Retirement Savings Plans

A secure retirement is something most investors aim to achieve. With careful planning, professional guidance and ongoing assessment, you'll be able to plan for that retirement with the IRA or retirement plan choice that's right for you.

TRADITIONAL IRA INVESTORS CAN BENEFIT FROM TAX-DEFERRED EARNINGS, REGARDLESS OF THEIR INCOME LEVEL.

A traditional IRA works very simply. If you're under age 70½, for 2018 you can contribute up to $5,500 per year, but not more than your earned income for the year (less any contribution made to a Roth IRA), and invest it in one or more options that you select. Over time, your account grows as the value of your investments rises. The earnings on your contributions are not taxed until you withdraw them in retirement, so your account can grow faster than a taxable account.

If you are 50 years of age or older, you may have the additional benefit of catch-up contributions, which allows you to invest an extra $1,000 per year.

 

If you meet the following criteria, your contributions will be either fully or partially deductible from your current taxable income, so you can potentially save on your income taxes for the year:

 

  • Your contributions will be fully deductible if neither you nor your spouse is an active participant in an employer-sponsored retirement plan;
  • If you are covered by a retirement plan at work, a deduction for contributions to a Traditional IRA will be reduced (phased out) if your modified adjusted gross income (AGI) for 2018 does not exceed $101,000 for a married couple filing a joint return. If you are single your AGI cannot not exceed $63,000.
  • Your spouse, but not you, is an active participant in an employer-sponsored retirement plan, and (subject to certain phaseout provisions) your AGI is less than $189,000.

If you are married and file a joint tax return, you may also set up and contribute to a Spousal IRA for a non-working spouse. You can contribute up to $11,000 total to these two IRAs, but not more than your combined earned income, and not more than $5,500 to either one for the 2018 tax year.

IRA COMPARISON CHART

Traditional IRA Roth IRA
Eligibility
  • You must have earned income and be under age 70 ½ in the year the contribution is made.
  • A non-working spouse is also eligible to contribute up to $5,500 in 2018.
  • No age limit, you must have a modified adjusted gross income (AGI) below $120,000 if single or $189,000 if married and filing jointly.
  • The maximum contribution limit is phased out for those individuals with AGI between $120,000 and $135,000 (single) and $189,000 and $199,000 (joint).
  • A non-working spouse is also eligible to contribute up to $5,500 in 2018.
Maximum contribution
2018: $5,500 annually 2018: $5,500 annually
Catch up contribution
If you are age 50 or older in the year of the contribution, eligible IRA holders can make an additional contribution of $1,000. If you are age 50 or older in the year of the contribution, eligible IRA holders can make an additional contribution of $1,000.
Tax-deferred growth
  • Investment growth is tax-deferred.
  • Contributions are possibly tax deductible.
  • Taxes are not paid on deductible contributions and all earnings until money is withdrawn.
Investment growth is tax-deferred and earnings can be withdrawn tax-free if the account has been open for at least five years and if certain requirements are met.
Contribution tax deductibility
  • If neither you nor your spouse is an active participant in an employer-sponsored plan, your entire contribution is tax deductible.
  • If you are an active participant in an employer-sponsored plan, and (subject to certain phaseout provisions) your AGI in 2018 does not exceed $63,000 (single) or $101,000 (joint).
Contributions are not tax deductible.
Required distribution
Distributions must begin by April 1 of the calendar year following the year you reach 70 ½ and continue each year by December 31. There is no required date for beginning distributions.
Taxable amounts withdrawn prior to age 59 ½ may be subject to an additional 10% penalty tax. Premature withdrawals may be subject to federal and state taxes plus a 10% federal tax penalty.
Qualified early withdrawals

Circumstances in which withdrawals can be made penalty free prior to age 59 ½ include:

  • IRA owner's death or disability
  • timely removal of excess contributions
  • substantially equal periodic payments made over life expectancy
  • purchase of health insurance while unemployed
  • the purchase of a first home (up to $10,000)
  • for certain higher educational expenses

Taxes apply to all earnings and all deductible contributions withdrawn.

Withdrawals are tax free if the account is open for at least five years and:

  • the withdrawals are made after attaining age 59½
  • your death or disability
  • to purchase a first time home (up to $10,000)

Distributions that are not qualified distributions are included in income to the extent attributable to earnings.

A 10% penalty tax will apply to the taxable portion of the non-qualified distribution unless an exception applies for individuals under the age of 59½.

Rollovers and transfers
  • When a Traditional IRA is converted to a Roth IRA, taxes must be paid on deductible contributions and all earnings.
  • Transfers to and from other Traditional IRAs are permitted.
  • When a Traditional IRA is converted to a Roth IRA, taxes must be paid on all pre-tax contributions and all earnings.
  • Transfers to and from other Roth IRAs are permitted.

THE MAJOR ADVANTAGE OF A ROTH IRA IS THAT YOU WILL BE ELIGIBLE FOR TAX-FREE DISTRIBUTIONS IF YOU MAKE A QUALIFIED WITHDRAWAL.

A Roth IRA is similar to a Traditional IRA in that you can invest up to $5,500 annually for 2018 and enjoy tax-deferred growth on your earnings. But there are some important differences. First, contributions are not tax-deductible, but can be withdrawn anytime without paying taxes. Second, earnings withdrawn after five years are tax-free if you meet one of the following criteria:

 

 • You attain age 59½

• Become disabled

•The distribution is made for a first-time home purchase (up to $10,000)

•The distribution is made to a beneficiary after your death

If you are 50 years of age or older, you may have the additional benefit of catch-up contributions, which allows you to invest an extra $1,000 per year.

You can contribute the full $5,500 if you're single and your AGI does not exceed $120,000 or if you're married filing jointly and your AGI does not exceed $189,000. Your eligibility to contribute phases out if you're single with an AGI between $120,000 and $135,000, or if you're married filing jointly with an AGI between $189,000 and $199,000.

CONVERTING TO A ROTH IRA

If you currently have retirement dollars invested in a Traditional IRA but want the benefits of a Roth IRA — including potential tax-free access to your money in the future — you can convert some or all of your Traditional IRA savings to a Roth IRA.

To make a conversion, you have to convert some or all of your Traditional IRA to a Roth IRA. This is considered a taxable event, so you will have to pay income taxes on the amount you convert. If you use part of your IRA money to pay this income tax, you may have to pay an additional 10% penalty tax on that amount.

If you decide to withdraw money from your Roth IRA within five years after the conversion, the taxable portion of the distribution will be subject to a 10% penalty tax, unless an exception applies.

IRA COMPARISON CHART

Traditional IRA Roth IRA
Eligibility
  • You must have earned income and be under age 70 ½ in the year the contribution is made.
  • A non-working spouse is also eligible to contribute up to $5,500 in 2018.
  • No age limit, you must have a modified adjusted gross income (AGI) below $120,000 if single or $189,000 if married and filing jointly.
  • The maximum contribution limit is phased out for those individuals with AGI between $120,000 and $135,000 (single) and $189,000 and $199,000 (joint).
  • A non-working spouse is also eligible to contribute up to $5,500 in 2018.
Maximum contribution
2018: $5,500 annually 2018: $5,500 annually
Catch up contribution
If you are age 50 or older in the year of the contribution, eligible IRA holders can make an additional contribution of $1,000. If you are age 50 or older in the year of the contribution, eligible IRA holders can make an additional contribution of $1,000.
Tax-deferred growth
  • Investment growth is tax-deferred.
  • Contributions are possibly tax deductible.
  • Taxes are not paid on deductible contributions and all earnings until money is withdrawn.
Investment growth is tax-deferred and earnings can be withdrawn tax-free if the account has been open for at least five years and if certain requirements are met.
Contribution tax deductibility
  • If neither you nor your spouse is an active participant in an employer-sponsored plan, your entire contribution is tax deductible.
  • If you are an active participant in an employer-sponsored plan, and (subject to certain phaseout provisions) your AGI in 2018 does not exceed $63,000 (single) or $101,000 (joint).
Contributions are not tax deductible.
Required distribution
Distributions must begin by April 1 of the calendar year following the year you reach 70 ½ and continue each year by December 31. There is no required date for beginning distributions.
Taxable amounts withdrawn prior to age 59 ½ may be subject to an additional 10% penalty tax. Premature withdrawals may be subject to federal and state taxes plus a 10% federal tax penalty.
Qualified early withdrawals

Circumstances in which withdrawals can be made penalty free prior to age 59 ½ include:

  • IRA owner's death or disability
  • timely removal of excess contributions
  • substantially equal periodic payments made over life expectancy
  • purchase of health insurance while unemployed
  • the purchase of a first home (up to $10,000)
  • for certain higher educational expenses

Taxes apply to all earnings and all deductible contributions withdrawn.

Withdrawals are tax free if the account is open for at least five years and:

  • the withdrawals are made after attaining age 59½
  • your death or disability
  • to purchase a first time home (up to $10,000)

Distributions that are not qualified distributions are included in income to the extent attributable to earnings.

A 10% penalty tax will apply to the taxable portion of the non-qualified distribution unless an exception applies for individuls under 59½.

Rollovers and transfers
  • When a Traditional IRA is converted to a Roth IRA, taxes must be paid on deductible contributions and all earnings.
  • Transfers to and from other Traditional IRAs are permitted.
  • When a Traditional IRA is converted to a Roth IRA, taxes must be paid all pretax contribution amounts and earnings.
  • Transfers to and from other Roth IRAs are permitted.

A ROLLOVER IRA IS A TRADITIONAL IRA THAT YOU CAN MOVE MONEY INTO FROM OTHER RETIREMENT PLANS (AN OLD 401(k), 403(b) OR ANOTHER IRA) AND MAINTAIN TAX-DEFERRED GROWTH.

 

A Rollover IRA is basically a Traditional IRA into which you can move money from other retirement plans and accounts and still maintain tax-deferred growth. You can roll over amounts distributed from your employer's retirement plan, from another IRA, a 403(b) account and from certain 457(b) accounts. For instance, if you're retiring or changing jobs, you can transfer your existing retirement savings accounts into a Rollover IRA, which can simplify managing your funds, possibly save you money on fees, and keep your funds growing on a tax-deferred basis.

 

 

A great feature of a Rollover IRA is that there are no taxes or penalties on amounts rolled into it. So, if you're in the process of receiving a distribution from a retirement plan and want to avoid the mandatory 20% federal income tax withholding, simply have the retirement plan directly transfer your proceeds into a Rollover IRA (retirement plans must withhold 20% unless the distribution is a Direct Rollover).

Consider rolling over your existing retirement accounts and distributions from retirement plans into a Dreyfus Rollover IRA. You'll maintain tax-deferred growth, enjoy a variety of investment options, benefit from Dreyfus' investment management expertise, and be able to better oversee your retirement planning progress because all of your funds will be consolidated into a single account.

IMPORTANT CHANGE TO INDIRECT IRA-TO-IRA ROLLOVERS (60 DAY ROLLOVERS)

Effective January 1, 2015, the IRS implemented a new rule governing indirect IRA-to-IRA rollovers. An IRA participant will be restricted to one indirect rollover across all IRAs they hold per 12-month period. Previously the restriction applied between two specific IRAs. As an alternative, the IRS is advocating trustee-to-trustee transfers as a means for moving money between IRA accounts, tax-free without restriction. For more information, please speak with your tax advisor.

 

A SEP-IRA RETIREMENT PLAN OFFERS A VALUABLE INVESTMENT OPPORTUNITY FOR SELF-EMPLOYED INDIVIDUALS AND SMALL BUSINESS OWNERS.

A Simplified Employee Pension IRA (SEP IRA) is similar to a Traditional IRA, but is specifically designed for small business owners or self-employed individuals. Aside from the higher contribution limit, SEP-IRAs are generally subject to the same rules governing Traditional IRAs and are inexpensive for employers to offer — there is virtually no administration and the cost is minimal.

CONTRIBUTION LIMITS

The employer is the sole contributor and may contribute, on the employee's behalf, up to 25% of the employee's compensation or $55,000 (for 2018), whichever is less.

TAX ADVANTAGES

Contributions to a SEP IRA are generally 100% tax deductible and investment earnings in a SEP IRA grow taxed deferred. Withdrawals after age 59 1/2 are taxed as ordinary income. Withdrawals prior to age 59 1/2 may incur a 10% IRS penalty as well as income taxes.

A SIMPLE IRA RETIREMENT PLAN FOR SMALL BUSINESSES CAN SERVE AS A VALUABLE RETIREMENT SAVINGS ALTERNATIVE TO A TRADITIONAL
401(K) PLAN.

A SIMPLE IRA for small businesses provides employers and employees with a simplified and inexpensive way to contribute toward retirement.

Similar to a traditional 401(k) Plan but without the administrative complexities, a SIMPLE IRA allows employees to contribute on a tax-deferred basis through convenient payroll deductions. The employer will also contribute to each individual's account by matching a portion of the employee contributions or contributing a fixed percentage of all eligible employees' pay.

Tax law provides an opportunity for owner-only businesses and self-employed individuals to save more for retirement when compared to other retirement plan alternatives. Contributions, in the form of salary deferrals and profit sharing contributions, can total as much as $55,000 in 2018 ($61,000 if age 50 or older).

In addition to these higher contribution limits, other advantages include the ability to take a loan from the plan and the limited administration required with an individual 401(k) plan.

THE 403(b)(7) ADVANTAGE: SPECIFICALLY DESIGNED FOR YOUR RETIREMENT

As an employee of an educational or non-profit organization, you have an opportunity to save for your future by investing in a 403(b)(7) plan. This plan enables you to conveniently build assets for retirement through automatic salary deduction — while enjoying significant tax benefits today.

TWO KEY TAX BENEFITS

With a 403(b)(7) plan, you authorize your employer to deduct a portion of your salary on a pre-tax basis. These amounts are automatically deposited in a special tax-deferred account held with a designated custodian. Not only is the money you contribute free from current federal income taxes, but any money you earn in the account accumulates tax free until you begin making withdrawals, presumably when you retire.

Thanks to the power of tax-deferred compounding, this plan lets you enjoy considerable tax savings throughout your working years and have a nest egg to draw on once you retire. Even modest contributions can grow to a sizable amount when you invest regularly on a tax-deferred basis.

SIX GOOD REASONS TO GET THE DREYFUS 403(b)(7) ADVANTAGE

Investing your 403(b)(7) account with The Dreyfus Family of Funds (Dreyfus) combines the benefits of tax deferral through payroll reduction with the investment diversity and flexibility you deserve.

The result is a powerful retirement investment vehicle to help you plan your financial future.

The Dreyfus Corporation has been helping investors build assets for their future for over 50 years. Dreyfus understands the importance of your retirement security. We are always striving to raise the bar by providing superior service and investment products.

1. A Tradition of Quality You Can Count On

When you invest with Dreyfus, you have the advantage of investing in a family of mutual funds from one of the best-known and most widely respected mutual fund companies in America.

Dreyfus, established in 1951 and headquartered in New York City, is one of the nation's leading managers of investment products and strategies.

Dreyfus provides unique access to BNY Mellon Investment Management's exclusive and diverse global network of world-class asset managers, delivering powerful investment insight and strategies, backed by the strength of our commitment to quality, performance and client relationships.

In today's global economy, navigating the world of investing is becoming an increasingly complex task. Investors — faced with more choices than ever — are demanding expert knowledge and quality investments. That's where Dreyfus can help. By combining our investment expertise with a full range of sophisticated product solutions, Dreyfus can help investors make the right decisions in a rapidly evolving marketplace.

2. Investment Diversity

Dreyfus recognizes that every individual has different investment needs and goals. That's why Dreyfus offers a full range of mutual funds, from conservative to the more aggressive.

The investment options let you choose among a variety of money market, bond and stock funds. So whether you're investing for growth, income, growth and income or safety, you are likely to find a fund or a combination of funds to suit your needs along with the level of risk you feel comfortable taking. The fund profiles and prospectuses contain a full description of your Dreyfus fund alternatives.

3. Investment Flexibility

You can switch easily among the funds available through Dreyfus within your 403(b)(7) Plan by making fund exchanges. This important service lets you take advantage of changing market opportunities and refocus your investment strategy as your needs and goals change over the years. This flexibility is a valuable feature in a long-term retirement plan.

4. Educational Guidance and Assistance

How you invest your retirement assets may be one of the most important financial decisions you ever make. Through our toll-free service number, you have access to our staff of professionally trained retirement specialists who are always available to provide you with educational guidance and information regarding your Dreyfus fund alternatives.

These specialists are qualified to give you the facts you need in order to make informed investment decisions as you open your account and as your retirement assets grow over the years. (Our specialists are also available to speak with any personal financial adviser you may designate.)

5. Low Fees

Low custodial and administrative fees are important. The less you pay in expenses, the more money you have available to invest for your future.

6. Complete Recordkeeping and Service

Dreyfus makes it easy for you to keep track of your retirement assets through a quarterly consolidated account statement that provides a clear at-a-glance picture of all the assets in your Dreyfus account. This easy-to-read statement shows all contributions, withdrawals, dividends and/or capital gains that we reinvested in your account during the previous three-month period. You also receive an annual statement that summarizes all activities in your account for the year.

If you have questions about your statement, want an account update between quarterly statements, need current fund yield or price information, or want to exchange among the Dreyfus funds, just call us anytime during business hours. Out retirement specialists stand ready to assist you courteously and efficiently in any way they can.

Contacts

This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular investment, strategy, investment manager or account arrangement. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. Please consult a legal, tax or investment advisor in order to determine whether an investment product or service is appropriate for a particular situation. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission. The Dreyfus Corporation and MBSC Securities Corporation are subsidiaries of BNY Mellon. ©2018 MBSC Securities Corporation, distributor, 225 Liberty Street, 19th Floor, New York, NY 10281.

This information is general in nature and is not intended to constitute legal or tax advice. Please contact your legal or tax advisor for more detailed information on legal or tax issues and advice on your specific situation. There are fees, expenses and penalties associated with different types of retirement plans.

Since 2006, certain retirement plans have been permitted to allow participants to designate some or all of their deferral contributions as "Roth deferral contributions." Roth contributions may only be rolled over to a Roth IRA.

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