My biggest concern with my retirement account (TSP) is that beneficiary is a minor. If I should pass away, I really don’t know what would happen to the money since he’s only nine years old. I think I need to set up a trust fund to ensure the money is spent how I want. In the meantime, I’m still trying to find out if a trust account is the right thing.

Thanks again for the post.

Romeo

Kris just noted that I should have a system for tracking reader article requests. I’m not sure why I haven’t thought of this before, but I’ll use her idea of creating a spreadsheet listing story ideas from readers. That’d be keen, yes?

Some CPA’s charge for the phone call. I don’t feel this is unreasonable.

Definitely contact a CPA or financial planner BEFORE taking money out.

Would an exception be if the home was a multi unit structure? For example, if a duplex is $50,000 more than a house but you can earn $500 a month from it would it justify taking a little out of the retirement account to cover it?

Given that, if you can avoid withdrawing the money from your retirement account, you should. There’s no way to put the money back once you’ve taken it out.

If you can’t afford the house without raiding your retirement, you probably can’t afford it at all.

What if you’ve rolled old plans into a “conduit IRA,” that is, an IRA you only put 401(k) rollovers into?

P.s. We were bit by the disbursement from my husbands last job. He thought he was ok because the check was good for 6 months. We wasted a couple thousand bucks on taxes we should not have paid.

This is a reply to Mike’s comment (there was no “Reply” box under his comment).

Thanks for offering your thoughts, Mike. I strongly agree with the words of yours that I have quoted above.

The economic crisis is not solely the fault of The Stock-Selling Industry. We all have a Get Rich Quick impulse within us and we all must fight harder to rein it in if we are to entertain realistic hopes of someday achieving financial freedom. There’s an old saying that “you cannot con an honest man.” If we weren’t so hot to fall for Get Rich Quick schemes, the Stock-Selling Industry would not be so keen to push them. They push them because their marketing surveys show that they work, at least in the short term.

That said, those who put themselves forward as investing “experts” take on a responsibility when they do so. If you are going to report numbers that people are going to use to plan their retirements, you have an obligation to report those numbers accurately. If you don’t, people are going to follow the inaccurate numbers and suffer horrible life setbacks as a result.

We all need to accept the share of responsibility that belongs to us. Middle-class investors have messed up. The Stock-Selling Industry has messed up. Journalists have messed up. The Personal Finance Blogosphere has messed up. Republican policymakers have messed up. Democrat policymakers have messed up. We are all in this together and we all messed up together.

My message is that we will all feel a whole big bunch better about ourselves when we stop worrying so much about who gets the blame and start focusing more on dealing with all the damage we have caused. When you are moving in the right direction, there’s more of a spring in your step with each day of forward progress. For so long as we remain mired in The Blame Game, things get darker and darker as the economic crisis worsens and worsens.

The first step to getting to a better place is saying the words “I” and “Was” and Wrong.” It’s not one person who needs to say those words, or 100 people, or 1,000 people, or 10,000 people. It’s our entire society. I do think it’s fair to say that those who call themselves “leaders” need to step forward first. That’s what it means to “lead.”

Rob

This is a national scandal, JJ. We are likely going to see MILLIONS of failed retirements in days to come because of our failure to correct the Old School safe withdrawal rate studies, which fail to consider the valuation level that applies on the day the retirement begins and thus get all the numbers wildly wrong. [The data shows that the valuation level that applies on the day a retirement begins is the single most important factor determining whether it will survive or not.]

I have a calculator at my site that provides the accurate numbers (At least I hope so!). It is called “The Retirement RIsk Evaluator”:

http://www.passionsaving.com/retirement-calculator.html

The calculator uses “P/E10″ to make the valuation adjustments. P/E10 is the price of the S&P 500 over the average of the last 10 years of earnings. This valuation metric was discovered by Benjamin Graham, who was Warren Buffett’s mentor. It has been popularized in recent years by Yale Economics Professor Robert Shiller, the author of Irrational Exuberance.

The historical data shows that the safe withdrawal rate varies from a low of 2 percent (permitting an annual withdrawal of $20,000 from a $1 million portfolio) at times of high valuations to a high of 9 percent (permitting an annual withdrawal of $90,000 from a portfolio of $1 million) at times of low valuations. The Old School studies say that the SWR is 4 percent at all times. Thus, millions end up retiring with portfolios nowhere close to big enough to support them while millions of others work many years longer than they need to to finance a sound retirement.

The “defenders” of the Old School studies say that the 4 percent number is a “rule of thumb.” I say that we should all begin reporting the retirement numbers accurately and thereby spare millions of our friends and neighbors and co-workers from suffering one of the worst life setbacks (a failed retirement) imaginable.

Thanks for your question. Please take care.

Rob