Your 401(k) Rollover Guide

Transcription

1 Your 401(k) Rollover Guide The best approach to rollovers is often the simplest.

2 A simple decision may make a big difference to your future. Whether you re changing jobs or retiring, leaving your employer means that you ll need to make a decision about what to do with the money in your 401(k) plan. More than likely, that money will need to keep working for you so you can meet your future retirement savings goals. At the same time, leaving your employer also means you probably have a lot on your mind and would love some help in making simple, but smart, choices. You ve come to the right place. This 401(k) rollover guide will help you understand your 401(k) distribution options and how a rollover IRA from John Hancock can be a simple and convenient way to help you stay invested for retirement. 2

3 INSIDE 4 Assess your distribution options 8 Review your investment choices 14 Make your move 15 Frequently asked questions Learn the advantages There are a variety Don t put off Find answers to and disadvantages of different ways to making a decision the most common of each option to invest your retirement to help keep your questions about help ensure you money. Learn more money working rollovers. make a decision that about the investment toward future goals. is consistent with options available at your financial goals. John Hancock. 3

4 assess your distribution options Be sure you understand your Options Overview When you leave an employer, there are several options available to you when deciding what to do with your 401(k) money. This section summarizes the pros and cons of your distribution options, outlines next steps and offers insights into why it may be important to stay invested and save for your future. Roll over to an IRA Stay in your existing plan or move to a new employer plan A rollover IRA is a type of IRA that is set up to receive distributions from a 401(k) or other qualified retirement plan. Once the rollover IRA account is opened and your 401(k) assets are transferred to it, you can invest your money in a variety of investment options at your discretion and according to your financial goals and tolerance for risk. You may be able to keep your money in your previous employer s plan. Also, a new employer may allow you to transfer your 401(k) money to their plan. Take a cash distribution You can remove your money from your 401(k) plan and take it in cash. Generally speaking, you ll need to pay taxes and possible penalties when you take a cash distribution. Other options There may be additional distribution options that are available only under your specific plan. Please check with your plan administrator for more information. 4

5 next steps and why it s important to save for If you want to......then follow these steps Action items Roll over to John Hancock» Simply call Roll over to another provider STEP 1 Find an IRA provider STEP 2 Open an IRA STEP 3 Fill out the distribution form that came with this guide STEP 4 Give the form to your plan administrator» Consider a John Hancock Rollover IRA. Stay in your existing plan» Check with your plan administrator to make sure you can do so. Move to a new employer plan STEP 1 Get the appropriate transfer information from your new employer STEP 2 Fill out the distribution form that came with this guide STEP 3 Give the form to your plan administrator» Make sure your new employer will allow you to transfer your money. Take a cash distribution STEP 1 Fill out the distribution form that came with this guide STEP 2 Give the form to your plan administrator» Consider taxes and possible penalties before taking cash (see example on page 6). Need Help? Call

6 distribution options... Advantages Possible Disadvantages Defers current taxation. Your money can continue to grow tax deferred. You can make additional contributions. You can consolidate multiple tax-deferred accounts. You may be able to take penalty-free withdrawals for a first-time home purchase or college education expenses prior to age 59½. Withdrawals made prior to age 59½ may be subject to a 10% IRS early withdrawal penalty and will be subject to ordinary income tax. State and local taxes may also apply. You cannot take a loan from your IRA. No employer matching. Fees and expenses could potentially be higher than in the plan. Defers current taxation. Your money can continue to grow tax deferred. You may be able to take penalty-free withdrawals after age 55. You may have access to loans and hardship withdrawals. You may be able to make additional contributions under your new employer s plan and receive employer matching contributions if eligible. You cannot make additional contributions if you stay in your old employer s plan, and there may be different rules for inactive employees. You will be subject to the distribution options under the plan. Your investment options will be determined by the employer s plan. Future changes to a plan may change the process for accessing your money. Immediate access to your money (once the distribution is processed and applicable taxes and possible penalties are withheld). You can still roll over all or a portion of your money without any tax consequences if you do so within 60 days of taking a distribution. Favorable tax treatment may be available to individuals born before 1936 who take lump-sum distributions. Your cash distribution will be subject to a potential 20% federal income tax withholding and possibly additional federal, state and local income taxes come tax time. Your cash distribution may be subject to a 10% IRS early withdrawal penalty if taken prior to age 59½. By taking a cash distribution and not investing the proceeds, you are, in effect, not allowing that money to help meet future retirement needs. Have questions? Call This material does not constitute tax, legal or accounting advice and neither John Hancock nor any of its agents, employees or registered representatives are in the business of offering such advice. It was not intended or written for use and cannot be used by any taxpayer for the purpose of avoiding any IRS penalty. It was written to support the marketing of the transactions or topics it addresses. Anyone interested in these transactions or topics should seek advice based on his or her particular circumstances from independent professional advisors. 5

7 Have questions? Call retirement Why Good Choices May Matter More Than Ever The retirement you ll face in the coming years is much different from the retirement that was enjoyed by retirees thirty years ago. People are living longer. The average retiree leaves the workforce at 62 years of age. 1 Since life expectancy at age 62 could be an additional 20+ years, 2 you need to plan for a long retirement. Also consider that, by definition, 50% of the population lives longer than their life expectancy. In fact, there s almost a 70% chance that at least one spouse from a healthy couple who are both age 65 today will reach the age of While living longer and healthier lives is a great thing, the longer your retirement the more money you ll need. Social Security can only take you so far. Many people make the assumption that they ll be able to rely on Social Security to fund a good portion of their retirement income. However, the average Social Security retirement benefit in 2013 was just over $15,000 per year. 2 In addition, the future of Social Security has come into question as the ratio of people contributing to the system and those receiving benefits is getting smaller and smaller. 3 The burden to save is on you. Years ago, many Americans relied on employer pensions as the main source of retirement income. Today, fewer and fewer people have pensions. Most Americans are now responsible for saving for their own retirement. Fortunately, there is something you can do about it: Take charge of your future and keep saving and investing for your retirement. Use the information in this guide to inspire you to keep your money working for you. 1 Employee Benefit Research Institute: The 2012 Retirement Confidence Survey. 2 Social Security Administration, Society of Actuaries, Key Findings, 2011.

8 Consider a rollover IRA It s convenient assess your distribution options If you re leaving your employer, a rollover IRA can help you remove your money from your employer s 401(k) plan while keeping your retirement money working for you. A rollover IRA enjoys the same tax-deferral benefits as your employer s 401(k) plan, but may offer you greater control over your money and how it s invested. All you re doing is moving your 401(k) money into a specific type of IRA. OPPORTUNITY LOST: TAKING A $20,000 DISTRIBUTION NOW VS. ROLLING OVER 4 6 Taking a cash distribution from your 401(k) may seem like the easiest thing to do, but it may not be in your best interest. Depending on your circumstances, taxes and possible penalties may be due, so taking cash now could make a big difference in your ability to meet your future retirement needs. As this hypothetical example shows, taking a cash distribution of $20,000 today would only give you $12,000 after taxes and penalties. But if you put that $20,000 in a rollover IRA so it could keep on working, it has the opportunity to grow and may be worth $64,143 ($44,900 after taxes) in 20 years. Even if you invested the cash distribution for 20 years in a taxable account, you might only end up with $27,323. $80K $60K $40K $20K $0K $12,000 Cash Distribution Today $27,323 Invest the Cash Distribution for 20 Years $64,143 $44,900 after taxes Value of Rollover in 20 years 4 This hypothetical example assumes a 25% federal income tax rate, a 5% state income tax rate and a 10% IRS early withdrawal penalty on the Cash Distribution amounts. The example also assumes a 6% average annual return on the rollover and the reinvested cash distribution. For illustrative purposes only. Not indicative of any particular investment. Past performance does not guarantee future results.

9 Have questions? Call and easy Advantages of a John Hancock Rollover IRA As a participant in a 401(k) plan with John Hancock, you re in a good position. If you choose, you can roll over your 401(k) into a John Hancock IRA and continue to enjoy access to the types of investment options you ve come to know and the type of service you ve come to trust. Best of all, rolling over your 401(k) to a John Hancock IRA is simple. No up-front sales charge. You will not incur any sales charge when you roll over to a John Hancock IRA although account fees, fund expenses and service charges may apply. Enjoy access to a similar roster of investment options. If you roll over your 401(k) into a John Hancock IRA, you can put your money into similar funds that may have been available in your plan or invest in other options available only through John Hancock. Rolling over has never been easier. Our dedicated Rollover Education Center will help you review your distribution options and help prepare all the paperwork on your behalf no matter which distribution option you choose. And should the size of your rollover require specialized attention, we will refer you to your plan s financial representative who can help you further explore your options. We re here for you today and tomorrow. John Hancock is a market leader in providing investors with the products and services needed to invest for retirement and other financial goals. When you roll over to John Hancock, you are investing with one of the most recognized and respected names in the financial services industry. Our parent company has been helping individuals and institutions increase and protect wealth for more than 150 years. 7

10 review your investment choices With thousands of mutual funds available in the U.S., many investors simply don t know where to begin when it comes to building a diversified portfolio. A John Hancock rollover IRA offers you a carefully selected list of mutual funds and portfolios to choose from. Lifestyle Portfolios. 8 invest based on your risk tolerance A John Hancock rollover IRA Lifestyle Portfolios: A way to invest based on your risk tolerance. John Hancock Lifestyle Portfolios are a series of asset allocation funds that provide investors with choices of varying degrees of investment risk, from aggressive to conservative. Each of the professionally managed Lifestyle Portfolios invests in other mutual funds and offers varying levels of risk and return potential. Retirement Living Portfolios. 10 invest based on your target retirement date Other Mutual Funds. 11 take a more hands-on approach to building a portfolio What is asset allocation and diversification? Asset allocation is the process of dividing a portfolio among the major asset classes of stocks, bonds and cash as a way of managing risk and return expectations. Investments are then further diversified within each asset class to help manage risk in the event one or more investments perform poorly. Bear in mind that asset allocation and diversification do not ensure a profit or protection against loss. Asset allocation does not ensure a profit or protection against a loss. Please note that asset allocation may not be appropriate for all investors, particularly those interested in directing the underlying funds on their own. Investing in foreign securities is subject to certain risks not associated with domestic investing, such as currency fluctuations and changes in political and economic conditions. The securities of small-capitalization companies are subject to higher volatility than larger, more established companies. High yield bonds are subject to additional risks, such as the increased risk of default. 8

11 Have questions? Call offers a variety of investment choices If your 401(k) money is currently in Lifestyles, good news You can roll over your 401(k) money into the same underlying Lifestyle Portfolios that are available in your 401(k) plan with John Hancock, making the rollover process as easy as it gets. Lifestyle Portfolios available via a John Hancock rollover IRA may have different fees and expenses than were available in your employer s plan. Not familiar with Lifestyles? Lifestyle Portfolios are simple and straightforward and can take the emotion and guesswork out of investing. Choose among five professionally managed portfolios, from aggressive to conservative. To determine which Lifestyle Portfolio may be appropriate for you, take the Risk Quiz on page 12. What makes Lifestyle Portfolios unique? With Lifestyles Portfolios, you gain access to a sophisticated process managed by experienced professionals. John Hancock Investment Management Services selects the underlying funds to be included in the Lifestyle Portfolios and then calls on the expertise of seasoned asset allocation professionals to help determine the optimal mix of asset classes and underlying funds to reach the stated goals of each Lifestyle Portfolio. JOHN HANCOCK LIFESTYLE PORTFOLIOS 3 HIGHER Aggressive Growth Growth & Income Income Aggressive 100% STOCKS Potential Return Moderate 45% STOCKS 55% BONDS Balanced 65% STOCKS 35% BONDS Growth 85% STOCKS 15% BONDS Not sure which portfolio might be right for you? LOWER Conservative 25% STOCKS 75% BONDS Take the Risk Quiz on page 12 LOWER Risk HIGHER 3 and use the results as a guide. This chart is for illustrative purposes and does not represent performance of any actual investment. This chart s purpose is to demonstrate the level of potential returns in relationship with the level of risk taken and is not intended as investment advice or a recommendation. 9

12 review your investment choices CONTINUED... A John Hancock rollover IRA offers Retirement Living Portfolios: A way to invest based on your projected retirement date. John Hancock offers a range of Retirement Living Portfolios. These funds are managed by a team of investment professionals who adjust each portfolio s make-up over time to ensure a gradual shift from equities to fixed income in the years leading up to and through retirement. Each portfolio name refers to the approximate retirement year of the investor. Portfolios with dates farther off initially allocate more aggressively to stock funds. As a portfolio approaches its target date, the allocation will gradually migrate to more conservative, fixed-income funds. The principal value of your investment, as well as your potential rate of return, are not guaranteed at any time, including at or after the target retirement date. What is a target date? A target date is the year in which JOHN HANCOCK RETIREMENT LIVING PORTFOLIOS APPROPRIATE IF YOU ARE RETIRING IN CURRENT ALLOCATIONS 5 Stocks Bonds a participant plans to retire and no longer make contributions. Retirement Living through 2050 Retirement Living through years years 96% 96% 4% 4% Retirement Living through years 96% 4% Retirement Living through years 95% 5% Retirement Living through years 89% 11% Retirement Living through years 80% 20% Retirement Living through years 69% 31% Retirement Living through years 58% 42% Retirement Living through 2010 < 0 years 49% 51% Asset allocation does not ensure a profit or protection against a loss. Please note that asset allocation may not be appropriate for all investors, particularly those interested in directing the underlying funds on their own. Investing in foreign securities is subject to certain risks not associated with domestic investing, such as currency fluctuations and changes in political and economic conditions. The securities of small-capitalization companies are subject to higher volatility than larger, more established companies. High yield bonds are subject to additional risks, such as the increase risk of default Allocations as of October Visit for current allocations and holdings.

13 Have questions? Call a variety of investment choices Other Mutual Funds: Take a more hands-on approach to building a portfolio. If you d rather take a more active role in managing your rollover IRA, John Hancock offers a variety of mutual funds that can suit your needs. Choose from funds covering major asset classes and investment styles, such as domestic and international equity funds, growth or value funds and more. For a comprehensive overview of each fund, visit Use the Risk Quiz on page 12 or the Fund-Selection Tool located at to help you select the mix of funds that may be right for you. Funds available in the John Hancock rollover IRA 6 Lifestyle JH Lifestyle Aggressive Portfolio JH Lifestyle Growth Portfolio JH Lifestyle Balanced Portfolio JH Lifestyle Moderate Portfolio JH Lifestyle Conservative Portfolio Retirement Living JH Retirement Living through 2010 Portfolio JH Retirement Living through 2015 Portfolio JH Retirement Living through 2020 Portfolio JH Retirement Living through 2025 Portfolio JH Retirement Living through 2030 Portfolio JH Retirement Living through 2035 Portfolio JH Retirement Living through 2040 Portfolio JH Retirement Living through 2045 Portfolio JH Retirement Living through 2050 Portfolio Aggressive Growth JH Emerging Markets Fund JH Global Opportunities Fund JH Greater China Opportunities Fund JH International Allocation Portfolio JH International Core Fund JH International Growth Fund JH International Growth Equity Fund JH International Small Company Fund JH International Value Equity Fund JH Natural Resources Fund JH Small Cap Equity Fund JH Small Cap Intrinsic Value Fund JH Technical Opportunities Fund A fund s investment objectives, risks, charges and expenses should be considered carefully before investing. The prospectus contains this and other important information about the fund. To obtain a prospectus, visit our web site at or call the Rollover Education Center at Please read the prospectus carefully before investing or sending money. 6 As of January 3, Growth JH Classic Value Fund JH Disciplined Value Fund JH Disciplined Value Mid Cap Fund JH Financial Industries Fund JH Fundamental All Cap Core Fund JH Fundamental Large Cap Core Fund JH Fundamental Large Cap Value Fund JH Large Cap Equity Fund JH Rainier Growth Fund JH Regional Bank Fund JH Small Company Fund JH Strategic Growth Fund JH U.S. Equity Fund JH U.S. Global Leaders Growth Fund Growth & Income JH Absolute Return Currency Fund JH Alternative Asset Allocation Fund JH Balanced Fund JH Global Absolute Return Strategies Fund JH Global Shareholder Yield Fund JH Sovereign Investors Fund Income JH Bond Fund JH Core High Yield Fund JH Emerging Markets Debt Fund JH Floating Rate Income Fund JH Focused High Yield Fund JH Global Conservative Absolute Return Fund JH Global Income Fund JH Government Income Fund JH Income Fund JH Investment Grade Bond Fund JH Short Duration Credit Opportunities Fund JH Strategic Income Opportunities Fund Cash Management JH Money Market Fund An investment in the JH Money Market Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency. Although this fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund. 11

14 review your investment choices The John Hancock Risk Quiz Take this short quiz to help you determine your risk profile. How to use this Risk Quiz If you re interested in Lifestyle Portfolios Match up your results to the appropriate lifestyle portfolio. Q1 What is your age? and over points If you re interested in Retirement Living Portfolios This quiz is not applicable. Select the appropriate portfolio based on your target retirement date. Q2 How many years until you plan to retire and begin making withdrawals from your plan? 5 25 years 4 20 years 3 15 years 2 10 years 1 5 years points If you re interested in Other Mutual Funds Use your results as a guide for selecting funds by investment type. If you re interested in All cases Call for more information. Q3 Which statement best describes your willingness to accept risk in order to achieve potentially higher returns? 5 I am willing to accept a higher level of risk in exchange for the potential for growth. 4 I am willing to accept a moderate level of risk. 3 I am willing to accept some risk in my investment options. 2 I am willing to accept a little bit of risk in my investment options, but am concerned more with security. 1 Security is my priority. I am willing to accept only a very low level of risk. points This Risk Quiz is designed to help you determine how to allocate your assets among four broad investment types (aggressive, growth, growth & income, and income), which together cover the major asset classes of stocks and bonds. The results are based on generally accepted investment principles. However, there is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives. All investments involve risks, and fluctuations in the financial markets and other factors may cause declines in the value of your account. NOTE: This questionnaire is provided to you by John Hancock Funds, LLC. It does not provide investment or financial advice. You should carefully consider all of your options before investing to determine how your decisions could impact your individual, financial, investment, tax, family and other personal considerations. As your financial circumstances or goals change, it may be helpful to retake the questionnaire to see if your results have changed. John Hancock Funds, LLC, is not responsible for reviewing your financial situation or updating the suggestions contained herein. 12

15 Have questions? Call Risk Strategies & Overviews Q4 How comfortable do you feel with at least a portion of your investments invested in the stock market? Aggressive TARGET ALLOCATION: 100% STOCKS 27% 32% 41% You seek maximum potential for growth over the long run and are comfortable with considerable potential risk in the short run. 5 Very comfortable 4 Comfortable 3 Neutral 2 Uncomfortable 1 Very uncomfortable points Growth TARGET ALLOCATION: 80% STOCKS 20% BONDS 25% 15% 33% Seeking growth of your money is your main concern, but you prefer to limit your potential risk. 27% Q5 The value of some investments may fluctuate significantly over time. If you invest $10,000, what level of decline would you be willing to tolerate over 5 years? 4 Down to $8,000 (a 20% decline) 3 Down to $8,500 (a 15% decline) 2 Down to $9,000 (a 10% decline) 1 Down to $9,500 (a 5% decline) points Balanced TARGET ALLOCATION: 60% STOCKS 40% BONDS 35% 20% 26% 19% Growth and security are both important to you, and you want to pursue them in equal measure. Q6 Do you think you can meet your retirement goals based on your current salary and savings outside of your qualified investment plan? 5 Strongly agree 4 Agree 3 Neutral 2 Disagree 1 Strongly disagree Add up your points here for your total score. points points Moderate TARGET ALLOCATION: 40% STOCKS 60% BONDS 55% 6-10 Conservative TARGET ALLOCATION: 20% STOCKS 80% BONDS 74% 14% 13% 18% 8% 4% 14% You feel a strong need to protect your assets while achieving a modest level of growth. Security is your greatest concern. You would not feel comfortable if your portfolio returns fluctuated greatly. Now match your total score to one of the Risk Strategies at right. You can use your result to help determine the type of investments that may be appropriate for you. Your quiz results may change over time. Take the Risk Quiz each year to make sure your risk profile accurately matches your risk tolerance. Aggressive Growth Growth & Income Income

16 make your move No headaches. No hassles. No paperwork. To roll over your 401(k) to John Hancock or learn more about your options... Call

17 Have questions? Call Frequently asked questions What is a rollover IRA? A rollover IRA is a special type of IRA that is set up to receive distributions from a 401(k) or other qualified retirement plan. How do I roll over to John Hancock? If you wish to roll over to a John Hancock IRA, call to speak with one of our Rollover Education Specialists. Does it cost anything to roll over to a John Hancock IRA? Participants in a 401(k) plan with John Hancock are eligible to roll over to a John Hancock IRA with no sales charge (other account fees, fund expenses and service charges may apply). How do I roll over to another IRA provider? You ll need to first identify the provider you want to roll over to, open an IRA with that provider, and get the appropriate wiring instructions. Then fill out the distribution form that came with this guide and return it to your plan administrator. What do I do if I want to stay in my existing employer plan? Do nothing. However, keep in mind that you may not be able to stay in your employer s plan if your account balance is less than $5,000. Check with your plan administrator. What do I do if I want to move my money into a new employer plan? If your new employer allows you to move your money into their plan, you ll first need to get the appropriate transfer instructions from your new employer. Then fill out the distribution form that came with this guide and return it to your plan administrator. How do I take a cash distribution? Fill out the distribution form that came with this guide and return it to your plan administrator. Who is my plan administrator? Your plan administrator is typically your employer, though in some instances it may be a third party. Call John Hancock participant services at if you are unsure. What do I do if I m unsure about what to do with my 401(k) money? If you would like information regarding all of your distribution options, call our Rollover Education Center at or visit How do I determine what investments are right for me? After reading through this guide, visit and click the start button under the heading Need Fund Selection Assistance? on the middle part of the home page. You can also surf the Internet for other IRA providers or consult with a qualified financial advisor. 15

18 John Hancock Funds, LLC MEMBER FINRA SIPC 601 Congress Street Boston, MA TDD ROP MF170687