Opportunities & Pitfalls for Inheriting IRA, 401k & Roth-IRA: Sonoma County B...
Roth 401(K) Powerpoint
1. The Roth 401(k) Presented to: Georgia Power Employees Jan 26th At Banning Mills
2. Roth 401(k) Overview What is a Roth 401(k)? How much can I contribute? Should I make pretax or Roth 401(k) contributions? Are distributions really tax free? What about employer matching? What else do I need to know? What about Roth conversions?
3. What is a Roth 401(k) ? The Roth 401(k) is simply a traditional 401(k) that accepts Roth 401(k) contributions. Contributions are made on an after tax basis Earnings and growth are federal tax free if certain conditions are met. Also are Georgia and Alabama state income tax free
4. How much can I contribute? Current maximum is 25% of compensation or $16,500 whichever comes first. Also can contribute up to $5500 as “catch up” contribution at or over age 50.
5. Should I make pretax or Roth 401(k) contributions? Depends on several factors: 1)Current income tax bracket 2)Tax bracket in retirement 3)Growth of assets over time 4)Planned distributions from accounts 5)Desire to pass assets on to heirs.
6. Are distributions tax free? Your contributions are always tax free. In order for the earnings and growth to be tax free, they need to meet 2 stipulations: 1)5 year waiting period 2)Age 59 ½, disability or death (heirs) Otherwise, income tax + 10%
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9. Roth IRA conversions TIPRA 2005 eliminates $100k ceiling for 2010 and beyond Income tax on conversions in 2010 only can be spread out over following 2 tax years (2011&2012) Must maintain 5 year holding period before taking distributions Advantageous to have funds already set aside to pay the tax on conversion.
10. After-Tax Account Roth Conversion Example After-tax account balance = $50,000 Contributions (basis) = $35,000 Earnings and growth = $15,000 If converted to Roth status and rolled into Roth IRA: Income added to 2011 AGI =$7500 Income added to 2012 AGI = $7500 End result is $50,000 Roth IRA growing tax-free for paying tax on $15,000! Note: These figures are a hypothetical example. Before engaging in this strategy you must find out your basis from the Southern Company Savings plan, and you should consult a tax advisor.
11. Who We Are The Signature Financial Group was formed in 2008 to provide independent and objective advice to Southern Company employees, retirees, and friends. Over 15 years direct experience advising on Southern Company Benefits. Offering retirement plan analysis, comprehensive financial planning and investment advice.
12. Who is Raymond James? Founded in 1962 2000 Offices Worldwide Ranked Highest in Investor Satisfaction with Full Service Brokerage Firms in 2008 by J.D. Power and Associates ™ Employer and partner with the Signature Financial Group
13. Disclaimer (legal stuff!) This information was pulled from material developed by Forefield, inc, an independent third party. It is general in nature, is not a complete statement of all information necessary for making an investment decision, and is not a recommendation or a solicitation to buy or sell a security. Investments and strategies mentioned may not be suitable for all investors. Past performance may not be indicative of future results. Raymond James and Associates, Inc. does not provide advice on tax. Legal, or mortgage issues. These matters should be discussed with an appropriate professional. Neither Signature Financial Group nor this presentation have been endorsed or approved by Southern Company, Georgia Power, or any of its affiliated operating companies.
