IRAs, 401(k)s & Other Retirement Plans

Taking Your Money Out

New edition!

Twila Slesnick, PhD, Enrolled Agent , John Suttle, CPA, Attorney

June 2011, 10th Edition

Whether you’re approaching retirement, changing jobs, or simply looking to borrow money from your 401(k), IRAs, 401(k)s & Other Retirement Plans will guide you through the minefield of IRS rules that govern distributions from retirement plans. You’ll learn how to:

avoid penalties for taking money out early
minimize taxes before and after retirement
leave your retirement plan to your heirs

Includes step-by-step instructions on completing tax forms required by the IRS!

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Take cash out of your retirement plan while avoiding taxes and penalties

If you have a retirement plan, IRAs, 401(k)s & Other Retirement Plans is your comprehensive guide on taking money out of it. Make sense of the complex tax rules governing when you can take money out of your plan and how much—all while avoiding the penalties and taxes that lurk in the fine print.

In plain English, this book covers the most common retirement plans, including 401(k)s, IRAs, profit-sharing plans, Keoghs, pensions, and tax-deferred annuities. It helps you answer these questions:

What kind of retirement plan do I have?
Can I take money out of my plan before I retire?
Can I borrow money from my 401(k) to buy a house?
Can I set up a Roth IRA?
What should I do with my 401(k) when I switch jobs?
What is a Roth 401(k)?
When do I need to start taking money out of my plan?
What happens to my plan when I die?

Completely updated for the 10th edition, IRAs, 401(k)s & Other Retirement Plans provides clear examples to guide you through the decision-making process and the crunching of tax numbers. Samples of tax forms required by the IRS are also included, as well as easy-to-follow instructions on completing them.

ISBN 9781413313932

Pages 328 pp

Forms 7 forms

1. Types of Retirement Plans

Qualified Plans
Individual Retirement Accounts
Almost-Qualified Plans
Nonqualified Plans

2. An Overview of Taxation

Taxation Fundamentals
General Income Tax Rules for Retirement Plans
Income Tax on Qualified Plans and Qualified Annuities
Special Income Tax Rules for Tax-Deferred Annuities
Special Income Tax Rules for IRAs
How Penalties Can Guide Planning

3. Early Distributions: Taking Your Money Out Before the Law Allows

Exceptions to the Early Distribution Tax
Calculating the Tax
Reporting the Tax
Special Rules for IRAs

4. Substantially Equal Periodic Payments

Computing Periodic Payments
Implementing and Reporting Your Decision
Modifying the Payments

5. Required Distributions: Taking Money Out When You Have To

Required Distributions During Your Lifetime
Death Before Required Beginning Date
Death After Required Beginning Date
Special Rules for Tax-Deferred Annuities
Special Rules for Roth IRAs
Penalty
Reporting the Penalty
Waiver

6. Required Distributions During Your Lifetime

Required Beginning Date
Computing the Required Amount
Designating a Beneficiary
Special Rules for Annuities
Divorce or Separation

7. Distributions to Your Beneficiary If You Die Before Age 70½

Determining the Designated Beneficiary
Distribution Methods
Spouse Beneficiary
Nonspouse Beneficiary
No Designated Beneficiary
Multiple Beneficiaries, Separate Accounts
Multiple Beneficiaries, One Account
Trust Beneficiary
Estate as Beneficiary
Annuities
Divorce or Separation
Reporting Distributions From IRAs

8. Distributions to Your Beneficiary If You Die After Age 70½

Administrative Details
Spouse Beneficiary
Nonspouse Beneficiary
No Designated Beneficiary
Multiple Beneficiaries, Separate Accounts
Multiple Beneficiaries, One Account
Trust Beneficiary
Estate as Beneficiary
Annuities
Divorce or Separation

9. Roth IRAs

Taxation of Distributions
Early Distribution Tax
Ordering of Distributions
Required Distributions

10. Roth 401(k) Plans

Taxation of Distributions
Early Distribution Tax
Ordering of Distributions
Required Distributions

Appendixes

IRS Forms, Notices, and Schedules

Form 4972, Tax on Lump-Sum Distributions
Tax Rate Schedule for 1986
Form 5329, Additional Taxes on Qualified Plans (Including IRAs)
and Other Tax-Favored Accounts
Form 5330, Return of Excise Taxes Related to Employee Benefit Plans
Form 5498, IRA Contribution Information
Form 8606, Nondeductible IRAs
Revenue Ruling 2002-62

Life Expectancy Tables

Table I: Single Life Expectancy
Table II: Joint Life and Last Survivor Expectancy
Table III: Uniform Lifetime Table
Table IV: Survivor Benefit Limits

Index

Forms

Form 4972, Tax on Lump-Sum Distributions
Tax Rate Schedule for 1986
Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts
Form 5330, Return of Excise Taxes Related to Employee Benefit Plans
Form 5498, IRA Contribution Information
Form 8606, Nondeductible IRAs
Revenue Ruling 2002-62

Free Chapters

Introduction: How to Use This Book

Introduction

This is not a mystery novel. It is a book about how to take money out of your retirement plan. We are not promising that you will stay up all night breathlessly turning each page to see what happens next. Nonetheless, you will find this book useful -- perhaps even surprising.

Let's start with the basics. There are many kinds of retirement plans and many possible sources for owning one. You might have a retirement plan at work, an IRA that you set up yourself, or a plan or IRA you've inherited. Or you might have all three. You might still be contributing to a plan, or you may be retired. No matter what your situation, you will find information in this book to help you through the minefield of rules.

There are many reasons to take money out of a retirement plan. You might want to borrow the money for an emergency and pay it back -- or not pay it back. Maybe you quit your job and you want to take your share of the company's plan. Perhaps you're required by law to withdraw some of your retirement funds because you've reached a certain age.

Whatever your situation, you probably have a lot of questions about your plan -- and how to take money out of it. This book can answer:

How do I know what kind of retirement plan I have? (See Chapter 1.)
Do I have to wait until I retire to get money out of my plan or my IRA? (See Chapter 3.)
Can I borrow money from my 401(k) plan to buy a house? (See Chapters 3, 4, and 5.)
What should I do with my retirement plan when I leave my company or retire? (See Chapter 2.)
When do I have to start taking money out of my IRA? (See Chapter 5.)
How do I calculate how much I have to take? (See Chapter 6.)
Can I take more than the required amount? (See Chapter 6.)
What happens to my retirement plan when I die? (See Chapters 7 and 8.)
Can my spouse roll over my IRA when I die? (See Chapters 7 and 8.)
What about my children? Can they put my IRA in their names after I die? Do they have to take all the money out of the account right away? (See Chapters 7 and 8.)
If I inherit a retirement plan, can I add my own money to it? Can I save it for my own children, if I don't need the money? (See Chapters 7 and 8.)
Am I allowed to set up a Roth IRA? Should I? (See Chapter 9.)
Can I convert my regular IRA to a Roth IRA? Should I? (See Chapter 9.)
How is a Roth 401(k) plan different from a Roth IRA? (See Chapter 10.)

To help you answer these and other questions, we include many examples. They guide you through the decision-making process and take you through calculations. You will also find sample tax forms that the IRS requires, along with instructions for how to complete them.

This book contains tables to help you calculate distributions. It also contains sample letters and worksheets you can use to communicate with the IRS or with the custodian of your IRA or retirement plan. We've even included some important IRS notices so you can read firsthand how IRS personnel are thinking about certain critical issues.

The tax rules for pensions, IRAs, 401(k)s, and other types of retirement plans are notoriously complex, which can be all the more frustrating because they are important to so many people. The good news is that help is here: This book makes the rules clear and accessible.

Press Reviews

" Few resources are as valuable when it comes to financial planning in later life. " -The Wall Street Journal " An explanation of the complicated rules on withdrawal, written for ordinary people. " -Hank Ezell, Atlanta Journal Constitution " Belongs on the bookshelf of anyone with an IRA, 401(k) or other type of qualified retirement plan. When the inevitable questions come up, here's where you'll find the answers. " -Kiplinger's Personal Finance " Uses everyday language to describe Internal Revenue Service rules for making withdrawals from retirement plans. " -The Wall Street Journal " A more impressively clear and comprehensive layman's guide is IRAs, 401(k)s & Other Retirement Plans... " -U.S. News & World Report " Finally, a book about retirement plans that should find a place on home bookshelves as well as in professional libraries. Anyone with an IRA or a plan at work will find accurate and easy-to-understand answers to almost any question. " -Attorney Charles R. Purnell, Pillsbury Madison & Sutro LLP " An excellent starting point... " -Money Magazine " The authors describe in everyday language the IRS' finicky rules for withdrawing your money from a retirement plan and warn of taxes and penalties for those who make a false step. It's a valuable resource indeed. " -Ann Perry, San Diego Union-Tribune " Twila Slesnick... literally wrote the book on 401(k) plans... " -Joe Ducy for KRON TV

Customer Reviews

" Enabled me to devise the most advantageous distribution schedule for my IRA... It is one of the most helpful books I have ever read. " -DK, New York