If you are... -approaching retirement -retiring early -changing jobs -looking to borrow money from your retirement plan -wondering what to do with an inherited plan ...you need this book! IRAs, 401(k)s & Other Retirement Plans helps you make sense of the rules that govern distributions from retirement plans, and avoid the stiff penalties that lurk in the fine print. It covers the different types of retirement plans -- including 401(k)s and other profit-sharing plans, Keoghs, IRAs and tax-deferred annuities -- and the taxes and penalties that can deplete your nest egg. In accessible, plain English, IRAs covers: the tax strategies before retirement the tax strategies at retirement dividing a plan at divorce tax penalties for taking your money out early methods for avoiding tax penalties distributions you must take during your lifetime distributions to your heirs after your death Roth IRAs With this book as your guide, you'll know the rules, avoid the penalties and save for your future like a pro.

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Read this chapter if you aren't certain which types of retirement plans you have -- either through your employer or as a self-employed person. Also read this chapter if you have an IRA but aren't sure which type. How many people have warned you that you'll never see a penny of the hard-earned money you've poured into the Social Security system and that you'd better have your own retirement nest egg tucked away somewhere? Perhaps those doomsayers are overstating the case, but even if you eventually do collect Social Security, it is likely to provide only a fraction of the income you will need during retirement. Congress responded to this problem several decades ago by creating a variety of tax-favored plans to help working people save for retirement. One such plan is set up by you, the individual taxpayer, and is appropriately called an individual retirement account or IRA. Another, which can be established by your employer or by you if you are self-employed, is referred to by the nondescript phrase, a qualified plan. A qualified plan is one that qualifies to receive certain tax benefits as described in Section 401 of the U.S. Tax Code. There are other types of retirement plans, too, which enjoy some of the same tax benefits as qualified plans but are not technically qualified, because they are defined in a different section of the Tax Code. Many of these other plans closely follow the qualified plan rules, however. The most common of these almost-qualified plans are tax-deferred annuities (TDAs) and qualified annuity plans. (Don't be thrown by the name. Even though it may be called a qualified annuity plan, it is not defined in Section 401 and therefore is not a qualified plan in the purest sense.) Both of these plans are defined in Section 403 of the Tax Code. Because many of the rules in Section 403 are similar to those in Section 401, TDAs and qualified annuity plans are often mentioned in the same breath with qualified plans. All qualified plans, TDAs, and qualified annuity plans have been sweetened with breaks for taxpayers to encourage them to save for retirement. And working people have saved, often stretching as far as they can to put money into their retirement plans. But saving is only half the equation. The government also wants you to take money out of the plan and spend it chiefly on your retirement. For that reason, the government has enacted a series of rules on how and when you can -- or, sometimes, must -- take money out of your retirement plan. (When you take money out, it's called a distribution.) Helpful Terms Adjusted gross income (AGI). Total taxable income reduced by certain expenses such as qualified plan contributions, IRA contributions, and alimony payments. Beneficiary. The person or entity entitled to receive the benefits from an insurance policy or from trust property, such as a retirement plan or IRA. Deductible contribution. A contribution to a retirement plan that an employer may claim as a business expense to offset income on the employer's tax return. You may know it as simply the employer's contribution. In the case of an IRA, a deductible contribution is one that an individual taxpayer may use to offset income on the individual's tax return. Distribution. A payout of property (such as shares of stock) or cash from a retirement plan or IRA to the participant or a beneficiary. Earned income. Income received for providing goods or services. Earned income might be wages or salary or net profit from a business.

 

If you are... -approaching retirement -retiring early -changing jobs -looking to borrow money from your retirement plan -wondering what to do with an inherited plan ...you need this book!

I. How to Use This Book 1. Types of Retirement Plans A. Qualified Plans B. Individual Retirement Accounts C. Almost-Qualified Plans D. Nonqualified Plans 2. Basic Tax Rules for Distributions A. Taxation Fundamentals B. General Income Tax Rules for Retirement Plans C. Income Tax on Qualified Plans and Qualified Annuities D. Special Income Tax Rules for Tax-Deferred Annuities E. Special Income Tax Rules for IRAs F. How Penalties Can Guide Planning 3. Taxes on Early Distributions A. Exceptions to the Tax B. Reporting the Tax C. Special Rules for IRAs 4. Avoiding the Early Distribution Tax: Substantially Equal Periodic Payments A. General Rules for Computing Payments B. Computing Periodic Payments C. Implementing and Reporting Your Decision D. Modifying the Payments 5. When Must You Begin to Take Your Money? A. Required Distributions During Your Lifetime B. Death Before Required Beginning Date C. Death After Required Beginning Date D. Special Rules for Tax-Deferred Annuities E. Special Rules for Roth IRAs F. Penalty G. Waiver 6. Distributions You Must Take During Your Lifetime A. Required Beginning Date B. Computing the Required Amount C. Designating a Beneficiary D. Special Rules for Annuities E. Divorce or Separation 7. Distributions to Your Beneficiary If You Die Before Age 70½ A. Determining the Designated Beneficiary B. Distribution Methods C. Spouse Beneficiary D. Non-Spouse Beneficiary E. No Designated Beneficiary F. Multiple Beneficiaries, Separate Accounts G. Multiple Beneficiaries, One Account H. Trust Beneficiary I. Estate As Beneficiary J. Annuities K. Divorce or Separation L. Reporting Distributions 8. Distributions to Your Beneficiary If You Die After Age 70½ A. Administrative Details B. Spouse Beneficiary C. Non-Spouse Beneficiary D. No Designated Beneficiary E. Multiple Beneficiaries, Separate Accounts F. Multiple Beneficiaries, One Account G. Trust Beneficiary H. Estate as Beneficiary I. Annuities J. Divorce or Separation 9. Roth IRAs A. Taxation of Distributions B. Early Distribution Tax C. Ordering of Distributions D. Required Distributions Appendices A. IRS Forms, Notices, and Schedules 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 B. Life Expectancy Tables Table I Single Life Expectancies Table II Joint Life and Last Survivor Expectancy Table III Uniform Table Table IV Survivor Benefit Limits Index

"Few resources are as valuable when it comes to financial planning in later life."

 

"An explanation of the complicated rules on withdrawal, written for ordinary people."

 

"Belongs on the bookshelf of anyone with an IRA, 401(k) or other type of qualified retirement plan. When the inevitable questions come up, here's where you'll find the answers."

 

Twila Slesnick, PhD, Enrolled Agent Twila Slesnick is an Enrolled Agent who specializes in tax and investment planning for retirees and prospective retirees. She has conducted numerous seminars throughout the U.S. in the areas of computer use, retirement planning and tax planning. She has also served as senior editor of a national computer magazine, developed computer software and designed mathematics curricula. She lives in Dublin, California. IRAs, 401(k)s & Other Retirement Plans is her first book for Nolo.

 

IRAs, 401(k)s & Other Retirement Plans: by Twila, Slesnick
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