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Understanding IRA Rollovers: 2 Charts to Help You

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

IRAs are a widely used retirement savings vehicle that offer versatility for savers. IRAs are often the account of choice when people leave a job and need a place to move their retirement funds from their former employer.

Moving money in or out of an IRA to or from another account is called a rollover. It’s important to understand how IRA rollovers work to use this option to your greatest advantage.

What is a rollover?

A rollover entails the transfer of retirement money from one plan to another. This might mean from an employer-sponsored retirement plan like a 401(k) plan to an IRA, or from one IRA account to another. It’s important to understand and follow the rules for performing a rollover so you don’t trigger an unwanted taxable event by doing things incorrectly.

In this article, we will break down the IRS rollover chart into smaller bits to help you understand various rollover rules.

3 types of rollovers

There are four ways to perform a rollover from one plan to another:

  • With a direct rollover, your account administrator moves money from your existing retirement plan, such as a 401(k), directly to an IRA account or to a new employer’s retirement plan. This is often the easiest and most hassle-free method to a rollover. No taxes will be withheld from the rollover amount.
  • A trustee-to-trustee transfer is used when taking a distribution from an IRA account. This means the financial institution that holds your IRA account will transfer the money directly to either an IRA account at another institution or to an employer-sponsored retirement account. This method allows you to avoid paying taxes on the transfer.
  • A 60-day rollover pertains to a distribution from an IRA that is directly paid to you. You will need to deposit the money in another IRA account or into an employer-sponsored retirement plan for the distribution to retain its tax-deferred status (and avoid any applicable fees). There is a mandatory tax-withholding when the distribution is made directly to you. To avoid paying taxes, you will need to deposition 100% or the amount distributed. This means that you will need to come up with the money withheld in taxes.

Before you consider a rollover involving an IRA, it’s important to keep the 12-month rule in mind. This rule applies to rollovers between IRA accounts, and only allows one rollover from the same IRA plan within one year.

Rollovers from an employer-sponsored retirement plan

It’s common to do a rollover from a 401(k), 403(b) or other types of employer-sponsored retirement plan when leaving an employer.

Rolling a balance into a traditional 401(k), 403(b), governmental 403(b), money purchase plan or a defined benefit plan (if there is a lump-sum option) to a traditional IRA is generally a matter of simply moving the money. These plans are typically funded with pre-tax money that has never been taxed.

Rolling a designated Roth account within an employer-sponsored retirement plan, such as a 401(k), to a Roth IRA account is also pretty straightforward since you are dealing with post-tax dollars in both cases.

Rollovers can sometimes be made into a new employer’s retirement plan if that plan accepts rollovers. However, it’s important to tread carefully when you attempt to roll over one plan type into a different type to ensure that the rollover is allowed, and that you are aware of any tax consequences. For example, rolling a 401(k) from your old employer to one at a new employer should be pretty straightforward. If the plans are different — for instance, moving a 401(k) to 403(b) — rollovers may or may not be allowed.

Money from a traditional IRA can be moved to a qualified plan that accepts rollovers, which is often a 401(k). In this case, the money from the IRA must have all originated from pre-tax contributions if rolled into a traditional 401(k) account. Performing this type of rollover will always depend on whether or not the receiving plan will accept such rollovers.

The chart below provides a quick glance at some rollover options when leaving a company:

Roll to:

Roll from:

Traditional IRARoth IRAQualified plan (pre-tax) 401(k), 403(b), 457(b)403(b)Governmental 457(b)Designated Roth account
Qualified plan (pre-tax) 401(k), 403(b), 457(b)YesYes1Yes2Yes2Yes2, 4Yes1, 3
403(b)YesYes1YesYesYes4Yes1, 3
Governmental 457(b)YesYes1YesYesYesYes1, 3
Designated Roth accountNoYesNoNoNoYes
Source: IRS
1. A rollover to a Roth IRA from one of these retirement accounts (in a non-Roth format) can be done, but this would constitute a Roth conversion that would result in taxable income.
2. Money from a qualified plan such as 401(k) plan can be rolled over to a qualified plan at another employer if the new plan accepts such rollovers. Typically, the funds have to be of the same type; for example, all contributions were made with pre-tax dollars.
3. Must be an in-plan rollover.
4. The 457 plan must have separate accounts.

Rollovers from a SIMPLE IRA

SIMPLE IRAs are a small business retirement plan. Participants in a SIMPLE IRA can generally roll money from or to a SIMPLE, but there are a few additional restrictions to be aware of.

Within the first two years of your participation in a SIMPLE IRA, you could face a 25% penalty for rolling your account balance from a SIMPLE IRA to another IRA or company retirement plan. However, you may avoid the penalty if you roll your SIMPLE IRA to another SIMPLE IRA account.

The two-year requirement would apply when you perform a rollover to a:

  • Traditional IRA
  • SEP IRA
  • Governmental 457(b) plan
  • Qualified plan (pre-tax)
  • 403(b) plan

Money can be rolled over to a SIMPLE IRA from most plans except a Roth IRA or designated Roth account within a retirement plan. Only one rollover to a traditional IRA or another SIMPLE IRA within 12 months is allowed.

Rollovers to and from an IRA

There can be any number of reasons to do a rollover from one IRA account to another. Perhaps you want to move to another IRA custodian that is a better fit for your needs. Or perhaps you have several IRAs and other retirement accounts scattered across various custodians or even old employers.

Consolidating these accounts in one place may be advantageous for you. Rollovers to and from IRA accounts have their own set of rules and it behooves you to understand them so as not to trigger an unwanted tax penalty. In this scenario, you’ll want to pay close attention to the 12-month rule and the 60-day rule discussed above.

Roll to:

Roll from:

Traditional IRARoth IRASEP IRAQualified plans (pre-tax)403(b)Governmental 457(b)Designated Roth account
Traditional IRAYes3Yes1Yes3YesYesYes2No
Roth IRANoYes3NoNoNoNoNo
SEP IRAYes3Yes1Yes3YesYesYes2No
Source: IRS
1. A rollover to a Roth IRA from one of these retirement accounts (in a non-Roth format) can be done, but this would constitute a Roth conversion that would result in taxable income.
2. The 457 plan must have separate accounts.
3. Only one rollover per 12-month period.

The bottom line

The ability to roll over to and from IRA accounts is one of their most attractive features. This tool can be handy to those saving for retirement as long as they take the time to understand the rules governing such rollovers.

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SIMPLE IRA Contribution Limits 2020

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone and is not intended to be a source of investment advice. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

SIMPLE IRAs are tax-advantaged retirement savings accounts that benefit small business owners and the people who work for them. In addition, you can use the SIMPLE IRA to save for retirement if you are self-employed. Like many other retirement savings vehicles, SIMPLE IRAs are subject to annual contribution limits.

SIMPLE IRA contribution limits

The annual SIMPLE IRA contribution limits for employees and employers in 2020 are as follows:

Annual SIMPLE IRA Contribution Limits

Employees under the age of 50

$13,500

Employees 50 years and older

$13,500, plus $3,000 in catch-up contributions

Employer matching contributions

Up to 3% of employee’s salary

Employer non-elective contributions

2% of the employee’s salary

SIMPLE IRA contribution limits 2020 for employees

For 2020, the amount employees may contribute to a SIMPLE IRA plan is capped at $13,500 per year. That’s an increase from 2019’s limit of $13,000, and an even bigger leap from the $12,500 limit imposed from 2015 to 2018.

It’s worth noting that for employees who are also participating in other employer-sponsored retirement plans, such as 401(k) or 403(b) plans, aggregate annual contributions to all plans cannot exceed $19,500 in 2020. For those 50 and older, the overall annual limit for catch-up contributions is $6,500 for 2020, for a total ceiling of $26,000.

SIMPLE IRA contribution limits 2020 for employers

If a small business owner chooses to offer a SIMPLE IRA plan, they are required to make contributions to their employees’ accounts. They may choose to either match their employees’ contributions, up to a certain limit, or make non-elective contributions.

If an employer chooses matching contributions, their match is capped at 3% of an employee’s annual compensation. While an employer can make matching contributions of less than 3%, the match cannot be less than 1% of the employee’s annual compensation — and it cannot be less than 3% for more than two out of five consecutive years.

If an employer chooses non-elective contributions, they are required to put money into their employees’ SIMPLE IRAs regardless of whether the employees themselves make contributions. With non-elective contributions, the employer must make fixed contributions of 2% of their employees’ compensation. For 2020, the maximum amount of an employee’s total compensation that can be considered for calculating a non-elective contribution is capped at $285,000, up from 2019’s cap of $280,000.

What are the contribution deadlines for a SIMPLE IRA?

Employers are required to deposit their employees’ SIMPLE IRA contributions within 30 days after the end of the month in which those contributions were withheld. Employers are required to make their matching or non-elective SIMPLE IRA contributions by their tax return filing deadline, including extensions.

For people who are self-employed, the deadline for depositing SIMPLE IRA contributions for a calendar year is 30 days after the end of year, or Jan. 30.

SIMPLE IRA contribution limits vs. Roth contribution limits

While SIMPLE IRA contributions are capped at an annual limit of $13,500, annual Roth IRA contribution limits are much lower. For 2020, Roth IRA contributions are capped at $6,000, with an additional $1,000 allowed for catch-up contributions for those 50 and older.

Another differentiating factor of Roth IRAs is that they have income phaseout limits. Depending on how much you make, you may be limited to how much you can contribute or whether you can contribute at all. For 2020, single filers cannot contribute to a Roth IRA if they make more than $139,000, and if married and filing jointly, you’re only able to contribute if you earn less than $206,000.

Can you contribute to both a SIMPLE IRA and a Roth IRA?

You can contribute the maximum allowed amounts to both a SIMPLE IRA and a Roth IRA, as their contribution limits are not cumulative. In fact, most financial advisors recommend you max out both your SIMPLE IRA and Roth IRA if you can afford to do so, as they offer different tax benefits.

While SIMPLE IRA contributions are made pre-tax, and therefore lower your taxable income, your Roth IRA contributions are made with after-tax dollars, so qualified distributions are tax-free.

“Advisors talk about diversification all the time, and usually they are talking about stocks and bonds,” said Gregory Kurinec, a certified financial planner with Bentron Financial Group in Downers Grove, Ill. “But investors will want to diversify their accounts into different tax categories as well. By having a combination of pre-tax (SIMPLE IRA), after-tax advantage (Roth IRA) and non-qualified, this will allow the investor to pick and choose which account to take funds from to best impact their tax situation.”

What is a SIMPLE IRA?

A SIMPLE IRA is an effective retirement savings match plan, especially for small business owners. SIMPLE IRAs are available to small businesses with 100 employees or fewer.

SIMPLE IRAs require employers to make contributions on behalf of their employees, either up to 3% of their employee’s compensation as an employer match or a flat 2% of the employee’s compensation.

As with most financial products, when it comes to saving for your golden years, a SIMPLE IRA is just one of the many options available to you. Explore all of the options at your disposal when deciding how to build your nest egg.

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Review of Altfest Personal Wealth Management

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone and is not intended to be a source of investment advice. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Altfest Personal Wealth Management is an investment management firm based in New York City. The firm typically only accepts clients with a minimum investment of $1 million. For these high net worth clients, Altfest Personal Wealth Management provides customized investment portfolios with comprehensive financial planning services. The firm has 16 employees who provide investment advisory services, and currently oversees $1.21 billion in assets under management (AUM).

All information included in this profile is accurate as of February 10th, 2020. For more information, please consult Altfest Personal Wealth Management’s website.

Assets under management: $1,210,000,000
Minimum investment: $1 million (waivable at the firm’s discretion for young professionals)
Fee structure: A percentage of AUM, ranging from 0.50% to 1.40%, depending on account size; hourly fees; fixed fees
Headquarters: 445 Park Avenue
Sixth Floor
New York, NY 10022
www.altfest.com
212-406-0850

Overview of Altfest Personal Wealth Management

Dr. Lewis Altfest launched Altfest Personal Wealth Management in 1983. He is still the majority owner of the firm and acts as CEO. He runs the organization along with his wife, Dr. Karen Altfest, the firm’s executive vice president, and their son, Andrew Altfest, the firm’s president. Both Lewis and Karen hold Ph.Ds; Lewis is an associate professor of finance at Pace University.

Including the Altfests, the firm has 37 total employees, 16 of whom provide investment advisory services. Altfest Personal Wealth Management specializes in creating customized, actively managed investment portfolios for high net worth clients. The firm and the Altfest family have won numerous awards for their performance, and both Lewis and Karen are regular contributors to financial news programs and publications.

What types of clients does Altfest Personal Wealth Management serve?

Altfest Personal Wealth Management primarily works with individual investors. A client usually needs a portfolio of at least $1 million to open an account with the firm — however, Altfest does make exceptions to this account minimum for “young professionals” who they believe will become high net worth clients in the future. The firm’s individual client base is currently split 40/60 between individuals and high net worth individuals, with the SEC defining high net worth individuals as those with at least $750,000 under management or a net worth of at least $1.5 million.

While the firm works with a diverse range of clients, it specializes in advising women, executives and healthcare professionals. In addition to individual investors, Altfest Personal Wealth Management also works with pension plans, profit-sharing plans, trusts, estates, corporations and other business entities.

Services offered by Altfest Personal Wealth Management

Altfest Personal Wealth Management specializes in investment management and financial planning. However, the firm’s investment management services are available to individuals and small businesses only; these services are not offered to investment companies, pooled investment vehicles, large businesses and institutional clients.

Most of the firm’s investment accounts are run on a discretionary basis, meaning that Altfest Personal Wealth Management advisors can make trades on behalf of the client. The firm does have a few nondiscretionary accounts, where the client must approve all trades themselves.

If a client only wants a few investment recommendations, rather than the management of their entire portfolio, the firm can provide this service as well.

Altfest Personal Wealth Management also offers comprehensive financial planning, as many of its advisors hold the certified financial planner (CFP) designation, a professional certification for financial planners. The firm’s financial planning services include the creation of a detailed financial plan outlining the necessary steps to achieve their goals and objectives. The plan can address specific areas, such as college savings, estate planning and debt management.

More specifically, Altfest’s services include:

  • Investment advisory services and portfolio management (mainly discretionary but some non-discretionary)
  • Financial planning
    • Retirement planning
    • Trust and estate planning
    • Charitable planning
    • Education planning
    • Tax planning
    • Cash flow forecasting
    • Budgeting and strategic planning
    • Long-term care planning
    • Debt management
    • Divorce planning
  • Insurance and risk management
  • Workshops and seminars
  • Newsletters and publications

How Altfest Personal Wealth Management invests your money

Altfest Personal Wealth Management builds unique, customized portfolios for each client based on their time horizon, risk tolerance, income level and long-term goals.

As part of this analysis, the firm follows a system called Total Portfolio Management. Rather than only looking at a client’s investment history, the firm also gets to know their entire financial plan, including income, debts, spending requirements and future earnings potential. The firm uses this information to finetune a portfolio comprised of stocks, bonds, mutual funds, ETFs and private funds.

Altfest Personal Wealth Management follows an active investment approach: this means the firm is regularly trading in an attempt to earn above-average portfolio returns.

Fees Altfest Personal Wealth Management charges for its services

For portfolio management services, Altfest Personal Wealth Management charges a fee based on a percentage of assets under management, with the rate ranging from 0.50% to 1.00%, depending on the size of the client’s portfolio. Altfest does not charge trading commissions or performance-based fees.

Portfolio Size Annual Asset-Based Fee
First $3 million* 1.00%
Between $3,000,001 and $6,000,000 0.75%
Over $6,000,000 0.50%
*If a portfolio falls below $2 million in value at the end of the quarter, the firm will assess an additional 0.10% fee on top of the asset-based fee listed above.

For “young professional” clients who don’t meet the firm’s portfolio minimums, Altfest charges the following fee schedule:

  • In the first year, the firm charges an annual fee of either 1.10% of assets under management or $2,500 whichever is greater.
  • After the first year, the firm charges 1.10% of the portfolio value or $1,500 per year whichever is greater.

This rate includes cash flow analysis, investment analysis, investment management and 401(k) recommendations. Clients who want additional financial planning services will be billed at a rate of $250 per hour.

If a client only wants standalone investment recommendations, Altfest Personal Wealth Management charges either an hourly fee ranging from $500 to $800 an hour, or a fixed fee of at least $3,500 for specific investment recommendation requests.

Finally, some of the investments included in Altfest’s portfolio recommendations may carry additional fees. Clients are responsible for covering these costs, though the money won’t go to Altfest Personal Wealth Management.

Altfest Personal Wealth Management’s highlights

  • Wide range of awards: Over the past few years, Altfest Personal Wealth Management has been recognized as a top investment advisor by publications including Barron’s, Forbes, Financial Times and Financial Advisor magazine.
  • Highly educated management team: The heads of the firm, Dr. Lewis Altfest and Dr. Karen Altfest, both hold Ph.Ds; Lewis is also an associate professor of finance at Pace University. In addition, many of the financial advisors at the firm hold the CFP designation.
  • Customized investment approach: Altfest Personal Wealth Management designs a customized portfolio for every client, tailored to their specific needs, and don’t lump people into one-size-fits-all funds as some firms may do.
  • Extensive financial planning in addition investing: Altfest Personal Wealth Management also specializes in financial planning. When the firm creates a portfolio recommendation, it goes over a client’s entire financial situation before designing the portfolio, not just their existing investments.
  • Specialty in advising women, executive and healthcare clients: The firm specializes in advising women, executives and professionals in healthcare. Additionally, Forbes named Dr. Karen Altfest one of the top women advisors in the country in 2017, 2018 and 2019.

Altfest Personal Wealth Management’s downsides

  • Above-average investment fees: Altfest Personal Wealth Management charges an annual 1.00% asset-based fee on the first $3 million in a client’s account (plus an additional 0.10% per quarter if their portfolio value falls below $2 million). In comparison, the median investment management fee charged by firms for accounts over $2 million is 0.75%, according to Kitces.
  • High minimum to open an account: It takes at least $1 million to open an account with Altfest Personal Wealth Management. While the firm does waive the minimum at its discretion for “young professionals,” the typical investor would need to be quite wealthy to make use of the firm’s services.
  • Only has one location in New York City: The only way to visit the Altfest Personal Wealth Management office in person is in New York City, the firm’s only location.

Altfest Personal Wealth Management disciplinary disclosures

Whenever an SEC-registered firm or its employees or affiliates face disciplinary action, including a criminal charge, a regulatory infraction or a civil lawsuit, the firm is required to report that incident in its Form ADV, paperwork filed with the SEC. Altfest Personal Wealth Management reports in its Form ADV that it has faced no such incidents over the past 10 years, indicating a clean disciplinary record.

Altfest Personal Wealth Management onboarding process

To start the onboarding process with Altfest Personal Wealth Management, you can request a free consultation with one of its advisors. You can contact the firm either by phone at 212-406-0850, by email at [email protected] or by filling out a form on the firm’s website. As part of the onboarding form, the firm asks you to share your story, which helps the firm start determining whether you are a good fit based on your income and profession.

If it seems like a good match, the firm’s advisors will then get to work designing your customized investment portfolio based on your goals, risk tolerance and overall financial situation. When you’re ready to launch, the firm’s advisors would then take care of opening your new accounts, transferring over your existing accounts, making the necessary investments and keeping up with the records for your portfolio.

The bottom line: Is Altfest Personal Wealth Management right for you?

If you’re a high net worth individual or a young professional who wants personalized investment recommendations combined with financial planning, Altfest Personal Wealth Management could be a good choice. This may be especially true if you are in one of the firm’s specialty client categories: women, executives and healthcare professionals. Since Altfest Personal Wealth Management only has one location in New York City, however, the firm might be a better choice if you live in the Northeast rather than other parts of the country.

On the other hand, Altfest Personal Wealth Management’s comprehensive services do not come cheap. The firm’s fees are higher than average, and you’d need at least $1 million to open an account (unless Altfest waives the minimum because you’re a young professional). If you want a simpler investment strategy or prefer to manage your portfolio more on your own, you could find less expensive advisors than Altfest Personal Wealth Management.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.