What To Do With Your Retirement Plan if You Leave Your Job

Leaving-your-jobIf you are leaving your job and have saved for your future by participating in your employer’s retirement plan, you have a major financial decision to make: what should you do with your account? Most people have several options from which to choose. You can either cash it out and walk away with the money, roll it over into an IRA, keep it where it is, or transfer the funds into your new employer’s plan. Each option comes with benefits and drawbacks.

Cash It Out

The opportunity to have a large amount of money handed to you can be very tempting! Common reasons a large number of workers cash out their qualified retirement plans (such as a 401(k), 403(b), and a 457 plan) when they leave their jobs include wanting to repay consumer debt or take a long over due vacation.

Be aware, however, that there are some downsides to cashing out your plan:

• Your former employer will withhold 20 percent of the funds for federal taxes, and then write you a check for the remaining 80 percent.
• If you are under the age of 59.5 you will have to pay a 10 percent tax penalty for the early withdrawal.
• You’ll have to start building your retirement savings again from scratch – which may not be so bad if you are very young and have decades to recoup, but if you are older you don’t have the luxury of time.

If you change your mind about taking the cash, you have 60 days to transfer the entire amount into an IRA (or into your new employer’s plan, if they allow it). This is called an indirect rollover. While you won’t be assessed the 10 percent penalty, you must deposit all of the money that was in the retirement account to avoid a tax consequence. If you only transfer the 80 percent that your employer gave you, the “missing” 20 percent will be considered a distribution and that sum will be taxed as ordinary income. Deposit the entire 100 percent though, and the IRS will credit you with the amount that was held back when you file your income taxes.

The IRS will also waive the penalty if you miss the deadline because of a mistake on your financial institution’s part, or if you were too ill to meet the cut-off date.

Note: the cash in your retirement plan is not lottery winnings! It is money you have set aside for those years when you will either be unwilling or unable to work.

Direct Rollover into an IRA

With an IRA rollover, you transfer your qualified retirement plan funds directly into a Traditional IRA. With these trustee-to-trustee transfers, the money is invested throughout the process, so you don’t have to deal with the tax problems associated with indirect rollovers. The 20 percent mandatory federal income tax withholding does not apply, nor does the 10 percent early withdrawal penalty.

Other benefits include:

• Rather than the limited funds in your old plan, you have a whole world of investment options open to you. IRAs allow you to invest in such vehicles as stocks, bonds, mutual funds, annuities, CDs, investment real estate, and precious metals.
• For estate planning purposes, IRAs give you flexibility in transferring funds to your beneficiaries. Your heirs can stretch withdrawals over a long period of time instead of having to take a lump sum withdrawal.
• If you use some of the money in an IRA to buy a first home or for higher education costs, the IRS will waive the 10 percent penalty (though you’ll still have to pay income tax on the withdrawal).

Keep Your Old Plan

Certainly the easiest way of dealing with the money you have in your retirement plan is to just leave it with your former employer’s plan. Many companies will allow you to remain a participant in their plan as long as you have at least $5,000 in your account.

There are a few advantages to leaving your money in an employer sponsored plan rather than rolling it over into an IRA:

• In many cases you can borrow from the plan – an option that is not available with IRAs.
• You may be happy with the menu of funds that your former company chose.
• If you leave the company when you are at least 55 years old, you can begin to take money out without penalty.

If you keep the money with your former employer’s plan, it is easy to lose touch with what is happening at the company, and they could change investment options without you being immediately aware of the changes. It can also be hard to keep track of many different accounts, particularly if you’ve job-hopped over the years and have left behind accounts with each employer.

Transfer It to Your New Employer’s Plan

In many circumstances you can transfer the proceeds from your former employer’s plan directly into your new employer’s plan. It is important to check with your new company first to make sure that it will accept the transfer before you arrange for the rollover.

There are several upsides to this option:

• Your investments continue to grow income tax deferred.
• You avoid the tax penalty and federal income tax withholding.
• As with your old plan, you will probably be able to borrow against the account.

The downsides? Your investment choices will be limited to your new fund options, there may be new plan restrictions to consider, and you won’t have the investment and access benefits that an IRA offers.
Decisions concerning the money you have invested in your employer sponsored retirement account are indeed big ones. Before you choose, be sure to consider your overall financial circumstances, investment needs, and the tax consequence of each option.

Copyright © 2006 Balance

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Online Banking Credentials are the Top Phishing Target by 300%

phishing credentialsIf you are wondering what types of companies are targeted most by hackers, Websense Security Labs has an answer. According to a report that includes data from January to May of this year, financial services firms top the list. The rate at which these types of businesses are targets is 300% more often than organizations in other verticals. What are the hackers after? Most often it is credentials for online banking.

The most common types of attacks that attempt to get this information are Geodo, Rerdom, and Vawtrack. These are all spread via email messages that go phishing for information. Geodo, which is a newer version of the Cridex malware is used 400% more often than in any other industry. It usually involves a user opening an attachment infected with malware which takes advantage of Microsoft Office macro functionality. Rerdom is a spam generator, which sends massive amounts of email to unsuspecting users with links or attachments that contain malware that harvests credentials. Vawtrak is a Trojan that attempts to steal passwords and uses browser histories and cookie information, as well as digital certificate information to obtain credentials. Always watch out for phishing attempts. This method of stealing information remains the top of the list as a strategy for hackers.

Often malware is embedded in attachments that come in phishing emails. When the attachment or link is clicked, it sets off some type of action allowing the malware to be released to search for information or otherwise wreak havoc. There are typical indicators for recognizing phishing. If it’s email, the messages contain poorly written text, typos, and punctuation mistakes. The sending email address may even be known by the recipient, but it is easy to spoof that information. Make sure to expand the email address to see the complete version of it. Even if the sender truly is someone familiar, always be 100% sure it is OK to open anything inside. Place a quick phone call to the sender if necessary. If there is a link, hover over it with the mouse to see if it directs to where you think it should. If in doubt, just don’t go there.

Make sure anti-malware is installed and updated on all devices. This will help detect much of the malware that does arrive in email messages. Many, if not most browsers also have anti-phishing features. Turn those on as well. Check the settings and options for the browsers you use.


© Copyright 2015 Stickley on Security

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Don’t Take A Vacation From Information Security: A Few Tips Before Your Trip


Off on your summer vacation? It’s likely you can log in from anywhere at any time to keep attached to the grid. Before you hit the road for your summer trip, make sure you and the kids keep basic security practices at the top of your minds.


  • Make sure those phones, tablets, and laptops are locked when not being used. It’s reported that around 100 smart phones are lost or stolen every minute in the United States. With all the information that is stored on those devices, you probably want to keep it secured. It is best to set them to auto-lock after a short time period (such as two minutes) just in case you forget to manually do it. When you do this, make sure it cannot be unlocked without entering a passcode. That may sound very elementary, but some people just lock it to behave as a screen saver; but then anyone can just unlock it and go to town retrieving information.


  • When choosing a passcode, make it as long as possible.  Every extra digit takes 10 times as long for someone to crack the code. Just don’t make it your birthdate or some other code that is easily associated to you.


  • Consider activating the option to wipe the device after so many incorrect passcode guesses. It’s easy to lose things when you’re traveling. You can also enable the “find my phone” feature, if it exists for your device so that if it’s lost, you can locate it.


  • If possible, use the option to encrypt the data when it is locked. This means that if someone tries to retrieve the data off the flash memory to read on another device, he still won’t be able to read it without a key.


  • Don’t assume that all the free WiFi you come across on that trip is secure. Even if a connection requires a password that you get from the cashier, it doesn’t mean it’s safe to use it. It’s better to use your cell phone connection from a security standpoint.


  • Consider turning off the GPS functionality (or geolocation) on all your mobile devices. These track your location, attach that information to your photos and posts, and subsequently may get sent out when you post to social media. If someone figures out you are not home, it makes your empty abode a nice target for a thief. Even if your furnishings are hand-me-downs or in bad shape, the information that can be found in your files or your mail can be valuable to an identity thief.


  • While it might be rare that you need to use a public computer or even an ATM these days (doesn’t every business take credit cards these days), use caution if you do find yourself in this position. Public computers are often loaded with malware that can steal your information, such as your banking login credentials.  Devices can be attached to ATMs and even to cash registers, called skimmers that can read the data off your debit card and steal your PIN and the details on the magnetic strip. Check for this before putting your card into the slot. Give it a jiggle and if it comes off, it’s a skimmer. Go to another machine.


  • If anything seems out of place or uncomfortable about a place where you want to use a credit or debit card, don’t feel bad for leaving and going elsewhere. If that uncomfortable feeling happens after your card has been used, use your smart phone to check your account right away. Report anything suspicious to your card issuer.


  • Just because you’re on vacation from your daily routine, doesn’t mean you should take a vacation from applying patches and updates as they are available. Turn on auto updates if it makes it easier to keep up while away.


  • Secure the devices the kids will be using too. They might be older tablets, but that just means they may be even more vulnerable if they are not up-to-date. Apply the patches and updates before you go.


  • Vacations are intended to alleviate stress. Take a few minutes to secure your devices in advance and you won’t have a digital mess to deal with when you get home. You don’t take vacations from your physical security, so why would you with your information security?  Happy and safe travels!

© Copyright 2015 Stickley on Security

9 Ways to Master Your Money

How_to_Master_Money1. Set Specific Goals

Saving tends to be easier when you have a certain purpose in mind: Saving for your first house, retirement at a certain age, a child’s college education, or even a trip around the world. The important thing is to be specific.

To develop a sound plan, these goals must have both a time frame and a dollar amount. Once you have listed and quantified your goals, you need to prioritize them. You may find, for example, that saving for a new home is more important than buying a new car.

Whatever your objective, be specific. Figure out how many weeks or months there are between now and when you want to reach your target. Divide the estimated cost by the number of weeks or months. That’s how much you’ll need to save each week or month to have enough money set aside. Remember, a goal is a dream with a deadline.

2. Pay Yourself First

Save and invest 5-10% of your gross annual income. Of course, this can be much harder than it sounds. If you’re currently living from paycheck to paycheck without any real opportunity to get ahead, begin by creating a solid budget after tracking all monthly expenses.

Once you figure out how you can control your discretionary spending, you can then redirect the money into a savings account. For many people, a good way to start saving regularly is to have a small amount transferred automatically from their paycheck to a savings account or mutual fund. The idea: If you don’t see it, you don’t miss it.

3. Maintain An Emergency Fund

Before you commit your newfound savings to volatile and hard-to-reach investments, make sure you have at least three to six months’ worth of expenses saved in an emergency fund to see yourself through difficult times. Keeping it liquid will ensure that you don’t have to sell investments when their prices are down, and guarantee that you can always get to your money quickly.

If you have trouble deciding how much you need to keep on hand, begin by considering the standard expenses you have in a month, and then estimate all the expenses you might have in the future (possible insurance deductibles and other emergencies). Generally, if you spend a larger portion of your income on discretionary expenses that you could cut easily in a financial crisis, the less money you need to keep on hand in your emergency account. If you have dependents, you’d want to keep more money in your emergency fund to offset the greater risk.

4. Pay Off Your Credit Card Debt

If you’re trying to save while carrying a large credit card balance at, say, 19.8%, realize that paying off the debt is a guaranteed return of nearly 20%. Once you pay off your credit cards, use them only for convenience, and pay off the balance each month. If you tend to run up credit card charges, get rid of the plastic and go back to using cash.

5. Insure Your Family Adequately

A major lawsuit, unexpected illness or accident can be financially devastating if you lack proper insurance. The key to insurance is to cover only financial losses so large that you could not cope with them and remain financially fit. If someone is dependent on your income, you need adequate life insurance. Long-term disability coverage is important as long as you need employment income. Also, be sure to carry adequate liability coverage on your home and auto policies.

To save on annual premiums, it might be feasible for you to raise your insurance deductible, or eliminate dual coverage. And whenever purchasing insurance – life, home, disability, or auto – be sure to shop around, and buy only from a reputable firm.

6. Buy A Home

Since 1968, the median price of single-family homes has gone up 300%; many houses still appreciate at a rate of 6% to 8% annually. Further, homeownership entitles you to major tax breaks. Interest on first and second home mortgages is fully deductible, meaning Uncle Sam helps subsidize your property investment. Additionally, the equity in your home can be a great source of retirement income.

Through a reverse mortgage, homeowners can access the equity in their home without having to sell, and have the option of receiving monthly income for life (or chosen term) or opening up a credit line against the home’s value.

7. Take Advantage Of Tax-deferred Investments

If your employer has a tax-deferred investment plan like a 401(k) or 403(b), use it. Often, employers will match your investment. Even if they don’t, no taxes are due on your contributions or earnings until you retire and begin withdrawing the funds. Tax-deferred savings means that your investments can grow much faster than they would otherwise. The same is true of IRAs, although the maximum amount you can invest annually in an IRA is substantially less than what you can put in a 401(k) or 403(b).

8. Diversify Your Investments

When it comes to managing risk to maximize your return, it pays to diversify. First you need to diversify among the three major asset classes: cash, stocks and bonds. Once you have decided on an allocation strategy among these three investment classes, it is important to diversify within each asset. This means buying multiple stocks within a variety of industries and holding bonds of varying maturities. Simply put, don’t put all your eggs in one basket. Also, don’t make the mistake of putting most or all of your money in “safe” investments like savings accounts, CDs and money market funds. Over the long haul, inflation and taxes will devour the purchasing power of your money in these “safe havens”.

All investments involve some trade-off between risk and return. Diversification reduces unnecessary risk by spreading your money among a variety of investments. Aside from diversification, the single most effective strategy is to invest continuously over time, with a long-term perspective.

9. Write A Will

The simplest way to ensure that your funds, property and personal effects will be distributed according to your wishes is to prepare a will. A will is a legal document that ensures that your assets will be given to family members or other beneficiaries you designate. Having a will is especially important if you have young children because it gives you the opportunity to designate a guardian for them in the event of your death. Although wills are simple to create, about half of all Americans die intestate, or without a will. With no will to indicate your wishes, the court steps in and distributes your property according to the laws of your state. If you have no apparent heirs and die without a will, it’s even possible that the state may claim your estate.

To begin, take an inventory of your assets, outline your objectives and determine to which friends and family you wish to pass your belongings. Then, when drafting a will, be sure to include the following: name a guardian for your children, name an executor, specify an alternate beneficiary and use a residuary clause which typically reads “I give the remainder of my estate to …” Once your will is drafted, you won’t have to think about it again unless your wishes or your financial situation change substantially.

© Copyright Balance