When changing jobs, is this your best option? When an employee leaves a job due to retirement or termination, the question about whether to roll over a 401(k)or other employer-sponsored plan quickly follows. A 401(k) plan can be left with the original plan sponsor, rolled over into a traditional or Roth IRA, distributed as a lump-sum cash payment, or transferred to the new employer’s 401(k) plan. Each option for an old 401(k) has advantages and disadvantages, and there is not a single selection that works best for all employees. However, if an employee is considering the option of transferring an old 401(k) plan into a new employer's 401(k), certain steps are necessary. Rolling Over to a New 401(k) The first step in transferring an old 401(k)to a new employer's qualified retirement plan is to speak with the new plan sponsor, custodian, or human resources manager who assists employees with enrolling in the 401(k) plan. Because not every employer-sponsored plan accepts transfers from an outside 401(k), it is imperative for a new employee to ask if the option is available from the new employer. If the plan does not accept 401(k) transfers, the employee needs to select one of the three other options for the 401(k) account balance. If the new employer plan accepts 401(k) transfers from other companies, there is often a substantial amount of paperwork that must be completed by the employee. The paperwork is provided by the new plan sponsor or human resources contact and requires the name, date of birth, address, Social Security number, and other employee identifying information. In addition, the 401(k) transfer form must provide details of the old employer plan, including the total amount to be transferred, investment selections held in the account, date contributions started and stopped, and contribution type, such as pre-tax or Roth. A new plan sponsor may also require an employee to establish new investment instructions for the account being transferred on the form. Once the transfer form is complete, it can be returned to the plan sponsor for processing. After the new and old plan sponsors both approve the transfer, the old plan sponsor distributes the balance of the 401(k) account to the new plan sponsor in the form of a check. After the check is received, the new plan sponsor deposits the check, and investments are purchased according to the employee’s new plan selections. A transfer from one 401(k) to another is a tax-free transaction, and no early withdrawal penalties are assessed. Advantages and Disadvantages of Transferring Advantages The biggest advantage of transferring an old 401(k) into a plan with a new employer is the ease of management. Instead of tracking investment selections, performance, or statements for multiple accounts, a transfer creates a single account that can be easily monitored. In addition, 401(k) plans typically carry lower fees on investments and transactions than rollover IRAs due to the group plan's purchasing power. Older employees have an additional advantage: Money held in the 401(k) of the company where an employee is currently working is not subject to required minimum distributions (RMDs). Account holders who turn 73 on or after Jan. 1, 2023, must take RMDs if they left the money in their previous employer's plan, according to the SECURE ACT 2.0. Anyone in this situation who turned 72 between Jan. 1, 2020, and Dec. 31, 2022, would be required to take these withdrawals. Disadvantages Transferring a 401(k) may not be the best choice for every employee, as a number of disadvantages exist. Employer-sponsored plans are limited to a certain number of investment options.8These restrictions may not allow plan participants to invest the way they want and may lead to poor asset allocation or a lack of diversification over time. Additionally, employees who participate in a 401(k) do not have a say in the company or the individual who manages the plan. The plan sponsor and company executives have total control over how the plan is established and maintained. The process of transferring a 401(k) to a new plan also can be time-consuming, as the new plan sponsor is tasked with vetting the old plan’s qualified status, hire and termination dates, and total balance eligible for the transfer. Pros A single account makes it easy to manage Fees are lower compared to rollover IRAs Required minimum distributions aren't required if you transfer your account to the new employer Cons Limited investment options No control over how the account is set up or managed Transferring may be time-consuming The Bottom Line The transfer of an old 401(k) plan to a new plan is a great choice for some employees. However, the benefits need to be weighed against the disadvantages before starting the process.

Preparation for LTC: Insurance Planning ahead for long-term care insurance can be seen as part of the retirement planning** - **it is something that young/middle-aged people should start to put on the agenda immediately. In particular, statistics show that women are 45% more likely to need long-term care, due to their higher life expectancy (80.5 years for women and 75.1 years for men). Therefore, planning LTC insurance in advance is even more important for women who are more risk-aware. Washington State: LTSS Trust Law In 2019, The Washington State Legislature established a long-term care insurance benefit for all eligible workers to address the future long-term care crisis - this is the first U**.**S state to establish a law about long-term care insurance. Below is a recap of the currently-adopted law (which may or may not be subject to changes in the near future): Employees can choose to opt-out and exempt from paying this tax, with some criteria: Tax payer must have your own individual long-term care insurance policyzin place before November 1st, 2021.Submission of opt-out requests can start as early as Oct 1st 2021 for Private LTC insurance opt-out. If the exemption is approved, individuals will not be required to pay this LTC tax, but will be permanently ineligible for benefits under the Program. Aside from Washington State, many other U.S states are also considering about something similar:

Traditional IRA In the area of retirement savings, one of the most commonly seen term in the United States is "IRA", which means individual retirement account. In U.S., IRA is a form of pension provided by many financial institutions that provides tax benefits for retirement savings. With the development of IRA, there have been several types of IRA in the United States: traditional IRA, SEP-IRA, SIMPLE-IRA, Roth-IRA. In this article, we will discuss the first three IRAs, and Roth-IRA will be covered in the upcoming article. In terms of the return rate of IRA, there is no absolute value. The actual rate of return is largely dependent on the types of investments you select. According to the Standard & Poor's 500® (S&P 500®), from Jan. 1, 1971 to Dec. 31, 2020, the average percent an IRA grows each year is10.8 percent, whereas for the 10 years ending December 31st 2021, S&P 500® had an annual compounded rate of return of 13.6%, including reinvestment of dividends. These rates can give you a glimpse of the expected return rate of an IRA, but are only reflections of the past few decades, and cannot guarantee anything for the future. Traditional IRA Traditional IRA (originally called Regular IRA) was established in the United States by the Employee Retirement Income Security Act of 1974 (ERISA). Generally, IRA is held at a custodian institution, such as: Banks Mutual fund companies Brokerage firms Life insurance companies The only criterion for being eligible to contribute to a traditional IRA is that you have sufficient income to make the contribution. Contributions you make to a traditional IRA may be fully or partially tax deductible, depending on your filing status and income. Generally, amounts in your traditional IRA (including earnings) are not taxed until you take a distribution (withdrawal) from your IRA. In other words, transactions in the account, including interest, dividends, and capital gains,are not subject to taxes while still in the account, but upon withdrawal from the account, you will be subject to federal income tax. The amount of money you can contribute to a traditional IRA account always comes with an annual limit (yes, most IRAs have limits for contribution): The primary benefit of the traditional IRA is like any tax-deferred savings plan: the amount of money available to invest is larger, compared to the case with a post-tax savings plan (such as a Roth IRA). This means that the multiplier effect of compound interest, or larger reinvested dividends, will yield a larger sum over time. Besides, with a traditional IRA, you always have the flexibility to convert to a Roth-IRA; whereas a Roth-IRA cannot be converted back into a traditional IRA- you can choose an optimal (lowest tax rate) time to convert over your life. Because you have a right, but not an obligation, to convert - that's like an option in finance. The disadvantages of a traditional IRA include strict eligibility requirements and a lack of liquidity. You must meet the eligibility requirements to qualify for these tax benefits: for instance, your income must be below a specific threshold for your specific filing status. But if your income (and thus tax rate) is that low, it might make more sense to pay taxes now (that's how Roth IRA works) rather than defer them (traditional IRA). In terms of the age limit of traditional IRA contributions, for 2020 and later, there is no age limit on making regular contributions to traditional or Roth IRAs. For 2019, if you're 70 ½ or older, you cannot make a regular contribution to a traditional IRA. However, you can still contribute to a Roth IRA and make rollover contributions to a Roth or traditional IRA regardless of your age. Taxes on excess IRA contributions If you are beyond the limit (whether the contribution or the age when you contribute), excess contributions are taxed at 6% per year for each year of the excess amounts remained in the IRA. An excess IRA contribution occurs if you: Contribute more than the contribution limit. Make a regular IRA contribution for 2019, or earlier, to a traditional IRA at age 70½ or older. Make an improper rollover contribution to an IRA. Also,all withdrawals from a traditional IRA are included in gross income, which are subject to federal income tax(with the exception of any nondeductible contributions). This tax is in lieu of the original tax on employment income, which had been deferred in the year of the contribution.