. And while it seems that all financial adviserss should act in a fiduciary capacity, unfortunately, not all do. And before the rules officially went into effect in 2018, the US Court of Appeals issued a decision to vacate the rules as a whole. However, I want to mention it because it could be reinstated and it is good for you to have an understanding of what a fiduciary is and also institutions can still hold their advisors to the fiduciary standard which many do. And as with most financial decisions, everyone’s situation is different. Yeah, the rollover decision needs to reflect how the sending 401k plan stacks up in comparison to the proposed IRA in terms of investment options, fees, expenses, and the services that you’ll receive in exchange for those fees.
Now, whenever I have something important to do, I make a checklist so I don’t forget any important steps. And today, I thought I’d share a checklist I made for my clients when they are thinking about their rollovers. And let’s go over these step by step. Pardon me. We’re going to go over these steps one by one. And unfortunately, because we do have a limited amount of time today, I can’t get as deep into the issues as I’d like, but I want you to be aware of these issues and either research them on your own or talk to someone about them so you can avoid any common rollover mistakes because some mistakes are quite costly in the form of either taxes, penalties, time, and they just can’t be fixed at that point. and you will have to live with the consequences for the next 30 plus years.
Okay. So, the first step to take is to determine what do you want to do with the money currently in your 401k or your other retirement plans. And this can make a difference in how much you roll over and where you roll it to.
How many of you have saved enough that you can fund retirement without tapping into your employer’s retirement plan? Or you have a pension which will support you in retirement and you’re you primarily want to use your retirement plan to leave an inheritance to loved ones. You know, if so, you may wish to consider a Roth conversion for part of the funds to provide potentially, you know, income taxfree withdrawals to your heirs. And we’ll review that option in a minute. But how many of you see your retirement plan as being a source of funds to help support your living expenses in retirement?
How many of you make or are considering making generous donations to charity? You know, cuz the use of your retirement plan may be a tax advantage way of doing that, which we will review in a little bit. And of course, everyone’s dream. But how many of you are going to go just go buy a big old boat and go fishing? Yeah. nice goal for retirement, but these funds may not be the best to use for that purpose due to the tax bill and a lump sum distribution. And as you can see, there are a number of goals to consider besides just deciding on a retirement date. And those goals should drive your retirement plan. And there are a number of different strategies you could utilize to achieve those goals. And that’s why we need to decide at the outset what you would like to do with your savings. And once that is decided, then you can move on to the next step, which is choosing a distribution option. And a distribution is the term the industry uses to indicate you are taking money or assets out of a retirement account. So let’s use that term here so you’ll be familiar with it when you see it in the paperwork. Now, there are three primary distribution options available to employees when they retire from a company.
One moment, please.
Now, let me just say as we go over these options, there are a few right and wrong answers here. There are a few right and wrong answers here. There are expensive and non-expensive answers though, simple and complex, but no right or wrong answers. It all goes back to what you want to do with your money. However, not following the rules for the option you choose could cost you in taxes, penalties, fees, and time. So, let’s avoid all that by reviewing the rules, and thinking through the consequences. All right, so what are our three options? You can roll over to an IRA. You can cash it out. You can leave it in your current employer’s plan. And we’re going to look at the pros and cons of each of these. So, your first option is to do nothing at all. You can leave it in your employer’s plan where it is now. If you have a good plan, that might be the way to go. But the investment fees in the plan may be lower than the fees for mutual funds and other investments with an IRA, too. There’s probably no advisory related fee as well. And if you’re 55 to 59 years old and may need to take a withdrawal from these assets, it may make sense to leave assets in the company plan because you can withdraw from your 401k at 55 if you’re retired early and you’re going to be able to avoid those early penalties. That’s just the separating from service. So you get to avoid that 10% penalty but at by 55 but before 59 and a half. And one of the benefits of leaving your savings in your employer’s plan is that assets in an Orisa sponsored retirement plan are shielded from creditors. Whereas IRA assets may not always be. It just depends on state laws. You know in California, Georgia, Maine, South Carolina, and Wyoming, neither an IRA nor a Roth IRA will be sheltered from creditors. But in Alabama, Mississippi, Montana, Nevada, and West Virginia, a Roth IRA will not be sheltered from creditors. However, within a retirement plan, you are limited to the investment options available by the plan. Your HR department, you know, if you have a 401k, Fidelity, Empower, Vanguard, doesn’t matter who, but your HR department picked the plan provider, i.e., let’s say use Fidelity here, and they selected 20 25 different investment options, and that’s all you have available to you. you know, 10, 12 different target date funds, a couple of index funds, maybe some cash funds, and some bonds, too, but that’s all you have available to you. It’s not that large of a selection. And another downside to leaving your savings in the company plan is that you will probably no longer have access to loans should you need to take a loan against your plan assets, nor can you make contributions to the plan. But if if you roll over to an IRA and have earned income, you still can. Now, another consideration is whether or not the plan document mandates a force distribution over a 5-year period for beneficiaries in the event that you pass. And you may want to stretch it out over their lifetime. But some plans may not give you that option.
And your second your second option is to cash out your savings, take the money, and run. Unfortunately, Uncle Sam would also love that as it would create an immediate income tax bill. But first, your company has to withhold 20% of your account balance for federal income tax. And depending on your tax situation, you may owe additional taxes or get a refund for a portion of that withholding at tax filing time. But next, if you are younger than 55, you’re going to be subject to a 10% penalty. And then to pile on the misery, this distribution will be counted as ordinary income and it could bump you into that next higher tax bracket. And if you’re in trouble with creditors, now you have some assets they can potentially attach to. But it’s the taxes that can really, really hurt. And of course, you’ll have to pay taxes. But cashing out now means paying them all right now and what is presumably presumably presumably one of your peak earning years. Folks, my apologies. Having a little stutter bug today. And your last option is to roll your savings into an IRA. Now, most of you probably are pretty familiar with IAS, but I just want to bring some points to your attention. Big advantage is that IAS offer you many more options than most 401k plans do. You don’t have to stick to mutual funds. You can buy those individual stocks, ETFs, and much more. In addition, you can now work directly with a financial adviser to help guide you through the rollover process and help you invest the funds within your retirement plan. And previously, you were restricted to the available investment options within the plan and obtaining the advice of a financial adviser regarding plan assets that was highly restricted. This rollover will be a significant part of your retirement planning and a financial adviser can help to prepare a comprehensive review of your financial situation and strategies for maximizing your standard of living in retirement. Possibly come up with maybe some good tax planning strategies, too. However, the downside to an IRA is that you are in control and you have a lot of options and options can be overwhelming. Now, unless you’ve done your homework or you have help from retirement specialists, of course. Speaking of which, we need to talk about the different types of IAS. And the two most commonly known are, of course, the traditional, like we’ve been talking about here, and then there’s also the Roth. A Roth IRA offers many of the advantages of traditional, but comes with a couple of tax lists. And by converting to a Roth IRA, you would have to pay taxes today, but you’ll never be taxed again on withdrawals and future earnings. And another advantage to Roth IAS is that you aren’t forced to start withdrawing money at 73 or 75 like you you would be with a traditional IRA when it comes to RMDs, those required minimum distributions because you’ve already paid the taxes on them. You’re free to choose when you want to withdraw funds. Downside is that you’ll have to pay taxes today on any of the amounts that you roll over to the Roth. And there’s also that fiveyear waiting period and you can’t start taking money from the account until 5 years have passed or until you’re 59 and a half. However, after 59 and a half, you can withdraw as much as you want of your contributions tax-free without any 5-year deadline. As you can see, it’s it’s complicated. And if you’re thinking of moving to a Roth, do your research and really talk to someone about it. And you can always call me. I’ll be glad to answer your questions. I’m going to offer that to you at the end of this here, too. Now, your next step is to consider the sources of funds in the plan. And if you were contributing a fixed percentage of your salary, your 401k plan over time, your schedule contribution may have exceeded the annual contribution limit. And many plans will allow these additional contributions to be made through what are called after tax contributions. And these after tax contributions may be a potential source of a rollover to a Roth IRA. You’ve already paid the taxes after all. And another reason to review the source of your funds is you may want to consolidate accounts so they’re easier to manage and you can save on fees.
Now the chart in the screen shows all the different types of retirement plans and how the funds in each type of plan can be rolled over. If you want to take a photo of this, go for it. Um I I don’t want to read through this entire slide cuz it is a lot for really just showing you that just about everything can be rolled into everything. and just keep it likeminded. So all traditional funds can about be rolled into any other type of traditional account. So if you have a 401k pre-tax, you can roll it into a traditional IRA into the next traditional 401k. If you have a pension, you can do the same thing with it. 403bs, same thing goes all the way around. But if you follow the chart, retiree with a 401k can roll over his account into an IRA. that retire retiree also has a SE IRA from his self-employment income. If you consolidate those 401ks and SE IAS into one account and you may also want to take this time to review all of your existing retirement accounts and consider consolidating them. You know, perhaps you have those old 401ks or an old SE or simple IRA from a previous job. Maybe have a thrift savings plan from an old government or military jobs. Those are all under the same umbrella to where they can be with um rolled over into one another.
Remember earlier when we talked about goals like giving to charity or leaving an inheritance and that requires some advanced planning strategies or suppose you have company stock in your plan. you may want to convert to a Roth IRA. And when you hear the term advanced planning techniques, you may think it’s just, you know, for the rich and famous, but not really, not in the slightest. Let’s take a look at some potential scenarios that may affect you.
Pardon me, folks.
Okay, so let’s take the case of Jane here. Jane recently retired at 66 as a teacher and her pension and social security payments are more than adequate to support her current standard of living in retirement. And Jane has been a diligent saver and has about half a million dollar in non-retirement assets which she plans to use to fund two nice vacations per year. And she has $250,000 in her 403b plan. And for those of you who are unfamiliar with the 403b, it’s the equivalent of a 401k plan. It’s just for public education institutions and nonprofits.
Now, when Jane reaches age 73, she’ll have to begin taking her IRSmandated required distri minimum distributions. Those are RMDs from her 403b or her IRA, assuming she performs that rollover. But these required minimum distributions are taxable to Jane at her ordinary income tax rate. And when Jane passes and her children inherit her IRA, they’ll have to continue taking her RMD and adding that RMD to their ordinary income tax every year. However, a Roth IRA does not have an RMD requirement while Jane is alive. Withdrawals after age 59 and a half are income tax-free, and withdrawals from an inherited Roth IRA will be income tax-free for her heirs. And if Jane does not require her retirement funds to support her standard of living in retirement and converts her 403b to a Roth IRA, she can now eliminate her RMD requirement and pass these assets to her children free of any future income tax, thereby allowing the assets to continue to grow tax-free throughout her children’s and even maybe her grandchildren’s lifetime. Let’s take a look at an example. While this can seem like a lot of information on the chart here, let me summarize it for you. All IRA owners who are age 73 or older, or 75 if you’re born after 1960, you must start taking RMDs from your IAS. And these distributions are taxable when they’re withdrawn. So therefore, assume that Jane leaves her 403b assets in her 403b plan or rolls them over to an IRA. And let’s just assume she achieves a 6% annual rate of return while withdrawing her RMDs in the beginning of each year, she can potentially incur more than $120,000 in income taxes. And if we assume that she saves that after tax RMD amount each year, her inheritance to her children could potentially be $335,272
in a beneficiary IRA and an additional $328,759 in that taxable account by age 90. In summary, this would be a $683,756
inheritance. and Jane would have paid $120,000 in income tax on R&Ds throughout her lifetime. Let’s not forget that that $335,000 left to her children would also carry an income tax on distributions from the beneficiary IRA.
Let’s take a look at what that inheritance may look like if Jane converts that 403b to a Roth IRA. All the funds that Jane converts to a Roth IRA will be realized as taxable income in the year she converts them. And for this reason, we will spread out Jane’s conversion over a few years so that her income tax bracket does not substantially rise in the year after her retirement. But if we assume that Jane converts her 403b plan to a Roth IRA over a 4-year period and remains and she remains in that 28% tax bracket and achieves that 6% net rate of return, she could potentially leave her children $772,000 in a beneficiary Roth IRA, which is now not subject to any of those ongoing capital gains, RMDs, or income tax on those assets. So, by performing a Roth conversion, Jane would have paid nearly $45,000 less in income taxes over her lifetime. And she’d also be able to potentially leave her children more money in the form of $772,000 free from any further income taxes at age 90 as opposed to the approximate $683, 335 of which was subject to that income tax. Now, this analysis assumes that Jane pays the 76,000 in taxes due in the conversion from the amount of money converted to the Roth IRA. Let’s look at the potential inheritance should Jane pay the income taxes from her non-retirement savings. Under the same set of assumptions, if Jane were to pay that 76,000 in taxes from her non-retirement, that taxable brokerage account savings, which she’s earmarked for her annual vacations, she could pay the same income tax, but leave her children almost $1.1 million, free from any further income tax.
So, to summarize, a Roth conversion can create a more tax advantaged inheritance for your children or even grandchildren. But maybe perhaps this charitable giving is important to you. So if you’re age 72 or older, you can distribute up to 100K from your IRA directly to a charity without the IRA distribution being taxable. And if you’re considering a sizable contribution to charity or would like to avoid realizing tax on your RMDs, you can roll over your retirement plan assets to an IRA and make distributions directly to a charity without increasing your taxable income. And then another advanced planning strategy, it revolves around company stock. So if you have company stock in your 401k plan, you know, and if you love the company and stocks done really well, you should consider taking advantage of the net unrealized appreciation or NUA and potentially saves you big on taxes. And while you should review an NUA analysis with your tax professional, let’s just take a look at an example.
So, distributions from an IRA or 401k are taxed at ordinary income tax rates, which are higher than long-term capital gains tax rates. And if you have company stock in your 401k, you may be able to distribute that stock from your 401k and realize a capital gain rather than ordinary income taxation when you sell the stock. But in order to take advantage of NUA, you must elect a lump sum in kind distribution from the plan. That is a total distribution from the plan of all assets and you can then roll over the non-comp stock portion to an IRA within 60 days. But all the assets must be distributed in kind to you for the company stock portion of the plan assets which will not then be rolled over. you will realize the basis in the stock as ordinary income and the remaining unrealized gain net unrealized appreciation would be taxable as a capital gain upon sale. So let’s take a look at this in action. So if you withdraw 50,000 in company stock with a basis of $7,500, you’ll potentially owe $1,800 in tax today, assuming a 24% tax bracket. After taxes, this will leave you with 48,200 in stock. Now, if this stock continues to grow by 8% per year for 10 years, you could potentially have $104,27 in stock in 10 years. And the stock in 10 years, if so, could generate taxable gain and then net you $82,200 in after tax bucks. Let’s look at what happens when if you leave the company stock in your 401k plan and withdraw the funds in 10 years. So, similar story. You leave 50k in common stock with the base $7500 in the plan and allow it to continue to grow by 8% for 10 years. You’ll have $107,946 in assets that can be withdrawn in 10 years. However, that withdrawal would be subject to ordinary income tax rates. And assuming the $107,946
withdrawal does not push you into a higher income tax bracket, that is $25,97 in taxes, leaving you with 82,000, a little over 82,000 after taxes. And that is only slightly less than had you taken advantage of the NUA. But prior to the passage of the Tax Cuts and Jobs Act from back in 2018, I believe utilizing the NUA often resulted in a much greater net after tax amount. However, the new law kind of lowered ordinary income tax rates while leaving the capital gains brackets as they were. And for this reason, depending on your situation, might not be as great as a difference between utilizing NUA and not depends on the person. We’d be happy to run that assessment for you. All right. So, step five. So, are you ready to perform a rollover? Let’s take a look at what you need to do. One of the first things to do when you’re ready to roll over your assets is to choose an advisor. And according to IRS rules, every IRA needs to have a custodian to watch transactions and keep records so you know, penalties and taxes can be deducted. And you will need one of those. However, there are different types of advisors to choose from. For many of you, your rollover is a significant amount of money. You’ve been saving for 20 to 30 years, investing it, growing it, and it represents a large percentage of your retirement assets. And naturally, there are plenty of firms that would like to manage that money for you. Independent adviserss, banks, brokerage firms, fund families, insurance carriers are all interested in managing your money. In fact, there’s so much competition out there that everyone has made it as easy as possible to roll your money over. So, in reviewing possible advisors, run them through a vetting process. Ask them if they’re a fiduciary. Ask them if they’re held to the fiduciary standard. Interview an adviser and talk to them about their investment process, type of financial planning services they will offer you, and of course, those pesky fees and transaction costs that are associated with working with an adviser. Ultimately, you are entering into a relationship that you hope will be long, maybe even 30, 40, 50 years. And you’ll need to find a firmer individual with which you feel most comfortable working with.
All right. Now, it is time to begin the rollover process. And the steps are pretty simple as you see here. And fair warning, when you check with your 401k provider, be prepared for a spiel and either leaving your assets with the plan or rolling over to their brokerage IRA. You may have heard it already is they will certainly get more aggressive the closer you get to retirement. But at this stage we will begin the process of notifying the 401k plan and your former employer and completing the paperwork. And you need to be very meticulous in this process. Remember when we talked about the NUA strategy and your one chance to get lower tax rates on your company stock. Well, you may be prepared. have all your ducks in order. But if you give incomplete or wrong instructions to HR, you can get stuck without any way to fix it. And I go through the paperwork with all my clients, including calling the 401k provider together and working with HR when necessary. Then it’s good to have a second set of eyeballs monitoring this process because the wrong box checked or an instruction not properly communicated could subject you to taxes penalties and possibly even delay your ability to access your funds. And this is where a competent advisor can be most helpful. You’re in control now. So you need to be sure to monitor the progress of this transaction so nothing falls through the cracks. It shouldn’t, but this is a serious chunk of change that’s moving around subject to bureaucracy and human error. And I I like to watch the whole process like a hawk for my clients. You should, too. So, now that you’ve opened an IRA with a custodian and received all the paperwork, it is time to now fund your new IRA. And you can fund your rollover through a direct or indirect rollover. Through a direct rollover, the plan sponsors will send a check directly to the IRA custodian. And when performing an indirect rollover, the plan will send you a check for the balance of your account. You’ll in turn forward a check to the custodian of your IRA. I never suggest for anybody to do an indirect rollover because you have to be very careful. If you elect to perform an indirect rollover and if the funds are not deposited in your IRA within 60 days, the rollover will then be disallowed. the entire amount distributed from the retirement plan will now be taxable and may even be subject to early distribution penalties.
All right, so what are some of the common consequences of or um with the rollover? And the consequences of a mistake can be brutal. Let’s take a look at some of the common mistakes that people make particularly if they’re acting without an adviser. So missing that 60-day deadline just mentioned is a big one. If you don’t deposit rollover funds into an IRA within 60 days, the entire rollover is now taxable as if you had just cashed out the retirement plan itself. So, make sure that you select a beneficiary for your new IRA and that you name a contingent in case your primary beneficiary is not here to collect the account after your passing. And don’t rely on a will to dictate how these assets will pass to your heirs because the IRA beneficiary designation or lack of designation trumps anything that’s stated in your will.
One moment, folks.
Enrolling over company stock or not paying off your loans before you leave are more big mistakes. Then if you do not repay all outstanding loans against your 401k, you’re going to be taxing the outstanding balance, including a potential penalty if you’re under age 59 and a half. Finally, as tempting as it may be, cashing out your 401k instead of letting your savings continue to grow tax deferred. It’s just downright silly. You pres presumably got another 20 to 30 years left after all. I hope for all of you it’s more like 50 and 60 years.
Now, I work with rollovers and soon to be retirees all day long. And here’s a list of just some of the services that we offer. If you’re having a hard time visualizing your future, we’ll put you through some scenario planning to get you thinking about the kind of life you want to lead in retirement. And if you need help budgeting, we can work with you to draw up a retirement income plan and withdrawal strategy. We can help you manage your accounts and consolidate them and structure them so you can set up a tax efficient withdrawal program that works for you. And of course, we can help with portfolio management. And we offer a variety of investments and financial strategies. We can work with you to find ones that are suitable for you and manage them for you if you like on an ongoing basis.
Now, with that folks, it’s now time for questions. But should you ever need anything from us, if you need to ask questions, here’s our my information. Um, that direct number just comes to my computer. Works perfectly fine. But there’s my email. If you’d like to schedule an appointment with me, I’m sending out a poll right now. Or you can use this QR code here to schedule an appointment with me that through that route. But please ask your questions. Like we just mentioned, this is a very important process. You don’t want to make any mistakes that you’re going to have to pay penalties and taxes on for the rest of your life. Um, but if everyone would please real quick just answer the poll. If you say no or not at this time, it doesn’t hurt me or affect hurt my feelings. Uh, I just like to see that I had everybody answer the poll. But if everybody would answer, please go ahead. And for those who are saying yes right now, um I will be contacting you tomorrow via email. Um and looking forward to helping you with any questions you might have, whether it be regarding investments, rollovers, Roth conversions, we’re here to help with that. So with that, I’m going to start taking questions. Let’s see what we got today.
Oh wow. First time in a while. No questions for me today. I must have been such a great presenter. Everybody caught on. It must be such a good uh good webinar.
Here’s one.
Why do you not suggest an indirect rollover? Um, just because of the the possibility of it all becoming taxable and reportable in one year. If you do a direct rollover, it’s made out to your new custodian. So, let’s say you’re moving it over to Fidelity. Check says Fidelity for the benefit of you, the client. That way if anything happens with the mail, it’s okay. Goes right through. I mean, there’s no problem there. You can always have a new check reissued. There’s no problem with um with ind with direct rollovers. Indirect rollovers. Uh if the check gets missing in the mail, now you have to talk to the IRS and have them forgive you in that case. So, just do a direct rollover.
So, is there a way to split benefits in a 457b where a portion rolls over and you keep part of the money even if that amount is taxable? Of course. It’s called a partial distribution, partial rollover. Let’s say you have $500,000 in your account and you want to put $250,000 of it in your IRA and leave 250 in your 457. You absolutely can. And it’s not even it’s not a taxable event. Um folks, there’s about 15 20 more people that still need to answer the poll. If you don’t mind answering, I really would appreciate it. Again, yes, no, not at this time. If you say yes, we’re happy to help you. If you say no or not at this time, it doesn’t hurt my feelings. I promise you it’s okay.
Yeah. Oo, here’s a good one. Aren’t there new Medicare rules or Medicare premiums are penalized if your income is higher some years due to cashing out retirement assets? So, it’s called Irma and it’s when your your Medicare is going to be based off of your modified adjusted gross income from two years earlier from and it’s ongoing. So, your Medicare cost, your Medicare premium from for 2026, what you’re going to pay in 2026 is based off of what you made in 2024. The more that you made, the higher your modified adjusted gross income, the higher more you have to pay in Medicare. Um, schedule a meeting with me. I’d be happy to go through that one with you. That’s a good question.
At what moment do we roll over or convert a traditional IRA to a Roth IRA? It depends on the person. Um it’s but one thing that we can do for you is we can run a financial plan to find out when the most optimal time will be. Um, you know, I have some clients, I actually have a few clients who are very lucky and they’re retiring in their mid to late 50s and it makes sense for them to actually wait two to three more years cuz they want to spend some money right now. So, it doesn’t make sense for them to do it for a couple more years. They want to be in that lower tax bracket to do it. Everybody’s situation is different, but there is a solution to finding out when is the best time to do a rollover and when’s the best time to do a conversion. be happy to show that one to you too. Just schedule an appointment with me. Or wait, you said yes in the chat. I I will reach out to you personally then.
Okay. So, the question going back to the 457 partial distribution one, I’d like to put a portion of 457b funds into an emergency savings account and largest portion into a Roth IRA. Would this be a partial rollover as well? Um, don’t do that. Don’t take out a large amount of money that you’re not going to use and just put it in emergency savings account. Just withdraw it whenever the emergency occurs. you you don’t need to pull out, you know, let’s say that you want to have 50 grand in an emergency savings account. Don’t you don’t need to have, you know, an additional 50 grand added to your modified adjusted gross income, not growing anything in your checking account, etc. It it’s I I’ll show you what I mean by it. Schedule a meeting with me and we can go over that, but it really doesn’t make the most sense to put it into an emergency savings account. What you could do if you want to just have some funds allocated for an emergency within your plan, let’s say it’s $50,000 is the amount you want to put into an emergency savings account. Put it into like your stable value fund within your IRA or your 401k. Get a 3 or 4% interest rate within your investment account. It’s still liquid funds and ready to go. And then the largest portion to the Roth IRA, like I mentioned, we can come up with a conversion strategy that’s good, makes sense for you. Just schedule an appointment with me and we can go over that together. Uh folks, there’s five more people that need to answer the poll. Again, it’s okay. Just say no or not at this time. Doesn’t hurt my feelings.
Okay, I’ll be sure to reach out to you. Happens all the time at the polls. What is the benefit of indirect rollover? Um really I don’t want to say that there are any. It’s just more control in your part. I mean whenever you do when you do a direct one, let’s say you’re with Fidelity and you’re moving it on over to Vanguard, Fidelity is going to I more than likely mail a check directly to Vanguard and you never have to see the check. It’s just going to go straight into your new account that you already opened up over there. Great. You don’t have to do anything and there’s no possibility of any tax consequences or any penalties for delay of your new custodian receiving the funds with an indirect. Only time I’ve ever been asked if somebody wants to do it is somebody who just wanted to be more in control. They didn’t want us to have a check that we can’t even cash. They were kind of nervous that we might have, you know, people were nervous. This is your life savings. Um this is your retirement funds. People don’t want a stranger holding a c, you know, a check in their hand with that amount of money, but there’s no way to be shifty with these because it’s made out to the institution. So, nothing wrong can happen there. Um, honestly, I just would avoid indirect rollover altogether. Again, if if you have a bad postman and he’s one of those guys that likes to throw the mail out in the side of the road because he had a bad day, we all heard about those stories back during CO. Um, if your check just sat in the grass and, you know, never got to the next institution, penalty taxes.
If you have a 403b with an ex employer, can you do a partial cash out? Well, you can roll all the funds over, but yes, you you can pull some funds out just depending on your situation. Um, if your next keyboard, are you older or younger than 59 and a half?
Okay. Well, you can pull money out of your They’re older than 59 and a half, so you can pull out anything from your 403b whenever you want to. Um, whatever amount you’d like. If you need just 10 bucks out of your 403b, you can take out 10 bucks. No penalty. You just pay the taxes on it if it’s pre-tax account. Um, but you you might want to just consider, you know, if you have that’s an exemp employer, you might have a couple of different accounts, you might want to consider consolidating, but get with me. We I’d be happy to go over the specifics of it. And, you know, folks, I’m sorry for saying that so much. It’s just everybody’s different. two people might seem very similar on paper, might have similar amount of money and similar um similar accounts, might even be invested similarly, but they’re two completely different people. So, the strategy and the tactics are going to be different as well. The approach is going to be different. So, I have to say just ask questions, you know, and I can’t answer or get all of your personal information on a public forum, but that’s why we offer these consultations after these meetings. Not only do we want to educate you at these webinars, we want those who absolutely want help and want to understand things in in their ins and outs of all this financial advising and retirement planning. We’re here to answer those questions on a personal one-on-one basis. So, please schedule a meeting with me and I can go over that one with you as far as what what’s best to do. But outside of that, those are all of our questions for today. Um, I’ll stay on here for another minute or two, answer any other questions that come on. But other than that, folks, thank you very much for joining me today. I do appreciate it. I hope this is a good webinar. Um, before you anybody heads out, if there’s a topic that you think would be great that we talk about, go ahead and put it in the chat or the Q&A. I’m always looking to see another topic for us to cover outside of just traditional IAS, Roth IAS, rolling over things, social security, life insurance, life insurance. Sorry, I told you guys I had a bad frog in my throat. Um, but please let us know some good topics that you’d like to hear us talk about. We’d be happy to go over that. Absolutely. It’s a pleasure. Thank you very much. Hope this was a good one today. And like I said, I’ll stay on for another two minutes, but folks, take care and I will see you for the Social Security one in a couple weeks.
Thank you.
Thank you as well.
Thank you very much. You have a great night as well.
But that is it folks. Thank you all very much for joining. I’m going to sign off here. Give it about 10 more seconds for anybody to stop me for last second question.
All right. Well, thank you all very much. Take care. Have a good evening.