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401(k) Decisions - You Can Take It With You

If you are preparing to change jobs, do you know what your choices are for managing the money in your current employer's retirement plan? Although many people choose to take a cash distribution, there are other options that may benefit you more.

Uncle Sam Loves Cash Distributions
Taking a lump-sum cash distribution may trigger an immediate 20% federal withholding tax. In addition, a 10% tax penalty may apply if you are younger than age 55.* Taking your money in cash also means that you'll no longer enjoy the potential benefits of tax deferral that a qualified retirement plan offers.

Depending on your circumstances, you may have several options that will allow you to maintain the tax-deferred status of your retirement plan assets:

  • Leave the money in your former employer's plan. Your former employer must allow you to leave the money where it is as long as the balance exceeds $5,000. You'll no longer be able to contribute to the account, but you'll still decide how the existing assets are invested.
  • Roll over the money to your new employer's plan. By "rolling" the money directly to your new plan, you'll avoid the taxes that could eat away at a cash distribution. You'll also only have one set of investments to monitor. Even if you're not immediately eligible to contribute to the plan at your new job, you may still be able to roll over the money right away.
  • Roll over the money to an IRA. If your new employer doesn't offer a retirement plan or you aren't yet eligible to participate, you can roll over the money directly to a traditional IRA. Again, you'll avoid taxes that you'd incur if you took a cash distribution and still enjoy the potential benefits of tax deferral. Experts advise against commingling your retirement plan assets with other IRAs you may have set up. Instead, open a separate IRA account, known as a "conduit IRA," which may allow you to move the funds to a new employer's retirement plan at a later date.

Research Your Options
If you plan to change jobs, don't just take the money and run. Since rules vary from company to company, find the time to explore your alternatives. If you have specific questions about your retirement plan distribution options, contact your employer's benefits coordinator or a qualified financial consultant.

*If you're age 55 or older and separate from service, the 10% penalty generally will not apply for lump-sum distributions taken from an employer-sponsored retirement plan. Keep in mind that the 10% penalty may be incurred on distributions taken from an IRA prior to age 59.

2010 Standard & Poor's Financial Communications. All rights reserved.

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Personal Banking Security Measures for the 21st Century

clientuploads/21st-Century-Securitysquare180.pngMany of us are constantly connected to the online world these days. This means that the potential is there for our computers and personal information to be compromised which greatly increases the risk of ID theft and financial fraud to occur. However, by taking some basic precautions you can significantly reduce the risk of your computing environment being compromised. Following these simple guidelines should help your computing environment become more secure:

Keep your computer and software up-to-date

Keep your computers and network equipment secured with the latest software updates and enable automatic updates whenever possible.  This includes updates to third party applications such as Java and Adobe Products.  

Use hard drive encryption

In the event your machine is lost or stolen, drive encryption can prevent others from accessing the data on your hard drive.  The purpose is to encrypt or scramble your data on your machine so that it can only be read with your encryption key.Many operating systems offer drive encryption.  Microsoft offers Bitlocker and Apple has FileVault. There are also other third party encryption offerings.   

Enable your firewall

Think of the firewall to your computer as the fence around your property.  If there were multiple holes cut in the fence, it wouldn’t be very useful at keeping people out.  Firewalls are typically enabled by default on Windows machines, but double check to make sure it’s on.  Here are instructions to do so if you are using Windows 7. Only allow necessary applications inbound access through your firewall. The same principles apply to your network firewall. 

Configure your screensaver

Set an auto-locking screensaver so your account gets locked out after a few minutes.  This is useful if you forget to lock your machine when are away from it. On Windows machines this can usually be done by pressing the “Windows Key” and the “L” button simultaneously.

Make your passwords stronger

The longer and more complex the password, the better.  At least 16 characters with a combination of upper and lowecase letters, numbers, and special characters is a best practice.

Configure your router

Use the strongest wireless security available (currently WPA2-CCMP) with a long and complex password for your wireless network. Disable WPS on your wireless router for greater security.   

 


Think that some secure banking information
of yours has been compromised?

If you suspect that your personal financial information has been compromised, call MutualBank Customer Support at 800-382-8031.


 

Monday, April 7, 2014

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401(k) Decisions - You Can Take It With You

If you are preparing to change jobs, do you know what your choices are for managing the money in your current employer's retirement plan? Although many people choose to take a cash distribution, there are other options that may benefit you more.

Uncle Sam Loves Cash Distributions
Taking a lump-sum cash distribution may trigger an immediate 20% federal withholding tax. In addition, a 10% tax penalty may apply if you are younger than age 55.* Taking your money in cash also means that you'll no longer enjoy the potential benefits of tax deferral that a qualified retirement plan offers.

Depending on your circumstances, you may have several options that will allow you to maintain the tax-deferred status of your retirement plan assets:

  • Leave the money in your former employer's plan. Your former employer must allow you to leave the money where it is as long as the balance exceeds $5,000. You'll no longer be able to contribute to the account, but you'll still decide how the existing assets are invested.
  • Roll over the money to your new employer's plan. By "rolling" the money directly to your new plan, you'll avoid the taxes that could eat away at a cash distribution. You'll also only have one set of investments to monitor. Even if you're not immediately eligible to contribute to the plan at your new job, you may still be able to roll over the money right away.
  • Roll over the money to an IRA. If your new employer doesn't offer a retirement plan or you aren't yet eligible to participate, you can roll over the money directly to a traditional IRA. Again, you'll avoid taxes that you'd incur if you took a cash distribution and still enjoy the potential benefits of tax deferral. Experts advise against commingling your retirement plan assets with other IRAs you may have set up. Instead, open a separate IRA account, known as a "conduit IRA," which may allow you to move the funds to a new employer's retirement plan at a later date.

Research Your Options
If you plan to change jobs, don't just take the money and run. Since rules vary from company to company, find the time to explore your alternatives. If you have specific questions about your retirement plan distribution options, contact your employer's benefits coordinator or a qualified financial consultant.

*If you're age 55 or older and separate from service, the 10% penalty generally will not apply for lump-sum distributions taken from an employer-sponsored retirement plan. Keep in mind that the 10% penalty may be incurred on distributions taken from an IRA prior to age 59.

2010 Standard & Poor's Financial Communications. All rights reserved.

Contact a Representative Today

Back to Education Resources

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