401(k) Decisions – You Can Take It With You

If you are preparing to change jobs, do you know what your choices are for managing the money in your current employer’s retirement plan? Although many people choose to take a cash distribution, there are other options that may benefit you more. 

Uncle Sam Loves Cash Distributions 

Taking a lump-sum cash distribution may trigger an immediate 20% federal withholding tax. In addition, a 10% additional tax may apply if you are younger than age 59½.1 Taking your money as a cash withdrawal also means that you’ll no longer enjoy the potential benefits of tax deferral that a qualified retirement plan offers. 

Depending on your circumstances, you may have several options that will allow you to maintain the tax-deferred status of your retirement plan assets: 

  • Leave the money in your former employer’s plan. Your former employer must allow you to leave the money where it is as long as the balance exceeds $5,000. You’ll no longer be able to contribute to the account, but you’ll still decide how the existing assets are invested. 
  • Roll over the money to your new employer’s plan. By “rolling” the money directly to your new plan, you may avoid the taxes that could eat away at a cash distribution. You’ll also have only one set of investments to monitor. Even if you’re not immediately eligible to contribute to the plan at your new job, you may still be able to roll over the money right away. 
  • Roll over the money to an IRA. If your new employer doesn’t offer a retirement plan or you aren’t yet eligible to participate, you might roll over the money directly to a traditional IRA. Again, you might avoid taxes that you’d incur if you took a cash distribution and still enjoy the potential benefits of tax deferral. Experts advise against commingling your retirement plan assets with other IRAs you may have set up. Instead, consider opening a separate IRA account, known as a “conduit IRA,” which may allow you to move the funds to a new employer’s retirement plan at a later date. 

Research Your Options 

If you plan to change jobs, don’t just take the money and run. Since rules vary from company to company, find the time to explore your alternatives. If you have specific questions about your retirement plan distribution options, contact your employer’s benefits coordinator or a qualified financial consultant. 


Source/Disclaimer: 

1If you’re age 55 or older and separate from service, the 10% additional tax might not apply for certain periodic withdrawals taken from an employer-sponsored retirement plan. Keep in mind that the 10% additional tax may be incurred on distributions taken from an IRA prior to age 59½. 

Required Attribution 
 
Because of the possibility of human or mechanical error by DST Systems, Inc. or its sources, neither DST Systems, Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall DST Systems, Inc. be liable for any indirect, special or consequential damages in connection with subscriber’s or others’ use of the content.  

© 2019 DST Systems, Inc. Reproduction in whole or in part prohibited, except by permission. All rights reserved. Not responsible for any errors or omissions. 

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Identity Theft and Taxes

Identity theft is one of the fastest growing crimes in America affecting millions of unsuspecting individuals each year. A dishonest person who has your Social Security number can use it to obtain tax and other financial and personal information about you. 

Identity thieves can get your Social Security number by: 

  • Stealing wallets, purses, and your mail. 
  • Stealing personal information you provide to an unsecured website, from business or personnel records at work, and from your home. 
  • Rummaging through your trash, the trash of businesses, and public trash dumps for personal data. 
  • Posing by phone or email as someone who legitimately needs information about you, such as employers or landlords. 

Tax-related identity theft occurs when a thief uses your Social Security number to file a tax return and claim a fraudulent tax refund. In 2018 alone, there were 649,000 confirmed identity theft tax returns.1 The IRS has become increasingly diligent in its efforts to thwart identity theft with a program of prevention, detection, and victim assistance. The “Taxes. Security. Together.” program is aimed at building awareness among taxpayers about the need to protect personal data when conducting business online and in the real world. 

Stay Vigilant 

By remaining vigilant and following a few commonsense guidelines, you can support the IRS in keeping your personal information safe. Here are a few tips to consider: 

  • Protect your information. Keep your Social Security card and any other documents that show your Social Security number in a safe place. 
  • DO NOT routinely carry your Social Security card or other documents that display your number. 
  • Monitor your email. Be on the lookout for phishing scams, particularly those that appear to come from a trusted source such as a credit card company, bank, retailer, or even the IRS. Many of these emails will direct you to a phony website that will ask you to input sensitive data, such as your account numbers, passwords, and Social Security number. 
  • Safeguard your computer. Make sure your computer is equipped with firewalls and up-to-date anti-virus protections. Security software should always be turned on and set to update automatically. Encrypt sensitive files such as tax records you store on your computer. Use strong passwords and change them routinely. 
  • Be alert to suspicious phone calls. The IRS will never call you threatening a lawsuit or demanding an immediate payment for past due taxes. The normal mode of communication from the IRS is a letter sent via the U.S. postal service. 
  • Be careful when banking or shopping online. Be sure to use websites that protect your financial information with encryption, particularly if you are using a public wireless network via a smartphone. Sites that are encrypted start with “https.” The “s” stands for secure. 
  • Google yourself. See what information is available about you online. Be sure to check other search engines, such as Yahoo and Bing. This will help you identify potential theft sources and will also help you maintain your reputation. 

Fear You Have Been Scammed? 

If you feel you are the victim of tax-related identity theft — e.g., you cannot file your tax return because one was already filed using your Social Security number — there are several steps you should take. 

  • File your taxes the old-fashioned way — on paper via the U.S. postal service. 
  • Print an IRS Form 14039 Identity Theft Affidavit from the IRS website and include it with your tax return. 
  • File a consumer complaint with the Federal Trade Commission (FTC). 
  • Contact one of the three national credit reporting agencies — Experian, Transunion, or Equifax and request that a fraud alert be placed on your account. 

If you have been confirmed as a tax-related identity theft victim, the IRS may issue you a special PIN that you will use when e-filing your taxes. You will receive a new PIN each year. 

For more information on tax-related identity theft visit the IRS website, which has a special section devoted to the topic. 


Source/Disclaimer: 

1The Internal Revenue Service, IR-2019-66, April 8, 2019. 

Required Attribution 
 
Because of the possibility of human or mechanical error by DST Systems, Inc. or its sources, neither DST Systems, Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall DST Systems, Inc. be liable for any indirect, special or consequential damages in connection with subscriber’s or others’ use of the content.  

© 2020 DST Systems, Inc. Reproduction in whole or in part prohibited, except by permission. All rights reserved. Not responsible for any errors or omissions. 

Tracking #1-983948 

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Go for the Gold

Performing well in these events can help you earn a gold medal in investing 

Fans of summer athletics look forward every four years to a major athletic event. Hundreds of athletes from all over the world converge to compete in swimming, track and field, gymnastics, and a host of other sports, including karate and surfing. Some of the athletes will be awarded bronze, silver, or gold medals, depending on how they perform.  

To help celebrate this motivating and inspiring event, why not try to earn a gold medal for investing in your retirement plan? Participate in the events below on a regular basis to help earn your medal.  

Review your risk tolerance  

When it comes to investing, everyone is unique. Some people prefer a more aggressive approach, especially if they are younger and have a lot of saving years ahead of them. Others prefer a more conservative approach, especially if they are nearing retirement. Others may be most comfortable with a moderate approach — an equal balance of aggressive and conservative investments. You should review your attitude toward investment risk on an annual basis — especially if there have been any life changes, such as marriage, birth or adoption of a child, divorce, nearing retirement, or adding new financial goals in addition to retirement. 

Embrace diversification 

Putting your money into a number of different types of investment options that include various asset classes can help reduce risk of overexposure to a single investment or asset class. Generally speaking, if you diversify your dollars into different asset classes, a decline in one asset class (i.e. utilities) should not have a significant impact on your overall portfolio. There is perhaps no better way to illustrate this than to look to the story of Life Savers candy. 

Clarence Crane invented Life Savers in 1912. He manufactured only one flavor: Pep-O-Mint. In 1913, Crane was approached by Edward J. Noble. Noble suggested that offering different flavors of Life Savers would attract more customers. Crane wasn’t interested in the concept but agreed to sell the business to Noble for $2,900. In his lifetime, Noble went on to develop a billion-dollar business manufacturing different flavored Life Savers. By diversifying his product, he appealed to more people and protected his business from the risk of one flavor losing popularity.  

Diversification works with investments, too. You should keep in mind that diversification does not ensure a profit or guarantee against loss.  

Rebalance your investments 

It’s no secret that investments rise and fall over time. And asset classes do not always rise and fall together. As such, your original game plan to diversify across different asset classes may drift over time. Let’s say that last quarter there was a stock market upswing and your original desired investment allocation of 60% in stock funds has now grown to 70%. Meanwhile, your intended investment allocation to bond and money market funds has now decreased. The current overall investment allocation no longer matches your wishes and may have become riskier than you are comfortable with. 

One solution for this is to choose to participate in an automatic rebalancing program if one is offered by your retirement plan recordkeeper. If you don’t have access to such a service, it’s easy to rebalance your investments yourself. In the example mentioned earlier, that means going into your account and selling off 10% of your stock fund investments and reallocating those funds back into your bond and money market investments so that they are aligned with your chosen allocation percentages. Representatives at your recordkeeper’s call center can likely help you do this.  

Seek professional help if you need it 

Many people consult with an investment advisor for guidance and advice regarding their retirement plan investments. An advisor can help you determine your retirement goals and how you can pursue them. They can: 

  • Provide ongoing portfolio rebalancing on your behalf. 
  • Help you understand different types of investments and their place in a balanced investment portfolio. 
  • Help you determine your financial goals beyond retirement, such as buying a home, funding a college education, starting your own business, or just getting better at budgeting and paying down credit card debt. 
  • Help you determine an appropriate investment strategy to achieve your financial goals, which are based on your risk tolerance and time frame.  
  • Meet with you on a regular basis to track progress and adjust as necessary. 

This material was prepared by LPL Financial, LLC.  

Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. To the extent you are receiving investment advice from a separately registered independent investment advisor that is not an LPL Financial affiliate, please note LPL Financial makes no representation with respect to such entity.   

If your advisor is located at a bank or credit union, please note that the bank/credit union is not registered as a broker-dealer or investment advisor. Registered representatives of LPL may also be employees of the bank/credit union. These products and services are being offered through LPL or its affiliates, which are separate entities from, and not affiliates of, the bank/credit union. Securities and insurance offered through LPL or its affiliates are: 

Not Insured by FDIC/NCUA or Any Other Government Agency Not Bank/Credit Union Guaranteed Not Bank/Credit Union Deposits or Obligations May Lose Value 

This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material. 

Kmotion, Inc., 412 Beavercreek Road, Suite 611, Oregon City, OR 97045; www.kmotion.com 

©2020 Kmotion, Inc. This newsletter is a publication of Kmotion, Inc., whose role is solely that of publisher. The articles and opinions in this newsletter are those of Kmotion. The articles and opinions are for general information only and are not intended to provide specific advice or recommendations for any individual. Nothing in this publication shall be construed as providing investment counseling or directing employees to participate in any investment program in any way. Please consult your financial advisor or other appropriate professional for further assistance with regard to your individual situation. 

Tracking #1-957756 (Exp. 02/21)

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Spring Cleaning

Eight tips for tidying up your personal finances 

Spring cleaning doesn’t just mean dusting off those bookshelves in your living room (which, by the way, probably havenít been dusted since you moved in) or vacuuming cobwebs off your ceilings (always great fun). Spring cleaning can also mean tidying up your finances. Here are eight tips to get you started.  

1. Check your withholding  

It’s great if you received a big tax refund this year, but it just means you gave Uncle Sam an interest-free loan out of your paychecks throughout the year. You may want to consider reducing the amount your employer is withholding from your paycheck. If you’re not sure what to do, check with a Certified Public Accountant or other tax professional for guidance. 

2. Check your debts  

Getting a handle on your debts, how much interest you’re paying, and when payments are due is a worthy exercise at any time of the year. Search for ways to reduce the interest rate you pay on loans and credit cards. Look for opportunities to consolidate debt if it makes financial sense — and put in place a system to avoid late payments. 

3. Review automated payments  

Many people have recurring payments that are automatically deducted from financial accounts. Review those payments, canceling those for products and services that are no longer used — such as gym memberships, streaming services or apps with programs you rarely watch.  

4. Shop around  

If it’s been awhile since you shopped around for better rates on your car insurance, cable, cell phone plan or other recurring items, now is a good time. You should be shopping for better rates at least once a year to ensure you’re not overpaying  
for services. 

5. Document everything  

Financial planners recommend documenting all your accounts, bills, and service provider contact information. You and your loved ones will be happy to have all important information together if there is an emergency or in the unfortunate event of someone passing away. “The Family Information Organizer: Your Planner for any Emergency, Disaster, or Loss of a Loved One” is a free ebook that you can use (https://www.amazon.com/Family-Information-Organizer-Emergency-Disaster-ebook/dp/B07HFG63CQ/). 

6. Check up on insurance coverage  

When was the last time you reviewed your homeowners or life insurance policies? It may be time for an insurance checkup, and not just to make sure you’re getting the most competitive rates. 

Pull copies of your policy documents to ensure you have adequate coverage or conduct an annual review with your insurance agent — especially for property-casualty policies. 

7. Practice cybersecurity best practices  

If your passwords typically vary between your birthday or your pet’s name, you should plan to increase your level of security (particularly for financial accounts and email). If you have trouble remembering all your passwords for various services you use, consider using a password manager. Look for a product that includes multifactor authentication for the most security. 

8. Check your beneficiary designations  

People pass away, get divorced, get remarried, and have children. When those and other life cycle events occur, people often forget to review their life insurance and retirement account beneficiary designations. Now is a great time to review them and make any appropriate changes. 


This material was prepared by LPL Financial, LLC.  

Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. To the extent you are receiving investment advice from a separately registered independent investment advisor that is not an LPL Financial affiliate, please note LPL Financial makes no representation with respect to such entity.   

If your advisor is located at a bank or credit union, please note that the bank/credit union is not registered as a broker-dealer or investment advisor. Registered representatives of LPL may also be employees of the bank/credit union. These products and services are being offered through LPL or its affiliates, which are separate entities from, and not affiliates of, the bank/credit union. Securities and insurance offered through LPL or its affiliates are: 

Not Insured by FDIC/NCUA or Any Other Government Agency Not Bank/Credit Union Guaranteed Not Bank/Credit Union Deposits or Obligations May Lose Value 

This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material. 

Kmotion, Inc., 412 Beavercreek Road, Suite 611, Oregon City, OR 97045; www.kmotion.com 

©2020 Kmotion, Inc. This newsletter is a publication of Kmotion, Inc., whose role is solely that of publisher. The articles and opinions in this newsletter are those of Kmotion. The articles and opinions are for general information only and are not intended to provide specific advice or recommendations for any individual. Nothing in this publication shall be construed as providing investment counseling or directing employees to participate in any investment program in any way. Please consult your financial advisor or other appropriate professional for further assistance with regard to your individual situation. 

Tracking #1-957773(Exp. 02/21)

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A Plan to Reduce Credit Card Debt

If you are contributing to a staggering sum of outstanding credit card debt in America, you need to start digging your way out, and the sooner the better. Debt can stand between you and your financial goals, such as buying a home and being able to fund your retirement. Here are some simple steps that may help you start paying down those charges.

Step 1: Consolidate and pay aggressively. One approach to paying off debt is to become systematic and aggressive. If possible, try to consolidate your balances into one card with the lowest interest rate. Then cut out some of your indulgences — lay off the morning coffee fix and brown bag your lunch. The $50-$200 a month you can save by making a few small sacrifices should go right into your credit card payment. If you can’t consolidate your debt, start with the card with the highest interest rate, and double or triple your monthly payments until you eliminate your balance. Then do the same thing with the next highest interest rate card, and so forth.

Step 2: Pay debt first, invest later. Conventional wisdom states that if you can earn a higher after-tax return on your investments than the interest rate you are paying on your debt, you should invest. Otherwise you should pay off your debt.

As an example, say you have a credit card balance of $8,000 with a 14% interest rate. Given current market performance, paying off the card before investing is a no-brainer. But even if the stock market was experiencing an annual gain between 8% and 9%, paying off debt would still be your better bet.

Step 3: Ask for a lower rate. You can accelerate the pay-down process by calling your card issuer and asking for a reduced interest rate.

It may take months or even years, but becoming debt free is your first step to true financial freedom. It is also a prudent move for individuals who are nearing retirement.

Required Attribution

Because of the possibility of human or mechanical error by DST Systems, Inc. or its sources, neither DST Systems, Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall DST Systems, Inc. be liable for any indirect, special or consequential damages in connection with subscriber’s or others’ use of the content. 

© 2019 DST Systems, Inc. Reproduction in whole or in part prohibited, except by permission. All rights reserved. Not responsible for any errors or omissions.

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