Open an IRA Account
you CHANGING YOUR JOB?
We will help you Rollover your 401(k) savings to an
Does I.R.A. Really Mean?
in this country, we’re not referring to the Irish Republican
Army. Actually, we’re talking about an Individual Retirement
Account. Or an Individual Retirement Annuity (see below)…
and even these terms can be confusing. After all, what does
an Education IRA have to do with retirement? And who is that
Roth guy, anyway? Isn’t “Rollover” something
my dog does? Let’s take a closer look.
one thing most IRAs have in common is special tax treatment.
That might mean tax-deferred growth (which means you don’t
pay taxes on your investment or its earnings until you withdraw
the money) or tax-free growth, which means you’ve already
paid the taxes on your IRA investment, but (as long as you
follow certain guidelines), you won’t pay taxes on your
investment earnings when you make a withdrawal. See the box
below for more clarification and important information about
how different IRAs work in relation to each other and the
tax codes, and clarification about special tax treatments.
other feature that brings these – seemingly dissimilar
– arrangements together is that the “I”
in IRA stands for “Individual”. An IRA is an arrangement
you make for yourself, not through an employer – like
a payroll-deduct retirement plan, or flexible spending account.
To the general public, the term “IRA” has come
to mean, simply, a personal account that enjoys some sort
of special tax treatment (again, see the box below for important
said (or written!), let’s take a look at the different
kinds of IRAs that are available to you:
Education Savings Account
(formerly Education IRA
not covered by an employer's retirement plan
on income, may participate in employer's plan
in an employer plan who are changing employers or retiring.
Rollovers are also accepted from other IRAs and Roth IRAs
and Simplified Employee Pension (SEP) Plans
under age 18 (Education IRAs cannot accept contributions
on behalf of beneficiaries older than 18)
deferred investment and earnings growth
Tax-deffered status of Employer Plan.
growth of investment earnings; Tax-free widrawals for
qualified education expenses
(Pre-tax eligibility subject to income limit)
limit ( for pre-tax rollovers) See traditional or Roth
IRA for yearly limits for additional contributions
to $2,000 per year (except for rollovers from other Education
IRAs); subject to income limitations
depending on income
depending on income
age to start taking income
start taking withdrawals by
30 (Remaining funds may be rolled into a Coverdell Account
for Another beneficiary
on earning and Pre-tax contributions
if funds invested five or more years
on earnings and pre-tax contributions
if withdrawn for qualified education expenses
(1) After 2008, indexed in $500 increments
for cost-of-living adjustments.
Definitions and Information about IRAs
– This means you don’t pay taxes on your IRA investment,
or its earnings, until you actually withdraw your money. IRAs
and other qualified plans already offer the same tax-deferral
feature found in annuities. Your investment is taxable at
withdrawal, and may be subject to an additional 10 percent
early withdrawal penalty if you withdraw it before you reach
age 59 ½.
growth – With a Roth or Education IRA, you’ve
already paid taxes on the money you invest in your IRA, and
you pay no taxes on its investment growth, assuming (with
a Roth) that it’s been invested for at least five years
and you’ve reached 59 ½, or (with a Coverdell
Education Savings Account) that it’s withdrawn for qualified
– An insurance contract that usually offers a range
of investment options, benefits and features. For example,
you can purchase guaranteed death benefits or payout options,
which are based on the claims-paying ability of the issuing
insurance company. For additional fees, you can choose death
benefit protection and the ability to receive a life-time
– Isn’t – Everything!
timing. Excessive or frequent trading. Mutual fund scandal.
These phrases, and the actions they represent, have consumed
the recent media. Careers in the financial arena are crumbling
as companies are accused of abuses and regulatory agencies
are bearing down with increased scrutiny on the practices
and managers who have accommodated them.
the highest level, “market timing” means attempting
to follow market activity to successfully “buy low”
and “sell high.” The term is typically used for
people who quickly buy and sell securities to grab profits
from short-term price changes. But it’s a little different
in mutual funds, which are usually geared to long-term investors
– people investing for retirement or education costs.
When someone trades in and out of a fund too frequently, it
may hurt the fund’s overall performance and burn other
shareholders practicing disciplined long-term investing.
market timing is not illegal, many funds have increasingly
discouraged the practice because it threatens to increase
costs, hurt fund performance and disadvantage long-term shareholders,
because money doesn’t stay invested in the fund. It
flows in one day and out the next. That means the funds need
to hold additional cash reserves to cover the frequent trading,
with fewer dollars available to invest on behalf of all shareholders.
Excessive trading can also result in higher transaction costs,
which increase the fund’s expenses, and potentially
reduce returns for the long-term investor.
Irish Republican Army
B) Individual Retirement Account
C) Interest Receiving Account
Moving money from one tax-favored plan into another
B) Something you teach your dog Rover to do
C) Something you can only do with an IRA
Calculating how long it takes you to walk from one end of
the NYSE floor to the other
B) Leaving your stock investments in the market until you
reach your financial goals
C) Practicing “buy low, sell high” on a minute-to-minute
basis, jeopardizing fund trading privileges
Coverdell Education Savings Account is:
The same thing as a 529 Plan
B) An IRA that can be used as a shorter-term investment for
goals like tuition funding
C) How the Coverdell family saves for tuition
The growth of your investment is halted until you pay taxes
B) You no longer need an accountant
C) You don’t pay taxes on your investment until the
money is withdrawn
stands for… Answer: B A Rollover is… Answer: A
Market Timing is…Answer: C
An Education IRA is… Answer: B Tax Deferred growth means…
note that the precise coverage afforded is subject to the
terms, conditions, and exclusions of the contract as issued.
This explanation is intended only as a guideline. This information
is not intended to be considered investment, tax or legal
advice. It is provided, for your education only. This is not
an IRA contract. All terms and coverages are defined solely
by your policy.
more details, please call a PaulBalep representative toll-free
1-800-964-8614 to receive a free, no-obligation proposal.
Like so many satisfied clients, we think you’ll be happy
you did. And to set up a meeting to discuss additional insurance
and financial goals: Visit us online at www.paulbalep.com,
or e-mail us at firstname.lastname@example.org.
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