The New Jersey Supplemental Annuity Collective Trust-Regular Plan

JOEL L. FRANK                                                                                                                     Retirement Financial Planner                                                                                                          (fee-only)                                                                                                                                                      6 Trotter Place                                                                                                                                     Marlboro, NJ 07746                                                                                                                          732-536-9472                                                                                                                                                                                                
March 2013  
   THE SACT-REGULAR PLAN…THE PERFECT IRA                                 
Active members of all New Jersey State-administered retirement systems have a  grand opportunity to contribute after-tax dollars to the Supplemental Annuity Collective Trust (SACT-Regular Plan). The contribution limit for 2013 is the lesser of $51,000 (includes pension 414(h) contribution) or 100 percent of compensation.  Lump-sum contributions of $50 or more may be made by check during the months of March, June, September or December.
Q.:  How does a retiring/separating from service particpant manage his or her SACT-Regular Plan account?
A.:  The SACT distribution options are:  
1.   A lump-sum settlement.  Tax is due on the earnings portion of the settlement.  The after-tax contributions portion of the settlement is refunded tax-free.  This option is sensible if you plan to spend the money in the short term.
2.   Five variable annuity income options.  All are poor choices because:  1. Income payments cease upon death and should you elect a joint annuitant all payments cease upon the last-to-die.  2. You have no access to your money since you have transferred the title to your money to the SACT in return for a monthly income.  3. The earnings portion of the monthly income is taxable.  4. The monthly income is volatile because the SACT is an all common stock investment.      
Most retirees choose a lump-sum settlement.  If they have no immediate need for the money they rollover the earnings portion of the settlement to a Traditional IRA and the after-tax contributions portion of the settlement to a Roth IRA.  I welcome your questions.

Copyright(c) 2013-2028 Joel L. Frank All Rights Reserved

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