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Finance Mun\ inter mutton On readers who sequired mote relurement plans requested that Esover this investment topic an ene of my tuture columns T hope the fellow wall he ot semor group of retifees of: those my some uid to out nearing retirement 401th) plans and Individual Retirement - Accounts (IRAs) raise your returns and trim your taxes. In recent decades have offered their employees the option of enrolling in a 401th» Retirement Plan a tax-deferred savings plan sane uoned by the US Government to enable people to save for their Also. - the ULS has _- sanctioned Individual Retirement dR Asi These may be opened in addition to. and separate from. employers retirement Gam ernment Aceounts employer sponsored 401th ) plans Internal Revenue Service rules for opening an IR A are Anyone not actively participat ing in an- employer sponsored meturement plan and not in the labor force may open a traditional IR A account it the 2004 adjusted gross income is $45,000, or less if tiling a tax return individually. or $65.000 it filing jointly with a spouse It the combined adjusted gross income is between $65,000 and $75,000. the tary -deduction is reduced. it is eliminated it point income tops $75,000 How it works It you fsle your tax return jointly, and your spouse has more than $6.000 of W- reported income. you and your The ins and outs of retirement plans BY TED KAPLAN faking funds from your 401(k) and putting them into an IRA can save your heirs a huge amount of taxes. spouse can contribute $3,000 each tor a total of $6,000. The IRS per- muts an addiuonal $500 \catch-up\ contribution if your spouse is over 50 yours of age. The amount you may place cach year into a 3OTik) plan is limuted by employers and the IRS bused upon the ty pe of 401(k) plan that your company has in force In some cases you may be able to contribute as much as $13,000 of your gross annual salary tax-free. The amount one can place annual- Iv into an IRA is limited by feder- al law and depends upon your age and income. For additional infor- mation on the different types of returement plans. you may request a copy of IRS Publication 590 tor any IRS publication) at 1-800- §29-3676; it may be picked up at the IRS offices in Hauppauge or Riverhead: easiest of all, for those who are computer literate: it is available on the IRS's website at ww wars.gov. If in doubt about how to proceed. it is always wise to consult your tax adviser or tinancial consultant. If you are still working and placed in the plan will be deterred unul you reture. allowing that money to grow It you transfer to a new compa- ny and the new employer does not offer a 401th) plan, you may leave your funds in the first plan. Although neither you nor your tormer employer will be con- tributing new funds to it. the montes already there will continue to grow, tax-deferred. As an alter- native you may roll it over into an IRA. If your new employer does offer a 401(k). then request a transfer \trustee to trustee\ direct- ly to your new employer's plan. If you are still working or con- sidering retirement. do not ever ask for a check for the balance. This may be a huge blunder! By law your employer must send 20 percent of your funds to Uncle Sam. sending you a check for only care in a plan which --80 percent your 101th) balance.. your enjplnyer contributes. You can reclaam your 20 percent match your own contributions. then naturally stay with it through reurement. Contribute as much as the plan will permit and to the maximum that your finances and cash flow allow. Advise younger family members just embarking on a career to do the same. even if it means lowering current dispo~- able income until they reach a higher level of income. This is the best way to plan for a secure retirement,. with a large portion of those funds coming as a gift from your employer. Another huge bonus is that annual income taxes on that portion of income with your next tax - return. However. in the meantime, if you plan to invest your money in an IRA you must deposit the entire 100 percent of your original account balance into the IRA within sixty days. If you have insufficient cash reserves and thus are unable to come up with the 20 percent already sent by your employer to Uncle Sam you will be hit for tax on the money involved and possibly tax penal- ties as well. In addition to a 401(k) plan with your employer. you may also Continued on page 14 PRIME TIMES * OCTOBER/NOVEMBER 2005 « TIMES BEACON RECORD «e PAGE 6
