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!
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 11th 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.
“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
Number of Pages
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 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 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.
Chapter 2 An Overview of Tax Rules 25 Taxation Fundamentals 26 General Income Tax Rules for Retirement Plans 32 Income Tax on Qualified Plans and Qualified Annuities 38 Special Income Tax Rules for Tax-Deferred Annuities 68 Special Income Tax Rules for IRAs 69 How Penalties Can GuidePlanning 74
Chapter 3 Early Distributions: Taking Your Money Out Before the Law Allows 77 Exceptions to the Early Distribution Tax 78 Calculating the Tax 87 Reporting the Tax 88 Special Rules for IRAs 94
Chapter 4 Substantially Equal Periodic Payments 101 Computing Periodic Payments 105 Implementing and Reporting Your Decision 115 Modifying the Payments 118
Chapter 5 Required Distributions: Taking Money Out When You Have To 123 Required Distributions During Your Lifetime 126 Death Before Required Beginning Date 127 Death After Required Beginning Date 128 Special Rules for Tax-DeferredAnnuities 129 Special Rules for Roth IRAs 131 Penalty 132 Reporting the Penalty 138 Waiver 139
Chapter 6 Required Distributions During Your Lifetime 143 Required Beginning Date 146 Computing the Required Amount 149 Designating a Beneficiary 157 Special Rules for Annuities 162 Divorce or Separation 166
Chapter 7 Distributions to Your Beneficiary If You Die Before Age 70 173 Determining the Designated Beneficiary 175 Distribution Methods 178 Spouse Beneficiary 182 Nonspouse Beneficiary 191 No Designated Beneficiary 196 Multiple Beneficiaries, Separate Accounts 197 Multiple Beneficiaries, One Account 198 Trust Beneficiary 206 Estate as Beneficiary 210 Annuities 211 Divorce or Separation 212 Reporting Distributions From IRAs 215
Chapter 8 Distributions to Your Beneficiary If You Die After Age 70 217 Administrative Details 219 Spouse Beneficiary 222 Nonspouse Beneficiary 231 No Designated Beneficiary 235 Multiple Beneficiaries, Separate Accounts 236 Multiple Beneficiaries, One Account 236 Trust Beneficiary 241 Estate as Beneficiary 244 Annuities 245 Divorce or Separation 245
Chapter 9 Roth IRAs 249 Taxation of Distributions 253 Early Distribution Tax 267 Ordering of Distributions 270 Required Distributions 272
Chapter 10 Roth 401(k) Plans 275 Taxation of Distributions 278 Early Distribution Tax 283 Ordering of Distributions 284 Required Distributions 285
Appendix A IRS Forms, Notices, and Schedules 287 Form 4972, Tax on Lump-Sum Distributions 288 Tax Rate Schedule for 1986 292 Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts 293 Form 5330, Return of Excise Taxes Related to Employee Benefit Plans 302 Form 5498, IRA Contribution Information 321 Form 8606, Nondeductible IRAs 322 Revenue Ruling 2002-62 335
Appendix B Life Expectancy Tables 341 Table I: Single Life Expectancy 342 Table II: Joint Life and Last Survivor Expectancy 343 Table III: Uniform Lifetime Table 361 Table IV: Survivor Benefit Limits 362
Introduction 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 retire-ment 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.