Your Guide to Individual Retirement Accounts · Traditional and Roth IRAs There are two types of...
Transcript of Your Guide to Individual Retirement Accounts · Traditional and Roth IRAs There are two types of...
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Your Guide to
Individual Retirement Accounts
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
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.
$5.4 trillion in IRA
assets in the U.S.
at the end of 20123
28% of all retirement accounts are IRAs2
4 out of 10, or 49 million, U.S.
households own at least one type of IRA2
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.
1http://money.cnn.com/retirement/guide/pensions_basics.moneymag/index7.htm2http://www.icifactbook.org/fb_ch7.html#retirement3http://www.icifactbook.org/
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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.
Roth IRA ȥ Contributions are made on an after-tax basis.
ȥ If certain requirements are met, all earnings are
tax-free; no future taxes are due on Roth assets.
ȥ You may be able to access Roth assets penalty-free
prior to age 59½ if special circumstances apply.
Traditional IRA ȥ Contributions may be made on a pre-tax basis.
ȥ Taxes are due when withdrawals are made.
ȥ This IRA is sometimes called a Contributory IRA.
Contributing to an IRABasically, 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.
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RolloversAnother 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.
Indirect Rollover ȥ You are given funds from
an existing retirement plan
via check; it is up to you to
redeposit the funds into the
new IRA.
ȥ 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.
Direct Rollover ȥ Assets from an existing
retirement account are paid
directly to the qualified plan or
IRA Custodian/Trustee, not to you.
ȥ There is no tax liability as there
is with a distribution.
Partial RolloverYou 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.
There Are Two Types of Rollovers – Direct and Indirect.
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Your Guide to Indiv idual Ret irement Accounts
A Consumer’s Guide to IRA Eligibility and Benefit Chart
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IRA Type Eligibility Contribution Limits/Deadline Distribution Regulations Suitability Benefits
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 $1,000 for 2013 and 2014
ȥ April 15 deadline for contributions and catch-up contributions for prior year
Required Minimum Distributions begin at age 70½
Distributions that avoid IRS withdrawal penalty: ȥ Death or disability ȥ First-time home purchase ($10,000 maximum) ȥ Qualified higher education expenses ȥ Age 59½ ȥ Medical expenses (in excess of 7.5% of AGI) ȥ Health insurance if unemployed ȥ Received as substantially equal periodic
payments over owner’s life expectancy (72(t)) ȥ Qualified reservist distribution ȥ Distributions due to IRS levy ȥ 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 Required Minimum Distributions
ROTH IRA Have earned income
Modified adjusted gross income (AGI) limits for Roth IRA contributions
Taxable YearBeginning Single Taxpayer
2013 $112,000 - $127,0002014 $114,000 - $129,000
Beginning Joint Returns
2013 $178,000 - $188,0002014 $181,000 - $191,000
$5,500 for 2013 and 2014
Catch-Up Contributions for Individuals Age 50 or Older ȥ $1,000 for 2013 and 2014
ȥ April 15 deadline for contributions and catch-up contributions for prior year
Contributions may be withdrawn tax free at any time
Distributions of earnings that avoid taxes* and IRS withdrawal penalty after five years: ȥ Age 59½ ȥ Death or disability ȥ 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 Required Minimum Distributions
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
Required Minimum Distributions begin at age 70½
Distributions that avoid IRS withdrawal penalty: ȥ Death or disability ȥ First-time home purchase ($10,000 maximum) ȥ Qualified higher education expenses ȥ Age 59½ ȥ Medical expenses (in excess of 7.5% of AGI) ȥ Health insurance if unemployed ȥ Received as substantially equal periodic
payments over owner’s life expectancy (72(t)) ȥ Qualified reservist distribution ȥ Distributions due to IRS levy ȥ 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 Required Minimum Distributions
*No federal taxes apply; however, state tax treatment of Roth IRA earnings may vary by state.
IRA Type Eligibility Contribution Limits/Deadline Distribution Regulations Suitability Benefits
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 $1,000 for 2013 and 2014
ȥ April 15 deadline for contributions and catch-up contributions for prior year
Required Minimum Distributions begin at age 70½
Distributions that avoid IRS withdrawal penalty: ȥ Death or disability ȥ First-time home purchase ($10,000 maximum) ȥ Qualified higher education expenses ȥ Age 59½ ȥ Medical expenses (in excess of 7.5% of AGI) ȥ Health insurance if unemployed ȥ Received as substantially equal periodic
payments over owner’s life expectancy (72(t)) ȥ Qualified reservist distribution ȥ Distributions due to IRS levy ȥ 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
ROTH IRA Have earned income
Modified AGI limits for Roth IRA contributions
Taxable YearBeginning Single Taxpayer
2013 $112,000 - $127,0002014 $114,000 - $129,000
Beginning Joint Returns
2013 $178,000 - $188,0002014 $181,000 - $191,000
$5,500 for 2013 and 2014
Catch-Up Contributions for Individuals Age 50 or Older ȥ $1,000 for 2013 and 2014
ȥ April 15 deadline for contributions and catch-up contributions for prior year
Contributions may be withdrawn tax free at any time
Distributions of earnings that avoid taxes* and IRS withdrawal penalty after five years; and: ȥ Age 59½ ȥ Death or disability ȥ 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
ROLLOVER IRA Persons receiving a distribution eligible for rollover from a retirement plan
Any amount may be rolled over
Must be rolled into an IRA within 60 days of the distribution
Direct rollovers are the preferred method of rollovers
Required Minimum Distributions begin at age 70½
Distributions that avoid IRS withdrawal penalty: ȥ Death or disability ȥ First-time home purchase ($10,000 maximum) ȥ Qualified higher education expenses ȥ Age 59½ ȥ Medical expenses (in excess of 7.5% of AGI) ȥ Health insurance if unemployed ȥ Received as substantially equal periodic
payments over owner’s life expectancy (72(t)) ȥ Qualified reservist distribution ȥ Distributions due to IRS levy ȥ 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
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Your Guide to Indiv idual Ret irement Accounts
®
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Looking for additional guidance on IRAs or ideal investment
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call Security Benefit at 1.800.888.2461
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A N N U I T I E S • M U T U A L F U N D S • R E T I R E M E N T P L A N S
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.
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 1-800-888-2461. 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.