Early Withdrawal

Archive for July, 2005

Question: Use IRA funds to prevent a forclosure?

I have real estate that I can no longer make mortgage payments?

Answer: No.

Assuming that it was a deductible Traditional IRA, there are no exceptions to paying the tax. There are a few exceptions to paying the 10% penalty but avoiding foreclosure is not one of them.

Jump through hoops, no penalty

Question: Is unemployment in NC affected by cashing out your 401(k)?

My husband was laid off in April of 2009 and has been on unemployment benefits since May. To keep our heads above water and pay some medical bills, we had to cash out his 401(k). While filing his weekly claim it does ask something about receiving retirement or pension. I understand the 20% taxes withheld by the IRS, and the state taxes withheld, and the fact that there is a 10% Early Withdrawal Penalty because we are under 59.5, but need to know what this will do to the unemployment. By the way, the money was taken out in 2009. Thanks for any help.

Answer: A 401K does not affect your eligibility for unemployment. The reason that they need to ask the question is because pensions that make a regular payment (usually monthly) or are currently funded by the employer do affect unemployment. Cashing out your 401k is not considered earned income for reporting purposes as required under the rules for unemployment benefits.

You should have received a 1099 regarding the amount of money that was withdrawn and that does have to be reported on your tax return this year.

Rep. Hoekstra on Early Withdrawal of 401Ks 6-17-09

Question: How does this Certificate of Deposit penalty for Early Withdrawal work?

There is a 5 year Certificate of Deposit offering 6% interest. Penalty is .75% (so 5.25% interest) for every year that the money is withdrawn early.
Does this mean that withdrawl in say, the 3rd year would give you 6% for the first 2 years and 5.25% for the 3rd, or would it be 5.25% for all 3 years?

Answer: Consider buying cd’s through a discount broker in the future.
Such as Schwab or Fidelity.
Their cd’s don’t have a penalty for selling early –
they simply sell at market price – usually you make a profit.

Could it be that they will be charging you 75% of the interest you earned during the last year? That would sound about right for a bank.
I would call the bank- this is new.
Usually they just charge 6 or 9 months interest -
banks are getting more clever at confusing people.
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