07-10-2014 12:33 PM
Young people seem willing to take more risks. Target date retirement funds are set up in a similar fashion, making more aggressive or riskier investments with the goal of achieving growth. As we get older, we take fewer risks and the target date retirement funds adjust their investment strategy to be more conservative.
In the fourth part of our five-part series, Scott Halliwell, a Certified Financial Planner™ with USAA, coaches you on the basics of target date retirement plans.
Investments provided by USAA Investment Management Company and USAA Financial Advisors Inc., both registered broker dealers.
Withdrawals made prior to age 59½ may be subject to a 10% penalty tax.
If you receive a check made out to you, your former employer is required to withhold 20% of the total amount. When you deposit the check into your IRA, you must make up that percentage from your own resources. At tax time, you can apply to get the withheld 20% back, but it could be a long way off. A better approach is to roll the money over without ever receiving it directly.
Traditional IRA distributions are taxed as ordinary income. Qualified Roth IRA distributions are not subject to state and local taxation, in most states. Qualified Roth IRA distributions are also federally tax-free, provided a Roth account has been open for at least five years and the owner has reached age 59½, or meets other requirements.
Other options are available besides rolling over your employer-sponsored retirement plan, and an employer-sponsored retirement plan can offer advantages investors can't get if they roll the money into an IRA.
Certified Financial Planner Board of Standards, Inc. owns the certification marks CFP® and CERTIFIED FINANCIAL PLANNER™ in the United States, which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.
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