To Roll or Not to Roll: It’s Your Choice

It used to be common for employers to encourage (or require) departing employees to withdraw their money from the company’s retirement plan.¹ Like most employee benefits, an employer-sponsored retirement plan is typically an expense for the employer.

Now that the baby-boom generation has started reaching retirement age (at the rate of about 10,000 per day), some employers are encouraging departing employees to leave their retirement savings in the company plan.^2–3 These employers are finding that the loss of large employee accounts can diminish their leverage when negotiating with plan administrators, possibly making their retirement plans less attractive to current and prospective workers.⁴

If and when you leave your current job, either to retire or to take a new position, understanding the options for your retirement savings may help you make decisions that serve yourinterests and not those of a former employer.

Stay Versus Roll

Employees are under no obligation to leave money invested in a former employer’s retirement plan but are free to roll it over to a traditional IRA. A properly executed IRA rollover can help preserve the tax-deferred status of retirement assets and avoid unwanted tax consequences and penalties. However, there are some subtle differences between IRAs and employer plans to be aware of before you decide how to proceed.

Investment options. The investment options in an employer plan tend to be limited by the plan administrator. The investment options available in IRAs are nearly unlimited.

Early withdrawals. If you think you might tap your retirement assets early, you may want to leave them in the employer plan. Normally, a 10% federal income tax penalty applies to distributions from traditional IRAs and employer retirement plans before age 59½. However, you may be able to avoid this penalty with an employer plan if you sever employment during or after the year in which you turn 55. [The age 55 exception does not apply to IRAs, annuity contracts, or modified endowment contracts (MECs), nor does an exception for death apply to MECs.]

You may also be able to withdraw money from a former employer’s plan or an IRA and avoid the early-withdrawal penalty by taking a series of substantially equal periodic payments (based on life expectancy) that continue for at least five years or until age 59½, whichever occurs later.

Early withdrawals may be penalty-free in the event of death or disability. IRA exceptions to the penalty also include a first-time home purchase ($10,000 lifetime maximum), unreimbursed medical expenses that exceed 7.5% of adjusted gross income, and qualifying higher-education expenses. Withdrawals from traditional IRAs and employer-sponsored retirement plans are subject to ordinary income tax.

Keeping track of multiple accounts. Over the course of your career, you could accumulate several retirement accounts. Rolling them all into a single IRA may give you a better perspective of your retirement portfolio and help reduce the potential for losing track of your money.

Creditor protections. Employer plans have strong creditor protections enshrined in federal law. Money rolled into an IRA from an employer plan typically enjoys the same protections.

There is no one-size-fits-all solution. A careful evaluation of your circumstances could help you decide what to do with your retirement assets when you change jobs or retire.

1, 3–4) The Wall Street Journal, May 8, 2011
2) Pew Research Center, 2010

The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2011 Emerald Connect, Inc.

For more information on Financial Planning contact EST Financial Group.

ESTFinancial Group

DIVORCE : The Division of Property

FOR IMMEDIATE RELEASE: October 27, 2011

Contact:  Sam Slabaugh, Certified Financial Planner™                                                                                           EST Financial Group                                                                                                                                     estfinancial@gmail.com                                                                                                                                             Office: 302-907-9706

THE DELAWARE MONEY SCHOOL TO HOST “FREE CLASS” AT THE Job Center, located at the Seaford Public Library, 600 N Market St. extended, in Seaford Delaware. Featuring Legendary Speaker Samuel F. Slabaugh, Certified Financial Planner™.

November 14, 2011 6:30-7:30

 DIVORCE : The Division of Property

A free class is being offered to the Public, Monday November 14, at the Job Center, located in the Seaford Public Library, 600 N Market St. extended, in Seaford Delaware. The class covers the division of marital property, in a divorce, from a Financial Planning perspective. The sponsor, Delaware Money School, is delighted to be able to provide an experienced and well qualified instructor, Samuel F. Slabaugh, CERTIFIED FINANCIAL PLANNER™    free of charge, to the public. Having written, spoken and taught on the subject many times, he is sought after to break down a compel subject, to simple understandable layman’s terms. This class focuses only on the financial aspects of divorce, and does not dwell on the moral, ethical or custody issues. It is intended to prepare the student to seek legal counsel if necessary, with an informed, knowledge base that allows them to focus on the facts at hand, rather than emotion.

The Money School, is the signature program of the nonprofit Delaware Financial Literacy Institute, They offer more than 600 free, no-hassle personal finance classes a year, throughout the state, taught by volunteers from the nonprofit and corporate sectors.. From Purses to Portfolios: Delaware Women Take Charge of Their Money, targets women's unique financial needs, and seeks to empower them. Participants can enroll in this program, earning a certificate that demonstrates a commitment to financial education. .

If you would like more information on this class contact:

Sam Slabaugh                                                                                                                                                                                                               estfinancial@gmail.com                                                                                                                                                                         EST Financial Group                                                                                                                                  
302-907-9706
www.estfinancial.com              

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Bring Your Life Insurance Home from Work

Only 44% of American households have individual life insurance — a 50-year low.¹ Perhaps this is because life insurance is a fairly common employee benefit. However, relying on a group policy through your employer means that the coverage could end if your job situation changes.
An important reason to own life insurance is to replace your lost income and provide your survivors with a source of cash (up to the policy limits) to help them pay living expenses. One way to help insulate your life insurance coverage from the unpredictability of your employment situation is by purchasing an individual policy. Depending on the type of policy you select, you may be able to obtain coverage for a specific number of years or for life.

Temporary Protection with an Expiration Date

As the name suggests, term life insurance offers a death benefit if the insured dies within the covered time period, which could range from one to 30 years. The death benefit is typically not subject to federal income tax, unless the employer pays the premiums.
Term life generally has a lower premium than permanent life insurance, particularly at the beginning of the term. With some term policies, the premium adjusts each year, whereas with others the premium remains fixed for the full term. You may be able to continue coverage beyond the original term at a higher premium, or even convert to a permanent policy (subject to age restrictions and policy minimums) while the policy is in force.

Lifetime Protection with No Expiration Date
Permanent life insurance offers lifetime protection and a guaranteed death benefit as long as you keep the policy in force by paying the premiums. Although the premium is higher than for term insurance, it typically remains level for the rest of your life.
A portion of the permanent life insurance premium goes into a cash-value account, which accumulates on a tax-deferred basis at a minimum guaranteed rate for the life of the policy. You may be able to borrow against the cash value during your lifetime to help pay for retirement or other needs.
Withdrawals of the accumulated cash value, up to the amount of the premiums paid, are not subject to income tax. Loans (as long as they are repaid) are also free of income tax. Loans and withdrawals from a permanent life insurance policy will reduce the policy’s cash value and death benefit. Any guarantees are contingent on the claims-paying ability of the issuing insurance company.
The cost and availability of life insurance depend on factors such as age, health, and the type and amount of insurance purchased. Before implementing a strategy involving life insurance, it would be prudent to make sure that you are insurable.
As with most financial decisions, there are expenses associated with the purchase of life insurance. Policies commonly have mortality and expense charges. And if a policy is surrendered prematurely, there may be surrender charges and income tax implications.
Ask yourself whether you are willing to stake your family’s financial future on group coverage that could change unexpectedly. An individual policy could help prevent gaps in your coverage.

1) LIMRA, 2010

The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security.

Let Sam Slaubaugh be your Financial Planner for life..Retirement Planning?

He is also licensed for insurance in Delaware, Maryland, Virginia and Pennsylvania.