401(k) Rollovers. GP P-N12/08 July 2009 [Expiration Date]

Transcription

1 401(k) Rollovers Investments and services offered through Morgan Stanley Smith Barney LLC, and accounts carried by Morgan Stanley & Co. Incorporated; members SIPC Morgan Stanley Smith Barney GP P-N12/08 July 2009 [Expiration Date]

2 Why Are We Here Today? Review the options available to you with respect to your 401(k) plan when changing employers Discuss the pros and cons of the various options, including keeping assets in your previous 401(k) plan or rolling over assets to a new plan or an IRA Review factors you will need to consider when initiating a 401(k) rollover 2

3 Options When Changing Employers Cash out Leave assets in your previous employer s 401(k) plan Roll over to a new 401(k) plan Roll over to an IRA 3

4 Cash Out Taxes and penalties Loss of tax-deferral 4

5 Cash Out Taxes and Penalties 20% withholding tax Ordinary income tax 10% early withdrawal penalty 5

6 Cash Out Taxes and Penalties Distribution $50,000 Check after 20% withholding $40,000 10% early withdrawal penalty $5,000 Federal income tax (28%) $14,000 State income tax (5%) $2,500 Net distribution $28,500 6

7 Cash Out Loss of Tax-Deferral $80,000 $70,000 $60,000 $50,000 $40,000 $30,000 $20,000 $10, $79,367 Tax-deferred $57,831 Taxable Assumptions: $10,000 initial investment 8% annual return Tax bracket of 28% during accumulation period and at time of distribution 7

8 Leave Assets in Your Previous 401(k) Plan No taxes or penalties Continued tax-deferral Little or no paperwork No need to reinvest Benefits Previous 401(k) Plan 8

9 Leave Assets in Your Previous 401(k) Plan Plan limitations Limited investment options Fees may be higher Future plan changes Considerations Previous 401(k) Plan Outstanding loans Access to Funds 9

10 Roll Over to a New 401(k) Plan No taxes or penalties Benefits Continued tax-deferral Plan features Asset consolidation Previous 401(k) Plan Assets New 401(k) Plan Loan availability 10

11 Roll Over to a New 401(k) Plan Waiting periods Limited investment options Considerations Plan features Need to reinvest Previous 401(k) Plan Assets New 401(k) Plan Withdrawal limitations After-tax contributions Company stock Rollover process 11

12 Roll Over to an IRA Traditional IRA Benefits Roth IRA No penalties More investment options Previous 401(k) Plan Assets IRA Account Greater flexibility Asset consolidation 12

13 Roll Over to an IRA Need to reinvest Transaction costs Fees Considerations No loans Roth IRA Previous 401(k) Plan Assets IRA Account Early withdrawals Company stock Rollover process 13

14 Indirect vs. Direct Rollover Indirect Rollover New 401(k) Plan 401(k) Plan Less 20% withholding + 20% withholding 60 days IRA Account 14

15 Indirect vs. Direct Rollover Direct Rollover New 401(k) Plan 401(k) Plan IRA Account 15

16 Why Rollover? Consolidating assets 401(k) Plan 401(k) Plan 401(k) Plan New 401(k) Plan or IRA Account 16

17 Why Rollover? Consolidating assets Investment options 17

18 Why Rollover? Consolidating Assets Investment Options Greater Flexibility in an IRA 18

19 Your Financial Advisor Team at Morgan Stanley Smith Barney Y:\Other\Get the Most Out of Your IRA ( ) 8/26/2010 Our Financial Advisors can provide: Access to intellectual strength and global resources of Morgan Stanley Smith Barney Financial solutions that address your specific needs and goals Name [First Name] [Last Name] Title Phone: Fax: Morgan Stanley Smith Barney, Morgan Stanley & Co. Incorporated and Morgan Stanley Smith Barney s Financial Advisors do not provide tax or legal advice, are not fiduciaries (under ERISA, the Internal Revenue Code or otherwise) with respect to the services or activities described herein, and this material was not intended or written to be used for the purpose of avoiding tax penalties that may be imposed on the taxpayer. Individuals are urged to consult their tax or legal advisor before establishing a retirement plan or to understand the tax, ERISA and related consequences of any investments made under such plan. 19