IRAs, 401(k)s & Other Retirement Plans

Strategies for Taking Your Money Out

IRAs, 401(k)s & Other Retirement Plans

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IRAs, 401(k)s & Other Retirement Plans

, CPA and , PhD

, 12th 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
  • calculate your required minimum distributions
  • leave your retirement plan to your heirs

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

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 to taking money out of it. Make sense of the complex tax rules governing when you can — and when you need to — take money out of your plan, and how much you can take out. Most importantly, avoid the penalties that many folks have to pay because they don't take their required minimum distributions.

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:

  • When do I need to start taking money out of my plan?
  • How do I calculate my required minimum distributions?
  • 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 contribute to a Roth IRA?
  • What should I do with my 401(k) when I switch jobs?
  • What is a Roth 401(k)?
  • What happens to my plan when I die?
  • What are the different rules for taking money of out an inherited plan?

Completely updated for the 12th edition, IRAs, 401(k)s & Other Retirement Plans provides clear examples to guide you through the decision-making process and making calculations. Samples of tax forms required by the IRS are also included, as well as easy-to-follow instructions on completing them.

“Few resources are as valuable when it comes to financial planning in later life.” - The Wall Street Journal

“[An] impressively clear and comprehensive layman’s guide.” - U.S. News & World Report

“Belongs on the bookshelf of anyone with a…qualified retirement plan. When the inevitable questions come up, here’s where you’ll find the answers.” - Kiplinger's Personal Finance Magazine

ISBN
9781413321623
Number of Pages
384
Included 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
  • John Suttle

    John Suttle has been practicing law for 18 years. His practice consists of estate and trust planning; probate administration; federal, state and local tax counseling for high net worth individuals and retirement planning under ERISA. Co-author of IRAs, 401(k)s & Other Retirement Plans, he has served as an expert witness in numerous cases and lives in Atherton, California.
  • Twila Slesnick

    Twila Slesnick is an Enrolled Agent who specializes in tax and investment planning for retirees and prospective retirees, and does pension plan consulting for individuals and small businesses. She has conducted numerous seminars throughout the U.S. in the areas of retirement and tax planning. Slesnick has been featured on television and radio programs across the country and in publications including Money Magazine, U.S. News & World Report, Newsweek and Consumer Reports. She is the author (with John Suttle) of IRAs, 401(k)s and Other Retirement Plans: Taking Your Money Out (Nolo). Slesnick has a bachelor's, master's and Ph.D., all from the University of California, Berkeley. She lives in Dublin, California.

Table of Contents

 Your Retirement Companion

1.  Types of Retirement Plans

  • Qualified Plans
  • Individual Retirement Accounts
  • Almost-Qualified Plans
  • Nonqualified Plans

2.  An Overview of Tax Rules

  • 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 Account3
  • 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

A  IRS Forms, Notices, and Schedules

Form 4972, Tax on Lump-Sum Distributions0

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

B  Life Expectancy Tables

Table I: Single Life Expectancy

Table II: Joint Life and Last Survivor Expectancy9

Table III: Uniform Lifetime Table

Table IV:  Survivor Benefit Limits

 Index

 

Your Retirement Companion

 

Let’s start with the basics. There are many kinds of retirement plans and many possible sources for owning one. This book is about how to take money out of your retirement plans.

You might have a retirement plan at work, an IRA that you set up yourself, or a plan or an 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). 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 to 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 the IRS thinks 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.  

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