Taxes

Almost Half of All People Leaving a Company Take Cash from a 401k

A 2005 survey from the benefits consulting company Hewitt Associates indicates that almost 50% of all people who are leaving an employer take a cash distribution from the existing 401k plan. A cash distribution is very different from a IRA rollover . A rollover does not involve penalties or taxes--simply moving money from a 401k to an individual retirement account or IRA. On the other hand, a cash distribution involves both taxes and early withdrawal penalties. This is an amazing and disturbing...

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Many Rules and Pitfalls with Early Withdrawals from 401k and IRA

The financial crisis has taken a heavy toll on the personal finances of most people. A natural reaction is to consider withdrawing funds from a tax advantaged saving plan such as a 401k or IRA. The reality, though, is that funds from such sources can be extraordinarily expensive when all of the penalty fees and tax implications are taken into account. The rules are complex and generally depend on a person's age and the type of plan involved. Some high-level points to consider: The federal...

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A Roth IRA Conversion Might Make Sense with Tax Increases on the Horizon

Both traditional individual retirement accounts (IRAs) and Roth IRAs are tax advantaged accounts.

With a traditional IRA, contributions to the account are tax deductible. Appropriate distributions from the account are taxed in the future at income tax rates that apply to the account owner's future level of income.

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Financial Crisis Will be Seen Fundamentally as a Crisis for Retirees and Near Retirees

Professor James Galbraith provided a keynote address at a recent industry conference sponsored by NAVA—the Association for Insured Retirement Solutions.

Professor Galbraith comes from the Economics department at the LBJ School of Public Affairs at the University of Texas at Austin. A Keynesian and an author most recently of The Predator State, Professor Galbraith has been a consistently strong and vocal advocate of government stimulus and intervention in response to the financial crisis.

Professor Galbraith’s basic message is that...

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Sequence of Returns Risk