It’s 2013. Do You Know Where All Your Retirement Savings Are?

January 21, 2013

The case for consolidating your retirement accounts only grows more compelling over time. A Traditional IRA here, a rollover IRA there, four job changes (so far!) and three retirement plan account balances left in the plans of former employers… If this describes your situation, you are not alone. Over the years, people accumulate a significant sum in retirement savings, often spread across various accounts. As accounts multiply and companies change ownership, it can become difficult to keep track of exactly how much you have saved toward retirement and how those funds are invested. You may also find it challenging to determine your distribution requirements on various accounts once you turn 70 ½. Consolidating accounts can help you make sure your savings are invested appropriately for your overall goals, track the performance of your holdings and, in many cases, discover more investment choices and incur lower fees. With retirement savings in just a few accounts, it becomes far simpler to execute your strategy and to measure your progress.

Why Consolidate?Streamlining the account structure of your retirement savings has many potential benefits. Comprehensive investment strategy. Over time, your investment objectives and risk tolerance may have changed. Thus, it can be difficult to maintain an effective retirement investment strategy—one that accurately reflects your current goals, timing and risk tolerance—when your savings are spread over multiple accounts. Once you begin the consolidation process, you can strategize investments to match your current goals and objectives. Greater investment flexibility: Often, 401(k) plans, other employer-sponsored retirement programs and even many IRAs have limited investment menus. A Morgan Stanley self-directed IRA can offer you the ability to choose from a wide range of investments including stocks, bonds, mutual funds, managed accounts and more. Simplified tracking: It is easier to monitor your progress and investment results when all your retirement savings are in one place. Less paper: By consolidating your accounts, you will receive one statement instead of several. That simplifies your life while protecting the environment. Lower costs: Reducing the number of accounts may result in fewer account fees and other investment charges. Clear required minimum distributions (RMDs): Once you reach age 70½, having fewer retirement accounts to manage can mean having fewer RMD requirements to follow. Comprehensive knowledge of your assets. If your employer-sponsored retirement plan is terminated or abandoned (an “orphan plan”) or is merged with or transferred to a retirement plan of another corporation after you leave, it may be difficult to locate the plan administrator to request a distribution of your benefits or to change investments. By contrast, assets in an IRA are always accessible if you want to change your investment strategy or need to take a distribution.

Consolidate Your Retirement Savings and Qualify for a Lifetime Fee Waiver With the Free Forever IRA^SM you can transfer, roll over or add $100,000 or more to an IRA at Morgan Stanley during 2013 and we will waive your annual maintenance fee for the life of the account.¹ What Can Be Consolidated? Listed below are types of retirement accounts eligible for consolidation.

IRAs held at financial institutions (banks, credit unions, mutual fund companies, etc.).
- Retirement plan assets held at former employers including:

- 401(k) plans - profit-sharing plans - money purchase plans - defined benefit plans - Keogh plans - ESOPs - government 457(b) plans - 403(b) plans How it works.There are several ways to combine retirement assets into a single account.

IRA-to-IRA transfers: Ask the IRA custodian where you will be establishing your account to help you complete their IRA transfer paperwork. Once you’ve set up your IRA, the custodian will do the rest, including contacting your previous IRA custodian(s) to get your assets moved over. There’s no limit on the number of IRA-to-IRA transfers that you can complete in any given year. (However, please note that a Roth IRA can be consolidated only with another Roth IRA.)

Knowing how rollovers work can help you make a decision about whether or not to consolidate.

IRA-to-IRA rollovers: You can ask your current IRA custodian to send you a check for the amount held in your IRA. You will then have 60 days to deposit the funds into another IRA without incurring any current tax liability. Note that your former IRA custodian will report the amount as a distribution on IRS Tax Form 1099-R; your new IRA custodian will report the rollover contribution on IRS Tax Form 5498. If you miss the 60-day time period, taxes and penalties may apply. IRA-to- IRA rollovers are restricted to one every 365 days per IRA.
Direct rollover from qualified plan to an IRA: Ask your previous employer(s) about the paperwork needed to complete a direct rollover of your qualified retirement plan assets to your IRA. The assets will be transferred once you complete the paperwork. Note that your former employer’s plan will report the amount as a distribution on IRS Tax Form 1099-R; the IRA custodian will report the rollover contribution on IRS Tax Form 5498. There are special rules involved in transferring a “pre-tax” retirement plan balance to a Roth IRA—talk with your tax advisor about the impact this may have on you.
Indirect rollover from qualified plan to an IRA: Like the IRA-to-IRA rollover, you can ask your previous employer(s) to send you a check for your vested plan balance and then redeposit those funds into an IRA or other qualified retirement plan within 60 days. However, the plan trustee will be required to withhold 20% of the taxable portion of the distribution as mandatory federal withholding. You will need to make up that 20% when you redeposit the funds into an IRA or the amount withheld will be subject to taxes and possibly penalties if you are under age 59½.

Speak with your tax advisor about these and other rules that may apply when consolidating retirement plan assets. When You Might Not Want to Consolidate. Notwithstanding the many benefits to consolidating your retirement accounts, there are some caveats to keep in mind. For example, while many qualified plans allow for loans, you cannot take a loan from an IRA. Thus, once you roll over a qualified plan into an IRA, the ability to take a loan is no longer available. However, once you leave the company you may not be able to take a loan out anyway, since few qualified plans allow loans to be taken out by former employees. Another consideration is RMDs. Upon reaching age 70½, owners of a Traditional IRA must begin taking required minimum distributions or face stiff IRS penalties. If the plan permits, qualified plan participants can delay taking required minimum distributions after attaining age 70 ½ if they are still working. A final consideration may be employer stock. Employer (and former) employer stock held in a qualified retirement plan may be eligible for special tax treatment on distributions (known as “net unrealized appreciation” or “NUA”) that you lose if you roll over the stock to an IRA. Check with your plan administrator and your tax advisor on whether or not the NUA rules may apply to you. Generally speaking, simplifying your retirement account structure can help you take control of your financial future. Your tax and financial advisors will be able to assist you in determining if consolidation makes sense given your specific circumstances and goals. Don’t wait. Your actions now can greatly affect your quality of life in retirement, whether it is years away or just around the corner. ¹Free Forever IRA program requirements: The following IRA account types are eligible: Traditional, Roth, Rollover, SEP, SIMPLE and SAR-SEP; the $100,000 addition to the IRA can be a combination of any of the following: IRA contribution, rollover from another non-MS or qualified retirement plan, e.g., 401(k) or a transfer from another non-MS IRA; the fee waiver offer is limited to one lifetime annual account maintenance fee waiver per Social Security Number listed on the account documentation; other product fees and charges (e.g., commissions) continue to apply; assets must remain in the account for one year from the date of deposit to qualify for the Free Forever IRA maintenance fee waiver; redeposit of a client’s prior IRA distribution does not qualify. The fee waiver will occur at the anniversary billing date following funding. Tax laws are complex and subject to change. Morgan Stanley Smith Barney LLC (“Morgan Stanley”), its affiliates and Morgan Stanley Financial Advisors and Private Wealth Advisors do not provide tax or legal advice and are not “fiduciaries” (under the Internal Revenue Code or otherwise) with respect to the services or activities described herein except as otherwise agreed to in writing by Morgan Stanley. This material was not intended or written to be used for the purpose of avoiding tax penalties that may be imposed on the taxpayer. Individuals are encouraged to consult their tax and legal advisors regarding any potential tax and related consequences of any investments made under such account. If you’d like to learn more, please contact Angel Chavez, 415-984-6008. Angel.chavez@morganstanley.com Article by Morgan Stanley Smith Barney LLC. Courtesy of your Morgan Stanley Financial Advisor. Morgan Stanley Financial Advisor(s) engaged Silicon Valley Latino to feature this article. Angel Chavez may only transact business in states where he is registered or excluded or exempted from registration www.morganstanleyfa.com/elcaminogroup/ Transacting business, follow-up and individualized responses involving either effecting or attempting to effect transactions in securities, or the rendering of personalized investment advice for compensation, will not be made to persons in states where Angel Chavez is not registered or excluded or exempt from registration. © 2013 Morgan Stanley Smith Barney LLC. Member SIPC. CRC 599636 12/12