Conference nyoss1::market_investing

I don't believe you receive the lump sum package until
after your 9 weeks pay run out?  

    
    	Re: .0
    
    	The way I understand the TFSOs to have worked in the past is that
    you continue to receive your regular pay for 9 weeks and _then_ get the
    lump-sum check.  If someone gets tapped on Dec 7th, I doubt they have
    the option of taking the lump-sum check in 1992 or 1993.
    
    	That said, if someone did have the choice, they'd be probably
    better off delaying the check until 1993.  If they take it in 1992,
    they'd have a full year of regular salary plus a big extra chunk of
    income to pay taxes on.  With the job market being the way it is,
    delaying the TFSO check until 1993 might let this money be taxed at a
    lower rate.  (ie. TFSO check + less than a full year's salary might
    result in being in a lower overall bracket.)
    
    	Cashflow wise, I don't think it is much of a difference.  Getting a
    sizeable one-time check like this in Jan/Feb would require (I think)
    filing estimated quarterly taxes.  The act of writing a big check to
    the gov't wouldn't be delayed until April of '94.
    
    							-craig

There are four additional line items to consider:

1. Life insurance - if  you have life insurance with Digital, do
   you want to continue during the nine weeks and possibly convert
   over to an individual policy or is saving the payments more 
   important?

2. LTD - given that the individual will be out of work, is LTD
   really necesssary for that period or is saving cash now more
   important?

3. SAVE - should one continue in the program or conserve cash?

4. ESPP - since one will NOT be able to participate in the plan,
   is continuing wise?

Gim

There was an interesting little piece of paper 
that came with the quarterly SAVE account 
statement that would be of some interest to 
people moving on from DEC and taking their Save 
or Retirement plans to roll over into an IRA. 

The old law allowed you to cash your lump sum 
distribution and take up to 60 days to roll it over 
into an IRA type plan. The new law seems to 
indicate that if you cash the lump sum check you 
still have 60 days to roll it over into an IRA 
but the IRS takes 20% off the top and holds onto 
it until you file your tax return for that year. 
If you get a roll over check in Jan of 93 this 
could mean that the IRS gets to hold that chunk 
of money for quite some time. 

Looks like the thing to do is to have your 
distribution check made payable to your IRA 
instead of yourself.

Be careful and plan ahead............ 

    
    	Re: .4
    
    	One of the other real nasty "gotchas" in this law is that if
    Digital is required to withhold that 20%, -that money- is considered to
    be a withdrawal unless you can come up with the equal amount of cash to
    add to the rollover.  For example, lets say you have $20,000 in SAVE
    and have the check made out to you during the rollover.  Digital is
    required to withhold 20%, or $4,000.  You now have a check for $16,000
    but you were trying to rollover $20,000.  If you don't add $4,000 of
    your own cash to that check, the IRS looks at it and says "Hmmm, cashed
    out a qualified plan at $20,000 and only rolled over $16,000.  Taxable
    withdrawal of $4,000!"  (And, of course, not only would you have to pay
    tax on this at your regular incremental tax rate, but also with the 10%
    early-withdrawal penalty tossed in for fun.)
    
    	It really pays to heed their warning and have the withdrawal check
    made out directly to whatever custodian is going to manage your IRA.
    Don't let the check ever be made out to you.              
    
    							-craig

      Is  there  a  reason  to keep a rolled-over 401K (e.g., SAVE) in a
      separate IRA rather than adding it to an existing IRA?
      
      I  seem to remember reading something about this being required if
      you ever wanted to roll it back into some other 401K. My memory is
      very vague on this.  Anyone recognize what I'm thinking of.

You roll your 401k $$ into a separate, unique IRA.  Don't put any other
$$ in it.  Then, should you have the opportunity to roll it into a
future 401k plan, you can.  The limits on contributions to 401k plans
are different than the limits on regular IRA's.  If you "co-mingle"
the 401k-type $ with non-401k $, the IRS says "you cannot ever separate
the money back to its component parts, so you cannot put it back into
the 401k type plan."

SteveSov

If you are TFSO'd the following policy takes effect:

"If you are currently enrolled in SAVE the following applies:

	1. If your balance is under $3500 you must withdraw your balance 
	(note previous replies regarding 20% witholding)

	2. If your balance is $3500 or greater, you may withdraw your balance or
	leave it in the plan.

SAVE contributions are deducted from the lump sum payment up to the legal limit
in accordance with the elections in effect on your termination date. If you are
currently in the SAVE plan, have a balance of $3500 or greater, and are eligible to
receive a cash out from the pension plan, you can roll over this amount to 
your SAVE plan and retain the tax deferred status of this money."

    re: .5
    
    >If you don't add $4,000 of your own cash to that check, the IRS looks at it and says "Hmmm,
    >cashed out a qualified plan at $20,000 and only rolled over $16,000. 
    >Taxable withdrawal of $4,000!"  (And, of course, not only would you have to
    >pay tax on this at your regular incremental tax rate, but also with the
    >10% early-withdrawal penalty tossed in for fun.)
    
    Is there a way (IRS form?) to let them know what happned?  I didn't
    know about this when I left my previous employer, got a check from them
    and turned around and opened an IRA with 20th Century.  Not realizing
    that a percentage might have been withheld (and not really having good
    personal bookkeeping at that point), I didn't even notice that they
    withheld any!
    
    Steven

    Whats the most promising investment to roll over 401(k) funds right now?
    
    Thanks Steve for pointing out the pitfalls in comingling funds, but if
    I rollover a 401(k) can I break it up into multiple conduit IRAs? What
    are the pros and cons?
    
    Also, what's the angle behind frequent rollovers? Not that's going to be
    relevant any more with the new 20% tax withholdings, but what loophole
    are they closing?
    
    --Sujit

Re: .9

Steven, this new rule goes into effect January 1, 1992.  If the rollover is 
completed by then, you are safe.  After that, you're screwed.

The law is written so the default is to deceive and penalize the average Joe/Jo.

Elaine

    Re: .11
    
    Thanks, Elaine.  I was afraid there was something going on that I
    didn't notice.
    
    S

    Yesterday's Globe talks about this subject and offers a new slant on
    the decision on whether to move from Save(401k) to IRA.  A recent
    Supreme Court ruling stated that money in 401k is exempt from a
    bankruptcy trustee but money in an IRA is not.  
    
    The article also makes mention of .4's point about $3500 and over
    balance allows one to remain with SAVE if one prefers.
    
    Regarding a bankruptcy I believe that State's may exempt IRA money but
    my interpretation of the article was that a State cannot attach 401k
    money any more.