To: rocksandbroncs
NOBODY SHOULD PANIC ON THIS AND DO STUPID THINGS LIKE IMMEDIATELY CASHING IN ALL THEIR IRAS & 401KSAND TAKING THE IMMEDIATE & LARGE TAX HIT. If you are in a position to do so, you can begin (possibly gradually) to move any existing retirement funds from traditional IRAs to Roth IRAs. If your tax & financial situation allows it, try to put any new IRA contributions directly into Roth IRAs. If your 401K plan has a Roth 401K component, go that route for new contributions or as big of a percentage of your new contributions as you can. If your 401K plan doesnt currently have a Roth component, lobby your employer to have one establishedhe/she could benefit also.
55 posted on Sat Nov 17 2012 06:55:26 GMT-0600 (CST) by House Atreides [ Post Reply | Private Reply | To 1 | View Replies | Report Abuse]”
What about the above advice from House Atreides?
And notice the article being commented on (and other related articles) seems to all go back to the “seniors council”, wherever they are.
(Seems like another “cottage industry” is springing up, this time raking in donations to keep 0 from messing with the retirement accounts.)
Here is one rule worth examining if you are in the right situation. At 57, I am. From Fox business..
Boomer: At age 55, what does separation of service exception for early withdrawals mean?
Libbe: The separation of service exception for early withdrawals allows for early withdrawals from ERISA qualified employer sponsored plans without a 10% federal tax penalty for early withdrawals if you are age 55 or older when you leave the employer. IRAs do not qualify for this separation from service exception so the money would have to stay in the employer plan. Some exceptions also exist to the 10% federal tax penalty for early withdrawals with 72(t) distributions (substantially equal and periodic payments) if taken from an ERISA qualified plan or from an IRA
The way I read the rules is that a conversion to a Roth IRA would still invoke the 5 year vesting rule for those funds. So if they got trigger happy and wanted to cash out the Roth IRA, the newly converted money would be subject to the 10% penalty if not held in the Roth for 5 years...