Converting 403(b) to an IRA Different individual Tax payer choose different retirement plans, vehicles, product and strategies

to be able to take advantage among other things lower taxes and other applicable distribution exclusion to possibly additional taxes One of the various retirement plans is a qualified retirement plans or Tax sheltered income contributions to a 40 !b" offered by most #ospitals, $olleges, Other%&ot for profit organi'ation and other tax%exempt organi'ation under ()* $ode +0 !b" The contributions made may be sub,ect to taxes in future years on withdrawals even at retirement or exit of employment contract with the organi'ation or employers offering such retirement plan, since the aim is to retain the tax payer from the organi'ation on other hand and take maximum deduction of compensation in the files tax returns One strategy to avoid both additional taxes and escape certain distribution exclusion is by way of rollovers- )oller exist for qualified plans to no qualified plans and within non qualified plans such as the Traditional ()., )oth ()., *(/012 and others )oller )etirement contributions made or money to an (ndividual )etirement .ccount !.n ()." One excellent way to keep retirement plan assets !contributions" growing tax%deferred when Tax payers changed ,obs is through a direct rollover of the assets to a traditional (ndividual )etirement .ccount !()."- This allows avoiding the mandatory 304 federal income tax withholding on withdrawals from tax%deferred retirement plans- Tax payers also are able to direct contributions to the financial institution of choice- /any more investment options are attracted because not only will Tax payer be able to invest in the mutual funds of choice, but permissible within an (). to invest in individual stocks-

(t is note worthy, if cash is taken from a qualified retirement plan account, it must be rolled over into an ()., rather than some other asset of equal valueThere are certain advantages to rolling over your 40 !b" into an ().- 5reater investment flexibility is ma,or among them#owever, a couple of distinct disadvantages must be kept in mind- .dministratively, it may cost more to maintain an ().- That6s because in a 40 !b", transaction costs are often not paid by Tax payer- .lso, money in an (). is more vulnerable to claims made by creditors if there is bankruptcy filing by Tax payers or being sued- This is unlike some 40 !b"6s or other employer% sponsored pension plans, that are protected by the 2mployee )etirement (ncome *ecurity .ct !2)(*." to insures that money currently invested in a plan for the explicit purpose of retirement is protected from people to whom the tax payer is or are indebted/aintaining future flexibility to eventually put the assets from retirement into a new 40 !b" plan, it is best to roll over assets to a new ()., called a 7$onduit ().,7 to avoid 7commingling-7 (f the assets from retirement plan are mingled with other assets in an existing ()., Tax payer may be unable to roll over those assets into another employer%sponsored plan, should you the tax payer wish to do so- 8ith a $onduit (). afford temporary parking space for money between 40 !b" plansOnce decision to rollover 40 !b" money or contributions is made, the decision must consider whether the rollover will be a direct rollover !also known as a trustee%to%trustee transfer" or an indirect rollover. Direct Rollover

Only a traditional (). can be used for rollover contributions from employer plans- . )oth (). is not eligible to receive rollover contributions from employer plans- )oller can be made to a to a traditional ()., then roll over the traditional (). to a )oth (). . direct rollover is the direct sponsor%to%sponsor !or trustee to trustee" transfer of a qualified distribution from your employer6s qualified retirement plan to an (). or new employer6s retirement plan !if you6re simply changing ,obs"- Tax payers do not touch the money! The two employers or the two financial institutions transfer the money on behalf of the tax payerDirect rollover is more convenient and there is no danger of missing the (). deadline, most investors prefer this option as it takes away the burden of 90 days timing to deposit receipt of check into an (). account1et6s say the Tax payer want to transfer 40 !b" funds from one financial institution to an (). with a different financial institution, *imple dial or call up the new institution and have a new institutions contact the old institution to handle the transfer.ccording to the ()*, a direct rollover may be accomplished by any reasonable means of direct payment, including a wire transfer or the mailing of a check to the eligible retirement plan- (f the payment is made by wire transfer, the wire transfer must be directed only to the trustee of the eligible retirement plan- (f payment is made by check, the distribution check from the retirement plan at Tax payer old company must be made out in the name of the trustee or custodian of the (). account directed by the tax payer to receive the rolled%over fundsThe Tax payer simply request the bank or brokerage house that will function as the (). trustee or custodian for specific written instructions on how the check should be made out- (t will be something like, Pay to the order of Major Financial Corporation, for the benefit of Joe . !ise. (f the plan is not an ()., the payee line of the check need not identify the trustee by name

and may read Trustee of the "#$%b& plan for benefit of Joe. . !ise. Tax payer institution of choice will provide guidance (n direct rollover, no money is withheld for taxes and tax payer does not have to remember to write a check to reinvest it(f no request a direct rollover is made, the company is required by law to withhold 304 of the amount distributed for federal taxes- Tax payer must roll over the remaining :04 within 90 days or else it becomes sub,ect to tax and may be sub,ect to a ;04 early distribution penalty(n addition, Tax payer must replace from personal own money the 304 withheld by the company and roll it over to an (). within the same 90 days- (f not within this time it is also sub,ect to tax and may be sub,ect to a ;04 early distribution penalty as wellThe Indirect Rollover to an IRA . request by Tax payer to the employer or (nvestment $ompany to issue a check directly to Tax payer from retirement account with plan to roll it over to another plan or (). is considered an 7indirect rollover-< The investment company will be only too happy to send a check for the full vested balance in the retirement account- (n this situation, Tax payer has 90 days to roll over the assets to preserve the tax status of the account- The check is simply deposited solely in the rollover (). within 90 days- The 90%day rule commences on the day after receipt of check and inclusive of the day the check is deposited into the ().- =or example, check received on *ept- ;, must be deposited into an (). on or before Oct- ; with no extension for weekends or holidays.nd, as mentioned earlier, your employer or investment company is required by law to withhold 304 of the amount paid to you as prepayment of federal income tax !you may recoup the 304 withholding when you file a credit on your income taxes for that year"- (f you want to roll over

the entire amount of your distribution, you can make up the difference using money from your other savings=or example, if you have > 00,000 to roll over, the amount you receive will only be >340,000 !> 00,000 less the 304 withholding of >90,000, which will be sent to the ()*"- Thus, you will only have >340,000 to rollover- (f you don6t happen to have >90,000 lying around and you don6t come up with it and put it into the ()., then that >90,000 will be considered a taxable distribution, even though part of it may be refunded to you when you file your tax return- .nd, if you received your distribution before you are +? ;@3, it probably will be sub,ect to a ;04 early distribution penalty as well- *o, to avoid tax hassles and lost investment returns on the withheld amount, always have the institutions transfer your money- Don6t ever take possession of retirement money that6s intended for a rollover or transferAdvantages of Rolling Over to an IRA A &o immediate tax is owed or penalties incurred on roll over of plan assets to an ().A 5ives the flexibility to invest (). contributions in almost every type of mutual fund or individual security with wide range of investment choicesA $onvenience and $ontrol- Tax payer control .ssets in an (). account, allowing access to the money if the need arise !taxes and penalties may apply, however"- On retirement, Tax payer can select from a variety of flexible payment optionsA $ontinued $ontributions- 8ith an ()., Tax payer can continue to make either deductible or nondeductible contributions, unless you want to avoid comminglingA )oth (). $onversion Option- (f you are eligible, you can convert to a )oth (). after completing a rollover to a traditional ().-

A (). as a *hort%Term Borrowing *ource Ta payer may face a temporary cash crunch and desperately need some extra money ,ust for a short period of time even when necessary cash comes in a month or so, but not in the immediate- . potential solution is 7borrowing7 from (). account, which can be done with no interest charge, virtually 'ero paperwork, and no delays from stuffy loan officersTechnically, this is impossible- #owever, there is a little strategy that will free up some money for a short period of time- Tax payer simply withdraws the needed funds and make sure to replace the money within 90 days- Tax payer is considered to have made a tax%free (). rolloverFreq enc! of Rollover The money can be deposited back into the same (). account it came from or into a different account, but each account can receive only one of these rollover deposits during any 9+% day period- 'irect or trustee(to(trustee rollovers from another (). into the account in question don6t count for purposes of the one%year waiting period rule, nor do rollovers of distributions from qualified retirement plans(f these guidelines are violated, it is considered to have made a taxable (). withdrawal, and Tax payer may owe the ;04 premature withdrawal penalty- This is smart way to keep retirement assets working even when tax payers change ,obsConcl sion .lways consult a competent financial professional or attorney to clarify issues or when you find yourself in doubt- (n the long run, you6ll come out ahead of the game-