1 00:00:40,650 --> 00:00:47,080 Suze: February 25th, 2024. Welcome everybody to the Women and Money 2 00:00:47,090 --> 00:00:51,150 Suze: podcast as well as everybody smart enough to listen, Suze O, 3 00:00:51,159 --> 00:00:55,400 Suze: here and today is Suze School. So that means get 4 00:00:55,409 --> 00:00:59,520 Suze: out your Suze notebooks or any paper that you can 5 00:00:59,529 --> 00:01:03,560 Suze: write things down on because, you know, we do have 6 00:01:03,569 --> 00:01:06,480 Suze: a tremendous amount of podcasts that I've done. 7 00:01:06,709 --> 00:01:10,339 Suze: I think we're well over 500 now and sometimes you 8 00:01:10,349 --> 00:01:14,489 Suze: hear something and it pertains to you or it doesn't 9 00:01:14,500 --> 00:01:17,440 Suze: pertain to you and then you think, ok, and you're 10 00:01:17,449 --> 00:01:21,169 Suze: just listening and then all of a sudden you really 11 00:01:21,180 --> 00:01:23,529 Suze: need to know what it is that I talked about 12 00:01:23,540 --> 00:01:26,650 Suze: on this podcast and you go back to the podcast 13 00:01:26,660 --> 00:01:29,419 Suze: and you can't find them and then it becomes a mess. 14 00:01:29,480 --> 00:01:32,129 Suze: So it's just easier if you keep a notebook 15 00:01:32,650 --> 00:01:38,150 Suze: with things that probably you will need to know one day. 16 00:01:38,889 --> 00:01:43,259 Suze: Now, listen, I know, I know that I said last 17 00:01:43,269 --> 00:01:49,550 Suze: week that I would be covering the topic, married filling separately. 18 00:01:50,250 --> 00:01:52,709 Suze: And some of you were so excited about that, 19 00:01:53,389 --> 00:01:55,980 Suze: but I decided, no, I'm not going to do that 20 00:01:55,989 --> 00:02:00,639 Suze: right now because really that topic applies to so few 21 00:02:00,650 --> 00:02:01,330 Suze: of you. 22 00:02:02,110 --> 00:02:06,050 Suze: And there's another topic that I want to do today 23 00:02:06,059 --> 00:02:09,570 Suze: that I know applies to almost every single one of 24 00:02:09,580 --> 00:02:14,669 Suze: you out there. So I've changed my mind. I'm a Gemini. 25 00:02:14,679 --> 00:02:19,410 Suze: I can do that. So, are you ready? Let's begin. 26 00:02:20,630 --> 00:02:23,119 Suze: Have any of you ever taken a trip to a 27 00:02:23,130 --> 00:02:28,978 Suze: foreign country where they speak a language other than your language? 28 00:02:28,990 --> 00:02:30,758 Suze: Let's say it's English. 29 00:02:31,559 --> 00:02:34,460 Suze: So you learn a few words or you go over 30 00:02:34,470 --> 00:02:37,779 Suze: there and you learn a few words such as hello. 31 00:02:37,949 --> 00:02:41,729 Suze: Thank you. I need the check. Whatever it may be. 32 00:02:41,740 --> 00:02:43,829 Suze: Is it to the left? Is it to the right? 33 00:02:44,210 --> 00:02:49,240 Suze: Where's the bathroom? And it's those few words that get 34 00:02:49,250 --> 00:02:53,460 Suze: you by. You don't need to learn the entire language 35 00:02:53,758 --> 00:02:55,059 Suze: to have a good time. 36 00:02:55,550 --> 00:02:58,779 Suze: You don't need to be able to speak it fluently 37 00:02:58,850 --> 00:03:03,288 Suze: to have a great time. Just a few words to 38 00:03:03,300 --> 00:03:08,168 Suze: get you by. Well, when it comes to money, I 39 00:03:08,179 --> 00:03:12,169 Suze: have to tell you the same is exactly true. 40 00:03:12,910 --> 00:03:17,399 Suze: You don't need to know the entire terminology that is 41 00:03:17,410 --> 00:03:22,690 Suze: used within the financial world. It is extensive, it is 42 00:03:22,699 --> 00:03:25,559 Suze: confusing and for most of you, 43 00:03:26,589 --> 00:03:28,279 Suze: it is irrelevant. 44 00:03:28,889 --> 00:03:32,720 Suze: You don't need to know that much, but you do 45 00:03:32,729 --> 00:03:36,490 Suze: need to know, especially when it comes to your retirement 46 00:03:36,500 --> 00:03:42,910 Suze: accounts that you have never paid taxes on traditional retirement accounts. 47 00:03:43,509 --> 00:03:46,229 Suze: Just a few words, 48 00:03:46,710 --> 00:03:50,139 Suze: because it is knowing that these few words that can 49 00:03:50,149 --> 00:03:53,809 Suze: keep you from making a mistake, that can keep you 50 00:03:53,820 --> 00:03:57,259 Suze: from paying taxes when you don't need to pay taxes, 51 00:03:57,449 --> 00:04:02,009 Suze: that can keep you from getting yourself into a penalty situation. 52 00:04:02,960 --> 00:04:07,619 Suze: And the reason that I'm still focusing on retirement accounts is, 53 00:04:07,630 --> 00:04:12,419 Suze: let's be honest, the majority of everybody out there has 54 00:04:12,429 --> 00:04:16,339 Suze: a retirement account, whether it's an IRA, doesn't matter whether 55 00:04:16,350 --> 00:04:21,619 Suze: it's traditional or Roth, whether it's a 401k 403b or TSP, 56 00:04:21,630 --> 00:04:25,578 Suze: doesn't matter if it's traditional or Roth, if you're even 57 00:04:25,690 --> 00:04:27,868 Suze: an individual or self employed, 58 00:04:28,399 --> 00:04:34,380 Suze: you have a SEP IRA, an individual 401k, possibly a pension plan. 59 00:04:34,589 --> 00:04:38,890 Suze: All of us have on some level at some time 60 00:04:38,899 --> 00:04:42,220 Suze: in our lives, retirement plans. And the truth of the 61 00:04:42,230 --> 00:04:46,058 Suze: matter is the bulk of the money that we have 62 00:04:46,070 --> 00:04:50,969 Suze: saved for later on in the future happens to be, 63 00:04:50,980 --> 00:04:57,089 Suze: in most cases in a retirement plan that is taxable. 64 00:04:58,160 --> 00:05:00,959 Suze: So there are just a few words that all of 65 00:05:00,970 --> 00:05:03,969 Suze: you need to know. And the reason that I'm doing 66 00:05:03,980 --> 00:05:08,039 Suze: this podcast is many of you write me emails and 67 00:05:08,049 --> 00:05:10,018 Suze: you tell me about your situation 68 00:05:10,790 --> 00:05:13,309 Suze: and you tell me that you've done this, you've done that, 69 00:05:13,320 --> 00:05:16,500 Suze: you've done that, you've done this and I'm so confused 70 00:05:16,510 --> 00:05:20,529 Suze: because I don't really understand what you've done because the 71 00:05:20,540 --> 00:05:23,950 Suze: words that you are using to describe the action that 72 00:05:23,959 --> 00:05:28,089 Suze: you've taken that you want advice on don't fit to 73 00:05:28,100 --> 00:05:33,489 Suze: the situation that you've described. Are you ready? And let's begin. 74 00:05:34,540 --> 00:05:38,730 Suze: First of all, write down the words 75 00:05:39,559 --> 00:05:40,100 Suze: rollover 76 00:05:41,760 --> 00:05:42,859 Suze: transfer 77 00:05:43,640 --> 00:05:50,380 Suze: and conversion. Those are terms that I really want us 78 00:05:50,390 --> 00:05:54,450 Suze: to understand today and how they work. 79 00:05:55,309 --> 00:05:58,669 Suze: Before I begin with all of this, if you have 80 00:05:58,678 --> 00:06:03,519 Suze: a TSP a thrift savings plan, what I'm about to 81 00:06:03,529 --> 00:06:08,618 Suze: say does not necessarily apply to you. Right after I 82 00:06:08,630 --> 00:06:12,570 Suze: have done this, I will then tell you what these 83 00:06:12,579 --> 00:06:17,089 Suze: words mean to you. Also, I just have to say 84 00:06:17,529 --> 00:06:20,670 Suze: that the majority of this is for people who have 85 00:06:20,678 --> 00:06:28,750 Suze: money in traditional retirement accounts, pre-tax retirement accounts. Some of 86 00:06:28,760 --> 00:06:31,428 Suze: it will apply to those of you who have Roth 87 00:06:31,440 --> 00:06:37,829 Suze: retirement accounts, but obviously Roth retirement accounts, in most cases, 88 00:06:37,880 --> 00:06:42,190 Suze: you don't owe taxes on them. So therefore, just keep 89 00:06:42,200 --> 00:06:43,829 Suze: that in mind. 90 00:06:45,029 --> 00:06:47,549 Suze: So let's start with our rollover. 91 00:06:48,279 --> 00:06:52,738 Suze: A rollover is when you have a specific type of 92 00:06:52,750 --> 00:06:59,500 Suze: employer sponsored plan such as a 401k or 403b 93 00:07:01,100 --> 00:07:05,239 Suze: and you either are leaving that place of employment 94 00:07:06,390 --> 00:07:09,420 Suze: or you have retired, whatever it may be, 95 00:07:10,209 --> 00:07:14,309 Suze: and you want to roll over, you want to change 96 00:07:15,320 --> 00:07:20,089 Suze: a 401k that is with your employer. You are rolling 97 00:07:20,100 --> 00:07:24,470 Suze: it over to a new custodian or trustee. They're both 98 00:07:24,480 --> 00:07:25,119 Suze: the same... 99 00:07:26,299 --> 00:07:30,799 Suze: at a new firm, whether it's a brokerage firm, a 100 00:07:30,809 --> 00:07:36,209 Suze: discount brokerage firm, a bank, a credit union, an insurance company, 101 00:07:36,239 --> 00:07:40,390 Suze: anywhere that you want to roll it over to. 102 00:07:41,329 --> 00:07:46,040 Suze: So you are changing the types of accounts that your 103 00:07:46,049 --> 00:07:48,070 Suze: money happens to be in. 104 00:07:48,750 --> 00:07:54,809 Suze: So you are rolling it over from a 401k to 105 00:07:54,989 --> 00:07:59,690 Suze: an IRA. And that's known at that point as an 106 00:07:59,700 --> 00:08:06,660 Suze: IRA rollover because it came from an employer sponsored plan 107 00:08:06,750 --> 00:08:09,890 Suze: known as a 401k or 403b. 108 00:08:11,760 --> 00:08:15,920 Suze: And what's important for you to understand about that is 109 00:08:15,929 --> 00:08:20,559 Suze: that there are two different ways for you to do 110 00:08:20,570 --> 00:08:21,649 Suze: a rollover. 111 00:08:22,369 --> 00:08:28,910 Suze: You can do a direct rollover or an indirect rollover. 112 00:08:29,649 --> 00:08:34,780 Suze: A direct rollover is when you are ready to change 113 00:08:34,789 --> 00:08:37,659 Suze: money from your employer sponsored plan 114 00:08:38,349 --> 00:08:41,049 Suze: to an individual retirement account 115 00:08:41,940 --> 00:08:45,059 Suze: where you set up an IRA rollover, 116 00:08:46,169 --> 00:08:48,780 Suze: you set it up at either a brokerage firm, a 117 00:08:48,799 --> 00:08:52,190 Suze: discount brokerage firm, wherever you want to set it up, 118 00:08:52,200 --> 00:08:53,689 Suze: you can even do it at a bank or a 119 00:08:53,700 --> 00:08:59,270 Suze: credit union and you open up an IRA account there 120 00:09:00,010 --> 00:09:03,020 Suze: And you ask your financial advisor 121 00:09:03,929 --> 00:09:07,299 Suze: to contact your ex-employer 122 00:09:08,190 --> 00:09:13,739 Suze: to request what's known as a custodian to custodian transfer. 123 00:09:13,940 --> 00:09:20,510 Suze: It's also known as a trustee to trustee transfer. And 124 00:09:20,520 --> 00:09:24,250 Suze: that means that your ex-employer 125 00:09:24,940 --> 00:09:32,409 Suze: is going to send directly to your IRA the money 126 00:09:32,419 --> 00:09:36,280 Suze: that is in your 401k or 403b. 127 00:09:38,340 --> 00:09:42,179 Suze: You do not touch that money at all. It goes 128 00:09:42,190 --> 00:09:45,319 Suze: directly from your ex-employer 129 00:09:46,179 --> 00:09:53,080 Suze: to your new custodian where your IRA rollover is going 130 00:09:53,090 --> 00:09:58,640 Suze: to be located just that simple. When you do that, 131 00:09:58,780 --> 00:10:02,159 Suze: if you have $100,000 in your 401k, 132 00:10:02,919 --> 00:10:08,659 Suze: then automatically $100,000 is going to end up in your 133 00:10:08,669 --> 00:10:14,450 Suze: IRA rollover. Now, on your documents, it's not going to 134 00:10:14,460 --> 00:10:19,829 Suze: say IRA rollover. It's just going to say IRA. But 135 00:10:19,840 --> 00:10:23,340 Suze: in essence, you are rolling over the money from your 136 00:10:23,349 --> 00:10:25,059 Suze: employer sponsored plan 137 00:10:25,739 --> 00:10:30,760 Suze: into a different type of plan known as an individual 138 00:10:30,770 --> 00:10:36,760 Suze: retirement account. Now, remember everybody, this is also true, whether 139 00:10:36,770 --> 00:10:40,640 Suze: you have a traditional account or a Roth account 140 00:10:41,989 --> 00:10:47,489 Suze: An indirect rollover. This is something that nine out of 141 00:10:47,500 --> 00:10:52,380 Suze: 10 of you will never ever want to do. Especially 142 00:10:52,390 --> 00:11:00,348 Suze: if you have a pre-tax retirement account, an indirect rollover 143 00:11:01,090 --> 00:11:07,789 Suze: is where your ex-employer might ask you, do you want 144 00:11:08,039 --> 00:11:12,119 Suze: them to send you a check or do you want 145 00:11:12,130 --> 00:11:16,190 Suze: them to send it directly to your new custodian? You 146 00:11:16,200 --> 00:11:22,949 Suze: always want choose sending it directly to your new custodian. However, 147 00:11:22,960 --> 00:11:23,939 Suze: some of you 148 00:11:24,700 --> 00:11:30,520 Suze: may decide, yes, please send me the check. 149 00:11:31,289 --> 00:11:35,010 Suze: So now it will not go directly to the custodian. 150 00:11:35,130 --> 00:11:37,659 Suze: It goes to you 151 00:11:38,659 --> 00:11:42,319 Suze: if they and listen to me closely now, if they 152 00:11:42,330 --> 00:11:48,159 Suze: send you a check and that check is made payable to you and this is coming from a 153 00:11:48,169 --> 00:11:54,320 Suze: traditional retirement account, what will happen is they will absolutely 154 00:11:54,330 --> 00:11:58,840 Suze: withhold 20% for taxes. 155 00:11:59,489 --> 00:12:07,130 Suze: So if you have $100,000 in your traditional 401k and 156 00:12:07,140 --> 00:12:09,390 Suze: they send you a check, made payable to you, 157 00:12:10,090 --> 00:12:15,500 Suze: you are only going to get a check for $80,000. 158 00:12:16,549 --> 00:12:20,289 Suze: You then will have 60 days from the date of 159 00:12:20,299 --> 00:12:21,130 Suze: that check 160 00:12:22,000 --> 00:12:28,140 Suze: to put it in, yourself, into an IRA at whatever 161 00:12:28,150 --> 00:12:32,650 Suze: firm you opened up an IRA with. So you are 162 00:12:32,659 --> 00:12:37,919 Suze: indirectly rolling over the money that was in your traditional 163 00:12:37,929 --> 00:12:42,859 Suze: 401k into an IRA because it's not going straight to 164 00:12:42,869 --> 00:12:47,299 Suze: the IRA. It's going to you first. Here is the 165 00:12:47,309 --> 00:12:49,260 Suze: danger if you do that. 166 00:12:50,179 --> 00:12:55,559 Suze: Number one, if you wait 61 days or more to 167 00:12:55,570 --> 00:13:00,880 Suze: do that indirect rollover with that $80,000. In this example, 168 00:13:01,510 --> 00:13:05,760 Suze: you are going to owe ordinary income taxes on that 169 00:13:05,770 --> 00:13:13,799 Suze: $80,000 and possibly a 10% penalty if you're not 59.5 170 00:13:13,809 --> 00:13:16,400 Suze: years of age or older, 171 00:13:17,520 --> 00:13:21,880 Suze: Something you need to think about. An exception to that 172 00:13:21,890 --> 00:13:25,260 Suze: would be that you're 55 years of age or older 173 00:13:25,270 --> 00:13:29,289 Suze: in the year you left service. Ok, you won't have 174 00:13:29,299 --> 00:13:32,140 Suze: to pay the 10% federal tax penalty, but you most 175 00:13:32,150 --> 00:13:39,299 Suze: certainly will have to pay ordinary income tax on that money. 176 00:13:40,030 --> 00:13:44,479 Suze: But here's the other problem, let's say you've been great 177 00:13:45,059 --> 00:13:46,569 Suze: and you get this money 178 00:13:47,210 --> 00:13:50,549 Suze: and within that 60 day period of time 179 00:13:51,359 --> 00:13:56,059 Suze: you have now put it in your IRA rollover account. 180 00:13:57,359 --> 00:14:00,580 Suze: So fine, you think you're doing ok. You are not, 181 00:14:01,250 --> 00:14:08,830 Suze: because the $20,000 that your ex-employer withheld for taxes 182 00:14:09,909 --> 00:14:13,169 Suze: is part of your taxable situation. 183 00:14:14,070 --> 00:14:17,559 Suze: So you are going to have to come up with 184 00:14:17,669 --> 00:14:24,609 Suze: $20,000 out of your own pocket to put into your 185 00:14:24,619 --> 00:14:30,169 Suze: IRA rollover to make sure that there's $100,000 in that 186 00:14:30,179 --> 00:14:35,570 Suze: IRA rollover within that 60 day limit. 187 00:14:36,169 --> 00:14:41,890 Suze: Otherwise you are going to owe taxes, on that $20,000 188 00:14:41,900 --> 00:14:45,299 Suze: that they withheld to pay taxes. 189 00:14:46,119 --> 00:14:49,419 Suze: You don't want to get yourself in that situation. It 190 00:14:49,429 --> 00:14:57,700 Suze: makes absolutely no sense whatsoever. Almost 100% of the time, 191 00:14:58,309 --> 00:15:03,369 Suze: you only want to do a direct rollover. You do 192 00:15:03,380 --> 00:15:08,520 Suze: not want to do an indirect rollover. However, there are some times when an employer refuses to do a custodian to custodian or trustee to trustee transfer. Don't ask me why, but they just refuse to do it. And what they will do instead is that they will send to you a check from your 401k. And they'll send it to you, but this time the check will be made payable to your new account wherever you have opened up your IRA. And if they do that, then don't worry about it because chances are they have not withheld the 20 percent mandatory withholding tax. So it's okay if they do that. It's better if they did it directly so you didn't have to go and then take the check and get it into the account within 60 days. But there are some employers that just refuse to do custodian to custodian rollovers. So just to be clear, if you're one of those people and you get a check made payable to your new financial institution, your new account, don't worry about it. Because again, they should not have withheld the 20 percent mandatory withholding. So if you have $100,000 in your 401k and now you want to do an IRA rollover with it.But your ex employer sends you a check made out to your new financial institution. Chances are that check is going to be for $100,000 and you will just have to take that check and make sure you immediately deposit it within that 60 day period. It should be really right away, everybody, so you don't forget about it, into your new account. Just that simple. So, very different than when your employer makes the checkout payable to you, they then have to do the 20 percent mandatory withholding versus your ex employer makes the checkout to your new financial institution. So even though that is an indirect rollover, you're not going to have the 20 percent withholding withheld from your payment. Alright, I hope you're clear on everything I just said. 193 00:15:12,190 --> 00:15:14,210 Suze: Next, transfer. 194 00:15:14,880 --> 00:15:19,650 Suze: A transfer is not a rollover everybody. 195 00:15:20,289 --> 00:15:25,590 Suze: A transfer is when you go from an IRA account, 196 00:15:25,890 --> 00:15:30,940 Suze: maybe at one brokerage firm to another IRA account at 197 00:15:30,950 --> 00:15:37,940 Suze: another brokerage firm, you are not changing the types of accounts, 198 00:15:39,109 --> 00:15:43,140 Suze: maybe it's going from one 401k at an employer that 199 00:15:43,150 --> 00:15:48,590 Suze: you left to your new employer. You're not changing the 200 00:15:48,599 --> 00:15:53,289 Suze: type of an account. It is again, a 401k is 201 00:15:53,299 --> 00:15:55,010 Suze: different than an IRA. 202 00:15:56,010 --> 00:16:00,070 Suze: An IRA is not different than another IRA. 203 00:16:00,880 --> 00:16:05,099 Suze: So when you are going from one type of IRA 204 00:16:06,200 --> 00:16:11,289 Suze: to another, to the exact same type of IRA at 205 00:16:11,299 --> 00:16:16,739 Suze: a different institution that is known as a transfer. 206 00:16:17,619 --> 00:16:21,830 Suze: And in that situation, you also want it to go 207 00:16:21,929 --> 00:16:24,559 Suze: from custodian to custodian. 208 00:16:26,140 --> 00:16:31,400 Suze: If you have an IRA, that is a traditional IRA, 209 00:16:32,190 --> 00:16:38,090 Suze: you legally are allowed to withdraw money from it if 210 00:16:38,099 --> 00:16:39,039 Suze: you want to 211 00:16:40,289 --> 00:16:43,820 Suze: and you have to put it back within the 60 days. 212 00:16:43,909 --> 00:16:49,030 Suze: Some people do that because they really need money. They're 213 00:16:49,039 --> 00:16:52,669 Suze: short on something. They know money is coming in within 214 00:16:52,679 --> 00:16:56,359 Suze: 60 days for them. So they literally take money out 215 00:16:56,369 --> 00:16:59,830 Suze: of their IRA, use it for what they need to 216 00:17:00,390 --> 00:17:04,819 Suze: when other money comes in, they replace it within those 217 00:17:04,829 --> 00:17:06,469 Suze: 60 days. 218 00:17:07,030 --> 00:17:12,698 Suze: That also is known as a roll over where you're 219 00:17:12,709 --> 00:17:16,219 Suze: rolling over money to yourself and putting it back in, 220 00:17:17,040 --> 00:17:24,510 Suze: you cannot do more than one indirect rollover a year. 221 00:17:25,170 --> 00:17:30,420 Suze: So whether it's from a 401k and you indirectly have 222 00:17:30,430 --> 00:17:33,709 Suze: money sent to you and then you put into an 223 00:17:33,719 --> 00:17:39,469 Suze: IRA or you have a traditional IRA where you have 224 00:17:39,479 --> 00:17:40,938 Suze: taken money out 225 00:17:41,869 --> 00:17:45,359 Suze: and you are putting it back in within 60 days. 226 00:17:45,569 --> 00:17:50,599 Suze: You cannot do that more than once in a 12 227 00:17:50,630 --> 00:17:52,560 Suze: month period of time 228 00:17:53,469 --> 00:17:57,790 Suze: Notice I said a 12 month period of time, I 229 00:17:57,800 --> 00:17:59,929 Suze: did not say annually. 230 00:18:00,790 --> 00:18:05,729 Suze: So if you do it, once you cannot do it again, 231 00:18:05,739 --> 00:18:12,629 Suze: from any account for another 12 months. When it comes 232 00:18:12,640 --> 00:18:15,599 Suze: to transferring your accounts, 233 00:18:16,680 --> 00:18:21,290 Suze: you can do it as many times as you want 234 00:18:21,300 --> 00:18:24,969 Suze: in a year when you transfer from one IRA to 235 00:18:24,979 --> 00:18:27,280 Suze: another IRA. And now you want to transfer it to 236 00:18:27,290 --> 00:18:31,139 Suze: another IRA. You can do that as many times as 237 00:18:31,150 --> 00:18:31,939 Suze: you want. 238 00:18:32,849 --> 00:18:38,810 Suze: You can also do a direct 401k rollover to an 239 00:18:38,819 --> 00:18:39,729 Suze: IRA 240 00:18:40,640 --> 00:18:42,699 Suze: as many times as you want. 241 00:18:43,560 --> 00:18:49,839 Suze: So again, when you transfer something. There's no limits on 242 00:18:49,849 --> 00:18:53,410 Suze: how many times you can do that provided. They are 243 00:18:53,420 --> 00:19:00,890 Suze: trustee to trustee or custodian to custodian transfers on rollovers. 244 00:19:01,119 --> 00:19:06,619 Suze: There's no limit providing. It is a direct rollover 245 00:19:07,270 --> 00:19:15,448 Suze: but indirect rollovers, any 60 day distribution that you get 246 00:19:16,109 --> 00:19:22,380 Suze: is only allowed once in a twelvemonth period of time 247 00:19:22,390 --> 00:19:25,448 Suze: across all the accounts that you have. 248 00:19:26,670 --> 00:19:28,530 Suze: Next - a conversion. 249 00:19:29,479 --> 00:19:30,819 Suze: A conversion 250 00:19:31,579 --> 00:19:37,920 Suze: is when you are changing, you are converting a pre-tax 251 00:19:37,930 --> 00:19:39,719 Suze: retirement account 252 00:19:40,680 --> 00:19:46,900 Suze: into an after tax retirement account. In most cases, you 253 00:19:46,910 --> 00:19:48,020 Suze: can convert 254 00:19:48,729 --> 00:19:53,810 Suze: a traditional 401k where you have never paid taxes on 255 00:19:53,819 --> 00:19:54,469 Suze: that money 256 00:19:55,180 --> 00:19:58,229 Suze: to a Roth 401k. 257 00:19:59,359 --> 00:20:01,420 Suze: That is a conversion. 258 00:20:02,500 --> 00:20:06,560 Suze: A conversion is when you go from a traditional IRA 259 00:20:06,829 --> 00:20:12,359 Suze: that you have never paid taxes on to a Roth IRA. 260 00:20:13,380 --> 00:20:17,560 Suze: When you convert, it doesn't matter if it's from a 261 00:20:17,569 --> 00:20:21,160 Suze: traditional 401k to a Roth 401k. 262 00:20:21,959 --> 00:20:27,899 Suze: A traditional 403b to a Roth 403b. A traditional IRA 263 00:20:27,910 --> 00:20:34,260 Suze: to a Roth IRA. You will owe taxes on any 264 00:20:34,270 --> 00:20:38,479 Suze: amount of money that you converted in the year that 265 00:20:38,489 --> 00:20:39,819 Suze: you converted. 266 00:20:40,699 --> 00:20:46,399 Suze: Do not get confused that once you retire from some 267 00:20:46,410 --> 00:20:51,510 Suze: place and you are taking a 401k and now you 268 00:20:51,520 --> 00:20:57,239 Suze: are thinking you are doing a rollover to an IRA 269 00:20:57,250 --> 00:21:00,640 Suze: at another brokerage firm or wherever you're doing it 270 00:21:00,900 --> 00:21:04,510 Suze: and you put it into a Roth IRA. It is 271 00:21:04,520 --> 00:21:10,319 Suze: going to be 100% taxable to you on the amount 272 00:21:10,329 --> 00:21:14,839 Suze: that you did that that is not a rollover. That 273 00:21:14,890 --> 00:21:16,400 Suze: is a conversion 274 00:21:17,640 --> 00:21:21,579 Suze: again, do not confuse it 275 00:21:22,880 --> 00:21:29,349 Suze: A 401k to an IRA rollover. Pre-tax is a rollover. 276 00:21:29,359 --> 00:21:34,859 Suze: A Roth 401k to a Roth IRA is a rollover. 277 00:21:36,290 --> 00:21:41,660 Suze: In a traditional IRA, meaning pre tax a traditional IRA 278 00:21:42,380 --> 00:21:49,280 Suze: to another traditional IRA at a different custodian is a transfer. 279 00:21:50,310 --> 00:21:52,290 Suze: A traditional IRA 280 00:21:53,020 --> 00:22:00,880 Suze: to a Roth IRA is a conversion. They are very, very, 281 00:22:00,900 --> 00:22:06,550 Suze: very different and many of you are getting these confused 282 00:22:06,930 --> 00:22:11,439 Suze: and ending up owing taxes when you didn't think you 283 00:22:11,449 --> 00:22:12,349 Suze: needed to. 284 00:22:13,209 --> 00:22:17,890 Suze: One other thing about a backdoor Roth IRA, since so 285 00:22:17,900 --> 00:22:19,910 Suze: many of you are interested in it. 286 00:22:20,770 --> 00:22:26,889 Suze: To do a backdoor Roth IRA, you fund an IRA 287 00:22:26,900 --> 00:22:31,579 Suze: that is non deductible and you convert it to a 288 00:22:31,589 --> 00:22:36,489 Suze: Roth IRA, you don't transfer it, you don't do a rollover. 289 00:22:36,500 --> 00:22:40,050 Suze: That is a conversion as well. 290 00:22:40,900 --> 00:22:45,069 Suze: Let's just quickly switch to those of you who have 291 00:22:45,079 --> 00:22:49,409 Suze: a thrift savings plan. You're a federal employee or you 292 00:22:49,420 --> 00:22:54,239 Suze: work for the armed services. Your retirement plan is known 293 00:22:54,250 --> 00:22:58,910 Suze: as a thrift savings plan or a TSP 294 00:23:00,010 --> 00:23:05,198 Suze: For you, a transfer means when you send money directly 295 00:23:05,209 --> 00:23:10,430 Suze: from a traditional TSP to your IRA account. 296 00:23:11,540 --> 00:23:14,859 Suze: So that is a transfer for you. 297 00:23:15,790 --> 00:23:20,719 Suze: If you're not TSP people, that was a rollover for you, 298 00:23:20,729 --> 00:23:23,449 Suze: a transfer for the TSP people 299 00:23:24,270 --> 00:23:29,900 Suze: mean you are simply sending money directly from 300 00:23:30,680 --> 00:23:34,859 Suze: where you have it to your IRA account. It does 301 00:23:34,869 --> 00:23:37,020 Suze: not go to you 302 00:23:38,030 --> 00:23:45,530 Suze: A rollover, however, within a traditional TSP means they send 303 00:23:45,540 --> 00:23:49,458 Suze: you a check directly and you have 60 days to 304 00:23:49,469 --> 00:23:56,709 Suze: get it into an IRA. They will automatically also withhold 20% 305 00:23:56,869 --> 00:24:00,609 Suze: and send it to the IRS. If you are in 306 00:24:00,619 --> 00:24:04,209 Suze: the armed forces or work for the federal government, 307 00:24:04,469 --> 00:24:10,609 Suze: you never, ever, ever want to do a rollover of 308 00:24:10,619 --> 00:24:15,920 Suze: any kind, you only want to do a transfer. 309 00:24:16,910 --> 00:24:21,649 Suze: So again, for you, the terminology is different than for 310 00:24:21,660 --> 00:24:25,448 Suze: those who aren't part of the armed forces or work 311 00:24:25,459 --> 00:24:29,790 Suze: for the federal government. That is what you need to know. 312 00:24:29,800 --> 00:24:34,150 Suze: That is the language of money when it comes to 313 00:24:34,160 --> 00:24:38,180 Suze: retirement accounts. Now, you may need to listen to this 314 00:24:38,189 --> 00:24:42,290 Suze: again over and over again. You may need to write 315 00:24:42,300 --> 00:24:43,810 Suze: the notes down 316 00:24:44,479 --> 00:24:49,109 Suze: over, over again in your Suze notebook. If I were you, 317 00:24:49,119 --> 00:24:52,199 Suze: what I would be doing is I would be writing 318 00:24:52,209 --> 00:24:56,189 Suze: down the type of retirement account I have 319 00:24:57,420 --> 00:25:01,839 Suze: and then I would be applying the terminology that I 320 00:25:01,849 --> 00:25:07,238 Suze: just gave you to the types of retirement accounts you 321 00:25:07,250 --> 00:25:11,438 Suze: have and what you intend to do with it. So 322 00:25:11,589 --> 00:25:15,140 Suze: that is the Suze school for today. 323 00:25:15,979 --> 00:25:20,000 Suze: Until Thursday when Miss Travis joins us again for another 324 00:25:20,010 --> 00:25:24,520 Suze: Ask KT and Suze Anything. Remember, there's only one thing 325 00:25:25,010 --> 00:25:27,069 Suze: that you need to know when it comes to your 326 00:25:27,079 --> 00:25:32,800 Suze: money and it is this people first, then money, then things. 327 00:25:33,229 --> 00:25:36,560 Suze: So you just stay safe and if you do all that, 328 00:25:36,849 --> 00:25:41,530 Suze: oh I promise you, you will be unstoppable.