Your Guide to. Individual Retirement Accounts

Transcription

1 Your Guide to Individual Retirement Accounts

2 Your Guide to Individual Retirement Accounts (IRAs) TRADITIONAL AND ROTH IRAs ROLLOVERS A CONSUMER S GUIDE TO IRA ELIGIBILITY AND BENEFIT CHART Only 10% of today s private-sector workers can count on retiring with a pension which used to be a standard part of most people s retirement plan.1

3 Security Benefit A pension and Social Security may not replace your entire income. This means you have to take charge of your own money if you want to retire well. 28% of all retirement accounts are IRAs 2 $5.4 trillion in IRA assets in the U.S. at the end of out of 10, or 49 million, U.S. households own at least one type of IRA 2 IRAs have become a trusted and popular retirement-savings vehicle to help people build a robust retirement portfolio. An individual retirement account (IRA) is a trust or custodial account set up in the United States for the exclusive benefit of you or your beneficiaries

4 Security Benefit Traditional and Roth IRAs There are two types of IRAs you can create traditional and Roth. A traditional IRA may allow you to save with tax-deductible contributions, and your assets grow tax-free until you withdraw them. A Roth IRA allows you to contribute post-tax dollars, so your withdrawals may be tax-free at retirement. Traditional IRA Contributions may be made on a pre-tax basis. Roth IRA Contributions are made on an after-tax basis. Taxes are due when withdrawals are made. If certain requirements are met, all earnings are This IRA is sometimes called a Contributory IRA. tax-free; no future taxes are due on Roth assets. You may be able to access Roth assets penalty-free prior to age 59½ if special circumstances apply. Contributing to an IRA Basically, anyone younger than age 70½ with earned income or compensation can begin and contribute to an IRA. There are contribution and adjusted gross income (AGI) limit situations that apply. See The Benefit Chart on pages 6 and 7 for details. 4

5 Your Guide to Individual Retirement Accounts Rollovers Another way to contribute to an IRA is through a rollover. A rollover is a tax-free distribution to you of cash or other assets from one retirement plan to another retirement plan. The contribution to the second retirement plan is called a rollover contribution. Most often people execute a rollover if they leave their employer, or consolidate assets into one IRA. There Are Two Types of Rollovers Direct and Indirect. Direct Rollover Assets from an existing retirement account are paid directly to the qualified plan or IRA Custodian/Trustee, not to you. There is no tax liability as there is with a distribution. Indirect Rollover You are given funds from an existing retirement plan via check; it is up to you to redeposit the funds into the new IRA. There is a 60-day period to re-invest the funds; any amount not re-invested or outside the 60 days is subject to taxes and possible IRS penalties. Partial Rollover You don t have to put the entire amount you withdraw from your retirement account into the IRA. You can invest a part of the assets and do something else with the rest; this is called a partial rollover. The portion not rolled over, more than likely is taxable and subject to an IRA early-distribution penalty. 5

6 Security Benefit A Consumer s Guide to IRA Eligibility and Benefit Chart IRA Type Eligibility Contribution Limits/Deadline TRADITIONAL IRA (Deductible) Have earned income Under age 70½ Comply with income restrictions for deductibility if you are an active participant in a retirement plan $5,500 for 2013 and 2014 Catch-Up Contributions for Individuals Age 50 or Older ȥ ȥ $1,000 for 2013 and 2014 April 15 deadline for contributions and catch-up contributions for prior year ROTH IRA Have earned income Modified adjusted gross income (AGI) limits for Roth IRA contributions Taxable Year Beginning Single Taxpayer 2013 $112,000 - $127, $114,000 - $129,000 Beginning Joint Returns 2013 $178,000 - $188, $181,000 - $191,000 $5,500 for 2013 and 2014 Catch-Up Contributions for Individuals Age 50 or Older ȥ ȥ $1,000 for 2013 and 2014 April 15 deadline for contributions and catch-up contributions for prior year ROLLOVER IRA Persons receiving a distribution eligible for rollover from a retirement plan or other IRAs Any amount may be rolled over Must be rolled into an IRA within 60 days of the distribution, (if an indirect rollover) Direct rollovers are the preferred method of rollovers 6

7 Your Guide to Individual Retirement Accounts Distribution Regulations Suitability Benefits Required Minimum Distributions begin at age 70½ Distributions that avoid IRS withdrawal penalty: Death or disability First-time home purchase ($10,000 maximum) Qualified higher education expenses Age 59½ Medical expenses (in excess of 7.5% of AGI) Health insurance if unemployed Received as substantially equal periodic payments over owner s life expectancy (72(t)) Qualified reservist distribution Distributions due to IRS levy Qualified hurricane distribution Eligible persons desiring a current-year tax deduction Persons expecting to be in a lower tax bracket after retirement Nonemployed spouse, filing a joint return Tax-deductible contributions Tax-deferred growth Penalty-free withdrawals under certain circumstances Beneficiaries can stretch the IRA Contributions may be withdrawn tax free at any time Distributions of earnings that avoid taxes* and IRS withdrawal penalty after five years; and: Age 59½ Death or disability First-time home purchase ($10,000 maximum) Persons ineligible for a deductible traditional IRA Persons expecting to be in a higher tax bracket after retirement Any persons with earned income Nonemployed spouse if filing a joint return Qualified withdrawals are tax-free Contributions may continue past age 70½ if investor has earned income No Required Minimum Distributions during lifetime Beneficiaries can stretch the IRA Required Minimum Distributions begin at age 70½ Distributions that avoid IRS withdrawal penalty: Death or disability First-time home purchase ($10,000 maximum) Qualified higher education expenses Age 59½ Medical expenses (in excess of 7.5% of AGI) Health insurance if unemployed Received as substantially equal periodic payments over owner s life expectancy (72(t)) Qualified reservist distribution Distributions due to IRS levy Qualified hurricane distribution Persons receiving a lump sum distribution from a retirement plan Earnings compound tax deferred Avoids taxes and penalties Allows qualified withdrawals without penalty Beneficiaries can stretch the IRA *No federal taxes apply; however, state tax treatment of Roth IRA earnings may vary by state. 7

8 Whether you re just beginning to save for retirement or looking to consolidate your assets into one account, IRAs may be a solution for you. Grow your investment tax deferred and gain confidence in your retirement. ANNUITIES MUTUAL FUNDS RETIREMENT PLANS Looking for additional guidance on IRAs or ideal investment vehicles within an IRA? Talk to your financial advisor or call Security Benefit at SecurityBenefit.com Services and securities are offered through Security Distributors, Inc. (SDI). Annuities are issued in all states except New York by Security Benefit Life Insurance Company (SBL). In New York, annuities are issued by First Security Benefit Life Insurance and Annuity Company of New York (FSBL), Rye Brook NY. SDI is a wholly-owned subsidiary of SBL. SBL and FSBL are subsidiaries of Security Benefit Corporation ( Security Benefit ). You should consider the investment objectives, risks, and charges and expenses of the mutual funds or variable annuities carefully before investing. You may obtain a prospectus that contains this and other information about the mutual funds or variable annuities and their investment options by calling our National Service Center at You should read the prospectus carefully before investing. Investing in mutual funds and variable annuities involves risk and there is no guarantee of investment results. These are general guidelines and are not meant to replace legal or tax advice for your specific situation. One Security Benefit Place Topeka, Kansas /01/15