IRA and 401k Law Planning

The new law gradually increases the amount you can contribute each year to a traditional IRA or Roth IRA** from $2,000 per person to $5,000 per person. The increase is phased in over a seven-year period starting in 2002. As a result, a married couple may eventually contribute up to $10,000 a year to a traditional and/or Roth IRA. There is, however, a limit of $5,000 per IRA.

Planning Considerations
The increase offers an opportunity to save more money for retirement. You can make contributions to a traditional IRA*** (and possibly to a Roth IRA) even if you put money into an employer-sponsored retirement plan.

Catch-up Contributions for Traditional IRAs and Roth IRAs
The new law allows investors age 50 and over to contribute more to an IRA. With these "catch-up" contributions, investors may be able to put up to $6,000 a year to an IRA when the provisions are fully phased in.

Starting in 2002, those 50 and over can contribute an extra $500 per year to a traditional IRA and /or Roth IRA. The catch-up contribution will remain at $500 through 2005, and will then increase to $1,000 for 2006 (and later years). For those investors 50 and over who plan to retire in the near future, this provision provides an added opportunity to build up funds for it. Again, investors can make catch-up contributions (and IRA contributions) in addition to employer-sponsored retirement plans.***

• New Rollover Rules
  With the new law, it is much easier for you to roll over (or transfer) retirement plan assets from one plan to another. This also applies when you move funds from a traditional IRA to an employer-sponsored retirement plan.
• You can roll over after-tax contributions
  Roll over from one qualified plan to another (or to an IRA, in certain situations). Also, surviving spouses may now roll over retirement plan distributions to a traditional IRA, or to a qualified plan, 403 (b) plan or 457 plan (generally, a plan sponsored by state or local governments) in which they participate. Previously, a surviving spouse could only roll over these distributions to his or her traditional IRA.
• Expanded Rollover Rules
  Under prior law, investors could only roll over distributions form a 403 (b) plan to another 403 (b) plan or to an IRA. Now, in most cases, investors can roll over assets between 401 (k) plans, profit-sharing plans, money purchase pension plans, 403 (b) plans, governmental 457 plans, and traditional IRAs. Previous rollover restrictions are eliminated.

IRA Planning Consideration
The expanded rollover rules may provide you with more control over where you want your retirement plan assets held and how you want them to be invested.

How it affects YOU
It is important to find out exactly how these changes affect you and your family. Speak to a financial advisor and your personal tax or legal advisors to have a personalized assessment done.

Contact the nearest Estate Planning Lawyer and obtain a free case evaluation.

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