What is an IRA?

Simply put, an individual retirement account (IRA) is an account that holds a variety of investments and relies on long-term, tax-deferred compounding to let retirement savings grow more quickly than in a taxable account. When you earn interest, receive a stock dividend or profit from the sale of a stock in an IRA, individuals don’t pay any taxes that year on those earnings. All taxes are deferred until you withdraw the earnings after retirement. In that way, retirement savings and earnings continue to grow until you need them during retirement.

A cash distribution may seem convenient, but you’ll be required to pay income taxes on the amount you’ve withdrawn from your 401(k) as well as a 10% early-withdrawal penalty if you’re not 59 ½ years of age. A better alternative is to keep those retirement assets growing tax-deferred in an Astor Asset Management IRA.

Potential implications of a $30,000 early cash distribution of an
eligible rollover amount from a 401(k) plan assuming:

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Click the green tabs on the left for more details.

Advantages of an IRA

When you call Astor, you’ll meet personally with one of our investment professionals, who will help you develop a retirement investment strategy and educate you about the rollover options. We’ll help you quickly and directly roll 401(k) assets from a former employer into an IRA which:

  • Enables you to consolidate multiple retirement plan accounts into one rollover IRA, providing greater convenience and simplicity, expanded investment options, and greater control over the retirement portfolio.
  • Potentially lowers administration fees.
  • Maintains the tax-deferred status of retirement savings (assets are not taxed until withdrawn).
  • Allows for additional contributions each year.
  • Offers greater flexibility with asset distribution during retirement, including partial distributions and penalty-free distributions prior to age 59 ½ (if certain requirements are met).
  • Provides the same federal protection from creditors as currently provided to 401(k) plan assets.
  • Could provide additional distribution options to beneficiaries, including the ability to stretch out asset distributions.

 

Potential Advantages of $30,000 (pretax) distribution rolled directly to an IRA versus taking a lump-sum cash distribution and investing the net proceeds of $19,500 (after tax*) in a taxable account

 

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Click here to request more information or call Astor today at 312.373.6280. Ask for Michael Hovanec or Scott Martin to set up a free consultation.