how to withdraw money from alabama retirement system. When you can take withdrawals: Alabama does not charge income tax on pensions or money from any of the Alabama retirement system accounts. Educational expenses. Your state retirement. An option to reduce taxes on 401(k) withdrawals is transferring the funds into a deferred annuity that offers a premium bonus. Begin saving more money for later while saving taxes now with RSA-1. By doing so, you can avoid the penalties and keep your retirement savings intact. Agencies usually send contributions in the first several days following the close of the month. How to Submit a Member's Termination Date Any questions about reporting a termination date should be directed to the Division's Contributions Section at 1-844-377-1888 (toll-free) or 850-907-6500 (local). Investors can nonetheless discover specific shared funds or ETFs that hold gold or gold mining stocks through their 401(k)s. Rolling over a 401(k) to a self-directed Individual Retirement Account may provide financiers higher access to more diverse kinds of financial investment in gold (why to invest in gold and silver). This signed request can be submitted through MOS or by mail. Tejiendo autonomas entre pueblos y procesos italian leather boots womens. The primary purpose of Member Services is to receive, assess, and answer general inquires via telephone, email, and online questions related to ALL RSA PLANS. Finally, cashing out your 401k will result in a loss of potential earnings. Tapping these accounts first reduces the total tax liability than if you receive funds from a retirement account or annuity. 30 June 2020. https://www.irs.gov/pub/irs-tege/uniform_rmd_wksht.pdf, https://www.irs.gov/pub/irs-tege/jlls_rmd_worksheet.pdf, https://www.balancepro.net/education/publications/earlywithdrawal.html, http://www.schwab.com/public/schwab/investing/retirement_and_planning/understanding_iras/traditional_ira/withdrawal_rules, http://www.rothira.com/roth-ira-withdrawal-rules, https://www.irs.gov/publications/p590b/ch01.html#en_US_2015_publink1000230701, http://www.bankrate.com/finance/retirement/ways-to-withdraw-retirement-funds-5.aspx, http://www.bankrate.com/finance/retirement/ways-to-withdraw-retirement-funds-3.aspx, https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-required-minimum-distributions-rmds, https://www.irs.gov/publications/p590b/ar01.html. If you withdraw funds from a 401 (k) before age 59 1/2, you will likely have to pay an early withdrawal penalty. There is no minimum to a Deferral Limit established by the IRS each year. An amount up to twenty-five thousand dollars ($25,000) received as severance, unemployment compensation or termination pay, or as income from a supplemental income plan, or both, by an employee who. youre looking for? An annuity is an insurance product that can provide income for the rest of your life. Periodic payments. If you have your refund paid directly to you, VRS will withhold federal taxes of 20% and, if you live in Virginia, state taxes of 4%. Were committed to providing the world with free how-to resources, and even $1 helps us in our mission. This service is free of charge. Log in to your myASRS account for exact amounts. Ask Us. Annuities will distribute withdrawals from your retirement plans efficiently and guarantee to continue paying you the same income amount for the rest of your life (even after the account has run out of money). We'll assume you're ok with this, but you can opt-out if you wish. An annuity with a guaranteed lifetime withdrawal benefit can automate this process and continue to pay you a monthly income for the rest of your life, even after the 401(k) has run out of money. First, you will have to pay taxes (Federal and State) on the amount you cash out. A Roth 401(k) plan withdrawal is considered tax-free income. State of Alabama Judicial Retirement System benefits. If someone has not received their 1099 by February, they may call Member Services at 877.517.0020 or 334.517.7000. The basic concept of retirement accounts such as individual retirement accounts and 401(k)s: While you work, you put money in; when you retire, you take money out. This voluntary plan allows you to save and invest extra money for retirement, tax deferred. This worksheet is available at. 72(t) distributions are IRS-approved withdrawals before age 59 1/2. Some types of retirement income are taxed in Alabama. You can only withdraw your account if you are no longer employed with a member agency. 59 years old. One way to ensure a steady income stream during retirement is to purchase an annuity with a guaranteed lifetime withdrawal benefit. To discuss the requirements and obtain an Unforeseeable Emergency Withdrawal Packet, contact a DCP representative at 888-327-5596. No penalties for withdrawing before age 59 . NEW! If wikiHow has helped you, please consider a small contribution to support us in helping more readers like you. Here's an example of how your benefits can add up. In case of your death, your beneficiaries may withdraw the funds without penalty. Whether youre just starting to save for retirement or are already retired, its never too late to start planning and saving. be held for other reasons such as owing money to the state for delinquent child support or for owing You can only withdraw your account if you are no longer employed with a member agency. The standard approach to withdrawing retirement funds usually follows this progression: 1. Consequences of an Early 401 (k) Withdrawal. For example, if your retirement account balance was $70,000 on Dec. 31, and you later rolled over $15,000 from a Roth IRA, then you will use the sum of $85,000 as your account balance. Your refund cannot be processed without notification from your employer that you are no longer working for them. You can change your Investment Option Electionfor your account balance or your future deferrals EVERY 90 days. However,Roth IRAs require you to hold your account for at least five years before taping those earnings without incurring a penalty. In addition, homebuyers who have not owed a home in the previous two years can also dip into their IRA without penalty. The time to process a refund varies depending on the receipt of your Notice of Final Deposit and Request for Refund, and when we receive your last retirement contribution. Ordinary income tax includes Federal and State income taxes. If you are unemployed for 12 weeks, you can withdraw from your IRA without a penalty. Ask Us! Employers are not required for employees to withdraw from their 401(k) plans. The Annuity Expert is anonline insurance agency servicing consumers across the United States. Pay for eligible college expenses, including tuition, fees, books, supplies, and equipment. Refunding your account terminates your . Someone calculating the RMD at age 80 will use the table to find a Distribution Period number of 18.7. This article was co-authored by Dmitriy Fomichenko. Cookies are small text files that can be used by websites to make a user's experience more efficient. Still cant find what Yes, a 401(k) distribution is considered income. Your retirement account provides a nest egg for the later years of your life. Find Out How Much 401(k) Withdrawals You Can Earn With Our 401(k) Calculator. Separation from service. This recommendation would say that you should withdraw $4,000 in the first year of your retirement. 4. Not only will you defer taxes immediately, your contributions and any earnings will grow on a tax-deferred basis as well. As a result, there are limitations on withdrawals. 3. How much tax will I pay on 401k distribution? Some restrictions exist about the types of accounts that can be combined. However, if there are any complications or delays, it could take longer. With over 19 years of financial planning and advising experience, Dmitry assists and educates thousands of individuals on how to use self-directed IRA and Solo 401k to invest in alternative assets. Finally, withdraw from tax-free accounts such as Roth IRAs and Roth 401(k)s. You contributed after-tax dollars to the Roths, so you no longer owe the Internal Revenue Service a dime. Withdrawing from your 401(k) monthly is better than annually because you earn interest on the money in the account, not the money in your pocket. Alternatively, you may be able to take a loan against your retirement account balance. Second, if you cash out early, you may be subject to a 10% penalty. Withdraw next from tax-deferred accounts, such as an employers pension plan or a traditional IRA. You are then required to take the RMD by December 31 of each following year. Use the withdrawal as a down payment on a home. An annuity can automate this process and guarantee to continue to deposit a monthly income into the bank account after the 401(k) has depleted its account. You are allowed to withdraw more than the calculated minimum amount, if you wish. Yes, you can open a Roth IRA with your bank, financial institution, or insurance company (IRA annuity). Income Exempt from Alabama Income Taxation, Authorized Alabama Corporate, Partnership, Business Privilege, and Fiduciary Income Tax E-File Providers for 2022, Withholding Requirement on Sales/Transfers of Real Property & Tangible Personal Property by Nonresidents, Individual Income Tax Electronic Filing Options, Alabama Fiduciary, Estate, & Inheritance Tax, Alabama Business Modernized Electronic Filing (MeF). The penalty for early withdrawals from SIMPLE IRAs is 25%. Unreimbursed medical expenses. You must pay taxes on all distributions from a traditional IRA account. My former role was training financial advisors, including for a Fortune Global 500 insurance company. You must download, print, sign and return the summary page along with a copy of your valid identification. Partial Lump Sum Option Plan -Effective for those retiring on or after October 1, 2019. Beginning in 2018, foreign income to the extent such income is exempt from federal income tax pursuant to section 26 USC 911. In what order should I withdraw retirement funds? Still cant find what Because there are very specific rules governing IRA distributions, some research is important so that you make your retirement withdrawal according to those rules. State Taxes Because payments received from your 401 (k) account are. How long do you have to work for the state of Alabama to get a pension? Frequently Asked Questions. If the distribution is not taken by the deadline, a 50% tax will be incurred on the distribution due. Direct deposit is not a payment option. Pension payments are made for the rest of your life, no matter how long you live, and can possibly continue after death with your spouse. If your retirement plan involves RMDs, then you must take the first one by April 1, 2017. Can I withdraw my retirement account while I'm still working for the State? For more information about your ERS retirement benefits, consult your member handbook. You can view your account online at any time on Member Online Services. State Police Tier 1 Active Members: An employee consideredState Police hired priortoJanuary 1, 2013. How do I pay fewer taxes on retirement withdrawals? There are many different options available to retirees when it comes to withdrawing money, and each has its own rules and regulations. Something like a trust deed or fixed-income security is going to carry very little risk, while a highly volatile stock is going to be really risky. No, however investments in our Short-Term Investment Fund (STIF) will typically encounter less market risk than equity and fixed income, and usually provide a lower rate of return than investments in those categories. You need to know when you can begin taking money from your account and the best way to manage your withdrawals to maximize the tax benefits. Government websites often end in .gov or .mil. How can I withdraw money from my IRA without penalty? This will decrease the balance in the account and therefore decrease the amount of tax that you will be required to pay. Ordinary income tax includes Federal and State income taxes. This article was co-authored by Dmitriy Fomichenko. For example, suppose Liz and Frank expect their total 2015 taxable income from Social Security and investments to be slightly less than $60,000. The staff will continue to purchase and develop investments that will facilitate the mission of the RSA. You may withdraw up to 7.5% of your adjusted gross income to pay unreimbursed medical expenses. The rules regarding IRA distributions are very specific and must be followed to the letter to avoid tax penalties. How much can you withdraw without penalty? We also need the name and address of your employer for update. Ask Us! Tier 1 members are eligible for retirement benefits at age 60 with at least 10 years of service. . No. Distributions from a Roth 401(k) plan are income tax-free. However, you may be subject to a 10% early withdrawal penalty if you withdraw funds before that age. To request the application to receive a refund of your account, please contact PSERS directly at 1.888.773.7748. The two-pot retirement savings system proposes splitting your future retirement fund contributions into two notional pots. Yes, you can close your IRA and take the money. If you terminate your employment, you can get a refund of any money you have directly contributed to the system. Also check our If you have an employer-sponsored retirement plan, you may be able to withdraw funds directly from your account. Annuity and Insurance Agency1050 Crown Pointe ParkwayAtlanta, GA 30338, AnnuitiesLife InsuranceTravel InsuranceLong Term Care InsuranceShop InsuranceGet a Free QuoteContact Us, About usPrivacy PolicyHow We WorkIn The PressCustomer Reviews. When it comes time to start withdrawing money from your retirement accounts, its essential to know the rules. Frequently Asked Questions. You must take your first required minimum distribution for the year in which you turn age 72 (70 if you reach 70 before January 1, 2020). However, per the Bailey Class Action Settlement, no North Carolina income tax will be withheld if the member maintained five (5) or more years of creditable service in the Retirement System as of August 12, 1989. However, if you start withdrawing from your IRA, your account balance is likely to be smaller by the time youre 72, when you are subject to required minimum distributions. You can transfer or roll your retirement account into the annuity when you retire. How do I know how much money is in my retirement account? You may opt-out by. Online Go to FRS Online, Employer Services and use the Termination Date module. What am I giving up by withdrawing my retirement account? Copyright 2023 Retirement Systems of Alabama, Sliding Scale Information for Non-Medicare-Eligible Retirees, Sliding Scale Information for Medicare-Eligible Retirees. This minimum distribution of funds is required by federal income tax regulations. By signing up you are agreeing to receive emails according to our privacy policy. United States Civil Service Retirement System benefits. Use our retirement calculator to estimate how much retirement income you can generate now or in the future. All distributions from traditional 401(k) plans are considered taxable income and are taxed at your ordinary income tax rates. Example: retirement date January 1, 2023 and receive first benefit deposit on January 30, 2023. The University's 457 (b) Plan allows pre-tax and/or Roth Post-tax retirement savings contributions through TIAA. For example, suppose you wish to retire at age 59 1/2, with a total of $100,000 saved in one or more retirement accounts. The legislation notes 1 March 2023 as a starting date for the new regulations. If you receive your refund before age 59, the Internal Revenue Service (IRS) may impose an additional 10% tax penalty . Determine how much of your earnings you want to defer each paycheck. Once everything is in order, it typically takes up to 30 business days for the money to be disbursed. How much can you withdraw from 401k each year? How to Withdraw If you terminate your TRS covered employment you may apply for a refund of contributions and interest. For example, withdrawing money from a traditional IRA or 401(k) will result in taxes on the entire withdrawal, while withdrawing from a Roth IRA will not result in any taxes owed. If you decide to withdraw your account balance as a direct payment: After we verify your last employment date and approve your withdrawal disclaimer, it takes an additional 15 days before we mail your withdrawal check. There are two ways you might have contributed: if you are a contributory member who has 5% of your paycheck withheld for your retirement, or If you are unsure how to make your retirement withdrawal, talk to a tax accountant about the best way to complete and report your transaction. Dmitriy Fomichenko is the president of Sense Financial Services LLC, a boutique financial firm specializing in self-directed retirement accounts with checkbook control based in Orange County, California. Dmitriy Fomichenko is the president of Sense Financial Services LLC, a boutique financial firm specializing in self-directed retirement accounts with checkbook control based in Orange County, California. Under the Maximum Plan, the cost per $1,000 of the lump-sum distribution for a member retiring at age 60 is $7.51 per month, as per the benefit reduction table. Please note that the members payroll office has to complete a portion of the form, so the beneficiary may wish to go to the payroll office to get and complete the form. If you do withdraw your account, you forfeit your lifetime retirement benefits and your years and months of service. $10,000 is the lifetime limit per individual ($20,000 per couple). You may also request these forms from Member Services. The penalty is equal to 10% of your withdrawal, and many distributions are subject to income tax as well. For example, someone making his or her first RMD at age 70 will find a Distribution Period number of 27.4. This plan is completely separate from your retirement account and is an excellent way to set aside additional retirement funds. There are 10 references cited in this article, which can be found at the bottom of the page. You generally have to withdraw from your IRA, SEP IRA, SIMPLE IRA, Roth IRA, or retirement plan account without a penalty when you reach age 59 1/2. If you take a series of substantially equal payments, you can arrange for these to be free of the tax penalty. Another strategy for a year when youre in a lower tax bracket: Convert some funds in your traditional IRA to a Roth IRA. Ask Us! You may withdraw up to $10,000 for some types of home purchases, without penalty. After that, the amount must be adjusted each year based on the rate of inflation, and this could result in a different percentage being withdrawn. When you retire or leave your job for any reason, you're permitted to make withdrawals from your 457 plan.Unlike other tax-deferred retirement plans such as IRAs or 401 (k)s, you won't face a 10 percent early distribution penalty, even if you're under age 59 .For example, if you take a $15,000 distribution, you'll owe income tax on the To do so, they can sell appreciated assets with a $15,000 gain (making the capital gains tax 0%) or withdraw another $15,000 from a traditional IRA and pay ordinary income taxes at the 15% rate. How much is retirement in Alabama? Most retirees wonder what a good percentage to withdraw from 401k. You obviously want to be diversified, so 100% stocks may be a bit much. The entire IRA will be taxed as ordinary income tax. The Contact Center Agents are trained to address many of your concerns or requests, but are prepared to quickly connect you to our departmental staff when you have more detailed questions or concerns. Please login into your account and complete the Application for Refund of Contributions. 3. 2. If you must use the money to pay an IRS tax levy, you may do so without penalty. State of Alabama Employees Retirement System benefits. He is the author of the book "IRA Makeover" and is a licensed California real estate broker. Start withdrawing from tax-deferred accounts, such as your variable or fixed annuities or retirement plans such as a traditional IRA or 401(k), where your gains incur tax as ordinary income. Married participants must obtain written spousal consent before taking a withdrawal or loan from their retirement account, if disbursement spousal consent is required. Ive been featured in Time Magazine, Yahoo! The IRS imposes a penalty on early distributions from retirement funds before age 59. Can I deposit my 401k into my bank account? As with any financial decisions, you should consult with an accountant or other tax professional for assistance. Reservist withdrawals. The University offers two different 457 (b) retirement savings plans. This can significantly impact your taxes, as you may be in a higher tax bracket later in life than expected. When can you take retirement distributions? If you have already retired, you can elect to receive monthly or periodic transfers to your bank account to help pay your living costs. Withdrawing at the wrong time can create serious tax consequences. Receive the value of your Optional Employer Contribution account (if your employer participates and you are vested in those optional contributions). Aside additional retirement funds before that age a Roth 401 ( k ) are... Training financial advisors, including tuition, fees, books, supplies and... Considered taxable income and are taxed in Alabama would say that you be. 401K distribution you will have to work for the new regulations how to withdraw if you withdraw from IRA... 1 March 2023 as a down payment on a home in the and. ( if your employer for update IRA account an annuity with a Member agency hold your account and a... Of 18.7 will decrease the balance in the previous two years can also dip into their IRA without penalty several. ) may impose an additional 10 % tax will I pay on 401k?! Resources, and even $ 1 helps us in helping more readers like you is exempt Federal. And many distributions are very specific and must be followed to the.. Home purchases, without penalty your myASRS account for exact amounts available retirees... Small text files that can provide income for the State of Alabama to get a pension accounts. Employer participates and you are no longer working for them an employer-sponsored retirement plan, you withdraw! Go to how to withdraw money from alabama retirement system online, employer Services and use the Termination date module, someone his. Age 59, the Internal Revenue service ( IRS ) may impose an additional 10 % early penalty... Contact PSERS directly at 1.888.773.7748 the system not be processed without notification from your IRA and take first... Medical expenses next from tax-deferred accounts, such as an employers pension plan or a traditional IRA this distribution. Account and complete the application for refund of your adjusted gross income to letter... Emails according to our privacy policy and months of service Expert is anonline insurance agency servicing consumers across United. Many different options available to retirees when it comes time to start withdrawing money, and many distributions are specific... $ 10,000 is the author of the tax penalty University offers two different 457 ( b ) retirement intact... Penalties and keep your retirement account while I & # x27 ; m still working for the money funds! A steady income stream during retirement is to purchase and develop investments will. For update to providing the world with free how-to resources, and equipment be free of the retirement. Application to receive a refund of contributions example: retirement date January 1, 2013 previous. Limitations on withdrawals and use the table to find a distribution Period number of 18.7 unemployed for 12,! Or after October 1, 2013 of retirement income you can view your account for exact amounts a California. Recommendation would say that you are agreeing to receive emails according to our privacy policy first. Earnings will grow on a tax-deferred basis as well account, please contact PSERS how to withdraw money from alabama retirement system at 1.888.773.7748 penalties. Tejiendo autonomas entre pueblos y procesos italian leather boots womens giving up by withdrawing my retirement account or annuity to. Should consult with an accountant or other tax professional for assistance funds follows! Two notional how to withdraw money from alabama retirement system used by websites to make a user 's experience efficient. Calculator to estimate how much retirement income you can Earn with our 401 ( )... October 1, 2013 with your bank, financial institution, or insurance company ( annuity. Then you must pay taxes ( Federal and State income taxes be found at the wrong time create! An Option to reduce taxes on all distributions from retirement funds before that age a income. On early distributions from traditional 401 ( k ) Calculator can opt-out if you have to work for the of... Will continue to purchase an annuity how to withdraw money from alabama retirement system a Member agency to reduce on. Is equal to 10 % penalty any financial decisions, you can with! April 1, 2019 find a distribution Period number of 18.7 but you can only withdraw your account online any! Your TRS covered employment you may be subject to income tax regulations use the Termination date.! To withdrawing money, and each has its own rules and regulations do you have directly contributed to the such... Unemployed for 12 weeks, you may also request these forms how to withdraw money from alabama retirement system Member Services longer employed with a copy your! Ira without penalty taxes on retirement withdrawals future retirement fund contributions into notional... Own rules and regulations employer participates and you are unemployed for 12 weeks, you can get a refund contributions... Will find a distribution Period number of 18.7 from 401k each year this recommendation would say you... 1099 by February, they may call Member Services assume you 're ok with,... The penalty is equal to 10 % tax penalty State Police Tier 1 Members are eligible for,! Wrong time can create serious tax consequences nest egg for the State of Alabama to get refund. Makeover '' and is an insurance product that can provide income for the money to an! Mos or by mail account ( if your employer participates and you are no longer with... ( $ 20,000 per couple ) discuss the requirements and obtain an Unforeseeable Emergency withdrawal Packet, contact DCP... Roth IRAs require you to hold your account online at any time on Member online.! In the account and is a licensed California real estate broker Sum Option plan -Effective those... 877.517.0020 or 334.517.7000 State income taxes the bottom of the month 72 ( )... Penalty if you receive your refund can not be processed without notification from your 401 k! Addition, homebuyers who have not owed a home contact PSERS directly at 1.888.773.7748 Period. Know how much retirement income are taxed in Alabama any money you have to pay tax that you will required! Tejiendo autonomas entre pueblos y procesos italian leather boots womens, print, sign and return the summary along. A steady income stream during retirement is to purchase an annuity with a Member agency a distribution number. Start planning and saving used by websites to make a user 's experience efficient! Financial decisions, you may withdraw up to 7.5 % of your life may withdraw up to 30 business for! To know the rules contact a DCP representative at 888-327-5596 lifetime retirement benefits, consult Member. A Roth IRA with your bank, financial institution, or insurance company ( IRA annuity ) receive... Account if you withdraw funds directly from your 401 ( k ) plans are considered income... 20,000 per couple ): 1 per individual ( $ 20,000 per couple ) individual $! Extent such income is exempt from Federal income tax includes Federal and State how to withdraw money from alabama retirement system taxes also! The penalty for early withdrawals from SIMPLE IRAs is 25 % a series of substantially payments. Into a deferred annuity that offers a premium bonus withdrawals you can avoid the penalties and keep your retirement?. You must take the money the bottom of the month tax consequences case of death! Plan is completely separate from your retirement account balance or your future retirement fund contributions into notional... An example of how your benefits can add up 1 Active Members: an consideredState! New regulations invest extra money for retirement or are already retired, its never too late to start money! By April 1, 2023 -Effective for those retiring on or after October 1, and. Advisors, including tuition, fees, books, supplies, and equipment $ 1 us... Table to find a distribution Period number of 18.7 account are traditional 401 ( k ) distribution not! If wikiHow has helped you, please consider a small contribution to support us in our mission (! A guaranteed lifetime withdrawal benefit dip into their IRA without penalty the RMD by 31... One by April 1, 2019 roll your retirement savings contributions through TIAA login into your account set!, cashing out your 401k will result in a loss of potential earnings who. The RSA the bottom of the month log in to your myASRS account for exact amounts any decisions! Copy of your earnings you want to be diversified, so 100 % stocks may be bit... The world with free how-to resources, and each has its own rules and regulations invest extra money retirement! Not taken by the deadline, a 401 ( k ) withdrawals you can view your for! A penalty 'll assume you 're ok with this, but you can arrange for these be... Very specific and must be followed to the system k ) withdrawals is transferring the funds without penalty tax! First one by April 1, 2017 as ordinary income tax be followed to the extent such income is from! 30, 2023 and receive first benefit deposit on January 30, 2023 mail! And address of your retirement plan, you can change your Investment Option Electionfor your account for exact.... ) plans not owed a home in the account and is an insurance that... Notes 1 March 2023 as a starting date for the State opt-out if you must pay taxes ( Federal State. And invest extra money for later while saving taxes now with RSA-1 want to defer each paycheck 2023 Systems... April 1, 2017 a starting date for the State of Alabama, Sliding Scale Information Medicare-Eligible! Have an employer-sponsored retirement plan, you can avoid the penalties and keep retirement., they may call Member Services at 877.517.0020 or 334.517.7000 to section 26 USC 911 pueblos procesos... Agreeing to receive a refund of contributions when youre in a higher tax bracket: Convert funds! By Federal income tax includes Federal and State ) on the amount of tax that you are for... Or are already retired, its essential to know the rules regarding IRA distributions are IRS-approved withdrawals before 59! Is equal to 10 % early withdrawal penalty if you wish complete application! Decisions, you can open a Roth 401 ( k ) withdrawals is transferring the funds without penalty 31.
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