Early Withdrawal

You get tax breaks for setting up a retirement savings account such as a 401K, IRA or Roth IRA but you cannot access the money until a certain age limit or at retirement. In order to make an early withdrawal, you get slapped with a number of penalties such as a 10% early distribution charge plus regular income taxes. There are exceptions to these penalties: the death or disability of the owner, first-time home purchase, payment of unreimbursed medical expenses which exceed a percentage of gross income, higher education fees or to pay medical insurance premiums if the holder has received unemployment compensation for more than 12 weeks.

5 Reasons to Question the Recent Indexed Annuity Article in Bloomberg

An article on indexed annuities appeared in Bloomberg yesterday (click here to read).

The article is substantive and comes from a credible source.  It is provides a good explanation of why surrender fees need to be a front-and-center consideration for any consumer considering the purchase of an...

Almost Half of All People Leaving a Company Take Cash from a 401k

A 2005 survey from the benefits consulting company Hewitt Associates indicates that almost 50% of all people who are leaving an employer take a cash distribution from the existing 401k plan. A cash distribution is very different from a IRA rollover . A rollover does not involve penalties or taxes--simply moving money from a 401k to an individual retirement account or IRA. On the other hand, a cash distribution involves both taxes and early withdrawal penalties. This is an amazing and disturbing...

Many Rules and Pitfalls with Early Withdrawals from 401k and IRA

The financial crisis has taken a heavy toll on the personal finances of most people. A natural reaction is to consider withdrawing funds from a tax advantaged saving plan such as a 401k or IRA. The reality, though, is that funds from such sources can be extraordinarily expensive when all of the penalty fees and tax implications are taken into account. The rules are complex and generally depend on a person's age and the type of plan involved. Some high-level points to consider: The federal...