Your Retirement Account Survival Guide

An IRA is a simple little thing. It's a common, garden-variety retirement vehicle, basically nothing more than a savings account with initials — right? Wrong.

The rules regulating IRAs are varied and vexing; IRS Publication 590 [PDF], the definitive source for Uncle Sam's shalls and shan'ts regarding IRAs, weighs in at a hefty 108 pages. And then there are all the guidelines about employer-sponsored plans — e.g., 401(k)s and 403(b)s. Whew! Seems like all this would be enough to fill a two-day conference focusing on nothing but retirement accounts.

Actually, it is. I know, because I attended one — Ed Slott's two-day IRA workshop (fun!). Slott, a CPA and the operator of IRAHelp.com, is recognized as one of America's foremost authorities on individual retirement arrangements (yep, that's what the “A” in “IRA” actually stands for). At the conference, he and his team led 100 financial-services pros (and one Fool) through a 430-page manual that described the care and feeding of retirement accounts, as well as several real-life examples of people who made mistakes that cost them thousands of dollars.

Some examples:

    • A teacher withdrew $67,553 from her 403(b) to pay her daughter's college expenses. She paid the income taxes, but thought she'd be exempt from the 10% penalty since the money was used for higher-education expenses. Sadly, that exemption applies only to IRAs, not 403(b)s or 401(k)s. Oops.

 

    • A widow inherited a $2,646,798 retirement account from her deceased husband. She transferred it to her own IRA, then withdrew $977,888. She wasn't yet 59-1/2 but figured she'd be spared the 10% early withdrawal penalty since she inherited the account. Indeed, distributions from inherited accounts are exempt from the 10% penalty. However, since she transferred the account to her own IRA, she owed Uncle Sam $97,789. Bigger oops.

 

It would be the ultimate in stinkiness if you spent years — nay, decades — saving in a retirement account, only to lose thousands due to one simple mistake. Here are just some of the guidelines you must follow to prevent just such a mistake from happening to you.

Stuffing It
The maximum you can contribute to an IRA in 2011 is $5,000 — or $6,000 if you're 50 or older. Granted, the biggest source of your IRA's funds is likely a transfer from a 401(k) or other employer plan, but contributing $5,000 annually is nothing to sneeze at. For one thing, sneezing at something is rude — but more importantly, contributing $5,000 a year to an account that earns 8% annually would result in $78,227 after 10 years and $247,115 after 20 years. Not shabby at all.

While contributing to an IRA can pay off over the long term, most people first contribute to their employer's retirement plan, especially if the boss matches contributions. After that, you may want to contribute additional savings to an IRA; if you have money in a retirement plan with a former employer, moving that to an IRA also makes sense.

Here are the advantages of an IRA over a 401(k) or other plan:

    • More investment options. The typical 401(k) offers a menu of five to 15 mutual funds, whereas an IRA with a discount brokerage allows the owner to choose from among thousands of stocks, exchange-traded funds (ETFs), mutual funds, individual bonds, CDs, and, if approved, alternative strategies such as options.

 

  • Lower costs. This depends on the plan and the IRA provider, but the cost-conscious investor will have more ways to limit fees in an IRA, such as investing in index funds, ETFs, or stocks that you hold for many years (avoiding the annual expenses of funds).

There are two reasons not to transfer an employer plan to an IRA:

    • If you retire between the ages of 55 and 59-1/2, you can take money out of the plan from your last employer penalty-free, whereas withdrawals from an IRA before age 59-1/2 might result in a 10% penalty.

 

  • If you own stock in your employer, you're likely better off transferring it to a taxable account to take advantage of net unrealized appreciation (NUA).
 

 

Getting It There From Here
The easiest and best way to move money from one retirement account to another is with a “trustee-to-trustee transfer.” Contact the company to which you wish to move the money, complete the paperwork they send you, and they'll handle the rest.

You want to avoid being sent a check payable to you alone. If that happens, you'll generally have 60 days to get the money into the new account. Wait any longer and it may be considered a distribution from your previous plan, subject to taxes and possible penalties. In addition, 20% of the distribution may be withheld; you'll have to cover that gap with personal funds when you move the money to a new account, but you'll get a refund when you file your taxes. If you don't make up that 20%, it, too, will be considered a distribution subject to taxes and penalties. This is all very bad.

If your current account provider insists on sending you a check, request that it be made payable to the new financial institution — for example, “XYZ Bank as trustee of IRA of John Doe” or “ABC Firm FBO Jane Smith” (FBO means “for benefit of”).

Spending It
As mentioned earlier, you generally have to wait until age 59-1/2 before tapping retirement accounts, whether IRAs or 401(k)s — if you don't, you'll be charged a 10% early-distribution penalty. However, there are several exceptions. Some apply to both IRA and employer-sponsored plans, others to just one. (Any exceptions apply just to the 10% penalty; regular taxation will still apply.)

The chart below lists the possible exceptions. If you find yourself in any of these situations, take the time to know all the details before you make a withdrawal. Most exceptions are restricted to certain groups, but Substantially Equal Periodic Payments are available to everyone; they're explained in IRS Code 72(t), but they're complicated and can trigger the penalty if not done properly. For all the details, visit www.72t.net.

Note: The very first exception listed is also available to everyone, but it's a large price to pay to avoid an IRS penalty.

 

Exceptions to 10% Early- Distribution PenaltyPlans and IRAsIRAs Only (Including SEP and SIMPLE IRAs)Plans Only
Death?  
Total and permanent disability?  
Substantially Equal Periodic Payments, a.k.a. 72(t)?  
Medical expenses that exceed 7.5% of adjusted gross income?  
IRS levy?  
Active reservists?  
Distributions from inherited accounts?  
Higher education, for self or qualified relatives ? 
“First-time” home buyer, up to $10,000 per account owner (can be used for qualified relatives, or for yourself if you didn't own a home in the previous two years) ? 
Health insurance if unemployed ? 
Age 55  ?
Age 50 for public safety employees  ?
457 plans  ?
Dividends from employee stock ownership plans  ?
Qualified Domestic Relations Order  ?
Totally insane prices on flat-screen TVs at an after-Christmas sale   

 

Contributions to a Roth IRA can be withdrawn tax- and penalty-free at any time, while earnings will be subject to the age 59-1/2 rule (as well as the five-year rule, which is a whole other complicated ball of wax). A Roth 401(k) is a different matter; all withdrawals are a proportional mix of contributions and earnings, with any taxes and penalties being assessed against the earnings only.

When You Gotta Take It
Owners of traditional IRAs as well as traditional and Roth employer plans must begin taking annual required minimum distributions (RMDs) the year they turn 70-1/2. Alternately, they can wait until the following year but take two distributions in that year. Otherwise, they'll pay a 50% penalty. Yes, even a Roth 401(k) has RMDs, but they can be avoided by transferring the money to a Roth IRA — the only account not subject to forced liquidation.

Surprisingly, beneficiaries of inherited retirement accounts must also take RMDs beginning in the year following the death of the original owner. This is true regardless of age — even if the account is a Roth IRA. The only exception: a surviving spouse who elects to make the inherited account her own (i.e., has it re-titled in her name) or rolls over the inherited account to her own existing account.

While non-spouse beneficiaries can roll an inherited 401(k) to an inherited IRA, they can't avoid the RMDs. The account must remain titled something along the lines of “Joe Smith, deceased, IRA for the benefit of Joe Smith Jr. as beneficiary.”

 

 

Bequeathing It
If you're interested in passing on wealth to your family, you probably want as little to go to taxes and lawyers as possible. Start by naming living, breathing human beings on your account beneficiary forms. Doing this means the account bypasses your will and probate (which can cost time and money), and the beneficiary or beneficiaries can “stretch” the account over their lifetimes. If the form is blank, or the listed beneficiaries are themselves deceased, the money will go to the estate. In that case, the account may have to be liquidated within five years, and it will lose all the tax advantages of an IRA or 401(k).

Keep in mind that the beneficiary form often trumps other legal documents, such as wills and prenuptial agreements. If your beneficiary form says your IRA should be split between your son and daughter, but your will says it should just go to your daughter (because your son has turned out to be an irresponsible spendthrift — or a banker), the account may end up being split. And to minimize the risk of lost or messed-up beneficiary forms (it does happen!), keep copies in your own records.

It's important to name primary beneficiaries as well as contingent beneficiaries (the people who will inherit your accounts if the primaries are deceased, or if they'd rather the contingent beneficiaries get the money). If you've inherited an IRA, make sure you name new beneficiaries.

Protecting It
Finally, here are three other considerations for protecting your retirement accounts, during this life and beyond:

    • Creditors and bankruptcy. The money in your employer-sponsored retirement account most likely can't be lost to bankruptcies, creditors, or lawsuits. IRAs receive bankruptcy protection up to $1 million. However, the amount of protection from other creditors varies by state.

 

    • IRA fees paid with non-IRA money. Many IRA providers charge an annual account fee, which is automatically taken from your account assets. However, you can instead send a check to the custodian and leave more money in the IRA to grow. This also applies to annual “wrap” fees, though not to commissions and mutual fund expenses.

 

  • Estate taxes. Retirement accounts, including Roths, are included in a gross estate for tax purposes. Recent laws increased the federal estate tax exemption to $5 million per person and $10 million per couple, but the limits drop in 2013. Twenty states also impose estate taxes, with exemptions as low as $338,333. If your estate is or will be worth a few million dollars or more, see a local, qualified estate-planning attorney.

Remember: Get help if you need it. If you're going to make a significant change to your retirement accounts, you might want a little professional help to make sure you're doing everything right. IRAHelp.com features a listing of advisors in your area who have taken extra training about IRAs and 401(k)s. Also, the fee-only financial advisors at the Garrett Planning Network charge by the hour (among other methods), which makes it easier to get your questions answered without having to turn over your entire financial life.

More about...Retirement, Investing, Planning

Become A Money Boss And Join 15,000 Others

Subscribe to the GRS Insider (FREE) and we’ll give you a copy of the Money Boss Manifesto (also FREE)

Yes! Sign up and get your free gift
Become A Money Boss And Join 15,000 Others
guest
55 Comments
Oldest
Newest Most Voted
Inline Feedbacks
View all comments
retirebyforty
retirebyforty
9 years ago

Jeez, so many rules! I’m in my late 30s so I don’t have to worry about most of these issues yet because I’m not planning to take distribution anytime soon. I’m definitely transferring my 401k to IRA as soon as I quit my job. There is no reason to have any employer stock in your 401k! Question: Are the retirement account protected from divorce? Not that I’m having any problem, just asking for a friend. Good tip about naming beneficiary, I didn’t know that bit. I’ll see if I can add a few names to the list so it doesn’t… Read more »

Pamela
Pamela
9 years ago
Reply to  retirebyforty

I’m not an attorney but I do get to read a lot of separation agreements as part of my job. Retirement benefits and equity from a shared house are the two most common asset settlements I see.

Tell your friend to talk to a lawyer.

mike
mike
9 years ago
Reply to  retirebyforty

Friend,hmmm? Nope Retirement accounts will be split according to the divorce agreement, look into the Qualified Domestic Relations Order if you want more info. Typically the QDRO take effect when once spouse has a large retirement plan compared to another. I saw this happen with a friend of mine (woman) who had way more than her husband who never saved but spent all of his money, while she saved. He ended up getting a nice chunk of her money too.

retirebyforty
retirebyforty
9 years ago
Reply to  mike

That’s what I though about the split – see a lawyer….

Nicole
Nicole
9 years ago

Best cat pictures yet! Er, I mean, bestest kitteh pickturs

Also, awesome chart.

Pamela
Pamela
9 years ago

I’ve seen the first time home buyer exclusion mentioned several times here at Get Rich Slowly but I don’t recall any posts that talk about whether borrowing your down payment form your retirement account is a good idea or not. Could we see a post that only talks about that decision–the pros and cons?

Or if you’ve posted on it already, I couldn’t find it. I’d love to see a link.

BTW, love the kitty pictures. It keeps me reading on topics I find very intimidating. Perhaps you’re willing to provide some “doggie” equal time?

Nicole
Nicole
9 years ago
Reply to  Pamela

Noooo! Cats rule, dogs drool!

stannius
stannius
9 years ago
Reply to  Pamela

To be clear, you would not be borrowing your down payment from the account, you would be withdrawing 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.

Amanda
Amanda
9 years ago
Reply to  stannius

I agree.

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?

stannius
stannius
9 years ago
Reply to  Amanda

All else being equal, you’re better off not withdrawing money from your IRA.

Mike Piper
Mike Piper
9 years ago

Two additional situations in which it makes sense not to roll over an account from an employer plan to an IRA:

-You work for the Feds and your employer plan is the TSP–with expense ratios so low as to be bordering on free.
-You’ve made non-deductible traditional IRA contributions and are planning a Roth conversion (aka “back door Roth”). In such a scenario, it likely makes sense to wait until the year after the conversion to do the rollover so as to minimize the amount of the conversion that’s taxable.

Holly
Holly
9 years ago

Hi, Robert-

Quick question…I thought that contributions to a Roth IRA need to be at least ‘five years old’ before they can be withdrawn without penalty. No?

If not, then either my adviser lies or maybe there is another situation where it could be true (i.e., Class A shares turn into B shares after 5 years which may affect withdrawal rules)?

Sorry…I am interested in all of these rules, but, honestly, things could be so much simpler!

Mike Piper
Mike Piper
9 years ago
Reply to  Holly

My understanding is that the 5-year rule only applies to earnings in the Roth and amounts that were converted from a traditional IRA or employer plan. From IRS Publication 590: “You generally do not include in your gross income qualified distributions or distributions that are a return of your regular contributions from your Roth IRA(s). … Unless one of the exceptions listed below applies, you must pay the 10% additional tax on the taxable part of any distributions that are not qualified distributions.” (emphasis mine) My takeaway from that: Distributions that are a return of your regular contributions are not… Read more »

retirebyforty
retirebyforty
9 years ago
Reply to  Holly

You can withdraw your Roth IRA contribution at anytime with no penalty. You only have to worry about penalty for the earning. Check the IRS website.

Amanda
Amanda
9 years ago
Reply to  retirebyforty

It’s not a very user friendly web site. Best saved for the professionals.

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

Sam
Sam
9 years ago

Funds in an employer sponsored plan can be cheaper than in an IRA because your employer may be getting access to institutional rates.

mike
mike
9 years ago
Reply to  Sam

I have rarely seen institutional fee % as low as vanguards mutual funds or etfs. Example Vanguard Total Stock Market .18%
Admiral Vanguard Total Stock Market Index or Regular Vanguard Total Stock Market ETF .07%

Confusador
Confusador
9 years ago
Reply to  mike

It does depend on what funds you have access to. My 401(k) has a bunch of Vanguard funds, and their institutional and institutional plus rates (for balances of >$100 and >$200 million) are obviously better than for individuals. For the Total Stock Market funds, they are .052 and .032. Granted, at that point the difference is almost not worth caring about, but if you have the options they can be worthwhile.

Rob Bennett
Rob Bennett
9 years ago

You’ve got to know how much your retirement account is worth. That’s the single most important thing. In 1982, stocks were priced at one-half fair value. In 2000, they were priced at three times fair value. That means that every dollar reported on a 1982 portfolio statement possessed a lasting real value of six times what ever dollar reported on a 2000 portfolio possessed. The person who retired with $300,000 in his account in 1982 was in as good shape as the person who retired with $1.8 million in his account in 2000. You need to subtract for overvaluation and… Read more »

JJ, Iowa
JJ, Iowa
9 years ago
Reply to  Rob Bennett

Rob,

Would you provide the calculation for the
amount you would over-value or under-value
the portfolio, or a link where this is discussed?
Is this based on a P/E ratio versus a
historical P/E ratio, or by price/book,
or do you have some other method? I’d be interested in that calculation for my own retirement estimations.

I know people who retired early in 2000 with what they thought was a huge portfolio, but when the markets tanked they had to
down-size their retirement.

Thanks!

Rob Bennett
Rob Bennett
9 years ago
Reply to  JJ, Iowa

I know people who retired early in 2000 with what they thought was a huge portfolio, but when the markets tanked they had to down-size their retirement. 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… Read more »

mike
mike
9 years ago
Reply to  Rob Bennett

I’m not disagreeing with your methodology and certainly I’m not happy with corporate greed mongers that have there whole hands in the pie, not to mention the whole host of other issues the effect portfolio fluctuations. But some responsibility has to fall on the individual to educate themselves, which includes stop blowing there money on endless junk and live below their means, so they have means later in life. If you are planning properly in early life, the withdrawal rates are less of an issue. Your RMD #s are going to dictate some of those percentages and if you don’t… Read more »

Rob Bennett
Rob Bennett
9 years ago
Reply to  Rob Bennett

some responsibility has to fall on the individual to educate themselves 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.”… Read more »

William
William
9 years ago

Great article, good cat pictures.

Any special rules for TSP, other than really low fees and good index funds?

ie, can I withdraw from my TSP before age 60 without a penalty? Does it follow 401(k) plans?

Mike Piper
Mike Piper
9 years ago
Reply to  William

The bottom two FAQs on this page may be helpful: https://www.tsp.gov/lifeevents/entering/enteringRetirement.shtml

William
William
9 years ago
Reply to  Mike Piper

Thanks, Mike. Here’s the most relevant component:

If you receive a TSP withdrawal payment before you reach age 59½, in addition to the regular income tax, you may have to pay an early withdrawal penalty tax equal to 10% of any portion of the payment not transferred or rolled over. However, if you are age 55 or older in the year you separate or retire, the 10% early withdrawal penalty tax does not apply.

So … if I work until age 55, I can withdraw without the penalty. If I leave before then, early withdrawal has a penalty.

Adrienne
Adrienne
9 years ago

“If you retire between the ages of 55 and 59-1/2, you can take money out of the plan from your last employer penalty-free”

Does that mean if you’ve left an old 401k at an earlier employer you cannot tap it at 55? I’m in my mid-30’s and have the bulk of my retirement in an old 401k which I’ve left there specifically for that reason. Though I’m self-employeed now who knows what the next 20yrs will bring. If I work for an employeer in the future does that mean I give up the 55 benefit of my old 401k??

mike
mike
9 years ago
Reply to  Adrienne

http://www.401khelpcenter.com/401k_education/Early_Dist_Options.html This explains the 55 rules better. The funds you have in your old employer plan couldn’t be tapped until 59 1/2. But you could roll the old employer plan into your current or future employer plan and maintain the same benefits. But at your age I would take a serious look at the fund choices and cost in your employer plan versus whats available in IRA, which are usually way cheaper and better. You could always fund a Roth IRA for the next 20+ years, contributions can be withdrawn tax free and look at the 72t(Substantially Equal Periodic Payments)rules… Read more »

stannius
stannius
9 years ago
Reply to  Adrienne

I was wondering this as well. Is there any restriction on rolling over old 401(k)s into your current employer, then withdrawing at age 55? All you would have to do is get hired somewhere with a good 401(k) plan at age 54.5 (for a typical six month waiting period to get into the plan.)

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

Justin @ MoneyIsTheRoot
Justin @ MoneyIsTheRoot
9 years ago

The trustee-to-trustee transfer is a very important aspect! I have had the check sent to me directly in the past, but with lost checks in the mail, delays in posting the principal etc, I cut it too close. From now on I would do a direct transfer if both parties allowed it.

Catherine
Catherine
9 years ago

I need help determining where I should start saving for retirement: open a Roth IRA on my own, or participate in an unmatched 403(b) at my new job.

I’m 24 and have no retirement savings. I only make $32,000/year, but am debt-free and have very low expenses so I could contribute to both. I HOPE I’m in a higher tax bracket when I’m retiring than I am now, so I’m thinking I should contribute the max to a RIRA and determine what I can afford to contribute to the 403(b). Does that make sense?

Robert Brokamp
Robert Brokamp
9 years ago
Reply to  Catherine

That’s what I would do, especially since many 403(b)s are expensive.

By the way, very cool that you’re thinking about all this at 24!

stannius
stannius
9 years ago
Reply to  Robert Brokamp

I think you would be better off contributing to both. Even if you are in a higher tax bracket in the future, under our current progressive tax structure, some income is tax free. By contributing some to both types, you hedge your bets.

mike
mike
9 years ago
Reply to  Catherine

Yes, vanguard has the lowest fees as well. As long as you have an emergency fund, that will cover 3-6 months expenses plus a minor set back, blown tire, etc…

Catherine
Catherine
9 years ago
Reply to  mike

I do have an emergency account, but I can’t decide how much to keep in it. On one hand, I’m serious about being financial independent and prepared for the worst. On the other hand, I’m being overly conservative because I have very few true financial obligations. So, my ING account is basically for medical emergencies, and I wonder if I should be doing something more fun with some of it…

mike
mike
9 years ago
Reply to  Catherine

-Make a simple quick monthly budget with all your fixed and other expenses either on paper or spreadsheet. Divide any yearly costs by 12 and include. You should have a minimum of 3-6 months of your fixed expenses, things you can’t cancel immediately, like rent, utilities,etc.. if you lose your job. Based on your comments, I don’t know your situation, you said your Ing account was for medical emergencies, does that mean no or high dedeductible health insurance? You said very few obligations and no debt, which may mean no or low rent. If your health insurance situation dictates the… Read more »

Kevin M
Kevin M
9 years ago

Great info Robert, as a CPA I strongly advise getting advice BEFORE taking any action with your IRA/retirement plan. Just this tax season I had a customer who thought she rolled over her IRA but got bad advice from the former custodian and the 60 day period lapsed. She owed about $5,000 in early distribution penalty due to the mess.

mike
mike
9 years ago
Reply to  Kevin M

I disagree about the CPA. Unless you can find one on the cheap, doubtful. Most of this stuff can be navigated on your own with just a bit of research. I have done multiple rollovers without any problem. I think it depends on your comfort level.

Kevin M
Kevin M
9 years ago
Reply to  mike

You did it fine, my point was this customer did not and it cost her big time. A 5 minute phone call (which I don’t charge for) would have saved her thousands.

Amanda
Amanda
9 years ago
Reply to  Kevin M

Some CPAs charge for phone calls. I don’t think it’s “wrong” for them to do this.

stannius
stannius
9 years ago
Reply to  Kevin M

For every 1 person who makes a mistake, there are 9 who don’t get around to starting their retirement account because they feel like they need advice.

Amanda
Amanda
9 years ago
Reply to  Kevin M

Kevin I agree a person should consult with a CPA BEFORE making a move. A CPA charging hourly would be reasonable.

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

Alex
Alex
9 years ago

Can I make a suggestion for an article? With graduation rapidly approaching across the country, I think it’d be quite helpful to do a sort of “What-you-should-be-thinking-about-for-the-next-phase-of-your-life” article. I’ll leave the creative title up to you. Of course, there’s a whole variety of financial situations you can find yourself in after college. Most people have to start paying back their student loans. Income can be quite varied. Many people go to med school or law school and finance their lives through more student loans. Grad schools often give out a tiny stipend. And then there’s those people with an actual… Read more »

mike
mike
9 years ago
Reply to  Alex

First if you search on this website and the net there is a lot info regarding your questions topic, which couldn’t be fully answered in one post. If you want to suggest an article, you probably need to email JD directly since I doubt he reads all the posts, now that he is a mini-tycoon planning his next adventure. As you referenced, college graduates are going to have different experiences depending on their current income, debt exposure, and money management behaviors. The easy answer would be make as much money as possible, spend way less than you make, pay off… Read more »

J.D. Roth
J.D. Roth
9 years ago
Reply to  mike

J.D. Roth-efeller here, taking a break from my tycooning. Actually, e-mailing me directly *is* the best way to get my attention. I do try to read all of the comments, but sometimes I’m way behind on them.

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?

Des
Des
9 years ago
Reply to  Alex

In that same vein, I would love to read articles like “What I wish I had known when I was 20/30/40/etc” Or “What I wish I’d known before I had kids” or “before I was married” or “before I was retired”, things like that from folks who have been there and are now looking back.

mike
mike
9 years ago
Reply to  Des

Don’t get me started. Save early and as much as you can, but make time for the things really enjoy, because you never know whats going to happen in life.

Mindy Crary
Mindy Crary
9 years ago

Is it sad that my favorite part of the article are the kitteh pickturs?

Maria
Maria
9 years ago

Great article! And funny last entry on the 10% penalty table. I didn’t realize how complex the withdrawal rule is and how costly a small procedural error can be. I have moved all my 401ks to a rollover IRA account with no major hiccups, now need to figure out the estate planning and the withdrawal strategy for this account. Time to find a good financial advisor for me. 🙂

Dallas saver
Dallas saver
9 years ago

I have a rollover Ira and a Roth but my income is too high to contribute to the Roth. I would like to consolidate the accounts if I can. Could I convert the rollover Ira to a Roth? Probably wouldn’t make sense now because my marginal tax rate is high but is it even feasible?

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.

mike
mike
9 years ago
Reply to  Dallas saver

If your modified agi is above 177K and you can’t contribute to a roth, your doing pretty decent. You could convert but probably would have been better doing it when the market was lower so the tax bite would be lower. There is also conversion calculators out there, that factor in all the variables and give addtional details based on situations. Alot will depend on what tax rate you think you will be in when you retire, its usually lower. If you save a lot it could be high, but the reality is tax rates are going to go up… Read more »

John Deese
John Deese
9 years ago

Does anyone have any firm opinions about which companies have the best options for IRAs (any differences in available funds/fees)? I have IRA accts on vanguard and an old 401k acct on fidelity (in addition to a new 403b on fidelity)- vanguard seems very cheap in terms of fees, but maybe there are better options?

Romeo
Romeo
9 years ago

Wow, this article was great. It definitely gave me knowledge to walk away with. And everytime that I thought I was going to fall asleep (not often), bam, those funny pictures of cats set me straight. 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… Read more »

Nomen
Nomen
9 years ago

While 401k plans can be wonderful, watch out. Just before I retired a few years ago, I noticed that my Fortune 100 company managed 401k plan was making very poor returns even on money market accounts and I was being charged large fees. The day I retired I transferred my 401k to a much better IRA that I could manage myself. A couple years later I joined a class action lawsuit against my former employer for mismanaging investments and overly large fees. We won a settlement but I only ended up with a tenth or less of my loss. Bottom… Read more »

Penny
Penny
8 years ago

Thanks for this article and the adorable cat pictures. I’ve been trying to set up a strategy for my retirement and didn’t realize the difference between a 401(k) and a traditional IRA. I’ll definitely be coming back to read this article again.

shares