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Pension rollovers


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Ugh. I started a new job and have to decide what to do with an old pension plan. I always thought I could just leave it there. Oh, brother.

 

 

The options are to

1) Roll over into an IRA or qualified employer plan

2) One of the above plus money given to me

3) Roll over to a Roth IRA (I don't have one)

 

My current job offers no retirement plan/IRA/whatever.

 

I have a retirement plan (CalPERS) from working for the state years ago with money still in it. I'm just not sure whether it is a "qualified employer plan" that I can roll my last job's plan into.

 

Can someone help me with at least the following:

 

--My thought is to call my last job's plan, finding out type of plan they consider to be a "qualified employer plan", and calling CalPERS to find out if they ARE this type of plan. If they are NOT, I'm guessing I'll have to find some IRA or Roth IRA and sign up within 60 days. Right?

 

--Point me to a good way to educate myself (I barely know what an IRA is), enough to make a decision?

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What you should do depends on many things, including your current income, your age, when you plan to retire, and so on. I would consult a certified financial planner, or someone with similar qualifications, in order to discuss the pros and cons of your various options.

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"Qualified Plan" is a term of art. If your new employer doesn't offer a retirement plan, then you basically have to rollover to an IRA (either Roth or regular). If you want to look for your own IRA, a lot of major banking institutions have them. You might call your local bank and ask if they offer an IRA. I've had IRA accounts with Citibank and Bank of America in the past. You can also get an IRA through Fidelity, ING, etc.

 

The rollover process itself should be pretty easy. Either your current plan will cut you a check that you then deposit with in your new IRA or in some cases they can wire the money directly into your new account. If anyone else has an interest in your retirement account (e.g., a spouse), he or she will have to sign a document agreeing to the rollover. The new IRA administrator can walk you through the process. They want your money and are usually happy to help you give it to them.

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Some of the things you're contemplating doing (taking cash and/or converting to a ROTH) can cause you adverse tax consequences. Hire a professional to advise you properly based on the facts and circumstances. A CPA for the tax consequences and an investment adviser as to the investment options.

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Dear FOS:

 

I think you would benefit from advice from a formal retirement money manager kind of person. You can go through an institution (like Fidelity Investments or TIAA-CREF) to help you make decisions and give advice.

 

TIAA-CREF:

https://www.tiaa-cref.org/public/products-services/ira

Fidelity:

https://www.fidelity.com/retirement-ira/overview

 

I assume you can't keep the most recent pension which, depending on the pension, may be a good thing or not. Personally, I've always preferred to have everything vested (i.e., in my greedy little hands) ASAP. TOo many pensions have defaulted.

 

CalPERS is, dollar-to-donuts, a qualified plan. Almost all pensions are. I seriously doubt whether you can roll money into it at this point.

 

I believe the only thing you can do is roll it into a Roth IRA or an IRA. Depending on how much in the plan is your contributions (employee) versus employer contributions, and whether you paid with pre-tax or post-tax dollars, would determine the feasibility of using a Roth. If your current retirement plan is a 401(k) or a 403(b), the contributions are, most likely, pre-tax dollars.

 

Above and beyond this, start contributing to an IRA or a Roth IRA. And shell out a little for some professional advice.

 

Calling your last job's plan is an excellent idea. I would take that as a first step. Decide on a company and work with them. They'll be happy to work with you. [My bias: I've worked with Traveler's, Metlife, Fidelity and TIAA-CREF and T-C gets my highest recommendations. You need not be eligible for a 403(B) {which is a 401(K) for the academic set} to use them. Fidelity didn't give me much in terms of advice.]

 

IRAs come in many forms. The best thing to do is find where you want it to be (a brokerage or a bank), have the account created, then transfer the money directly to that account, thereby avoid tax consequences of having the money in your possession.

 

I've been fortunate to have a relationship with my financial adviser for 30 years. When it came to "rolling over", they told me to set up a date, and we did a couple of half-hour phone calls. It really isn't difficult.

 

Best of luck. Feel free to PM me. I hope the references will be of use. There are probably hundreds more available.

 

REF:

The I.R.S. take on IRAs" http://www.irs.gov/Retirement-Plans/Individual-Retirement-Arrangements-%28IRAs%29-1

"What is an IRA?" https://www.fidelity.com/retirement-planning/learn-about-iras/what-is-an-ira

"What's the difference between a Traditional IRA and a Roth IRA?" http://money.cnn.com/retirement/guide/IRA_Basics.moneymag/index2.htm

"IRA--Frequently Asked Questions" https://www.wellsfargo.com/help/faqs/investing-ira/

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I would consult a certified financial planner, or someone with similar qualifications, in order to discuss the pros and cons of your various options.

 

+1

 

Don't do this alone.

 

Absolutely DO NOT take cash without sound professional advice. The tax penalties may (or may not) be severe, but do it knowing in advance.

 

This is one place to absolutely seek the advice of a professional even if you don't normally do that.

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Ugh. I started a new job and have to decide what to do with an old pension plan. I always thought I could just leave it there. Oh, brother.

 

 

The options are to

1) Roll over into an IRA or qualified employer plan

2) One of the above plus money given to me

3) Roll over to a Roth IRA (I don't have one)

 

My current job offers no retirement plan/IRA/whatever.

 

I have a retirement plan (CalPERS) from working for the state years ago with money still in it. I'm just not sure whether it is a "qualified employer plan" that I can roll my last job's plan into.

 

Can someone help me with at least the following:

 

--My thought is to call my last job's plan, finding out type of plan they consider to be a "qualified employer plan", and calling CalPERS to find out if they ARE this type of plan. If they are NOT, I'm guessing I'll have to find some IRA or Roth IRA and sign up within 60 days. Right?

 

--Point me to a good way to educate myself (I barely know what an IRA is), enough to make a decision?

 

 

Most of the advice you were given in prior responses was good.

 

Open and read this link:

 

http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Rollovers-of-Retirement-Plan-and-IRA-Distributions

 

The above link is what the IRS says you must do with pension rollovers.

 

Notice item number 3 with respect to transferring money to a new IRA or other plans. If you do not do a trustee to trustee, there will be withholding on the amount of money you withdraw from the old plan. You have 60 days to put the pension balance in a new plan. However, if there was withholding, you will not have the full amount to roll over to the new account. You must make up the difference out of your own funds or be taxed on the amount of withholding because the withholding came from pre tax dollars. This gets complicated and confusing. Therefore, it is better to do a trustee to trustee to avoid the withholding.

 

This is spelled out for you (briefly) in the above IRS link.

 

I don't know your age. If you are 59 and 1/2 or more, you can avoid penalties on not rolling over the money but you will be taxed on the money if you do not roll it into a new plan or IRA.

 

Get a CPA to guide you through this. If you do not do the transfer correctly, and the amount is large, it could be costly. Sometimes you have to bite the bullet and pay a professional fee for certain things. This happens to be one of the certain things.

 

Good luck.

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First, a qualified plan is simply one that is described in Section 401(a) of the Federal tax code. The most common type of qualified plans are profit sharing plans (including 401K plans), defined benefit plans, and money purchase pension plans. In general, your contributions are not taxed until you withdraw money from the plan.

 

CalPERS is a “defined benefit” plan which provides benefits that are calculated using a “defined formula”, rather than contributions and earnings to savings plan. Retirement benefits are calculated using a member’s years of service credit, age at retirement, and final compensation (average salary for a defined period of employment). There are different retirement formulas that are determined by the members employer (state, school, or local public agency), safety, industrial, or peace officer/firefighter; and the specific provisions in the contract between CalPERS and the employer.

 

You must to keep your money with the CalPERS system in order to receive your pension upon retirement age!

 

All retirement plans are different based upon the plan designs. Some employer plans let you keep your money in the plan when you leave employment. They simply don’t let you add to the plan after termination.

 

Your options are generally:

o Liquidate the account by taking a distribution – bad idea!

o Liquidate the account and reinvest the proceeds into another qualified plan – bad idea!

o Direct rollover into another qualified plan – best option!

o Keep the account with your old employers plan – varies by plan

 

 

If you take your money in cash, the plan will withhold 20% federal tax withholding even if you subsequently contribute it to another qualified plan such as your new employers plan. Any distributions from a qualified plan will be taxable income. Additionally, if you take a distribution prior to age 59 ½ from your plan you will incur an additional early withdrawal penalty.

 

You should seriously consider rolling the money over into another qualified plan such as an IRA or your new employer plan. Distributions from a qualified plan into another qualified plan are tax-free. You want move the money from your old account to your new qualified plan using a “direct rollover”. Your new employer plan will give you the direct rollover paperwork to complete and forward to your prior employer plan. In a direct roll over, the old plan forwards the proceeds to the new plan directly without any money coming to you. This avoids the old plan from withholding the 20% federal income tax and avoids any early withdrawal penalties.

 

Regarding should you rollover into an IRA or your new employer plan will depend on various factors. You want to review the fee’s associated with each plan as well as the investment options. One advantage for rolling over into another employers plan is that employer plans generally offer the ability to take a loan out. Interest paid is credited back to your account. You may not loan against an IRA plan.

 

You probably will have more investment options in an IRA plan but that may come with added plan fees.

 

As you are probably aware, contributions to a qualified plan (401k) is pre-tax income, meaning you have not paid tax on the contributions. Once you reach retirement age, your distributions are taxable.

 

A Roth IRA allows you to make contributions after tax, meaning you have already paid tax on the contributions. Once you reach retirement age, your distributions are tax-free.

 

You must qualify in order to contribute to a Roth IRA. The factors are your income and filing status. For 2014, tax filer filing single, head of household or married filing separately with a modified AGI of less than $114K may contribute $5,500 to an Roth IRA. If the income exceeds $129K, the person does not qualify for a Roth IRA.

 

Your should google “converting a 401K to a roth IRA” and read some articles regarding the pro’s and con’s of a roth. It all depends on your personal situation.

 

Vanguard.com and Fidelity.com are both good sources for basic information.

 

I agree with the advice above, get professional help to guide you. Mistakes can be costly.

 

Hope this helps point you the right direction.

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not at all an expert, but....

 

be very, very careful the rollover is just that and doesn't become taxable ordinary income upon withdrawal from the initial location....

 

probably shouldn't commingle the pension with the CalPERS funds.....there may be different rules for each, so keep them separate....

 

Roth IRAs are very good and have some good advantages over regular IRAs, but research the pros and cons of each....

 

I also recommend Vanguard for retirement funds.....pretty conservative company well-known for low costs, but it's a big company...many other good outfits exist, too

 

https://investor.vanguard.com/corporate-portal/

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I agree with most all of what's been said so far, but just wanted to add my two cents which is to not get stressed over this. It's a happy problem, having money you need get to deal with. Any of the investment houses (I'm partial to Fidelity) would be happy to walk you through the process. In previous incarnations I've rolled a 403(b) into a 401(k) and later rolled that into a roll-over IRA, all with no tax consequences. I don't remember the logistics, but remember it being painless. (Perhaps you have to sell shares and the money sits on the sidelines a few days waiting for the transfer, and god forbid the markets soar those days, but that's beyond your control and they're just as likely to tank.) The old money grows happily as you continue earning (and saving) elsewhere, and by the time you need it, there'll be six or seven figures just in this one account waiting for you.

 

Kevin Slater

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You can get good advice at no cost from professionals at Fidelity, Charles Schwab or Vanguard (and perhaps others). They can answer the questions you raised and come up with a plan to invest (at low cost). I'm a big fan of Fidelity (I've done business with all three but Fidelity was the best at helping me develop an investment plan so it wasn't as much go it alone in putting my money to work) but think you'd be ok with any of the aforementioned three. You should not feel guilty talking with more than one and going with whichever you feel best about. I do like that both Charles Schwab and Fidelity have offices you can visit for face to face meetings. I'm not aware that Vanguard has those, or maybe they just have less of them.

 

One thing I've recently learned is that Charles Schwab and Fidelity are offering cash incentives to move retirement account to their companies. The incentive is based on how much is moved and its added to the retirement account. Not huge incentives but a little icing on the cake perhaps.

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Ugh. I started a new job and have to decide what to do with an old pension plan. I always thought I could just leave it there. Oh, brother.

 

--My thought is to call my last job's plan, finding out type of plan they consider to be a "qualified employer plan", and calling CalPERS to find out if they ARE this type of plan. If they are NOT, I'm guessing I'll have to find some IRA or Roth IRA and sign up within 60 days. Right?

 

--Point me to a good way to educate myself (I barely know what an IRA is), enough to make a decision?

 

As is usual in these types of discussions I must issue the disclaimer that I am no longer a Registered Investment Advisor so anything I say should be regarded as you would any advice from an online forum.

 

When I was a financial planner I almost always advised my client to roll over retirement funds into an IRA rather than an employer retirement plan. Every single employer retirement plan I ever reviewed had a far more limited selection of investment options available than almost any IRA on the market today. If you're not knowledgeable about IRAs or investments in general having a wider range of options may not be of much interest to you, but, at the least, I think it would be easier to open up an IRA to roll over your retirement funds than to negotiate with CalPERS to accept your rollover funds. (I believe CalPERS is a qualified employer plan. I don't know if they would allow a rollover in your circumstance.)

 

Unless you're over 59 1/2 I would NOT suggest taking any of the money out. Doing so would subject you to a 10% early withdrawal penalty.

 

As far as education is concerned - look at the web site of the bank or other financial institution(s) you regularly deal with and start reading their materials. Companies like Vanguard, Fidelity, Charles Schwab, TD Ameritrade, etc. all have extensive materials available to non-customers about retirement accounts.

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When I changed employers five years ago, I rolled everything - my 401(k) and Pension - into a traditional IRA after talking to a financial advisor. (I'm having a great time evaluating investment options for the IRA.)

 

My two biggest pieces of advice - - (1) like others, talk to a professional, and (2) act quickly - once you withdraw the funds from your former employer you have a limited window of time to deposit in an IRA. A delay can result in a taxable event.

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Thanks everyone. It's never been in my plans to take any of the money out, so that and the taxes are not a concern.

 

Reading the feedback, I now half-remember doing this once before with a previous employer: going to a bank, hearing a spiel about the plans available, choosing one and rolling it over.*

 

And yeah, it was painless. It just took some time.

 

(and then never getting an answer from the sales person ever, ever again!).

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Thanks everyone. It's never been in my plans to take any of the money out, so that and the taxes are not a concern.

 

Reading the feedback, I now half-remember doing this once before with a previous employer: going to a bank, hearing a spiel about the plans available, choosing one and rolling it over.*

 

And yeah, it was painless. It just took some time.

 

(and then never getting an answer from the sales person ever, ever again!).

 

As my kids used to say "whatever". You've already gotten far better advice than going to a bank. Only a fool would leave anything but funds to have on hand for an emergency in a bank where you're paid less than 1% a year on your money - inflation is greater than that which means you're losing money.

 

Go to Fidelity or Vanguard or another similar. You can take as little risk or as much with their advice. I've found the service from both to be outstanding. If you have lots of money you'll have an advisor that will call and check in with you. If you don't - yet - have lots of money they will still come up with a low cost investment plan that meets your tolerance for risk that you can either automate (usually the best approach as 99% of humans can't time the market profitably) or manually invest according to the plan you come up with (not all investments allow for automation).

 

As for taking time, you can do this over the phone or (probably best) in person depending on whether they have an office near where you live. Its worth 1 - 2 hours of your time (or more if you want) to do it right because I'm guessing you work for your money and its growth is important to your retirement. It won't invest itself so "suck it up" (haha) and git er done.

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F of S, you have received some great advice and pretty consistent. As a 401k advisor for my company, I never give personal advise I always tell people to contact a certified financial advisor and preferably one who has tax background. You did my heart great hearing you plan to reinvest in your retirement immediately. I cannot tell you how many people when they change jobs think it is a good thing to pay off debt, WRONG!!!!!!! The number 1 question I get, "I want to take some money out of my 401k." Thankfully we have a plan that is restrictive that we tell everyone when they join, if you put money in this plan you can not get it out. We are not a savings account, bank or credit union, consider it similar to social security but more secure and definite which means come back when you retire.

 

Anyway consider going to an independent financial advisor and not one connected to Fidelity or any other fund manager. I'm picky, not a lack of trust but reality is they fund managers are going to push their funds. Find one that has a tax specialist on staff. Make sure your beneficiaries are up to date, because the money will go directly to them and do not have to go to probate. Find an attorney and get your will taken care of and I might add get your medical advocate signed up as well.

 

Again thank you for not wanting to buy a new car with that money. Be sure to have an indepth conversation with whatever financial advisor you find and include all your funds in the conversation. Given your new firm does not have retirement offerings set up payroll deduction that can go to your new account right away. That way it is difficult not to fund your future. You don't need to roll everything into a Roth you can have both but financial advisor and tax guy can give the best advise.

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The debacle is not far down the road. Forget monetary "stuff". Buy a good carbine rifle and ample ammunition. Stock up on canned goods. In the event that you have to make a run for it, be prepared: invest in a good money belt for your gold coins, have the family jewels sewn into your underwear, and cut the family Picasso from its frame and have it handy as a "wraparound" in your flight.

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The debacle is not far down the road. Forget monetary "stuff". Buy a good carbine rifle and ample ammunition. Stock up on canned goods. In the event that you have to make a run for it, be prepared: invest in a good money belt for your gold coins, have the family jewels sewn into your underwear, and cut the family Picasso from its frame and have it handy as a "wraparound" in your flight.

 

 

Love it...lol. :)

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