Retirement Plans for Individuals and Businesses















Small Business Retirement Plans

Qualified Retirement Plan Guide

Have you changed jobs or are you recently separated from service?

Determining what to with a 401(k) or a 403(b) when you leave your employer can be confusing, complicated and stressful. At Dougherty & Associates we’ll educate you on your distribution options to help you make the informed decision that’s right for you. You have several choices when you change jobs or retire:

  • Leave the account in place if your former employer’s plan allows
  • Roll the assets to your new employer’s plan, if the plan permits
  • Cash out of your plan (taxes and penalties may apply)
  • Roll the assets to an IRA or Roth IRA

Rolling employer retirement plan assets at a previous employer into a single, consolidated IRA can make it easier to see what you have, while also reducing the number of statements and accounts you have to track.

  • Benefit from tax-deferred earnings– Earnings on 401(k) assets rolled to an IRA continue to grow on a tax-deferred basis, just as they did in your 401(k).
  • Improve investment flexibility- Rolling 401(k) assets into an IRA may provide more investment choices and greater flexibility in managing your assets than maintaining separate employer retirement plans.
  • Simplify Required Minimum Distribution (RMD) calculations- A rollover can also help simplify recordkeeping in retirement. By consolidating retirement accounts, you maintain fewer accounts and decrease the number of calculations needed to meet minimum distribution requirements after age 70½.
  • Gain experienced guidance and oversight- When you consolidate your retirement assets with Dougherty & Associates, you gain focused expertise and ongoing assistance in managing your assets, along with help adjusting your strategy as circumstances or your goals change.

Special Considerations for Employer Stock Holdings. 

Understanding NUA Tax Treatment on Employer Stock
If you hold shares of your employer’s stock in your 401(k) portfolio or in your employer’s Profit Sharing plan, you may be able to take advantage of Net Unrealized Appreciation (NUA). NUA should be taken into consideration before making any distribution decision, including rolling all or a portion of these retirement plans to an IRA. While there are typically no tax consequences when cash or mutual fund assets are rolled from a 401(k) into an IRA, rolling employer stock holdings in either a 401(k) plan or a profit sharing plan directly into an IRA could result in your missing the opportunity for some very favorable tax treatment for these assets.

Be sure to contact us before considering any retirement plan distribution or rollover options.   We can help you sort through the complexity and get organized for your future.


Introduction to Retirement Planning

What is retirement planning?

Retirement planning involves an analysis of the various choices you can make today to help provide for your financial future. To make appropriate choices, you need to predict--as well as you can--your future economic circumstances. You'll also need to establish your post-retirement goals. When you've determined how much of an income stream you'll probably require in the future, you'll be in a position to make wise choices now about income, saving, investments, and employer-sponsored or other retirement plans.

Of course, you need to tailor your retirement planning to your own unique circumstances--planning methods may be different for employees and executives than for business owners. And no matter who you are, you'll probably want to gain some familiarity with the Social Security system, with post-retirement health care insurance coverage, including Medicare and long-term care (LTC) insurance. For some people, retirement may be an eagerly anticipated event, an opportunity to enjoy so many things that working may have precluded--travel, hobbies, and more family time. For other people, even the word "retirement" may conjure up feelings of fear or dread, particularly for those employees who work without the benefit of pension or other retirement plans. And newspaper stories predicting the collapse of the Social Security system can certainly compound anxiety. Whether you are financially comfortable or are of limited means, however, retirement planning is possible and can help you take control of your own future.

How can you determine your retirement income needs?

To determine your retirement income needs, you'll want to evaluate your present circumstances--your income, your expenses, your assets, and your debts. Next, you'll need to think about your future circumstances. There are four main sources for your retirement income: Social Security, pensions or other retirement vehicles, your investment portfolio, and savings. If you predict that your current income will not provide you with your desired retirement lifestyle, there are certain steps you can take now to help change your circumstances.

You'll want to think about your future sources of income, but also about where you'll live. Will you continue to live in your current home, for instance, or will you move to a condominium or retirement community? And if your employer typically provides early retirement packages to its employees, you'll need to know how to evaluate such packages from a number of perspectives. For information about the above, see Determining Your Retirement Income Needs.

See also Personal Residence Issues in Retirement and Considering an Offer to Retire Early--Should You Take It?

How do you save for retirement?

Learning how to save for retirement is imperative. There are a number of retirement vehicles available, including traditional and Roth IRAs, employer-sponsored retirement plans, nonqualified deferred compensation plans, stock plans, and commercial annuities. Proper retirement planning requires an understanding of the workings of these tools.

In addition, your personal investment planning can help you on the road toward your retirement goals. The sooner you start, the longer you'll have to accumulate funds for retirement. You'll want to understand the taxation of your retirement and investment vehicles. This is especially important since the enactment of the Jobs and Growth Tax Relief Reconciliation Act of 2003 (2003 Tax Act). The 2003 Tax Act reduced the capital gains tax rates and the tax rates of certain dividends, making the decision to allocate assets inside or outside a retirement plan more crucial.

Finally, you may want to learn strategies for handling the competing demands of educating your children and retiring. For information on all of the above, see Saving for Your Retirement. 

What should you know about distributions from IRAs and other retirement plans?

Effective retirement planning involves not only an awareness of the types of savings vehicles available, but also an understanding of taking distributions from these vehicles. In particular, you should be familiar with the income tax ramifications of distributions (including a possible 10 percent premature distribution penalty tax for distributions made prior to age 59 ½). You may be interested in knowing whether you can borrow money from your retirement plan, whether it is better to receive your retirement money in one lump sum or in monthly checks, and whether you can roll your retirement plan balance into an IRA.

In addition, you may be concerned about naming one or more beneficiaries for your IRA or employer-sponsored retirement plan. What are the tax implications? What about required minimum distributions from the plan after you reach age 70½? For information about these and many other related topics, see IRA and Retirement Plan Distributions.

What if you are an executive or business owner?

A number of additional retirement planning tools are often available for executives, such as nonqualified deferred compensation plans offered by employers to their key employees. If you're an executive, you should realize that nonqualified plans and stock plans can be valuable tools for retirement planning. You should understand the mechanics of the special benefits afforded by your employer, including the tax implications for you.

If you are a business owner, on the other hand, you have some special retirement planning concerns of your own. In particular, you may want to plan for the succession of your business to family members or to others. You may also want to know which retirement plans are best suited to your form of business. For information about these and related topics, see Special Planning Considerations for Executives, or Planning for a Succession of a Business Interest, or Retirement Planning Options for Business Owners.

How do Social Security and other government benefits programs impact retirement planning?

If you're planning for retirement, you should also consider the Social Security income (if any) you'll be receiving in the future. In fact, it is possible for you to estimate your Social Security benefits ahead of time. You may want to check your Social Security record periodically to ensure that you have met the eligibility requirements and that your information is accurate and complete. You'll also want to become familiar with ways to optimize your Social Security benefits and minimize their taxation. The timing of your receipt of benefits can be important, as can the impact of post-retirement employment. For more information, see Social Security. Other governmental programs should also be considered when planning for retirement.

In particular, you should review the topics of Medicare and Medicaid. You should know what Medicare does and does not cover and what other health care options are available to you. How expensive are these governmental and supplemental health programs? What are the eligibility requirements? Medicaid planning can be particularly important for people of modest means. You should know the Medicaid eligibility requirements, the penalties for transferring assets inappropriately, and the various strategies available for protecting assets. In addition, you should become familiar with the specific methods of protecting your personal residence and the extent to which your state can impose liens on your property and pursue recovery remedies after your death. If you are planning for your post-retirement years, you should also gain some familiarity with long-term care insurance, nursing homes, retirement communities, assisted living, and other housing options for elders. For information on all of the above, see Health Care in Retirement.

Do government employees have special retirement concerns?

If you work for the federal government, a state government, a railroad, or if you are in the military, your retirement benefits may be subject to special rules. You should know how your retirement plan works, what distribution rules apply, how your survivors can benefit, how your plan may be integrated with Social Security, and what tax rules apply.

For more information, see Retirement Programs for Federal and State Employees, or Military Benefits, or Railroad Retirement System.