Moving Your Retirement Assets

Rollovers

• A rollover means moving retirement assets from a qualified retirement account or employer-sponsored plan into an IRA without tax penalty
• Rollovers are not deductible but must be reported to the IRS
• A “direct rollover” occurs when funds are moved directly from an employer-sponsored retirement plan to a traditional IRA custodian
• There is a 20% mandatory tax withholding if the employer-sponsored retirement plan funds are made payable to the account holder
• You are limited to one rollover in any one-year period (unless you are converting an IRA into a Roth IRA)
• If the check is made payable to you, you have 60 days1 to move the funds into a qualified IRA or face income tax and 10% early withdrawal penalty
• • You have the company securities distributed in kind (as shares, not cash) to your taxable brokerage account as part of a total distribution from the plan
  • You pay ordinary income tax on the original cost of the securities3
  • The difference between the cost basis and the stock’s market value when you receive the distribution will be taxed as long-term capital gains
  • Any change in value after you receive the distribution will be taxed as long- or short-term capital gain or lossCompany Securities in Retirement Plans
    • If you have a profit sharing, 401(k) or stock bonus plan at work that includes company securities, you may be eligible for an often-overlooked provision
    • Net Unrealized Appreciation (NUA), allows you to pay long-term capital gains tax on part of your account when you change jobs or retire.1

    

In-Service Withdrawals

• Before you access your retirement funds, it is important to understand potential tax penalties for early withdrawals
• In general, distributions from a retirement plan or Traditional IRA before age 59½ may incur a 10% tax penalty on the amount you withdraw
• Penalty-free withdrawals before age 59½ are available under the following conditions:
• Death
• Disability (as defined by the IRS)
• Withdrawals to pay unreimbursed medical expenses in excess of 10% of your adjusted gross income (AGI)

• You take distributions from a qualified plan (does not apply to IRAs) after termination of employment in the calendar year you turn 55 or older
• You take substantially equal payments according to IRS Code 72(t)1
• If you retire at 55+ and need access to funds, consider a partial, penalty-free distribution from your plan and transfer remaining funds to a traditional IRA
• Once you reach age 59½, you will be able to take penalty-free distributions from your IRA account

Americans Retire Earlier Than Expected

RETIREMENT DOESN’T STOP THE CLOCK

• By the time you retire at about age 65 or so, you may have spent more than 100,000 hours on the job!
• The average Baby Boomer began saving for retirement in their mid-thirties
• Whether you started early or late, you’ve likely spent tens of thousands of hours during your best working years carefully saving a portion of your earnings for retirement
• No matter what happens in your life, one thing is very clear—once retired, you’ll likely stay retired for many years. But how much time have you spent actually mapping out and planning for your retirement?

A Traditional View of Retirement

Your parents likely:

• Worked for many years at the same company
• Retired at about age 65 and received a comfortable pension
• Relied upon Social Security for supplemental retirement income
• Focused primarily on money during their retirement planning process
• Generally lived their retirement years as an extended vacation
• Didn’t always know how to fill their time without work
• Thought end-of-life planning was relatively simple

A New View of Retirement

• Many of us have worked for several companies during our careers;
  others have been self-employed for some or all of our working lives
• This sense of self-reliance you’ve will help you enormously as you
  prepare for a largely self-directed retirement.
• These changes have created both new opportunities
  and additional responsibilities

New Retirement Opportunities

Many of today’s retirees:

• Retire at a younger age
• Enjoy a longer period of good health and increased lifespan
• Look forward to spending more than a quarter of their life in retirement
• Prioritize an active, independent, purposeful lifestyle
• View retirement as a new, fulfilling chapter of life

The New Retirement Planning Process

1.Determine the outcome you want to achieve

2.Educate yourself to make informed decisions

3.Analyze your current financial situation

4.Develop a financial plan to address scenarios like job loss, health
problems/ disability, changes to Social Security, death in the family

5.Implement the plan, selecting the financial products necessary for a coordinated portfolio

6.Review your plan and adjust over time

Retirement Planning Roadblocks: Common Areas for Improvement

1.Don’t define how they wish to live their retirement years

2.Don’t set financial goals to achieve their lifestyle goals

3.Don’t make a commitment to be financially successful

• Don’t educate themselves about personal finance
• Don’t take a financial inventory – cash flow and net worth
• Don’t manage credit wisely
• Don’t seek professional assistance

4.Don’t invest early in life or on a regular basis

5.Don’t use tax laws to their advantage

6. Don’t allocate assets properly and adjust as needed
7. Don’t plan for the unexpected
8. Don’t take full advantage of employer benefit plans and don’t choose
   the best way to take money out of their retirement plan
9. Don’t properly plan for their estate
10. Don’t create a comprehensive financial plan

What Most Tax Payers Earn -Tax Fact

With tax cuts and IRS simplification proposals on the agenda, tax revenue statistics are focal points as certain taxpayers in various age and income groups may or may not see beneficial changes.

The Internal Revenue Service (IRS) keeps careful detail on tax revenue and how it is broken down. Tax revenue data is based on Adjusted Gross Income (AGI) which is compiled and revised during every tax season. 
Of the more than 134 million tax returns filed for tax year 2016, the bulk of returns fell between the $30,000 to $200,000 income ran

ge. The median income group of taxpayers earning $50,000 to $75,000 comprised the largest segment of tax payers nationwide with over 18 million filers. The second largest group includes those earning between $100,000 to $200,000, with nearly 16 million filers in 2016.

Demographical factors drive tax revenue, such as middle-aged, dual income house-holds tending to earn more for a longer period of time. The amount of income also determines the number of filers in each income group. For 2016, there were only 3,469 taxpayers reporting $10,000,000 or more in income and 1,086,092 filers re-porting no income.

Source: IRS

Social Security Taps Trust Fund – Financial Planning

The Social Security program’s cost will exceed its income this year for the first time since 1982, forcing the program to access a $3 trillion trust fund to cover future benefits. Social Security is funded by two trust funds, one for retiree benefits and another for disability benefits.

The latest annual report issued by the trustees of Social Security and Medicare revealed that by 2034, the program’s trust fund will be depleted. Depletion means that Social Security recipients will no longer be receiving full scheduled benefits. Recipients would receive about three-quarters of their scheduled benefits after 2034. Congress can eventually act to fortify the program’s finances, but it may be years before it actually takes effect and funds.

The report also mentioned that Medicare’s hospital insurance fund would be depleted in 2026, three years earlier than anticipated in last year’s report. The trustees noted that the aging population of the country has placed additional pressure on both the Social Security and Medicare programs. A decade ago, roughly 12% of Americans were age 65 or older, today 16% of Americans have already surpassed 65, the eligibility age for Medicare.

The Social Security Administration considers various factors in projecting its estimates, including fertility, immigration, wages, health, and economic growth. A recent drop in U.S. birthrates along with stagnant wages has placed additional burden on the viability of future benefit payments.

Sources: https://www.ssa.gov/oact/TR/2018/index.html

Chinese Products With The Largest Trade Deficits With U.S. – Trade Policy
Electronic devices and computers are the products with the largest trade deficits with the U.S. Over the past few years, American consumers have become accustomed to inexpensive Chinese made products available in every retail and online store across the country.

One of the biggest casualties of the imposed tariffs are auto manufacturers located in the United States. Ironically, there are currently 10 foreign auto manufacturers with plants in the U.S. compared to only two U.S. owned auto manufacturers. These manufacturers all rely on comp

onents primarily imported from Asia and China whose controlled costs are critical to the profitability of the companies.
A list of 1300 identified products imported from China are primarily used as components for larger more expensive products. The question is what percentage of these products are comprised of imported components subject to tariffs.

Foreign manufacturers have skirted tariffs and manufacturing rifts over the years by having certain products assembled in the United States, but comprised of imported components. Hence the controversial tag noting “assembled in the USA”, which many consumers and consumer groups have found to be misleading.

Sources: U.S. Department of Commerce