Federal act makes access to retirement plan easier
November 17, 2006
The Pension Protection Act of 2006 (PPA 2006) brought with it many opportunities that could impact your retirement and long-term wealth planning. Beginning in 2007, this legislation makes effective important changes that may allow you easier access to spousal, non-spousal and your own retirement plans.
• After-tax contributions from a 401(k) or other qualified plan can be rolled tax-free into a 403(b), and vice versa. This affects employees who move from a corporate job to a job with a non-profit organization or school, for example.
• Employees who have reached age 62 and who haven’t separated from service by working part-time at reduced compensation, “working retirement,” will be permitted to make taxable withdrawals (in-house distributions) from their employer pension plans.
• If you are the beneficiary of an IRA, 401(k) or other qualified retirement plan owned by someone other than your spouse, you will be able to set up an inherited IRA to receive the funds and preserve the tax-free status of the account.
This change is particularly important for domestic partners and children or grandchildren who inherit retirement plans. Talk to your Financial Advisor about the proper transfer of funds, and how the account should fit into your overall financial plan.
Be sure to consult with your tax, legal and financial advisors before you make any decision to withdraw financial assets.
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• William Creekbaum, MBA, CFP, a Washoe Valley resident, is senior investment management consultant of SmithBarney, a financial services firm serving Northern Nevada at 6005 Plumas Street, Ste. 200 Reno, NV 89509.