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Retirement Services

If you ask 10 people what their idea of a perfect retirement is, you’ll likely get 10 different answers. Some will no doubt involve world travel, others might long for the call of a tropical location, and some will want the simple joy of a life of leisure.

There’s one constant, the financial foundation to support your ideal retirement plan. That’s why we spend the time getting to know you and your family.

Choosing the right retirement plan depends upon a number of factors including suitability, eligibility, and the plan’s ability to meet your financial needs. Once we have a good understanding of your future needs, we work together to develop a plan that will move you towards that perfect retirement.

A retirement fund “rollover” occurs when you withdraw assets from one eligible retirement plan and, within 60 days. you contribute part or all of it to another eligible plan. The transaction is not taxable but needs to be reported on your federal tax return. Most distributions from eligible retirement plans can be rolled over, except for:

  • The nontaxable part of a distribution, such as your after-tax contributions to a retirement plan
  • A distribution that is one of a series of payments based on your life expectancy, or the joint life expectancy of you and your beneficiary, or paid over a period of ten years or more
  • A required minimum distribution
  • A hardship distribution
  • Dividends on employer securities, or The cost of life insurance coverage

Other exclusions exist for certain loans and corrective distributions.

If a distribution is paid to you, you have 60 days from the date you receive it to roll it over to another eligible retirement plan. Any taxable amount of a distribution that is not rolled over must be included in income in the year of the distribution, and if you are under 59 ½ at the time of the distribution, that portion might be subject to a 10% tax for early distribution.

A traditional Individual Retirement Account (IRA) is a personal savings plan that provides tax advantages to individuals saving for retirement. A Traditional IRA allows our investment managers to direct pretax income towards select stocks, bonds, and other financial assets that can grow tax deferred.

A Traditional IRA is a great way to lower your tax liability and save money for retirement. If you invest $5,000 into a Traditional IRA, you can claim that $5,000 as a tax deduction on your income taxes. The deduction will lower your adjusted gross income, which in turn will lower your tax liability.

When it’s time to start receiving distributions from your Traditional IRA, the income is treated as ordinary income and may be subject to income tax. Distributions are required to start coming out of the account when you reach 70 ½ years of age.

There are additional benefits and restrictions of the Traditional IRA. Please give us a call to discuss and see if a Traditional IRA would be a good choice for your retirement plan.

A Roth IRA differs in many ways from a Traditional IRA, but the primary differentiator is the Roth IRA does not provide the tax deduction that a Traditional IRA does. You are taxed up front, but your contributions and gains grow tax free. This makes the Roth IRA a great vehicle to create tax-free income and growth for your retirement portfolio.

A Roth IRA may be invested in any combination of stocks, bonds, mutual funds, certificates of deposit, and money market funds. Earnings are not subject to income tax, provided you have held the account for 5 years or more and are at least age 59½. Your direct contributions can be withdrawn at any time and are tax-free.

Contribution limits can change year to year, as can adjusted gross income limits to contribute. We would be happy to spend some time reviewing your account and determining if a Roth IRA would be a good vehicle for your retirement portfolio.

There are some important benefits and restrictions of the Roth IRA.

Benefits are:

  • Tax-free growth
  • Assets can be passed to beneficiaries after death
  • Easy withdrawal process
  • No Minimum withdrawal requirements
  • You can have a Roth IRA even if you have other retirement plans

Restrictions are:

  • Contributions are not tax deductible like they are with a Traditional IRA
  • Fees will be assessed (10% ) if you withdraw money before 59½, unless for a variety of qualified reasons (education, first-time home purchase, medical expenses, disability health insurance, etc)
  • Income limits on participation

The SIMPLE IRA Plan allows employees and employers to contribute to a Traditional IRA set up for employees. SIMPLE stand for Savings Incentive Match Plan for Employees, and it is ideally suited as a retirement savings plan for small companies that do not offer a retirement plan.

An eligible employer may adopt a SIMPLE IRA and must meet the requirements that apply to traditional IRAs. However, contributions to an employee’s SIMPLE IRA are limited to:

Employee contributions made under a salary reduction agreement; and Employer contributions that are made as either matching contributions or non-elective contributions. The IRS has issued two model forms that may be used by employers that want to establish a SIMPLE IRA for their employees. If the employer has established a SIMPLE plan, an employee must be eligible to participate in any calendar year if he or she received at least $5,000 of compensation from the employer during each of the two preceding calendar years, and is reasonably expected to receive at least $5,000 in compensation during the current calendar year.

A self-employed individual is treated as an employee and may participate in a SIMPLE plan if the minimum compensation requirement is met.

A Simplified Employee Pension IRA (SEP) provides an employer with a simplified way of making contributions to an employee’s retirement account. Contributions are tax-deductible to the employer, are not currently taxable to the employee, and any earnings accumulate income tax-deferred. No annual contribution is required by the employer, but if a contribution is made, it must be the same percentage of compensation for all eligible employees. The annual employer contribution limit can change every year. Contact us for more information.

Any employee who is at least 21 years old and has worked for the company in at least three of the last five calendar years must be permitted to participate.

Advantages to the employer:

  • Contributions are tax-deductible
  • Contributions and costs are flexible
  • Reporting is minimal – no IRS or Department of Labor forms
  • Little or no administrative expense

Advantages to the employee:

  • Participant has the right to direct investments
  • Annual contributions are not currently taxed to the participant
  • Earnings on the account are not currently taxed to the participant

Disadvantages to the employer:

  • Contributions must be made for part-time and seasonal employees
  • Employees are always 100% vested

Disadvantages to the employee:

  • No guarantee as to future benefits
  • Investment risks rest on the participant
  • No assurance as to the frequency and amount of employer contributions

A profit sharing plan is an arrangement that allows employees to share in the profits of their company. Profit sharing plans are a great way to give employees a sense of ownership in a firm, which in turn gives them incentive to increase job performance and decrease excess spending.

Each employee receives a percentage of profits based on the company’s earnings. The firm dictates what portion of the profit will be shared and payments may vary in accordance with salary or wages, and are in addition to regular earnings.

Typically, there are restrictions with regard to withdrawing funds, especially without penalties.

Charter Trust can help in the creation and administration of your profit sharing plan and can invest the assets in accordance with your investment policy statement. Should you not yet have an investment policy statement, we can assist in developing, drafting and implementing one for you.

A 401(k) plan is a retirement plan that meets certain participation requirements of IRS Section 401(k). To make contributions, an employee can agree to a salary reduction or to defer a bonus, and the employer can also make discretionary contributions. Employer contributions, if any, are tax-deductible to the employer, are not currently taxable to the employee, and any earnings accumulate income tax-deferred.

Plan investments must be diversified and prudent. Generally, participants direct the investment of their own deferrals and may also direct the investment of the employer contributions. Participant contributions must be always 100% vested. Employer contributions are usually subject to a vesting schedule, so should the participant leave the company before they are 100% vested, a percentage of that portion of the account is forfeited. Any employee who is at least 21 years old and with 1,000 hours of service within one year, subject to some exclusions, must be permitted to participate.

Among the advantages to the employer:

  • Employers are not required to make discretionary contributions.
  • Contributions are tax-deductible.
  • Employer can direct employer investments.
  • Employer matching contribution is a popular employee benefit.

Advantages to the employee:

  • Participant generally has the right to direct their investments.
  • Participant deferrals are made with pre-tax dollars.
  • Earnings on the account are not currently taxed.
  • Employer may make matching contributions of some amount.

Disadvantages to the employer:

  • Employers may be required to make mandated contributions to satisfy certain requirements.
  • Administrative costs are greater than with other types of plans.

Disadvantages to the employee:

  • No guarantee as to future benefits.
  • Investment risks rest on the participant.
  • Company may or may not make discretionary contributions.

A Defined Benefit Pension Plan is an employer-sponsored retirement plan, but it is entirely different from many pension funds where payouts are dependent on the return of the invested funds.

With a defined benefit plan, employee benefits are determined by personal factors such as years of service or salary. It promises a specific monthly benefit at retirement, sometimes an exact dollar amount, but more often a percentage determined by the assessment of each employee’s personalized factors. There are restrictions to when and how you can withdraw these funds without penalty.

At Charter Trust, we will assist in working with a third-party administrator and actuary to manage your plan, and we will invest the assets in the plan in accordance with the plan document and current laws.