Retirement: Investing in Multiple Plans

Overview of File Box 3

With the increase in contribution limits for 2012, consumers have more options as they plan for retirement.

In working through our important documents, I took the time during this retirement category to explain the options through an overview, the types of accounts, allocating your money, designating your beneficiaries, and transferring your accounts.

In completing this category, I will share how to invest in multiple plans and list the retirement documents held within my File Box 3.

Investing in Multiple Plans

If you have money to invest for retirement, then you will want to get the most from your contributions. Remember, you will need to part with your money and not touch it until retirement.

If you think you will need that money before retirement, then consider a money market fund – which acts like a savings account with a higher return for your investment.

When you determine that you can put this money aside without touching it until retirement, then invest as follows:

1. Employer-sponsored Plan – the maximum one can contribute in 2012 is the lesser of one’s entire income or up to $50,000 which includes any matching by the employer. For 401(k) and 403(b) plans, employee contribution limits are $17,000.

2. IRA or Roth IRA – the maximum is $5,000 per person. You may split your contribution between your Traditional IRA and Roth IRA, but the total cannot exceed $5,000 in your individual retirement accounts.

3. Annuities – if you have invested in the prior two options or a self-employment option and still need a retirement account, then invest in annuities. Remember, annuities are not tax-free, so choose wisely.

Filing Retirement Documents

Within File Box 3, I have filed our social security documents in the first file opening. In the second and third slots, I have our retirement documents. The second slot holds Paul’s retirement documents while the third file opening holds my retirement documents.

Paul’s Retirement Documents

1. His employer-sponsored retirement plan documents include the summary description, quarterly statements, and beneficiary designations which are paper clipped together. If he had any withdrawals, then copies would also be kept within this bundle.

2. For his Roth IRA, the summary page, conversion documentation, quarterly statements, and beneficiary designations stay paper clipped together within this opening.

3. The final set of documents are copies of the check and account statement from the initial transfer from an employer-sponsored plan to a Traditional IRA.

These three sets of documents are housed in the second file opening of our File Box 3.

Tracy’s Retirement Documents

Behind the summary pages, I keep one set of documents for my Roth IRA. These documents include copies of the check from my employer-sponsored 401(k) plan when I rolled it over to a Traditional IRA, the quarterly statements, and beneficiary notifications.

This bundle also includes the transfer paperwork from a Traditional IRA to a Roth IRA and all the quarterly statements since the conversion. These documents remain paper clipped and housed in the third file opening of File Box 3.

Other documents you might have are correspondence, withdrawal slips, and merger documentation when one company combines with another.

Weekly Project: Separate your retirement documents by person and file them.

In using time wisely to organize your important documents, find a system that works for you. I share my documents as an example to follow. Adjust these recommendations to meet your needs.

In finishing up 2012, we have completed the second of five categories in File Box 3. Beginning in 2013, we will continue organizing the third category – our investment documents. Continue plugging along while using time wisely.

Question: What additional retirement documents do you have within your filing system?

Retirement: Transferring Accounts

Overview of File Box 3

If you established your retirement accounts when you were in your 20s, then you may need to adjust your retirement choices as you draw closer to retirement.

This category of retirement plan documents began with an overview, the types of accounts, allocating your money, and designating your beneficiaries.

In continuing this retirement category, remember these tips and tricks when transferring retirement accounts.

Transferring Retirement Accounts

Employer-sponsored plans to a Traditional IRA

If you get laid-off or leave an employer where you have a retirement account, you can choose to leave your retirement account with that employer or transfer it.

When Paul and I left Pennsylvania, we both had employer-sponsored plans. Paul had a 403(b), and I had a 401(k). We both chose to transfer our funds to a Traditional IRA.

NOTE: When transferring from an employer-sponsored plan to an individual plan, you must choose a traditional IRA. You can later convert your Traditional IRA to a Roth IRA, but you cannot transfer from an employer-sponsored plan directly to a Roth IRA. The main reasons are tax changes and moving types of plans.

Since Paul and I had to open up a Traditional IRA each for these funds, we contacted our provider – Vanguard – for the process they suggested we follow. To avoid tax penalties, we completed a custodian to custodian transfer on each account.

The employer-sponsored plans wrote checks directly to our Vanguard fund, but sent us the check. We then filled out the appropriate paperwork and sent the checks with the paperwork to Vanguard.

Our accounts were setup, and we did not incur any tax penalties since we did not take possession of the money. If we had had a Traditional IRA already setup, we still would have opened another account to keep the monies separate.

Traditional IRA to Roth IRA

Since Paul and I know not what our tax bracket will be when we retire, we wanted to convert to a Roth IRA, but the taxes on the conversion are due for that tax year. Without the money set aside for that tax bill, we waited.

Fortunately, there was a loophole in the tax system for 2010. Due to a bill passed in 2005 called the Tax Increase Prevention and Reconciliation Act (TIPRA), a Roth conversion in 2010 did not incur the taxes until 2011 and 2012. With the tax spread over 3 tax years, we jumped at the opportunity and converted both of our Traditional IRAs to Roth IRAs.

To make the conversion, we contacted Vanguard, and they handled the transfer over the phone. It was very easy as we were keeping the same allocation of our contributions. We paid half of the tax from these conversions in 2011 and will pay the remainder when we file our 2012 taxes. Then when we need the money in retirement, the taxes will have been paid.

If you transfer your individual accounts between companies, then contact the company you are transferring to for their recommendation. Sometimes, they can handle most of the conversion for you.

In using time wisely to transfer your retirement accounts contact the company who will hold your money. They can save you money, energy, and time by giving you instructions.

When you transfer, do not take possession of the money. Do a custodian to custodian transfer to prevent tax penalties. Then keep copies of all correspondence regarding the transfer.

Weekly Project: Gather all documentation resulting from transfers of your retirement accounts.

Keep working on getting your documents organized. Next week, I will share the documents I keep within this retirement category of my file box 3. Until then . . . keep organizing!

Question: If you have transferred accounts, what tips can you share to save money, energy, and time?

Retirement: Selecting Beneficiary Designations

Overview of File Box 3

This series has been filled with lots of information. Hopefully, the information has been helpful and not confusing.

With so many options, one can get lost and lose hope. My goal is to present the material as thoroughly as possible without overwhelming you with information. 😉

We began this retirement category with an overview, the types of accounts, and allocating your money.

Once you have your retirement plan and diversified your contributions, the next step is designating your beneficiaries.

Selecting Beneficiary Designations

Beneficiary Defined

In the event of your death, your beneficiaries are the people, trusts, or estates to whom you leave your benefits. You will need to designate at least one beneficiary for each retirement account.

Beneficiary Types

There are two types of beneficiaries: primary and contingent.


A primary beneficiary inherits the retirement benefits immediately upon the death of the account holder without going through probate and without consulting the will. Even if the account holder’s will gifts the retirement account to another, the benefits fall to the primary beneficiary.

One can name more than one beneficiary giving each a percentage of the benefits, but the total percentage must equal 100%. For example, Uncle Bob – 50%, Aunt Mary – 30%, and Cousin Joe – 20% = 100%.

If an account holder names someone other than a spouse as a primary beneficiary, most providers will require written permission from the spouse before accepting the beneficiary.


The contingent beneficiary will receive the benefits if the primary beneficiary is unavailable or unwilling to do so. You may name more than one contingent beneficiary, but you must select the percentage per beneficiary. In some cases, you may name a second contingent beneficiary in the event the primary and the first contingent cannot accept the benefits.

Beneficiary Selection

If you are married and have an established trust, make your spouse your primary beneficiary and the trust your contingent beneficiary. If you have children, you might consider making your spouse your primary beneficiary, your children by percentages your first contingent beneficiaries, and then your trust your second contingent beneficiary.

If you have a trust, then contact the attorney who established it to ask for guidance regarding naming your beneficiaries. Each state or commonwealth handles probate, wills, and beneficiaries differently. Your attorney can advise accordingly.

Beneficiary Update

In the event of a birth, death, or divorce, you may need to update your beneficiary designations. As a general rule, check your beneficiary designations annually.

In using time wisely, check your retirement accounts for your beneficiary designations. If needed, make any necessary changes and keep copies or e-mails of all correspondence.

Weekly Project: Update your retirement beneficiaries.

As we continue organizing our important documents, designating and updating our beneficiaries guarantees our primary beneficiaries the benefits of our accounts. You have worked so hard to choose the right investment and allocated your contributions. Take time to designate your beneficiaries to guarantee those benefits to those you love. Happy designating!

Question: How often do you check your beneficiary designations? 

Retirement: Allocating your Money

Overview of File Box 3

In working through our important documents, I am taking a bit more time on the retirement category to explain some very confusing aspects of investing.

Though I am not a financial adviser, I have been through this process. I know how confusing it is, and how much easier it is when you know your options.

Though I cannot choose for you, I can point you in the right direction and offer encouraging words along the way. 🙂

As we continue organizing our important documents, we are working on the second category of retirement plan documents in File Box 3. After the overview, we looked at the different types of retirement accounts. Today, we will consider how to allocate your money in those accounts.

Allocating your Money

Employer-sponsored Plans

When we signed up for our employer-sponsored plan, we had to choose how to diversify or invest our contributions. Honestly, this was the hardest part for me. I researched and found a breakdown I felt comfortable doing. Then I consulted my uncle to confirm my choices before forging ahead. This table from  Personal Finance for Dummies by Eric Tyson provided the guidance I needed: 


Aggressive Risk


Moderate Risk


Moderate Risk

Bond Fund




Balanced Fund

(50% stock/50% bond)




Blue Chip/Larger Company

Stock Fund(s)




Aggressive/Smaller Company

Stock Fund(s)




International Stock Fund(s)




At the time we setup our accounts, we chose the 25-year-old allotment recommendations. In the next few years, we will adjust to the 45-year-old recommendations.

We looked among the available funds offered through our employer-sponsored plan and found a reliable balanced fund, larger company stock fund, smaller company stock fund, and international stock fund. By going a quick search on Swag Bucks, we found options we liked. The chart guided us to our choices.

Individual Retirement Accounts

Unlike the employer-sponsored plan, the individual retirement accounts can be setup at any financial institution. Though having so many options, making this choice was actually less complicated for me.

I knew from all the reading I had done that we wanted to invest in mutual funds. A mutual fund is run by a fund manager. Many investors pool their money together to purchase the securities and each owns a part of the whole. So, with a small investment, you can own shares of a fund that your one investment would never have been able to purchase alone.

Knowing we wanted mutual funds, we just looked for no-load options. This means that there is no commission charged. We chose Vanguard which is the largest no-load fund company and consistently has the lowest operating expenses in the business. By going with Vanguard, we keep more of our investment rather than paying high fees and expenses.

The recommendations from Eric Tyson we used to decide were the conservative portfolio and aggressive portfolio:

Conservative Portfolio – 50% stocks and 50% bonds

For example: Vanguard Total Bond Market Index – 25%, Vanguard Star – 55%, and Vanguard International Growth or Vanguard Total International Stock Index – 20%

Aggressive Portfolio – 80% stocks and 20% bonds

For example: Vanguard Star – 50%, Vanguard Total Stock Market Index – 10 to 20%, and Vanguard International Growth – 30 to 40%  OR Vanguard LifeStrategy Growth – 100%

Making these decisions is a prediction. We do not know what the market will do, but we chose based on the recommendation we had. Thus far, these investments have done well. We have seen the market drop and rise, but overall our investment continues to grow.

By researching and using guidelines, you can make informed decisions in allocating your money. With your plan in place and your money diversified among the funds, your retirement savings can grow to meet your future needs.

Weekly Project: Review your asset allocation within your retirement accounts.

In using time wisely to file your important documents, continue making progress. Next week, we will look at selecting your beneficiary designations. In the meantime, happy organizing!

Question: How often do you change your investments? 

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Retirement: Defining the Types of Accounts

Overview of File Box 3

When building a house, one begins by designing the framework. If you begin choosing tables and bedroom furniture, you might end up with too much space or not enough.

Starting with the framework and layout determines how you decorate. With retirement savings, one needs to begin with the framework – the plans.

In organizing our important documents, we are concentrating on our retirement plan documents held within File Box 3.

Last week, I provided an overview of the retirement category, and today, we start by defining the types of accounts.

Defining Retirement Account Types

Though there are numerous types of retirement accounts, the four major types are employer-sponsored, self-employment, individual, and annuities.

Employer-sponsored Plans

401(a) Account

Coming from the section of the tax code regulating these plans, the 401(a) is a qualified governmental plan. If you work for local, state, or federal government, you probably have this option. These plans provide an account into which both the employee and the employer contribute or the employer solely contributes.

The retirement income is based on the account balance accumulated throughout the years of the retiree’s employment at the time of retirement. Any distributions, investment gains, or investment losses will affect this balance. The account balance is a combination of the contributions, performance of the investment funds selected, and fees and expenses from the investment options offered through the employer’s investment providers.

These plans accrue tax-free. Taxes are owed only when the funds are dispersed from the account.

401(k) Account

The 401(k) plans are usually offered through payroll deduction from your employer. With contributions excluded from your reported income, these amounts are usually free from federal and state income taxes. You will not pay taxes until you withdraw the money.

A benefit to this plan is if your employer matches your contribution. If your company matches 6% of your contribution, then you will want to contribute at least 6% (if you can afford it) to get the full matching benefit.

If you cannot contribute the maximum matching percentage, then aim to do so. This is extra savings in your account.

403(b) Account

These 403(b) plans are for nonprofit organizations. They carry the same benefits as the 401(k), but have slightly different regulations for setting up. The tax code section is different which is why this is a separate type of account.

Self-employment Plans


This type of retirement plan is a Simplified Employee Pension Individual Retirement Account. If you are self-employed, then this type of account is an option for your retirement savings. Consider doing some research on the benefits.

Keogh Plan

Though more paperwork than a SEP-IRA, the Keogh plan allows one to put aside a large percentage of the self-employed income. These types of accounts are a bit complicated with filings and four different types. If you are interested, please research and find a great resource to help you set it up and administer correctly.

Individual Retirement Accounts

Traditional IRA

A traditional individual retirement account allows one to deposit money into this account tax-free. Since you are making the deposit on after-tax dollars, you claim these contributions on your tax return which lowers your income for the year.

Your money accrues tax-free until you make a withdrawal. When you make a withdrawal, you will claim that money on your tax return and claim the appropriate amount of tax.

One downside of a traditional IRA is the requirement to  begin making withdrawals at the age of 59 ½ .


The ROTH IRA is another type of individual retirement account. Unlike the Traditional IRA, one pays taxes on the money before investing.

The benefit is that at the time of withdrawal, no tax is owed. The money still accrues within the account, but you are not required to withdrawal the money at any specific age. You can just let it build until you need it, even if you wait until age 75.


With contracts backed by insurance companies, annuities are not tax-deductible. This type of investment makes sense for those who reached the limit on employer-sponsored and self-employment plans, made the maximum contributions to an IRA, and willing to leave the money compounding for at least 15 years.

With so many types of retirement plans, these four are basic ones. There are many different forms these types take, but just understanding the types gives you a framework for deciding on the best options for your family. If this was too much information, just concentrate on the employer-sponsored and IRA options. These are the typical accounts one would carry.

Weekly Project: Determine which types of retirement plans you carry.

In using time wisely to get your important documents organized, keep gathering your retirement documents. Next week, we will continue looking at how to allocate your money within your desired plan. Keep learning!

Question: How many types of retirement accounts do you have?