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Qualifying Assets
What are 'qualified' retirement assets?
How do I know what type of qualified retirement plan my rollover check is from?
Why does my previous employer hold 20% of my IRA for taxes?
How can I get the withholding tax back if I open an R Account?
Can I make additional contributions to my R Account after it is open?
Is there a limit on how many accounts I can transfer?
If I have an IRA with another company (like Schwab) - can I transfer that?
Can I transfer just part of another IRA to my R Account?
Can I borrow from my R Account?
401(k)
What is a 401(k)?
How does a 401(k) plan work?
What's the difference between a 401(k) plan and a company's profit sharing plan?
403(b)
What is a 403(b)?
Can I transfer my 403(b) assets to my R Account?
457(b)
What is a 457(b)?
Can I transfer my 457(b) assets to my R Account?
IRA
What is an IRA?
Can I roll over other IRA assets into my R Account?
ROTH IRA
What is a Roth IRA?
Can I transfer my Roth IRA into my R Account?
SEP IRA
What is a SEP IRA?
Can I transfer my SEP IRA into my R Account?
SIMPLE IRA
What is a SIMPLE IRA?
Can I move my SIMPLE IRA into The R Account?
ROLLOVER IRA
What is a Rollover IRA?
Can I transfer my Rollover IRA into my R Account?
Will I owe taxes on my Rollover IRA?
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What are ‘qualified’ retirement assets?
Qualified assets are investment accounts where income tax has been deferred until funds are drawn out for income during retirement such as:
- 401(k) employer-sponsored plans from previous employers, to which you are no longer contributing
- IRAs such as traditional IRA’s, SEP IRAs, SIMPLE IRAs, Roth IRAs and IRA Rollover accounts
- 403(b) plans to which you have stopped making new contributions
- 457(b) plans to which you have stopped making new contributions
Qualified assets include your retirement plan final distribution.
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How do I know what type of Qualified Retirement Plan my rollover check is from?
The company or institution will identify the type of plan when you request the rollover paperwork.
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Why does my previous employer hold 20% of my IRA for taxes?
If you receive a check made payable to you, directly from an IRA or 401(k) plan, then the company or institution sending you the check must withhold at least 20% for federal income tax payments. Your actual tax due may be quite a bit higher than 20% if early withdrawal penalties of 10% and state taxes are also added in. You can avoid these taxes, and avoid having your company withhold 20% if you do a direct rollover.
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How can I get the withholding tax back if I open an R Account?
Deposit your check into your R Account at Fidelity within 60 days of the date issued, plus an amount equal to the sum of tax your employer withheld. By funding your R Account with the equivalent of 100% of your retirement plan payout inside 60 days, you will be eligible to receive the 20% withheld by your employer as a tax refund when you file your tax return. If you do not make up the withheld amount, it will be considered as a distribution and taxed as ordinary income. It could also be subject to a 10% early withdrawal penalty.
Any amount of your payout not deposited into a tax-advantaged account within 60 days is subject to ordinary income tax and possibly penalties.
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Can I make additional contributions to my R Account after it is open?
Yes. You can transfer an unlimited number of qualified assets to your R Account once it is open.
Appropriate cash contributions may be made to an IRA that you later transfer to the R Account - and the 401(k) distribution from your final job may be transferred to your R Account when you retire.
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Is there a limit on how many accounts I can transfer?
There is no limit, as long as all the accounts are qualified assets.
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If I have an IRA with another company (like Schwab), can I transfer that?
Yes. You can transfer all traditional IRAs to your R Account.
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Can I transfer just part of another IRA to my R Account?
Yes, it is possible to transfer a portion of another IRA into the R Account.
First, ask us to provide all the paperwork then instruct your IRA Administrator to liquidate as you wish and transfer those funds to your R Account at Fidelity.
You will pay no penalties or tax on the sum transferred because you're simply transferring it between IRAs.
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Can I borrow from my R Account?
IRS tax rules prohibit borrowing from retirement investments in your IRA. You can liquidate holdings and withdraw money but you will be required to pay the due income tax on the sum withdrawn and you may attract the Federal 10% early withdrawal penalty. Under special circumstances you will not have to pay those penalties.
For more details, email help@moneymasters.com or call 1-800-266-9191.
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What is a 401(k)?
A 401(k) is a retirement investment plan set up by an employer to help employees save for their retirement. Your employer deducts an agreed amount of money from your paycheck, before tax, and it is invested in the plan options you choose. Your employer can also contribute a matching amount.
You don't pay tax on the money in your 401 (k) until you begin to withdraw it for retirement after age 59 and a half. If you cash in your 401(k) sooner than age 59 and a half you might pay penalty tax in addition to the normal income tax due. There is a limit on how much you can invest into a 401 (k) each year.
In 2008 the maximum pre-tax amount was $15,500, $20,500 over age 50. In 2009, this increased to $16,500, $22,000 over age 50.
The federal government established the 401(k) in 1981 to encourage people to prepare for retirement. It's named after the section of the Internal Revenue Code, which established it - Section 401(k).
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How does a 401(k) plan work?
You decide how much money you want deducted from your paycheck and invested each payday, up to the maximum the IRS allows each year. You also decide how you want that money invested, choosing from your plan's different investment options. The money you contribute to your 401(k) account is deducted from your pay before income taxes are taken out. This means that by contributing to a 401(k) you lower the amount of tax you pay each payday.
When you retire you can begin withdrawing that money - at which time it is taxed as you take it.
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What’s the difference between a 401(k) plan and a company’s profit sharing plan?
A "profit sharing plan" allows an employer to share company profits with employees by contributing a percentage of the company's annual profits to the plan. The amount of the contribution can change each year, or may not be made at all, depending on the company's financial circumstances.
In a 401(k) plan you contribute a percentage of your paycheck and your employer can contribute too…employer contributions are typically made each year and are not tied directly to company profits.
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What is a 403(b)?
A 403(b) is an employee-funded retirement plan for people employed by universities, colleges, public schools and certain not-for-profit organizations.
Contributions are invested into the 403(b) plan and both principal and interest earned are tax-deferred until distribution. It's named after the section of the Internal Revenue Code, which established it - Section 403(b).
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Can I transfer my 403(b) assets to my R Account?
Yes you can. 403(b) assets are tax-deferred funds like those in a 401(k) and may be rolled over to your R Account without losing their tax-deferred status.
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What is a 457(b)?
A 457(b) is an employee-funded retirement plan for people employed by state and local government tax-exempt organizations. Contributions are invested into the 457(b) plan and both principal and interest earned are tax-deferred until withdrawal. It's named after the section of the Internal Revenue Code, which established it - Section 457(b).
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Can I transfer my 457(b) assets to my R Account?
Yes you can. 457(b) assets are tax-deferred funds like those in a 401(k) and may be transferred directly to your R Account without losing their tax-deferred status.
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What is an IRA?
An IRA is an Individual Retirement Account - a tax-deferred retirement investment account you establish for yourself, whether you're employed by a company, or self-employed.
An IRA account can be with a bank, mutual fund, insurance company, or another type of trustee. Deposits are tax deductible and the investment and earnings are not taxable until withdrawn. The earliest that withdrawals can begin is at age 59 1/2. If they begin earlier there may be a 10% penalty, unless you utilize a series of substantially equal payments under tax code 72 (T).
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Can I roll over other IRA assets into my R Account?
Yes - all traditional IRAs can be rolled into The R Account. If you are rolling assets from a 457(b) plan, there may be additional tax considerations. Contact your tax advisor for more detailed information.
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What is a Roth IRA?
A Roth IRA is an Individual Retirement Account - a retirement investment account you establish for yourself, whether you're employed by a company, or self-employed. It is the only IRA into which you contribute tax-paid (not tax-deferred) money. The accumulated growth in a Roth IRA Account is tax-free and so you don't pay more tax on your money when you withdraw it. You can make contributions beyond, and make withdrawals before, age 70 1/2. And you are not obliged to begin distribution at that age either.
You may have a Roth IRA along with an employer-sponsored retirement plan provided you meet adjusted gross income requirements.
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Can I transfer my ROTH IRA into my R Account?
Yes. Your Roth is a qualified retirement asset like a traditional IRA or IRA Rollover account and can be transferred directly to your R Account without losing its tax-deferred status.
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What is a SEP IRA?
A SEP IRA is a Simplified Employee Pension plan, (also just called a SEP) - a retirement plan for self-employed people and small-business owners.
'Employer' contributions are made into each eligible employee’s SEP IRA.
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Can I transfer my SEP IRA into my R Account?
Yes. Your SEP is a qualified retirement asset like a traditional IRA or IRA Rollover account and can be transferred directly to your IRA R Account without losing its tax-deferred status.
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What is a SIMPLE IRA?
A SIMPLE IRA is an individual retirement account for self-employed people and small-business owners (under 100 employees). The employer and employee make equal contributions into the fund - with an employer limit of 3% of that year's compensation. One SIMPLE can be rolled over or transferred into another SIMPLE.
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Can I move my SIMPLE IRA into my R Account?
Yes. Your SIMPLE is a qualified retirement asset and can be transferred directly to your R Account without losing its tax-deferred status as long as it is at least 2 years old.
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What is a Rollover IRA?
A Rollover IRA is an Individual Retirement Account for people who are changing jobs or retiring and have assets accumulated in an employer-sponsored retirement plan. These assets can be rolled over directly (inside 60 days) into a Rollover IRA without incurring any tax penalties, and they remain tax-deferred.
This is done (trustee to trustee) by a check made out to the new trustee or custodian of the Rollover IRA.
You can consolidate multiple retirement accounts into a single Rollover IRA to simplify and consolidate your retirement assets.
You can make annual contributions to your Rollover IRA from your wages or salary.
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Can I transfer my Rollover IRA into my R Account?
Yes - all traditional IRAs can be rolled into The R Account, including another Rollover IRA.
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Will I owe taxes on my Rollover IRA?
No. Rolling over eligible assets directly to a Rollover IRA within your R Account allows you to postpone paying taxes on the amount rolled over until it is withdrawn. You’ll also continue to accumulate earnings on these rollover assets on a tax-deferred basis.
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