Latest / Money In Motion with Klaas Financial / Rollover or Roll Over

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Rollover or Roll Over · Money In Motion with Klaas Financial

0:01
Speaker 1: Talking this week with our retirement planning professionals from Class Financial,
0:04
Speaker 1: Malia Quavis and Kyle Kite. If you've got a question
0:07
Speaker 1: for Millie and Kyle, love to have you join us
0:09
Speaker 1: this morn and tell number to get on the air
0:12
Speaker 1: six oh eight three two one thirteen ten. That's six
0:14
Speaker 1: oh eight three two one thirteen ten. We're going to
0:17
Speaker 1: be talking with Millie and Kyle will be talking.
0:18
Speaker 2: About rollovers this week.
0:20
Speaker 1: But if you have anything retirement related to any type
0:23
Speaker 1: of question, Malia and Kyle are here to answer your question.
0:26
Speaker 1: Telphonn ombver here at station to get on the air
0:28
Speaker 1: six oh eight three two one thirteen ten. That's six
0:31
Speaker 1: oh eight three two one thirteen ten. You can learn
0:33
Speaker 1: more about Class Financial on their website classfinancial dot com.
0:37
Speaker 1: That's Class k LaaS Financial dot com and their telephone
0:42
Speaker 1: number six oh eight four four two five six three seven.
0:45
Speaker 1: Don't forget no charge for that initial get to know
0:47
Speaker 1: you appointment Tech Loss Financial. It will be complementary to
0:50
Speaker 1: you again their number six oh eight four four two
0:53
Speaker 1: five six three seven joining us this morning. As mentioned
0:56
Speaker 1: Malia Quavis and Kyle Kite. Malia, how the heck have
0:59
Speaker 1: you ben my friend, very.
1:01
Speaker 3: Good, Happy spring.
1:02
Speaker 1: It's here, it is, it is. It looks like some
1:05
Speaker 1: great days ahead.
1:06
Speaker 2: Kyle. How have you been doing. It's been a while
1:08
Speaker 2: too talking with you.
1:11
Speaker 4: Doing good.
1:12
Speaker 2: It's good to talk with both of you.
1:14
Speaker 1: And as mentioned, we're going to be talking about retirement accounts, rollovers,
1:18
Speaker 1: maybe switching jobs or of course as you near retirement
1:21
Speaker 1: you really start to pay closer attention to these type
1:23
Speaker 1: of things. We'll talk about some of the stuff that
1:26
Speaker 1: you need to have in mind and need to be doing,
1:28
Speaker 1: some actions you need to be taking with our retirement
1:30
Speaker 1: planning professionals this morning, and just a moment, a couple
1:33
Speaker 1: of things mentioned the website COSS Financial dot com. Don't
1:36
Speaker 1: freak can listen back to this and previous shows podcasts
1:38
Speaker 1: all online at that website class financial dot com. That's
1:42
Speaker 1: coss k l aas financial dot com. You can also
1:45
Speaker 1: sign up for the weekly Market Pulse newsletter right online again.
1:48
Speaker 1: They're telephone number six so eight four four two five
1:51
Speaker 1: six three seven. Later on the show, we're going to
1:53
Speaker 1: be doing the Class Quiz question the week, another chance
1:55
Speaker 1: for you to win a fantastic prize. This week, our
1:57
Speaker 1: friends at Costs Financial have provided a twenty five five
2:00
Speaker 1: dollar gift card to ihop tell you a little bit
2:02
Speaker 1: later on in the program how you can win that
2:04
Speaker 1: little tipto. Oftentimes, just about every week, the question and
2:07
Speaker 1: answer come up during the program, and before we get
2:09
Speaker 1: rolling on this week's conversation, let's actually look back at
2:12
Speaker 1: last week's show, Malia and get the Claws quiz question
2:15
Speaker 1: and answer there as well.
2:17
Speaker 3: Yeah, so, one of our favorite topics around here is
2:20
Speaker 3: discussing Medicare. So last week's question was, according to Medicare
2:25
Speaker 3: dot gov, Medicare is a federal health insurance program in
2:29
Speaker 3: the United States for people. What age you're older? So
2:32
Speaker 3: his multiple choice was at age sixty two, sixty five,
2:36
Speaker 3: or sixty seven, and Pat called in with a correct answer.
2:40
Speaker 3: Congratulations to her. Medicare is available to you at the
2:45
Speaker 3: age of sixty five, So Sean, you cannot sign up yet. Okay,
2:51
Speaker 3: take note of that, But congratulations to Pat, and thanks
2:54
Speaker 3: everyone for listening and calling in for answering that question.
2:58
Speaker 2: It was a fantastic show as well. Good folks.
3:00
Speaker 1: If you want to listen back, you can always head
3:01
Speaker 1: on over to class financial dot com. That's class financial
3:05
Speaker 1: dot com. Somedays I feel sixty five or older.
3:07
Speaker 3: Moly, I don't know, we all do, we all do.
3:09
Speaker 2: I don't know if that counts for much, So of
3:12
Speaker 2: course we might be.
3:14
Speaker 1: You know, as we talk about approaching retirement and switching jobs,
3:17
Speaker 1: I know a lot of folks reach out to you
3:19
Speaker 1: if they've got maybe an old retirement account to roll over,
3:23
Speaker 1: and Kyle, I got to ask, what should they know
3:25
Speaker 1: before making making any kind of moves.
3:28
Speaker 4: Yeah, it's a great question, Sean. So these jobs, it's
3:32
Speaker 4: very common that they leave behind an older timement plan,
3:34
Speaker 4: an old four and K or a four H three
3:36
Speaker 4: B something like that. So some of the stats around
3:39
Speaker 4: this are According to the Bureau of Labor Statistics, individuals
3:42
Speaker 4: between ages eighteen and fifty two may change jobs up
3:45
Speaker 4: to twelve times, and many of those jobs likely included
3:49
Speaker 4: an employer sponsored retirement planning like a four oh one K,
3:52
Speaker 4: four H three B simply er A or a set
3:54
Speaker 4: by RA. So it's very common that, you know, when
3:56
Speaker 4: you're switching jobs, sometimes these things you kind of forget
3:59
Speaker 4: about once while, and people will come and see us
4:01
Speaker 4: ten or fifteen years later and like, oh, yeah, I
4:03
Speaker 4: had all these old things out there that I forgot about.
4:05
Speaker 4: So if you have an old retirement account, it's important
4:08
Speaker 4: to understand your options before you may so many people
4:12
Speaker 4: choose to roll their funds into the new employer's plan,
4:14
Speaker 4: which allows for easier account management and avoids immediate taxes
4:18
Speaker 4: or penalties. But there's some other options that you have
4:21
Speaker 4: out there as well. So the first one, and the
4:24
Speaker 4: one that we probably recommend the least, would be to
4:26
Speaker 4: just cash out the four one K. So while it
4:29
Speaker 4: may seem tempty, to be careful here because there's some
4:33
Speaker 4: significant financial consequences, the big one being that the entire
4:37
Speaker 4: balance of what you cash out becomes taxabile income in
4:40
Speaker 4: the year that you withdraw it, and if you're under
4:44
Speaker 4: the age of fifty nine and a half, you'll likely
4:46
Speaker 4: face a ten percent early withdrawal penalty on top of
4:49
Speaker 4: federal and state tag and for many many people, you know,
4:53
Speaker 4: if you're under that age of fifty nine and a
4:54
Speaker 4: half and you cash this money out, you're going to
4:56
Speaker 4: lose you know, somewhere in that twenty to thirty percent
4:59
Speaker 4: range between the the penalty and the taxes on it.
5:02
Speaker 4: So one you know some options where this might work
5:04
Speaker 4: is if you only have a small balance, this might
5:06
Speaker 4: not be a big deal, So think of you know,
5:08
Speaker 4: one thousand, two thousand and three thousand dollars. It's not
5:10
Speaker 4: as big with the penalty and stuff like that. But
5:13
Speaker 4: if you've accumulated a lot of money inside that plan,
5:16
Speaker 4: adding that lump sum to your yearly income could push
5:19
Speaker 4: you into that higher tax bracket as well. So that's
5:21
Speaker 4: part of the reason why we say, you know, it's
5:23
Speaker 4: one of our least recommended options.
5:25
Speaker 1: I would say so talking this morning with Malia Kuavis
5:28
Speaker 1: and Kyle Kite, they are our retirement planning professionals from
5:31
Speaker 1: cost Financial. You can learn more online their website costs
5:34
Speaker 1: financial dot com. That's cost k l a a s
5:37
Speaker 1: financial dot com. Fantastic resource to learn more about the
5:39
Speaker 1: team at Costs Financial. You can learn about their separate divisions,
5:42
Speaker 1: how they can help you or if you're an employer
5:44
Speaker 1: as well. They've got a lot of information up on
5:47
Speaker 1: the website costs Financial dot com. There tell for number six,
5:50
Speaker 1: SOH eight four four two five, six three seven, don't
5:53
Speaker 1: forget no charge for that initial gets to know your
5:55
Speaker 1: appointment at Costs Financial. It will be complimentary to you.
5:57
Speaker 1: Again they're number six, SOH eight four four two five
6:00
Speaker 1: six three seven, and it joined us this morning with
6:02
Speaker 1: a question. Now I gotta do is pick up phone,
6:03
Speaker 1: give us call six eight three two one thirteen ten.
6:06
Speaker 1: That's six oh eight three two one thirteen ten. So, Kyle,
6:09
Speaker 1: as you talk about some of the penalties and some
6:12
Speaker 1: of the consequences of doing a four oh one K withdrawal,
6:15
Speaker 1: are there ways to kind of put the genie back
6:18
Speaker 1: in the bottle?
6:18
Speaker 2: Are there ways to reverse a four oh one K withdrawal?
6:21
Speaker 4: Yeah, so there is, Sean, but you got to be again,
6:23
Speaker 4: very very careful, and you got to do it quickly.
6:25
Speaker 4: So if you act fast, you might be able to
6:27
Speaker 4: undo one of these withdrawals. So this is called a
6:31
Speaker 4: which means redepositing the funds into a qualified retirement account
6:34
Speaker 4: within those sixty days. But you got to remember that generally,
6:38
Speaker 4: when you do a four oh one K cash out,
6:39
Speaker 4: they automatically withhold that twenty percent in taxes, so you're
6:43
Speaker 4: going to have to not only put the money back
6:44
Speaker 4: that they cashed out to you, but also make up
6:46
Speaker 4: those difference in taxes as well. And you can got
6:49
Speaker 4: to keep in mind that you can only do one
6:51
Speaker 4: rollover per year between those iras. So again these are
6:55
Speaker 4: a lot of the things that we have to be
6:56
Speaker 4: very very careful of, and again why we don't recommend
6:58
Speaker 4: this very often for people. So the next option would
7:02
Speaker 4: be to keep your four one K with your former employer.
7:04
Speaker 4: So again this is where people kind of just forget
7:06
Speaker 4: about it and leave it sit there or they don't
7:07
Speaker 4: take any action. Many come the funds in the plane
7:11
Speaker 4: and the money can continue to grow tax deferred. But
7:15
Speaker 4: it's getting more and more common that if your balance
7:17
Speaker 4: is under five thousand, your former employer may eventually ask
7:20
Speaker 4: you to move it. So they'll either push it into
7:22
Speaker 4: an IRA for you, or they'll keep you know, sending
7:24
Speaker 4: you emails or letters in the mail that they want
7:27
Speaker 4: you to move it. And while this option keeps it simple,
7:30
Speaker 4: there's a few drawbacks to this. So the first one
7:32
Speaker 4: is that you can't contribute to the account anymore, so
7:34
Speaker 4: you can't contribute to prior for to one k's, it'd
7:37
Speaker 4: only be current four to one k's or current iras
7:39
Speaker 4: that kind of stuff. And you'll need to monitor your
7:42
Speaker 4: investments to ensure that they align with your risk tolerance.
7:44
Speaker 4: So again, these things can change as you get a
7:46
Speaker 4: little bit older. Maybe you've left it there for twenty
7:48
Speaker 4: years and you're a different stage of life, and we
7:50
Speaker 4: need to tweak those investments that would be one hundred
7:52
Speaker 4: percent on you. And then most plans offer a limited
7:55
Speaker 4: selection of investment options, so your choices may be restricted.
8:01
Speaker 1: Aft because not too long ago, I received one of
8:04
Speaker 1: these letters from an employer that I worked at right
8:06
Speaker 1: out of high school. There's less than a thousand dollars,
8:10
Speaker 1: and I felt terrible because I'm like, boy, these poor
8:13
Speaker 1: people have been managing this all about it that I
8:16
Speaker 1: didn't even know existed. But yeah, it does. I guess
8:19
Speaker 1: that's probably quite common. What about we talk about some
8:23
Speaker 1: of the options. What about rolling over your four to
8:26
Speaker 1: one K into a new employer's plan.
8:28
Speaker 4: Yeah, as we mentioned earlier, this is probably one of
8:30
Speaker 4: the more common options for people. Most four one K
8:33
Speaker 4: plans will allow you to roll over old four to
8:35
Speaker 4: one ks into this new one. So this is a
8:37
Speaker 4: popular choice because it just consolidates things. And you've heard
8:40
Speaker 4: Au say it on the show many many times. We're
8:42
Speaker 4: big fans of consolidation, simplification, and diversification, right, So by
8:46
Speaker 4: consolidating this, it makes it easier to manage your retirement
8:49
Speaker 4: savings and better yet there you don't have to worry
8:51
Speaker 4: about paying taxes or anything like that. It's all tax free.
8:55
Speaker 4: It's not a taxable event, so you're good to go
8:57
Speaker 4: in that respect. And there's a couple of additional benefit
9:00
Speaker 4: fits when it comes to a four to one K.
9:01
Speaker 4: Number one is you've got the Aris of protections offering
9:04
Speaker 4: potential creditor protection. So remember this is where if you're
9:09
Speaker 4: if you are filing bankruptcy things like that, you have
9:11
Speaker 4: creditor protection for retirement accounts, but falls into those Arista
9:14
Speaker 4: guidelines of four to one ks, and your new four
9:17
Speaker 4: to one K maybe you move to a bigger company
9:19
Speaker 4: so they have better investment options or lower fees. This
9:21
Speaker 4: could be an efficient way to grow your savings. And finally,
9:24
Speaker 4: you want to be mindful of your pretext and WROTH
9:27
Speaker 4: balances because they do need to be rolled over properly
9:29
Speaker 4: into corresponding accounts. So going from a four to one K,
9:32
Speaker 4: a traditional four one K to a WROTH four O
9:34
Speaker 4: on and K that could be a taxable event. So
9:36
Speaker 4: you just got to be very very careful when you're
9:37
Speaker 4: looking at these things.
9:38
Speaker 1: Really important stuff to know their As we talked this
9:41
Speaker 1: morning with our retirement planning professionals from Class Financial, Kyle
9:44
Speaker 1: Kite and Malia Quavis. You can learn more about Costs
9:47
Speaker 1: Financial on their website coss Financial dot com. That's coss
9:50
Speaker 1: k l aas Financial dot com. They're telephone number six
9:54
Speaker 1: so eight four four two five six three seven. No
9:57
Speaker 1: charge for that initial get to know you appointment tech
9:59
Speaker 1: Costs Financial h we will be complimentary to you again.
10:01
Speaker 1: They're telephone number six so eight four four two five
10:04
Speaker 1: six three seven. You're saying, well, rolling it over a
10:06
Speaker 1: four oh one K into a new four oh one K.
10:09
Speaker 2: Is one thing.
10:09
Speaker 1: What about an IRA? We'll get the details on that.
10:11
Speaker 1: We'll do it next as Money in Motion with cost
10:14
Speaker 1: Financial continues right here on thirteen ten. WIBA join this
10:19
Speaker 1: week by Malia Quavis and Kyle Kite. They are our
10:22
Speaker 1: retirement binding professionals from COSS Financial. The website cossfinancial dot com.
10:27
Speaker 1: It's coss k l Aasfinancial dot com. Great resource to
10:31
Speaker 1: learn more about COSS Financial, how they can help you
10:33
Speaker 1: if you're an employer. Also, I'll learn how they can
10:36
Speaker 1: help you.
10:36
Speaker 2: Also.
10:36
Speaker 1: There's different divisions of COSS Financial. It's all really really
10:40
Speaker 1: nice on the website Colssfinancial dot com. While you're there,
10:42
Speaker 1: If you haven't signed up yet for the weekly Market
10:45
Speaker 1: Pulse newsletter, I strongly urge you to do that. I
10:47
Speaker 1: signed up probably ten years ago. It's a great it's
10:50
Speaker 1: not spam or anything like that. It's like once a
10:52
Speaker 1: week you'll get an email and it gives you a
10:54
Speaker 1: little snapshot of what's been going on in the markets,
10:56
Speaker 1: things you need to know about. Linked to the most
10:58
Speaker 1: recent podcast as well, and that's free to you at
11:00
Speaker 1: Classfinancial dot com. Speaking of things that are free to you,
11:04
Speaker 1: that first appointment no charge, It is complementary. All I
11:06
Speaker 1: gotta do is make that appointment by calling Class Financial
11:08
Speaker 1: office right here in Madison six oh eight four four
11:10
Speaker 1: two five six three seven. Again that telephon number six
11:13
Speaker 1: O eight four four two five six three seven talking
11:16
Speaker 1: rollovers this week with Malia and Kyle, and we left
11:19
Speaker 1: off talking about rolling over your old four oh one
11:22
Speaker 1: K into your new four to oh one K and Malia,
11:25
Speaker 1: I have to imagine that a common option for folks
11:28
Speaker 1: is maybe rolling over that old four oh one K
11:31
Speaker 1: into an Ira.
11:33
Speaker 3: Yeah. So, as as always when we're speaking about things
11:37
Speaker 3: you can do or shouldn't do, as you you know,
11:41
Speaker 3: look at your retirement accounts, we would just advise slow down,
11:44
Speaker 3: just slow down, And this option comes up, you know,
11:47
Speaker 3: probably the most frequent out there, one of the most
11:51
Speaker 3: frequent choices aside from people say I'm just going to
11:54
Speaker 3: cash out the whole thing, which Kyle clearly told us
11:56
Speaker 3: not to do that. So so when we say down,
12:00
Speaker 3: we want we want to make sure that you understand
12:02
Speaker 3: what you're doing and your choices. And so if you
12:06
Speaker 3: decide to roll over your four oh one K, you
12:08
Speaker 3: will open up an IRA. You can do that by yourself,
12:11
Speaker 3: you can do it at your local bank, you can
12:13
Speaker 3: do it with your financial advisor. And really the objective
12:16
Speaker 3: here is to take your traditional four oh one K
12:19
Speaker 3: or four O three B and you would move that
12:21
Speaker 3: potentially into a traditional IRA. Or similarly, if you had
12:27
Speaker 3: a wroth four oh one K balance, you would want
12:29
Speaker 3: to make sure that is transferred into a wroth IRA
12:33
Speaker 3: at any of these different institutions. So what you need
12:37
Speaker 3: to keep in mind if you do decide to go
12:39
Speaker 3: with choice number five here rolling that those retirement funds
12:42
Speaker 3: into an IRA, you have to understand this is not
12:45
Speaker 3: a taxable event, certainly not the WROTH. Everyone understands that
12:48
Speaker 3: that money went in after you paid taxes on it,
12:51
Speaker 3: and we'll continue it will continue to grow tax tax
12:55
Speaker 3: tax free. However, the pre tax accounts, the those will
13:00
Speaker 3: not create taxes until you take them out somedays, so
13:04
Speaker 3: keep that in mind. Not a taxable event. However, as
13:08
Speaker 3: we mentioned before, if you withdraw those funds the pretax
13:12
Speaker 3: from the IRA before the age of fifty nine and
13:15
Speaker 3: a half, you'll likely face a ten percent early withdrawal penalty.
13:21
Speaker 3: So why would you even put it into an IRA. Well,
13:25
Speaker 3: an IRA is going to give you more flexibility for distribution,
13:28
Speaker 3: so that is a common reason people will decide to
13:31
Speaker 3: go this way. So unlike four oh one K plans,
13:34
Speaker 3: they generally have stricter withdrawal rules. And you know, people
13:38
Speaker 3: don't like to have handcuffs on their own money, you know,
13:41
Speaker 3: so they like the opportunity to say and depending on
13:44
Speaker 3: where they're at in life, maybe they're getting very close
13:47
Speaker 3: to retirement, they want to be able to control the
13:50
Speaker 3: way in which their IRA assets are invested, and if
13:55
Speaker 3: they want to take money out of them, they want
13:57
Speaker 3: to be able to do it at their discretion. So
14:00
Speaker 3: some key considerations for why people do choose to do
14:04
Speaker 3: a roll over. Besides, the flexibility would be investment selection.
14:08
Speaker 3: So you know you're in an IRA, you're able to
14:11
Speaker 3: choose an investment strategy that maybe aligns better with your
14:14
Speaker 3: time horizon and also your risk tolerance. For example, you
14:18
Speaker 3: might want to invest in a CD within an IRA
14:22
Speaker 3: because that might offer you lower risk, but we have
14:25
Speaker 3: to keep in mind that might offer minimal growth as well,
14:28
Speaker 3: whereas a diversified portfolio of stocks and bonds could provide
14:32
Speaker 3: better long term potential. So we're not here to say
14:35
Speaker 3: that there aren't four oh one K four three B
14:38
Speaker 3: plans out there that don't have, you know, a host
14:41
Speaker 3: of selections, but they typically have less selections out there
14:47
Speaker 3: choices for you to make, so that again going from
14:51
Speaker 3: ten to one hundred choices or beyond might be important
14:56
Speaker 3: for you. Fees is another reason to con that are
15:01
Speaker 3: making the choice or not. You have to understand there's
15:04
Speaker 3: investment fees associated with both your old four oh one
15:07
Speaker 3: K and also the new IRA, and so leaving it
15:10
Speaker 3: behind might be the right choice because their fees are
15:13
Speaker 3: considerably less potentially, but again your choices might be limited
15:17
Speaker 3: as well. Timing in RMD rules is the next area.
15:22
Speaker 3: If you retire between the ages of fifty five and
15:25
Speaker 3: fifty nine and a half. And again this goes back
15:28
Speaker 3: to my beginning point, slow down, slow down. If you're
15:31
Speaker 3: retiring between those ages, our suggestion might be leave your
15:36
Speaker 3: money in that four oh one K because that may
15:39
Speaker 3: allow you to withdraw funds penalty free, whereas rolling it
15:43
Speaker 3: into an IRA could delay that option until age fifty
15:46
Speaker 3: nine and a half. So what I'm talking about here
15:50
Speaker 3: is for persons who are approaching the age of fifty
15:53
Speaker 3: five still working for the company. It's called separation of
15:57
Speaker 3: service at age fifty five, and they are potentially looking
16:01
Speaker 3: to completely retire, and they need to develop an income stream.
16:07
Speaker 3: If we're able to take money from that four to
16:09
Speaker 3: oh one k again before we've ever moved it over
16:13
Speaker 3: to an IRA. If we can start taking it from
16:17
Speaker 3: the four to oh one K, you will still have
16:20
Speaker 3: to pay taxes on that, but coming out of that
16:24
Speaker 3: vehicle will prevent this age fifty nine and a half
16:28
Speaker 3: termination fee, so to speak, this penalty. So we've done
16:32
Speaker 3: that with many many clients. It's an important thing to
16:35
Speaker 3: know before you just, you know, blatantly, Oh, I'm just
16:37
Speaker 3: rolling all over to an IRA, and I'll deal with
16:40
Speaker 3: it later. This could actually create some good income for
16:43
Speaker 3: you and not cause you to have that penalty, So
16:46
Speaker 3: make sure you know you're timing. Another area certainly is
16:50
Speaker 3: required minimum distribution. So we've got clients, I'll be honest,
16:54
Speaker 3: they work into their eighties. Not that you want to shine,
16:57
Speaker 3: but the rest.
16:58
Speaker 2: Of many people I'll like to work.
17:01
Speaker 3: But if you plan to work past age seventy two,
17:06
Speaker 3: and you're keeping funds in a current employer's four oh
17:09
Speaker 3: one K, that will allow you to continue to defer
17:12
Speaker 3: rmds until you stop working. So again, these people I'm
17:17
Speaker 3: speaking of are continuing to feed their four oh one
17:21
Speaker 3: ks and they are not forced to take rmds out.
17:24
Speaker 3: And RMDH today, of course is seventy three, so it's
17:28
Speaker 3: amazing you can continue to contribute and you're not forced
17:31
Speaker 3: to take out the required minimum distributions. And finally, wroth conversions,
17:36
Speaker 3: So if you roll traditional four to one K assets
17:39
Speaker 3: into a wroth ira, as Kyle mentioned earlier, taxes are
17:43
Speaker 3: due at the time of conversion, so you just want
17:46
Speaker 3: to be careful, don't rush through it. Get some good
17:49
Speaker 3: advice as to your situation and what you should do
17:52
Speaker 3: when you do leave an employer and those retirement assets.
17:56
Speaker 2: Great advice this morning.
17:57
Speaker 1: As we talked this morning with our retirement planning professionals
17:59
Speaker 1: from Class Financial, Melia Quavis and Kyle Kites, don't forget.
18:02
Speaker 1: You can learn more about Class Financial their website coss
18:05
Speaker 1: Financial dot com. Great website, coss Financial dot com. That's
18:08
Speaker 1: k l aas Financial dot com. They're telphone number six
18:11
Speaker 1: oh eight four four two five six three seven. No
18:15
Speaker 1: charts that initial gets to no deployment at costs Financial.
18:17
Speaker 1: It'll be complementary to you again that number six oh
18:19
Speaker 1: eight four four two five six three seven. So Kyle,
18:23
Speaker 1: what if I have maybe employer stock in my four
18:25
Speaker 1: oh one k? Anything I need to consider? There any
18:28
Speaker 1: special considerations in that area.
18:30
Speaker 4: Yeah, it's a great question, Sean. And this is this
18:32
Speaker 4: is a very can be a complex strategy until you
18:35
Speaker 4: get your arms around it. But there's something called a
18:38
Speaker 4: net unrealized appreciation. So this is a tax advantage way
18:42
Speaker 4: to transfer stock from your four oh one k into
18:45
Speaker 4: a taxable account while benefiting from the longer or lower
18:48
Speaker 4: long term capital gains. Tax rates get into this makes
18:53
Speaker 4: I just want to let everybody know we're not tax accountants.
18:54
Speaker 4: So always consult your CPA before making this decision, because,
18:58
Speaker 4: as I said, this strategy can be a great thing
19:00
Speaker 4: for some people, but you have to understand what you're
19:02
Speaker 4: getting into. So here's how it works. So typically, when
19:05
Speaker 4: you pull money out of a four to one K,
19:07
Speaker 4: as we've been talking about, your withdrawals are going to
19:09
Speaker 4: be taxed as or so again, whatever tax bracket you're
19:13
Speaker 4: in when you pull as those funds out, that's the
19:16
Speaker 4: tax rate you're going to pay. However, under the NUA strategy,
19:20
Speaker 4: the growth on employer stock qualifies for the lower long
19:24
Speaker 4: term capital gains tax rate rather than being taxed as
19:27
Speaker 4: ordinary income. So again, think of this as if you've
19:31
Speaker 4: got employer stock inside your foural one K. This is
19:34
Speaker 4: where an anyway strategy could come into play. So what
19:38
Speaker 4: the big thing that you have to be aware of, though,
19:40
Speaker 4: is that the original cost basis of the shares is
19:43
Speaker 4: subject to ordinary income tax when distributed. So I'm going
19:46
Speaker 4: to give you an example to kind of bring all
19:48
Speaker 4: this together. So let's say the cost inside your four
19:52
Speaker 4: oh one K is one hundred thousand dollars, meaning that's
19:55
Speaker 4: what you've paid for it, or that's what it was
19:56
Speaker 4: worth as the company was great, and you shares throughout
19:58
Speaker 4: the years, but today when you go to retire, those
20:01
Speaker 4: same shares excuse me, are worth a million dollars, So
20:05
Speaker 4: one hundred thousand dollars basis of million dollars of gain
20:08
Speaker 4: if you elect the any income tax on that one
20:13
Speaker 4: hundred thousand dollars of basis that I just mentioned, but
20:16
Speaker 4: that remaining nine hundred thousand a million minus the hundred
20:20
Speaker 4: That remaining nine hundred thousand is going to be taxed
20:22
Speaker 4: at long term capital gains tax rates, which for most
20:25
Speaker 4: people is a lot more favorable because the maximum long
20:28
Speaker 4: term capital gains rates actually twenty percent, but most people
20:31
Speaker 4: pay somewhere around fifteen percent for long term capital gains.
20:36
Speaker 4: So these transactions are most beneficial when you've seen substantial growth.
20:40
Speaker 4: So kind of like what I was just explaining out
20:41
Speaker 4: in my example there. But you've got to be remember
20:44
Speaker 4: there's a few things that have to be met for
20:46
Speaker 4: this to work. So there has to be a triggering
20:48
Speaker 4: event such as a retirement, losing your job, or turning
20:51
Speaker 4: fifty nine and a half. That could be what needs
20:54
Speaker 4: to happen. But the entire four to one K plan
20:56
Speaker 4: must be emptied in one calendar year, so again doesn't
21:00
Speaker 4: mean it all has to come out at one time.
21:01
Speaker 4: You just have to do the NUA transaction and roll
21:04
Speaker 4: the rest of the money out of the four oh
21:05
Speaker 4: one k in the same calendar year. And that stock
21:08
Speaker 4: must be moved in kind. So if it's whatever your
21:12
Speaker 4: employer's stock is, it has to stay those shares into
21:15
Speaker 4: this new tax will brokerage account. As soon as you
21:17
Speaker 4: move it. You can always sell those shares, but it
21:19
Speaker 4: has to move in kind like that. So these strategies
21:24
Speaker 4: can certainly reduce overall tax liability. They also remove these
21:27
Speaker 4: assets from the tax deferred environment of a retire not
21:31
Speaker 4: right for everybody, as we've been kind of explaining.
21:33
Speaker 2: Here talking this morning with Kyle Kaite and Maliakuavis.
21:36
Speaker 1: They are our retirement planning professionals from Class Financial. The
21:39
Speaker 1: website COSS financial dot com. That's Coss k l aas
21:43
Speaker 1: Financial dot com. They're telephone number for the office right
21:45
Speaker 1: here in Madison, sixt'h eight four four to two five
21:48
Speaker 1: six three seven. No charge for that initial get to
21:50
Speaker 1: know your appointment. Tech Loss Financial complementary to you again
21:53
Speaker 1: their number six oh eight four four two five six
21:56
Speaker 1: three seven. Kyle any final thoughts on on on the
21:59
Speaker 1: old four one ks.
22:01
Speaker 4: Yeah, it's definitely something to be aware of, and obviously
22:03
Speaker 4: Malia kind of mentioned this too. If you're considering rolling
22:06
Speaker 4: over at old four oh one, k, take the time
22:08
Speaker 4: to evaluate all your options and consult with the financial
22:10
Speaker 4: professional to make the most informed decisions. We said, there's
22:13
Speaker 4: a lot of kind of steps you got to be
22:15
Speaker 4: aware of here in places to make a misstep, So
22:17
Speaker 4: you definitely want to get some help when you're considering
22:19
Speaker 4: these things.
22:19
Speaker 1: Really important guidance this week, as always from our retirement
22:22
Speaker 1: planning professionals from Class Financial, I mentioned the website Cossfinancial
22:26
Speaker 1: dot com. One thing I haven't mentioned is you can
22:28
Speaker 1: submit a question right online for the Money and Motion
22:30
Speaker 1: listener question corner. As a matter of fact, coming up
22:33
Speaker 1: to the next segment, we will answer Martha's question. We'll
22:35
Speaker 1: also do the COSS Quiz question week. You're going to
22:38
Speaker 1: want to sit tight for that. More of Money in
22:40
Speaker 1: Motion with Coss Financial comes your way next right. You're
22:42
Speaker 1: on thirteen ten WIBA talking this week with our retirement
22:47
Speaker 1: planning professionals Malia Quavis and Kyle Kite. Of course they
22:49
Speaker 1: come to us from Class Financial website Coss Financial dot com.
22:53
Speaker 1: That's Coss Klaasfinancial dot com. Tell phone number six oh
22:58
Speaker 1: eight four four to two five six three seven. No
23:01
Speaker 1: charge for that initial get to know you appointment at
23:03
Speaker 1: Class Financial. It will be complimentary to you again their
23:06
Speaker 1: number six oh eight four four two five six three seven.
23:09
Speaker 1: Hold on to that telephone number as a well. Coming
23:11
Speaker 1: up a little bit later in the segment, we'll do
23:12
Speaker 1: the Class quiz Quench leak your chance to win a
23:14
Speaker 1: twenty five dollars gift card to IOP. Before we get
23:17
Speaker 1: to that, another really cool thing that folks are able
23:19
Speaker 1: to do is email a question for the Money in
23:21
Speaker 1: Motion listener Question corner and Martha road in. She says,
23:25
Speaker 1: I'm turning sixty five soon and eligible for Medicare, but
23:28
Speaker 1: my spouse is still working and will be uh and
23:31
Speaker 1: we're covered under their employer sponsored health insurance. Should I
23:35
Speaker 1: enroll in Medicare now or should I stay on my
23:38
Speaker 1: spouse's plan? Malia have at it.
23:41
Speaker 3: Yeah, so that's a really good question. It's nice to
23:44
Speaker 3: have choices. Let's start there. So, whether you should enroll
23:48
Speaker 3: in Medicare at sixty five or stay on your spouse's
23:51
Speaker 3: health plan? Does depend on a few key factors. So
23:55
Speaker 3: first you're you're gonna want to check can You probably
23:58
Speaker 3: already know this whether your spouse is in play layer
24:00
Speaker 3: has twenty or more employees, So if so, their health
24:04
Speaker 3: insurance is considered credible coverage, meaning you can delay Medicare
24:09
Speaker 3: enrollment without penalties. So in this case, you might choose
24:12
Speaker 3: to stay on their plan, especially if it offers better
24:15
Speaker 3: coverage or lower costs than Medicare. You know, Medicare just
24:20
Speaker 3: to go off. We had a discussion last week on
24:23
Speaker 3: Medicare coverage. It's not that a lot isn't covered on
24:26
Speaker 3: Medicare coverage, but it is different than what you're probably
24:30
Speaker 3: experiencing being under your the employer plan of your spouse,
24:35
Speaker 3: So you do want to understand what you might be
24:37
Speaker 3: giving up if you switched over to Medicare. So, if
24:42
Speaker 3: your spouse's employer has fewer than twenty employees, Medicare does
24:47
Speaker 3: become the prime primary payer for you. Your spouse's plan would
24:51
Speaker 3: only pay secondarily, So in this situation you should you
24:55
Speaker 3: should enroll Medicare Part A and Part B to ensure
24:58
Speaker 3: your full coverage and again avoid potential late enrollment penalty.
25:02
Speaker 3: So the key here. You really want to understand are
25:05
Speaker 3: there twenty or more employees with his company or less?
25:10
Speaker 3: And then also you want to consider the costs and
25:12
Speaker 3: coverage of each option. So Medicare might have lower premiums
25:16
Speaker 3: and out of pocket expenses than your spouse's plan or
25:18
Speaker 3: vice versa. But if you do end up choosing to
25:21
Speaker 3: delay Medicare, you're going to want to sign up during
25:23
Speaker 3: the Special Enrollment Period the SEP once your spouse retires
25:28
Speaker 3: or or you lose coverage, lose their coverage to avoid
25:32
Speaker 3: late penalty. So do some research. I'm glad you checked
25:35
Speaker 3: in with us and best of luck.
25:38
Speaker 1: Really good question, Martha, and another place you can get
25:41
Speaker 1: some more information. As Malia mentioned last week, we did
25:43
Speaker 1: talk about Medicare. Great podcast that's available to you at
25:47
Speaker 1: COSS Financial's website cossfinancial dot com. That's cost k l
25:51
Speaker 1: aasfinancial dot com. Tell for number six O eight four
25:54
Speaker 1: four two five six three seven. No charge for that
25:57
Speaker 1: initial get to know your appointment tech Loss Financial. It
25:59
Speaker 1: will be complimentary to you again their number six oh
26:02
Speaker 1: eight four four two five six three seven. You can
26:04
Speaker 1: you want to hold on to that telephon number now
26:06
Speaker 1: because it's time for the Coss Quiz question of the week.
26:08
Speaker 2: It works like this. In just a moment, I'll ask
26:10
Speaker 2: you the class quiz question week.
26:11
Speaker 1: You will then have thirty minutes from the inter Today's
26:13
Speaker 1: program to call the Coss Financial Office right here in
26:15
Speaker 1: Madison at six oh eight four four two five six
26:18
Speaker 1: three seven. If you are the first caller with the
26:21
Speaker 1: correct answer, you'll win this week's prize, which is a
26:23
Speaker 1: twenty five dollars gift card to I Hop. This week's
26:26
Speaker 1: class quiz question the week is this true or false?
26:30
Speaker 1: If you take a distribution from your four oh one
26:33
Speaker 1: K before the age of fifty nine and a half,
26:36
Speaker 1: you will likely face a ten percent early withdrawal penalty.
26:41
Speaker 1: Is that true or is that false? Telephone number six
26:43
Speaker 1: oh eight four four two five six three seven. First
26:46
Speaker 1: Garth correct answer won the twenty five dollars gift card
26:48
Speaker 1: to the International House of Pancakes. Also, don't forget that's
26:51
Speaker 1: Class Financials office right here in Madison six oh eight
26:55
Speaker 1: four four two five six three seven. No charge for
26:57
Speaker 1: that initial get to know your appointment at COSS Financial
27:00
Speaker 1: is complimentary to you again their number six o eight
27:02
Speaker 1: four four two five six three seven. Melia Kyle, It's
27:05
Speaker 1: been great chatting with both of you guys. Have a
27:07
Speaker 1: great spring and look forward to talking again real soon.
27:10
Speaker 3: Thanks Sean, Yeah, thanks Sean.
27:11
Speaker 1: Take care guys, Doctor Marty Greer. She joins us next
27:14
Speaker 1: here on thirteen ten. Wiva