Retirement accounts

Well, the election of 2008 has come and gone. Barack Obama is the president-elect of our great nation. Now, the main question turns to, “How will Obama’s election affect me personally?” Well, since you asked, the main target of the Obama administration may be your 401k, 403b, IRA, and other Retirement accounts. Read More »

FINRA warns sternly against using your 401(K) to get through a rough patch. For one thing, if you are under age 59-1/2, you'll be paying taxes through the nose: You'll have to fork over ordinary income tax on the amount you withdraw, plus a 10% penalty tax. To increase the pain, some employers will withhold 20% of your withdrawal amount. Which means that instead of getting the $20,000 you were hoping to use to pay the bills, you could wind up getting less than $14,000.

However, the biggest price you'll pay will be losing the opportunity to increase your investment in the future. Let's say that you're 40 years of age, and you have $40,000 in your 401(K). If it's growing at a conservative rate of 6%, you'd have more than $107,000 in 17 years, and that's even without adding more contributions. But if you withdraw half of your $40,000, the remaining $20,000 would be worth less than $54,000 in that same period of time. That's a dead loss of more than $50,000 just to get that $14,000 for your current needs. Think about it. Read More »