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.
For more information regarding this subject, please click
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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on the amount rolled over until it is withdrawn from your IRA.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.
For more information regarding this subject, please click
here.
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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.
For more information regarding this subject, please click
here.
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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.
For more information regarding this subject, please click
here.
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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.
For more information regarding this subject, please click
here.
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.
For more information regarding this subject, please click
here.
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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.
For more information regarding this subject, please click
here.
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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.
For more information regarding this subject, please click
here.
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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.*
For more information regarding this subject, please click
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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.
