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Your career may take many twists and turns
Americans, on average, have worked
11 different jobs by the time
they turn 42 years old.
Source: Bureau of Labor Statistics, National Longitudinal Survey of Youth 1979, 2008, which is the most recent data available.
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Which road will you follow?
1. Stay put: leave it in the plan
2. Convert it to cash
3. Move it to your new employer’s plan
4. Take it with you with a Rollover IRA
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Option 1:
Stay putYou can often keep your retirement savings invested in your old plan after you leave your job.
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You may want to leave your money in the plan
Cons• Your investment choices may
be limited
• You may not be allowed to make additional contributions ortake loans
• You could have recordkeeping headaches if you change jobs frequently
• The plan controls access toyour savings
Pros
• Tax-deferred compounding
• No taxes or IRS penalties
• Some plans offer special investment options such as employer stock
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Option 2: Convert your savings to cashWithdrawing your assets in a lump sum is an option, but it’s rarely the best choice for pursuing your retirement savings goals.
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Avoid detours!Taking a cash distribution can have a significant impact on your ability to meet your savings goals
Cons
• Distribution may be subject to taxes and penalties
• The money can never be rolled over to another IRA or employer retirement plan
• If you don’t invest the money,it could derail your retirementsavings plan
Pros
• Immediate access to your savings
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Cashing out could meanpaying a hefty toll
Tax consequences:
• Income taxes due at current rate
• 20% mandatory withholding
• 10% additional tax on early withdrawals*
• Loss of tax-deferred status
* Most withdrawals made before 59½ are subject to a 10% additional tax penalty.
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Cashing out could meanpaying a hefty toll
Take it now Roll it over Retirement plan account balance
$50,000 $50,000
25% federalincome tax
–$12,500 –$0
10% early withdrawal penalty
–$5,000 –$0
Remaining balance $32,500 $50,000
* Most withdrawals made before 59½ are subject to a 10% additional tax penalty.
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There’s no substitute for time on the road to retirement Investor A stays investedRolls over a $50,000 portfolio, which earns8% a year for 25 yearsInvestor B cashes out, then five years later tries to catch upContributes $5,000 a year for 20 years, also earning 8%
Totalinvested$50,000
Total$245,425
Total$367,009
Totalinvested$100,000
Illustrative purposes only.
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Option 3: Move your savings If you are changing jobs, you may be able to move your savings to your new employer’s retirement plan.
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Moving your savings can get you further down the road to retirement
Cons
• Investment options maybe limited
• Rules governing withdrawals are based on the plan’s provisions
• New plan may not be available if you’re starting your own businessor taking a part-time job
Pros
• Tax-deferred compoundingof assets
• Retirement assets under one roof
• Some plans offer special investment options, such as employer stock purchase programs or loan provisions
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Option 4:
Take it with you!Transfer your savings to a Rollover IRA without taxes or penalty.
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A Rollover IRA offers a range of benefits, wherever your careertakes you
Cons
• Does not offer loans
• Special tax advantages for assets held in employer stock are not available
• May offer less protectionfrom creditors
Pros
• Wider range of investment choices
• Option to make withdrawals before age 59½ without IRS penalties
• Ability to convert assets to aRoth IRA
• Easier recordkeeping and management
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Two ways to roll overyour savings1. Direct rollover
• Retirement assets are transferred directly from formeremployer’s plan to:
–A Rollover IRA, or
–A new employer’s plan
•No income taxes due
•No mandatory 20% federal income tax withholding
•No IRS penalty for early withdrawal
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Two ways to roll overyour savings2. Indirect rollover•Distribution check is made payable to participant•20% is withheld for federal income tax purposes•Participant has 60 days to reinvest distribution
(including amount withheld) in a new employer’s plan orin a Rollover IRA
•IRS penalty for missed deadline is severe–Cannot shelter those assets from taxes in the
future–Income taxes must be paid on full distribution–10% additional tax if distribution is made before
age 59½
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Keep your eyes on the road
• Remember, cashing out can cost you
• Compounding can help grow your savings
• A Rollover IRA may offer more flexibility
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Need directions?
Talk to your financial advisor
Call Putnam Investments
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A BALANCED APPROACH
A WORLD OF INVESTING
A COMMITMENT TO EXCELLENCE
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Investors should carefully consider the investment objectives, risks, charges, and expenses of a fund before investing. For a prospectus, or a summary prospectus, if available, containing this and other information for any Putnam fund or product, call your financial representative or call Putnam at 1-800-225-1581. Please read the prospectus carefully before investing.
Putnam Retail Management putnam.com
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