Early Withdrawal

Archive for November, 2010

Question: ira withdrawl to pay off mortgage or buy house next door?

I’m 36 years old, and I have an IRA with 1.1m in it (self directed). I have a mortgage of 330K.

Answer: I would pay off the existing mortgage and then save, save, save.

Tom Barry on the British Occupation of the Six Counties

Question: How many people are going to pay the 10% penalty to close their IRAs to keep Obama from stealing them?

According to reports, Obama is trying to get you to turn over your IRA for a guaranteed government check. The fear is that Obama will at first ask and then, later, demand that you turn it over. With only a 10% penalty for Early Withdrawal from an IRA, maybe now would be a good time to start protecting that investment from confiscation.

Answer: I already am withdrawing from my IRA, because it’s the only savings I have that wasn’t flattened in the 2008 meltdown.

It would not surprise me at all if the Democrats respond to the retirement crisis by confiscating all existing retirement savings plans and distributing the money “fairly.” Or at least they will make drastic changes that make it extremely counterproductive to have any money in your retirement plan, all in the name of “fairness.”

As in, it’s not fair that others have saved nothing for their retirement, while you are sitting there hording money because you saved for your retirement. People who saved should be punished for being so unfair by having money saved up, while others saved nothing and they now have nothing saved. That’s just not fair to the people who have nothing, so the only choice is to nationalize all retirement savings and distribute it fairly….

QUOTE FROM ARTICLE:

“The centerpiece of the push, the so-called automatic IRA, appears to have particularly strong backing. This would require employers who do not offer a retirement plan to enroll their employees in a direct-deposit individual retirement account unless the employee opts out…

“Employers that do not offer a retirement plan would be required to offer workers the option of having money automatically deducted from their paycheck and deposited into an IRA. Workers’ contributions would be steered into a basic investment option. They could opt out if they wish.

“Employers would receive a tax credit for offering the IRAs, to offset any related administrative costs.

“Auto enrollment has been shown to sharply increase participation in retirement plans, according to the Retirement Security Project….”

The typical Democrat solution: MAKE IT MANDATORY, then cheer at the “sharp increase” in participation.

Planning for Retirement? (Advice From John Piper)

Question: Ira Withdrawal strategy?

I received great answers on my last post. Now about withdrawals. Now that I know that you pay taxes on Traditional IRA withdrawals based on your last tax bracket, wouldn’t it make sense to get another job just before retirement? If you make $100,000+ and then stop working at that job you are now in the 35% tax bracket. If you go out and get another job at say a fast food restaurant, work there a while, you are now in maybe 10-20% tax bracket. Now you will only pay 10-20% as oppose to the 35% on withdrawals. I’m not a tax advisor or anything like that, but wouldn’t that make sense? Business major in my early twenties.
Thanks jo blo and girlwhok. Out of all my studying, now I understand. I will pay income tax on withdrawals regardless of my final tax bracket. The more I withdraw, the more I will pay. The less I withdraw, the less I will have to pay.

Answer: Your tax bracket is base on whatever earned income you made in the taxable year (Jan 1 – Dec 31). So if you only made $20,000 during the year, you fall in 15% tax bracket. Any withdrawals of the gains and tax-deductible contributions will receive a 15% income tax and possible a 10% penalty (if withdrawn before age 59 1/2).

Guess what? In 2010, you can rollover your Traditional IRA into a Roth IRA because income limit does not matter! You pay taxes on the conversion, but at least you don’t have to take mandatory withdrawals at age 70 1/2.

Wealth Strategies with Roth IRA Conversions – Part 1