WHAT IS A ROLLOVER

TO AN (IRA)?

A rollover to an individual retirement account (IRA) is a distribution of assets from an employer-sponsored plan (or another IRA) that has been "rolled over" or deposited into a traditional IRA.

WHY SHOULD YOU USE A ROLLOVER TO AN IRA?

If you want to roll over assets from an employer's retirement plan into an account that offers tax advantages, investment flexibility and the option of later converting to a Roth IRA, consider the benefits of a rollover to an IRA.

WHAT ARE THE BENEFITS OF A ROLLOVER TO AN IRA?

Select the best option for your retirement plan assets If you retire, change jobs or leave an employer for any reason, you'll need to consider how - or if - your assets in that employer's retirement plan should be distributed. What's right for you depends on a wide range of factors, including your current financial situation and long-term goals. Your Senior Care of Texas Financial Advisor can help you evaluate your choices. Your employer is required to provide you with information about your options, which may include the following:

• Keep the assets in your current employer-sponsored plan.
  • Leaving money in your current plan may be an attractive option if you're happy with the plan's investment choices and performance. Also, your current plan may offer investment options that are available to you only while you are in the plan.
  • Keep in mind that some plans offer a limited range of investments and may restrict how often you can move from one type of investment to another or limit your access to the assets. Also, consider how future events, personnel and policies over which you have no control could affect the value of your retirement assets.
• Roll over all, or some, of the assets to your new employer's plan.
  • If this option is permitted by the plan, your assets will continue to benefit from tax-deferred treatment of all earnings, and you won't face immediate tax consequences.
  • Remember that you may not have the choice of investment options and the flexibility of changing investments because such choices may be limited by your new employer's plan. Also, depending on the plan provider's capabilities, access to your assets can be delayed by processing timetables.
• Take a distribution from your employer-sponsored plan.
  • If you are eligible, certain favorable tax treatments, such as net unrealized appreciation (NUA), capital gains rates or forward averaging, may apply.
  • Keep in mind that a withdrawal of your retirement plan assets is subject to a mandatory 20% withholding of federal income tax and may also be subject to an additional 10% penalty if you received a distribution from a qualified plan prior to age 59½.
• Roll over the assets into a traditional IRA.
  • Assets continue to grow on a tax-deferred basis.
  • There are no immediate tax consequences or early withdrawal penalties.

Other options may be available to you. Consult your plan administrator to determine the full range of those options.

Benefit from rolling over to a traditional IRA

• A traditional IRA allows you to control exactly when and how you invest, so you can reallocate your assets as market conditions or your financial goals change.
• You can also manage your distributions by drawing on your assets according to your own timetable without being constrained by a predetermined distribution schedule from an employer retirement plan. Remember that, after age 70½, you must take required minimum distributions. A required minimum distribution (RMD) is the minimum amount of funds you must begin taking annually from your qualified retirement plan(s) after attaining age 70½.
• Consolidating your retirement plan assets in an IRA can provide you with streamlined record keeping to help you meet your retirement goals while offering the convenience of aggregating all your assets in one account.
• You can make withdrawals from an IRA at any time. Withdrawals are taxed as ordinary income and are subject to a 10% penalty tax unless you are age 59½ or older, or meet another exception.
• Beneficiary designations can be part of an effective estate-planning strategy. With an IRA, you have the flexibility to name any beneficiary, including a child, friend, domestic partner, trust or charity - thus creating an efficient vehicle for intergenerational wealth transfer.

• You do not pay taxes on assets in your traditional IRA until they are withdrawn. Many investors may be in a lower tax bracket when they access their assets (usually in retirement) than when they made their contributions.
• Earnings and deductible contributions are taxed as ordinary income without additional penalties if withdrawals are made after age 59½.
• Tax-deferred growth can make a significant difference in your investment return. For example, an investor in the 30% tax bracket, contributing $3,000   1 a year over 30 years at an 8% rate of return, will have approximately $130,000 more in an IRA than in a comparable taxable investment.

• If you are eligible, a Roth IRA allows you to withdraw all your money free from federal income tax if you are over age 59½ and have funded the account for at least five years, or you qualify for another exception. However, you will pay taxes on the taxable income generated by the rolled-over distribution from your traditional IRA.
• Assets eligible for conversion include deductible and nondeductible contributions made to a traditional IRA, any earnings or appreciation of those contributions, and any eligible amounts rolled over to the traditional IRA from other retirement plans.
• You won't have to pay the 10% early withdrawal penalty tax when you convert a traditional IRA to a Roth IRA, but you will owe ordinary income taxes on any previously deducted traditional IRA contributions and on all earnings.
• If you are eligible for both a traditional IRA and a Roth IRA, deciding which one is right for you depends on your overall financial plan. Your Senior Care of Texas Financial Advisor can help you evaluate your options.

• Your Financial Advisor can help you design an investment strategy that places your retirement assets in the context of your overall financial objectives.
• Your Financial Advisor can also give you access to a much broader range of investments through your IRA rollover than are usually available through employer plans - from stocks, bonds, mutual funds and CDs to sophisticated, customized investment alternatives.

HOW CAN YOU GET STARTED?

If you want a flexible, tax-advantaged option for your retirement plan assets, ask your Senior Care of Texas Financial Advisor about a rollover to an IRA.

This maximum contribution limit is applicable to individuals under age 50 for 2002. The contribution limits increase gradually until 2008, when they reach $5,000. After 2008, limits are increased for cost of living adjustments (COLA).

For illustrative purposes only. Returns are not guaranteed and do not reflect taxes, if any, payable upon withdrawal.

Neither Senior Care of Texas nor Senior Care of Texas Financial Advisors provide tax advice. Clients should review any planned financial transactions that may have tax implications with their personal tax advisors.

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