IRA/CD withdrawal questions
8 years ago
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- 8 years ago
- 8 years agolast modified: 8 years ago
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Anyone considering moving funds from a 401K or trad IRA to a Roth
Comments (46)---""Personally, I dont think it is smart financial planning to have your entire life savings in your retirement account." Why not?"" I'd like to clarify the above response. The only exception that I can think of is an emergency account.--- Assuming you are funding your retirement account appropriately to provide adequate retirement income, why would you put additional savings into retirement accounts? Once there, you can't use them easily and without penalty until you are retirement age. No, tax savings from tax-deferred accounts are not inconsequential, but neither is the freedom that comes with having money available to use how when for what you want. I am putting money into a combination of 401k and Roth retirement accounts at a rate which will conservatively provide me with adequate retirement income. This is less than the max--(although well over employer-match). Every thing else goes into ordinary ol' non-tax-deferred investment accounts. It's not really "emergency" money--- i also have 6-month living expense emergency funds in my bank account. But I am in my 30s. Why would I put any money above and beyond what I will need for retirement somewhere that I can't easily reach it for the next 15-20 years? Maybe I'll want to go to grad school and want to use it for tuition. Maybe I'll get married and want to put my husband through school. Or my husband's kids. Maybe I'll want to buy a bigger more expensive house and want to use it for down payment. Or a second vacation and/or investment home. I might want to take a year off work and travel. I might want to take a year off work and be a mommy to a new baby. I might not *want* to take a year off work but be forced to when I'm fired from my current job and it takes me a year to find a new one. I might want start-up money for my own business. I might have a sudden desire for one of those convertible Mercedes two-seaters (is it the SL i think).... I might I might I might. Freedom (and security) is "why not?" (which are the same reasons btw that I'm saving it in the first place rather than simply spending everything above and beyond what I've decided I need to save for retirement)...See MoreBest CD rates? What have U found?
Comments (23)Nicole, if you leave the money in for ten years, you would not be paying a penalty at all. The term is ten years. If you left it in you would have pretax income of about $45,000 on an initial investment of $100,000. That is a pretax income number. You only have to pay the penalty if you withdraw before the 120 month term. The APY, net of the penalty would be 0.250%, not 0.030% The risk you are taking is that deposit rates are currently about as low as they can get and will likely increase before the end of the term. Let's say this happens in two years, that means you will have invested your money for two years in an instrument with an APY of essentially 0.250%. I think it's a pretty safe bet that rates will rise, so if it were my money, I'd park it in a money market account (same bank has one for 1.10%) until I thought that deposit rates were stable and then I would buy a long term CD. Putting the money in a liquid account will allow you to maximize your earnings on the cash both now and later. But, YMMV....See MoreInherited IRA
Comments (6)Be aware you will probably pay a fee for closing out the IRA and moving it. Standard stuff, just so you know. Banks tends to charge higher management fees than a good discount brokerage, and offer a generally poorer choice of funds to pick from. If you are scared of the market and want to keep the money in CDs, check out the bank they are currently held at as to how their rates compare against the competition. The website http://cdrates.bankaholic.com/ shows you rates and can sort by term, but they do not verify the financial health of the bank. Do some homework here and pick a bank thatÂs safe even if not the highest fractional return. A lot of banks are in trouble but the FDIC doesnÂt publish that list so it can be hard to find out if a bank is real danger of being taken over. If you don't know how to move an IRA I would certainly not classify you as someone who should be investing in individual stocks! Mutual funds (stocks aka equities) and short-term bond funds would be a better investment. To move an account, open an account at any brokerage or financial institution  theyÂll usually let you do it on-line  first. See my caveats below about proper titling. THIS IS IMPORTANT! Once the account is active (entered into the system), the brokerage/FI will contact your motherÂs bank and get the funds transferred over. You do not and should not ever have to Âtouch the funds. Schwab ranks high for customer service and widest variety of available funds. Vanguard is discount but you can only invest in Vanguard funds - they have some very good ones but also some real dogs with similar names so it can be tricky. There's an analyst who posts on-line and he specializes in Vanguard funds only, with interesting analyses of why one fund is a good investment but another similar Vanguard might not be. This is fascinating reading but more than you probably want to do. Similar to Vanguard but with several funds ranked highly by Money magazine for overall return in their recent survey is T. Rowe Price. You might want to check the Money magazine website to read the full results of the survey article. Fidelity is the biggest pension funds broker/manager but I donÂt consider them the best from a funds standpoint. Caveats: The 2 critical things about Inherited IRAs are titling and distributions. You can have IRS difficulties if either of these is messed up. Wherever you move your IRA to, stay on top of these issues, because the IRS considers it your responsibility, no one else's. Titling an Inherited IRA: NEVER combine an Inherited IRA with your personal IRA funds. The title of the account should be: "Inherited IRA deceasedname fbo yourname". So if I inherit an IRA from my mother, it is titled "Inherited IRA Susan B. Anthony fbo JKom51". FBO means 'for benefit of' and it is acceptable to use the acronym. - Distributions must continue if your mother was taking them, but they are calculated on your life expectancy....See MoreHow to Figure IRA Withdrawal (non-Roth)
Comments (6)I do not think you can reduce the amounts of your required minimum distributions by listing your grandchild as a beneficiary. In order to avoid "market timing" in taking your distributions, try to make them "neutral" with respect to the market performance. You can do that my planning in advance to take equal distributions of 1/4 of the total amount to be distritubed each quarter of 2009 -- say, March, June, Sept, and Dec. If you are fortunate enough that you do not need the money from your distribution for living expenses, you can just transfer the money to a taxable account and put it in a similar investment that it was in in the tax deferred account -- or you could take the opportunity to consider a different investment. One more thing: If you made any IRA contributions and paid taxes on them because your income was above the limit for taking a tax deduction, your required minimum distribution should deduct those taxed contribitutions, or you would be paying taxes on that money twice. I'm sure there an IRS information sheet that explains that whole situation. It makes excellent reading if you have insomnia. Look up tax form 8606. That's the one you should be using when you file your return to report your cumulated taxed IRA contributions. Have fun....See More- 8 years ago
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