Archive for May, 2008
Ira Withdrawal Education
May 23rd, 2008
Question: Saving for College Education.?
I am a divorced single father with two kids. One is 11 and the other is 9. My parents dropped the ball when I was of college age and ended bot being able to go. They earned to much so I didn’t qualify for much, and I had to support myself from when I 18 and couldn’t afford. Plus, they never planned on p[aying in the first place. I don’t want this to happen to my kids, and I am beginning to save for their education – 400 a month.
There are a number of different plans from what I can see. from where you can prepay for a state school in PA to an investment type of education account in PA. I am thinking that it may be better to put it in an IRA and withdrawal it out when College calls or just put the money in a mutual fund. I really don’t like the idea of putting the money in their own account because as I said – I am divorced. I really don’t trust my ex-wife. I think she could access the funds as a co-legal custody parent. She isn’t saving. She has her own kids as well
Answer: There are educational IRAs, or your state’s 529 savings plans, or if you’re more conservative (I-bonds).
Any of them you can designate who is the executor of the money is through a lawyer if you’re no longer around.
Ira Withdrawal Options
May 9th, 2008
Question: Taxes on a 401k withdrawal question?
I was recently terminated and on our company website it is giving me the option to withdrawal my 401k.. Its not a huge amount so I dont want to go through the trouble of rolling into IRA.. My question is this: I know that it is taxed 20% + 10% fee etc, but I am wondering if that amount is taken out and they send you the rest, or do they send you the lump sum and you are responsible for paying the taxes on it come year-end..?
Ok, very good info, but my question is a bit more specific: Lets just ASSUME I have $1000 available to withdrawal, and lets ASSUME it gets taxed 50%.. The question is will I get a check for $500, or will I get a check for $1000, but be subject to the $500 tax at the end of the year..?
Answer: You will be responsible for the 10% penalty.
As for the regular tax, the difference between the withholding and your actual tax will be either your responsibility (if actual is more) or overpayment (if withholding is more).
Also note you will be assessed tax on state and local level, if applicable. Generally withholding is not automatically done on the state and local level.
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Tags: 401k, advice, change, contribution, inherited ira withdrawal options, ira, ira withdrawal options | 
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Life Expectancy Tables Used
May 3rd, 2008
Life expectancy tables used for 72t Distributions
Which life expectancy tables can be used to determine 72t Distributions?
The life expectancy tables that can be used for 72t Distributions are:
1. Uniform Lifetime Table (Table III)
Longer life, lower percentage of balance withdrawn.
Example: For people age 56 the life expectancy is 40.7.
2. Single Life Expectancy Table (Table I)
Shorter life, higher percentage of balance withdrawn.
Example: For people age 56 the life expectancy is 28.7.
3. Joint Life and Last Survivor Table (Table II)
Life expectancy is based on the age of the owner and the beneficiary. If there is more than one beneficiary use the age of the oldest beneficiary. The life expectancy factor may be more or less than using the tables above based on the age of the beneficiary. (See IRS Publication 590, Appendix C)
In the case of the RMD method, the same life expectancy table that is used for the first distribution year must be used in each following year.
Example: The taxpayer uses the single life expectancy table for the RMD method in the first distribution year; the same table must be used in subsequent distribution years.
Note: These tables are not subject to change depending on circumstace, such as early plans for retirement.