Examples

• Cleaning up the "Junk Drawer"
• 401(k) Mistakes to avoid -- Early Distribution

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Cleaning Up the “Junk Drawer”
Rick and Laurie are in their late 30’s, have two young children and a really busy schedule. They’ve managed to save through in Rick’s retirement accounts at work, have great credit, own a beautiful home and are beginning to think about paying for college. They know they should take a look at their finances, but put it off because it seems like an enormous undertaking.

O’Brien Financial Planning listened to Rick and Laurie and gave them a painless review of their current situation. The process was easy for Rick and Laurie and resulted in a tidier financial picture, professionally designed to help them meet their saving, college funding and retirement goals.

Before	After
A hodge-podge collection of savings with no clear connection to each other…or to the couple’s goals.	A professionally designed portfolio that married the family’s investments to their goals, reduced paperwork and
Retirement Accounts $132,000 in two 401(k) accounts with former employers. 60% in a cash account earning under 2% annually. 40% in the stock of a former employer, which has grown at 8% over the past five years. $33,000 in current employer 401(k)	Retirement Accounts Combined old 401(k) accounts into one IRA. New account is designed with Rick and Laurie’s time horizon and tolerance for risk. Maintained 401(k) with current employer, increased contributions to current maximum. Started Roth IRA accounts for Rick and Laurie to further prepare them for retirement.
Regular Savings $55,000 divided between a Certificate of Deposit and technology stocks from late 90’s (waiting for them to come back before selling)	Regular Savings Moved funds to one account, which, along with their IRA, is designed with Rick and Laurie’s time horizon and tolerance for risk. Started 529 College Savings accounts for their two children, helping make paying for college easier.
Insurance Paying $800/year for term life policy on Rick through his employer	Insurance Saved $200 per year and purchased a 20 year term policy for Rick, providing him with the same amount of insurance but without being dependent on his employment.

This example is for illustrative purposes only. It is based on hypothetical rates of return and does not represent investment in any specific product. It should not be used to predict or project investment performance.

No implication or inference should be drawn by present or prospective clients that similar investment performance will occur in the future. Top

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401(k) Mistakes to Avoid -- Early Distribution.

Meet Bob. Bob had a successful career at a large corporation, and built a nice nest egg in his 401(k). When Bob left his employer fifteen years before he planned on retiring, he felt confident that he would be able to manage those funds. So, when Bob left his employer, he withdrew his entire 401(k) balance and deposited it into a Money Market account while he researched where to invest his savings. Three months after taking the withdrawal, he invested in an IRA account over the internet.

Unfortunately, Bob failed to research the tax rules regarding retirement account distributions. This was a big, irreversible mistake. When Bob asked for a full distribution of his IRA, IRS rules required his employer to withhold 20% of his account balance. When Bob held onto his account balance for more than 60 days, he subjected himself to an additional 10% IRS penalty for early distributions. Bob ended up paying 30% of his account balance in taxes. That was avoidable, but his mistake was irreversible, and the biggest financial mistake of his life. If Bob had made a direct rollover from his 401(k) into an IRA, he would have avoided paying taxes on premature distributions.

Whether you have one or a dozen retirement accounts from former employers, O’Brien Financial Planning can help you plan your rollover strategy in a tax compliant manner while helping you integrate your IRA into a strategy designed to fit your needs.

Here are some other important considerations regarding retirement accounts:

• Borrowing from your 401(k). Your retirement account may be your largest single asset. For many people, tapping into that equity and “borrowing from yourself” can be tempting. Before you give in to this temptation, consider the risks. Be sure you understand how your repayments are invested until the loan is fully paid back.
• Investing in the Cash Account. Today, many 401(k) plans offer a wide array of investment choices. Some employees find this decision overwhelming and select a cash account for their savings. This may or may not be appropriate for you. Check with your plan sponsor to learn about your investment options and take an active role in determining how your retirement savings are invested.
• Failing to Participate. Starting a new job is a busy time with many decisions to make. One decision you shouldn’t put off is participating in the retirement plan. Read the plan documentation carefully and understand how much you may be able to contribute. Failing to participate now can have big consequences years down the road. Top

No implication or inference should be drawn by present or prospective clients that similar investment performance will occur in the future.

These hypothetical scenarios are for illustrative purposes only.  It is not indicative of investing in any particular product.