Touch Not the Retirement Fund, Thus Sayeth the Experts

Michael Bowler | RSS | Thu, May 28 2009 | 0 Comments

This economy is no stranger to financial burdens. We are finding out how fast the mighty really can fall. If the mighty can fall so quickly, it is no wonder that some of us are falling. Sometimes you just have to do what you just have to do in order to financially survive this recession. Just do not do anything hastily, especially things that might hurt retirement or savings.

When financial times get tough, so do the decisions people have to make. Sometimes people have to figure out how they will get the money to pay the bills and sometimes people have to decide what bills they are going to pay this month. In that quest for extra cash, you should be very careful raiding the retirement funds. “This can be the most expensive cash you’ll ever withdraw,” says Ed Slott, an accountant in Rockville Centre, N.Y., whose specialty is retirement.

Early withdrawal of retirement savings from that IRA or that 401k can mean massive penalties and taxes. Unfortunately, to try to minimize this, it is suggested that you work with a financial advisor or accountant that specializes in retirement savings. The federal government usually charges a 10% penalty on money withdrawn from a 401k or IRA by those under retirement age (considered 59 ½).

Withdrawals of earnings and deductible contributions are subject to federal income taxes plus any taxes charged by your state and local jurisdictions. If you live in California, an early-withdrawal fee will be charged by the state. In a Roth IRA, contributions can always be withdrawn without penalty, but earnings can be taxed and penalized to the content of the government(s) that have jurisdiction over you (likely government, state, and local). This does not even count the fees to pay any advisor you may work with.

For people still investing in their company’s 401(k) plan and under retirement age, withdrawals generally are not even permitted unless labor there is terminated. There are, however, certain “hardship” exemptions which are strictly adhered to legally, including medical expenses, avoiding foreclosure on a home or funeral costs. Even so, those exemptions are still heavily taxed and penalized.

IRA rules are more lenient, allowing hardship withdrawals without the penalty, but the money will still be subject to steep taxes. In most cases, the only way for someone in a 401k under retirement age to avoid the penalties and taxes is to borrow from the 401k account. These loans can’t be more than 50% of the balance of the account or total more than $50,000. Here is the rub, though: it must be paid off within five years.

“Some companies will allow in-service withdrawals only for severe hardships; others don’t bother imposing restrictions,” says Frank Palmieri, a Princeton, N.J., benefits attorney. Anyone considering withdrawing money from a retirement account should consider it nearly mandatory to sit down with an accountant. You’ll want to consider the taxes and penalties hit which should be factored into how much money is withdrawn.

Related posts:
The Pitch – Are you pulling from your retirement fund?
People who make less are less likely to save for retirement
Do You Really Need to Open a Swiss Bank Account Online?

Tags: retirement savings, federal income taxes, accounting

CFO of Freddie Mac found dead in his home

Jennifer McClelland | RSS | Wed, Apr 22 2009 | 0 Comments

The Assoicated Press is reporting that David Kellermann, the acting CFO of Freddie Mac, was found dead at his home this morning due to an “apparent suicide.”

While Freddie Mac has been extremely criticized for its shady business practices and has often been linked to the cause of the financial meltdown, there really is never a reason for someone to take such drastic steps to escape from the company.

Kellermann was only 41 years old and had been with Freddie Mac for more than 16 years. He was serving as senior vice president, corporate controller and principal accounting officer. He was named acting CFO in September 2008.

Related posts:
Corporate Name Changes Change the Game or Just Confuse?
Really bad corporate name changes

Tags: corporate controller, accounting, senior vice president

Unemployment can lead to greater amounts of debt.

Jennifer McClelland | RSS | Tue, Mar 31 2009 | 0 Comments

Unemployment has been increasing in the United Kingdom as well as the United States. Situations in the UK have become increasingly dire as the recession deepens.

Those who are unable to find work may be turning to school as well. Over the course of one year the University of Dundee had an increase in student applications of 16.5 percent. The increase in student applications means there will most likely be an increase in student loan applications.

College is supposed to be one of the most integral parts of life. It is supposed to be when a child leaves their parents’ homes and discovers the world on their own for the very first time. It is not supposed to be a time when they are worried about what kind of job, if any job at all, they will be getting in four years when they graduate.

When these students graduate college in 4-5 years what will the job market hold for them? It is tough to say, but what is certain is that these students will face a mountain of student loan debt.

As unemployment numbers suggest, current and upcoming graduates are having a difficult time finding work. Accounting firm Deloitte Touche Tohmatsu has recently had an increase in applicants in its Edinburgh office of 59% for any open positions.

These graduates are not only having a hard time finding work, but they are also going to start facing their student loans soon. Student loan billing is typically deferred until six months after graduation. Once those six months are up, students will begin to be billed for the loans they incurred while in school and without income, that can be difficult.

In the UK, the average unsecured household debt is around £9,633, secured debt increases the number to £21,750, and people are beginning to default on some of this debt. Many families are defaulting because the debt load is simply too much to bear. Judgments against those in England and Wales have risen to 223,519 in the 3rd quarter of last year. The number equals staggering 2,430 people receiving judgments daily.

Debt Free Direct is a UK based company that can help resolve some of these debt issues that families are facing. Instead of going it alone, Debt Free Direct is giving anyone in the UK free debt advice at no charge and without obligation at 0800 083 1433 or you can read more about them at: http://www.debtfreedirect.co.uk/news/threatsposedbyrisingunemployment-8277-03022009/

Related posts:
Students continue to face huge amounts of debt; and it’s increasing.
Student debt is on the rise
You Should Not Walk Away From Your Student Loans

Tags: Edinburgh, Judgments, market