Tips and Tools For Financial Success - Newton Free Library

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In most cases, you roll over a traditional IRA to another traditional IRA and a Roth IRA to a Roth IRA. There are specific guidelines for handling rollovers. Normally, the easiest way is a direct rollover: You ask your current IRA custodian to transfer the money directly to another custodian where you already have an IRA—either a previously existing one or one you’ve just opened. Once you fill out the authorization forms, the money will be moved electronically to the investments you have selected in the new account— though not instantly. It may take days or even weeks for the transaction to take effect and you’ll want to follow up to be sure that the transfer has actually been completed and the money invested as you’ve directed. A direct rollover isn’t the only way to handle moving your IRA assets. You can ask for a check for the amount to be rolled over and complete the transaction on your own. But you must deposit the full amount into the new IRA within 60 days. If you don’t, regardless of the reason, the IRS considers the money an early withdrawal, so taxes are due as well as a potential 10 percent penalty if you’re younger than 59½. What’s more, that amount can never be deposited in a tax-deferred account again. You may also choose to convert a traditional IRA to a Roth IRA. Before January 1, 2010, only taxpayers with incomes under $100,000 could make these kinds of conversions. But that ceiling has been lifted. The law creating this change also included a special provision that allows taxpayers to spread the extra taxes caused by the conversion over 2011 and 2012. When you convert a tax-deferred IRA to a Roth IRA, all tax-deductible contributions, plus the earnings they’ve generated, are added to your gross income and taxed at your regular income tax rate. So if you’ve accumulated a substantial amount in the IRA you’re moving, you could face a hefty tax bill. If you’re thinking about moving your assets to a Roth IRA, you should consult your tax adviser to be sure it is appropriate for you. One thing you’ll want to consider is how you’ll pay the taxes. In most cases, the benefits of converting tax-deferred accounts to a Roth are only realized if the taxes are paid from savings or investments outside the retirement fund itself. Pulling the tax payment from your rollover could be more costly for younger investors. If you are younger than 59½ years old, you could receive a 10 percent early withdrawal tax penalty if the full conversion amount is not deposited in your new Roth account within 60 days. Another factor is whether you’ll keep the Roth IRA open at least five years. If that doesn’t seem likely, making the switch is probably not a good idea because you’ll owe tax again on the withdrawals since the tax-free withdrawal provisions won’t apply. IRA Beneficiaries When you open an IRA, you should name a beneficiary for your account. A beneficiary is the person you want to receive the assets you have accumulated when you die. If your IRA custodian permits it, you might also name contingent or secondary beneficiaries—essentially, back-up heirs in case something happens to your first choice, or that person chooses not to take the money. For example, you might name your spouse as primary beneficiary and your children as contingent beneficiaries. 71
Activity 1: Pay Yourself First Action Plan (from FDIC Money Smart) The top half of the plan gives you space to record factors that may affect the steps you take to save, and the savings or investment products you use to save. The bottom half of the plan gives you space to record the actions you plan to take now, a month from now, and a year from now in order to reach your savings goals. Decision Factors How much do I want to accumulate over a certain period of time? How long can I leave my money invested? How do I feel about risking my money? Action Plan What will I do now to save toward my goals? What will I do by the end of the month to save toward my goals? What will I do by the end of the year to save toward my goals? 72
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Financial Literacy at the Library T
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Background and Acknowledgments Fina
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Chapter V. Credit Overview of Credi
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6 Newton Free Library hosted Financ
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8 © 2011 American Consumer Credit
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Goal Setting & Financial Planning (
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Financial Goals Worksheet (SMART)
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Planning For Unexpected Life Events
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1. Determine what to keep at home a
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5. Keep a close watch on your bank
Page 21 and 22: 20 Kip Child, FDIC Community Affair
Page 23 and 24: Introduction to Banks (from FDIC Mo
Page 25 and 26: 24 Debit Cards • Fees? • Fee wa
Page 27 and 28: Ways to Take Money Out of Your Acco
Page 29 and 30: Using Electronic Banking (from FDIC
Page 31 and 32: Activity 1: Checking Account Fees (
Page 33 and 34: Activity 3: Record Transactions in
Page 35 and 36: Sample Check Register Check Number
Page 37: Paper Money Copy, cut, and put the
Page 40 and 41: III. Budgeting Practice Good Habits
Page 42 and 43: Create a Budget—and Pay Yourself
Page 44 and 45: Household Budgeting Worksheet Housi
Page 46 and 47: Read the scenario, review the Month
Page 48 and 49: Increase Your Income How might how
Page 50 and 51: Develop a Spending Plan A spending
Page 52 and 53: Implement Your Plan Seek Assistance
Page 54 and 55: • Educate yourself and learn more
Page 56 and 57: Budgeting Quiz 1. How long should y
Page 58 and 59: Budgeting Quiz -Answers 1. Correct
Page 60 and 61: IV. Saving and Investing Preparing
Page 62 and 63: The true magic of compound interest
Page 64 and 65: 9. Pay off high-interest credit car
Page 66 and 67: Risk-Return Relationship Table (FIN
Page 68 and 69: Compounding with Tables (FINRA Inve
Page 70 and 71: Retirement Savings Vehicles (FINRA
Page 74 and 75: Activity 2: Savings Goals Worksheet
Page 76 and 77: Investing Quiz 1. Which of the foll
Page 78 and 79: Investing Quiz - Answers 1. Correct
Page 80 and 81: Making your First Investments http:
Page 82 and 83: V. Credit Overview of Credit What i
Page 84 and 85: What Is a Credit Report? (from FDIC
Page 86 and 87: How the Credit Report Is Used (from
Page 88 and 89: How to Get Your Free Annual Credit
Page 90 and 91: Credit Cards: What Are They Used Fo
Page 92 and 93: Credit Card Comparison Chart (from
Page 94 and 95: ACCOUNT ACTIVITY Date of Transactio
Page 96 and 97: Activity 1: Maria’s Credit Report
Page 98 and 99: Activity 3: Who Poses the Most Cred
Page 100 and 101: Credit Terms and Definitions Bankru
Page 102 and 103: 8. All of the following appear on y
Page 104 and 105: VI. Borrowing Basics Types of Loans
Page 106 and 107: Car Loans (from FDIC Money Smart) T
Page 108 and 109: To Rent or To Own? (from FDIC Money
Page 110 and 111: Activity 1: Which Loan Is Best? (fr
Page 112 and 113: Activity 3: How Much Mortgage Can P
Page 114 and 115: Note: Make sure you compare loan of
Page 116 and 117: Estimated prepaid amounts for inter
Page 118 and 119: Borrowing Basics Quiz 1. Which of t
Page 120 and 121: Answers for Borrowing Basics Quiz 1
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VII. Life Skills Menu Planning Work
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Grocery Shopping Tips 1. Clean out
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Computer Terms and Definitions Comp
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Housing Terms and Definitions Appli
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8. According to the 2010 Consumer E
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VIII. Glossary Glossary (excerpted
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Compounding: Interest paid on money
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Interest: A percentage of your bala
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Stocks: Parts of a company, called
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IX. Recommend Resources Bibliograph
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Careers and Life Skills Bostick, Na
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Heath, Julia A. Personal finance es
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Debt information for teens: tips fo
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Tutor/Teacher Cordell, Jane. Cambri
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Newton Free Library Financial Educa
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I. Learning English Online Resource
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Investor Knowledge Quiz - http://ww
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American Consumer Credit Counseling
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Nationwide Resources (from American
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This publication is made possible b
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