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STATE OF CONNECTICUTDEFERRED COMPENSATION 457 PLAN
The Roth 457 More Choice in Your 457 Plan
STATE OF CONNECTICUT DEFERRED COMPENSATION 457 PLAN
You should consider the investment objectives, risk, and charges and expenses of the investment options offered through a retirement plan carefully before investing. The fund prospectuses containing this and other information can be obtained by contacting your local representative. Please read the information carefully before investing.
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STATE OF CONNECTICUT DEFERRED COMPENSATION 457 PLAN
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Important information
• Voya does not offer tax or legal advice. This material is not intended to be used to avoid tax penalties, and was prepared to support the matter addressed in this presentation. The taxpayer should seek advice from an independent tax advisor.
• Third-party administration provided by Voya Retirement Insurance and Annuity Company (VRIAC), One Orange Way, Windsor, CT 06095-4774. Securities distributed by Voya Financial Partners, LLC (Member SIPC) or other Broker-Dealers with which Voya Financial Partners, LLC has a selling agreement.
• Registered Representatives and Investment Adviser Representatives are affiliated with Voya Financial Advisors, Inc, member SIPC.
CN-1214-11040-0116
STATE OF CONNECTICUT DEFERRED COMPENSATION 457 PLAN
Our Mission – Simple and Clear
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To make a secure financial future possible –one person, one family, one institution at a time
STATE OF CONNECTICUT DEFERRED COMPENSATION 457 PLAN
a smart way to save.
Automatic payroll deductions
Investment flexibility
Tax-deferred* retirement contributions and earnings
Your 457 Plan continues to offer…
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*Please note that distributions from a 457(b) plan will be taxed as ordinary income when distributed and are subject to any tax penalties that may apply, unless an IRS exception applies.
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STATE OF CONNECTICUT DEFERRED COMPENSATION 457 PLAN
The Roth 457 option to consider
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A Roth 457 offers you the potential for tax-free* income whenyou retire.
*Certain qualifying conditions apply.
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STATE OF CONNECTICUT DEFERRED COMPENSATION 457 PLAN
With the Traditional 457
Now:Pay no income taxes
on contributions during yourworking years.
Pay taxeswhen you withdraw during retirement.
Later:
The Internal Revenue Code generally prohibits withdrawals of 457(b) contributions and earnings prior to death, age 70 1/2, severance of employment, or unforeseeable emergency. Note that distributions from the Roth 457(b) are subject to taxation on the portion attributable to earnings if made before Qualified Distribution provisions are satisfied.A Qualified Distribution is one that meets the 5 year rule AND occurs at least at age 59 1/2, death, or disability.
Would you rather pay taxes later?
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STATE OF CONNECTICUT DEFERRED COMPENSATION 457 PLAN
With the Roth 457
Now:Pay income taxes
on contributions as youmake them.
Withdraw savings tax-freeduring retirement,
once qualifying conditions are met.
Later:
Or get them out of the way now?
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The Internal Revenue Code generally prohibits withdrawals of 457(b) contributions and earnings prior to death, age 70 1/2, severance of employment, or unforeseeable emergency.
Note that distributions from the Roth 457(b) are subject to taxation on the portion attributable to earnings if made before Qualified Distribution provisions are satisfied.
A Qualified Distribution is one that meets the 5 year rule AND occurs at least at age 59 1/2, death, or disability.
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STATE OF CONNECTICUT DEFERRED COMPENSATION 457 PLAN
Some things stay the same• Simple payroll deductions.
• Same high contribution limits* as for a traditional 457.
• Access to the same investment options.
• Same flexibility to make investment changes.
• Same required minimum distributions.
Some things change
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*When contributing to both, traditional and Roth, contribution limits apply to the combined balance.
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STATE OF CONNECTICUT DEFERRED COMPENSATION 457 PLAN
The treatment of Traditional 457 Roth 457
Money going in Pre-tax After-tax1
(contributions)
Money Taxable when Tax-free if five-year holding period iscoming out withdrawn satisfied and age 591/2 or older, (distributions) disabled, or deceased
Some things change
Direct Rollovers allowed to Traditional 403(b), governmental 457(b), 401(a) including 401(k), Traditional IRA or Roth IRA2
Direct Rollovers allowed to another Designated Roth 401(k), 403(b) or 457(b) that will accept them or Roth IRA2
Money moving on (rollovers)
1 Roth deferrals are subject to federal (and, where applicable, state and local) income tax withholding, while Traditional deferrals are not. However, payroll taxes (FICA and FUTA where applicable ) apply to both Roth and Traditional deferrals.2 Rollovers to a Roth IRA from a Roth 457(b) are not subject to the income restrictions that apply to Roth IRA contributions.
Some things stay the same
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STATE OF CONNECTICUT DEFERRED COMPENSATION 457 PLAN
The Roth 457
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So, who might this be right for?
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STATE OF CONNECTICUT DEFERRED COMPENSATION 457 PLAN
The Roth 457 might be right if you ...
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Are just starting career Are in relatively lower income tax bracket Believe your income (and taxes) will
increase in the future Aren’t worried about current tax
deduction
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STATE OF CONNECTICUT DEFERRED COMPENSATION 457 PLAN
The Roth 457 might be right for you if...
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Traditional RothPre-tax 457 After-tax 457
Comparing Cindy’s options:
After-tax value: $320,394 $406,500
Gross income: $35,000 $ 35,000
Less taxes at 33%** -$157,806 -$0
Annual salary available to save: $3,000 $ 3,000
Less taxes at 25%* -$0 -$750
Net yearly contribution: $3,000 $2,250
(totals over 40 years): $120,000 $90,000
Value at retirement:(assumes 40 years of contributions at 6%) $478,200 $406,500
** Assumed rates designed to illustrate impact of lower and higher tax rates in retirement. Systematic investing does not ensure a profit or guarantee against loss. Consider your financial ability to continue your purchases through periods of low price levels.This is a hypothetical example for illustrative purposes only and is not intended to reflect the performance of any specific product, nor does it reflect sales charges or other expenses that may be required for some investments. Neither Voya nor its agents and representatives can provide tax, legal, or accounting advice. You should consult your own attorney or tax advisor about your specific circumstances.
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*Based on current federal and state taxes as of 2013.
STATE OF CONNECTICUT DEFERRED COMPENSATION 457 PLAN
“I’m more the traditional type.”
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Can’t really afford more taxes now Needs more tax deductions Doesn’t expect to be in a higher
tax bracket when he retires
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STATE OF CONNECTICUT DEFERRED COMPENSATION 457 PLAN
Comparing Dan’s options:Traditional RothPre-tax 457 After-tax 457
Gross income: $75,000 $75,000
Less taxes at 15%** -$56,800 -$0
Annual salary available to save: $10,000 $10,000
Less taxes at 25%* -$0 -$2,500
Net yearly contribution: $10,000 $7,500(totals over 20 years $200,000 $150,000)
Value at retirement:(assumes 20 years of contributions at 6%) $378,900 $284,200
After-tax value: $322,100 $284,200
“I’m more the traditional type.”
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*Based on current federal tax rates as of 2013.** Assumed rates designed to illustrate impact of lower and higher tax rates in retirement. Systematic investing does not ensure aprofit or guarantee against loss. Consider your financial ability to continue your purchases through periods of low price levels. This is a hypothetical example for illustrative purposes only and is not intended to reflect the performance of any specific product, nor does it reflect sales charges or other expenses that may be required for some investments. Neither Voya nor its agents and representatives can provide tax, legal, or accounting advice. You should consult your attorney or tax advisor about your specific circumstances.
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STATE OF CONNECTICUT DEFERRED COMPENSATION 457 PLAN
“Both, please.”
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Not sure whether taxes will be higheror lower in retirement
Want to diversify tax strategy Still wants a current income tax
deduction
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STATE OF CONNECTICUT DEFERRED COMPENSATION 457 PLAN
Value at retirement:(assumes 10 years of contributions at 6%) $81,500 $61,100
Comparing Marnie’s options:Traditional RothPre-tax 457 After-tax 457
Less taxes at 25%** -$20,400 -$0
Less taxes at 25%* -$0 -$1,500
Net yearly contribution: $6,000 $4,500(totals over 10 years $60,000 $45,000)
Gross income: $60,000 $60,000
After-tax value: $61,100 $61,100
Annual salary available to save: $6,000 $6,000
“Both, please.”
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*Based on current federal tax rates as of 2013.** Assumed rates designed to illustrate impact of lower and higher tax rates in retirement. Systematic investing does not ensure a profit or guarantee against loss. Consider your financial ability to continue purchases through periods of low price levels. This is a hypothetical example for illustrative purposes only and is not intended to reflect the performance of any specific product, nor does it reflect sales charges or other expenses that may be required for some investments. Neither Voya nor its agents and representatives can provide tax, legal, or accounting advice. You should consult your attorney or tax advisor about your specific circumstances.
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STATE OF CONNECTICUT DEFERRED COMPENSATION 457 PLAN
Consider this…• Are you looking for tax-free (subject to qualifying conditions)
retirement income?• Do you expect your taxes to be higher when you retire? • Are you currently in a lower income tax bracket?• Do you like the idea of diversifying your tax strategy by contributing
to both the 457 and the Roth 457 options?
There’s more …
Is Roth right for you?
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These materials are not intended to be used to avoid tax penalties, and were prepared to support the promotion or marketing of the matter addressed in this document. The taxpayer should seek advice from an independent tax advisor.
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STATE OF CONNECTICUT DEFERRED COMPENSATION 457 PLAN
Consider this…
If you answered “yes” to any of these, a Roth may make sense for you.
• Are you already maxing out your Traditional 457 contributions?• Can you afford a reduction in take-home pay to contribute the same
amount to your Roth 457?– For those already contributing to a Traditional 457 and wishing to
switch to a Roth 457• Are you looking to leave tax-free assets to your heirs?
– A Roth 457 may be rolled over to Roth IRA: age 70 ½ required distributions do not apply to a Roth IRA
– A traditional 457 may be rolled over to a Roth IRA which may be advantageous as set forth above. In order to complete the rollover to the Roth IRA, taxes will need to be paid on the traditional 457
Is Roth right for you?
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STATE OF CONNECTICUT DEFERRED COMPENSATION 457 PLAN
What’s next?
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Use the online calculator.
Time to take action.
Consult a professional.
Read on the topic.
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STATE OF CONNECTICUT DEFERRED COMPENSATION 457 PLAN
Thank you for participating!!
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Third-party administration provided by Voya Retirement Insurance and Annuity Company (VRIAC), One Orange Way, Windsor, CT 06095-4774. Securities distributed by Voya Financial Partners, LLC (member SIPC). These companies are wholly owned, indirect subsidiaries of Voya Financial, Inc.Registered Representatives and Investment Adviser Representatives are affiliated with Voya Financial Advisors, LLC, member SIPC. ©2014 Voya Services Company
Thank
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