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Can I Withdraw Money From My Defined Benefit Plan?

Most pensions will not allow in-service withdrawals but some will allow loans. While you are working for your employer, you typically may not withdraw money from your Defined Benefit Plan. The IRS permits plan loans if the plan administrator permits it. In-service withdrawals are possible after age 62, meaning money can get taken out before separation from service. If you leave your employer before retirement, the funds are usually kept in a Trust until you reach retirement age (or until a specified age at which you can start to receive the benefits). Continue reading...

What if I Need the Money in My 401(k) Before I Retire?

Withdrawals and loans can be taken out of a 401(k) before retirement, but the money may be subject to penalties, conditions, and taxes. It is quite common that 401(k) funds are needed before retirement, even though the IRS wants you to wait until you’re 59 ½, and will generally want to levy a 10% penalty on any premature withdrawals. Most plans allow employees to take non-taxed loans out on their balance, which may stunt the growth of the account which was intended for retirement, but if the funds are paid back on-schedule, as stipulated in the plan’s loan agreement, the employee can get back on track quickly. Continue reading...

What are the Withdrawal Rules From My Self-Employed 401(k)?

Individual 401(k)s will have the same withdrawal rules as regular 401(k)s. The withdrawal rules for a Self-Employed 401(k) are identical to the rules for a traditional 401(k). If you want to avoid a 10% early withdrawal penalty, you’ll need to keep the money in your account until you reach age 59½, but if you separate from service after 55 you may be able to make withdrawals penalty-free. If you really need the money early, certain exceptions for disability, medical expenses, 72(t) annuitized distributions, and plan loans can allow you to sidestep the penalty. Withdrawals for any other reason, including hardships, are still subject to the penalty. Continue reading...

What are the Withdrawal Rules for My SIMPLE IRA?

SIMPLE IRAs have the same withdrawal rules as Traditional IRAs, with one notable exception. SIMPLE IRA contributions and earnings may be withdrawn at any time, but there are certain penalties that apply. If you are under the age of 59½, you must pay a 10% penalty fee in addition to income taxes on your withdrawal. If the early withdrawal occurs within two years of receiving your first employer contribution, the 10% penalty is increased to 25%. Continue reading...

What is swing trading?

Swing trading is active trading that is not frequent enough to be categorized as day-trading but generally follows short-term trends. Swing trading can describe long or short positions traded on upswings and downswings of a security or index, and these positions are generally held from one day to two weeks. Generally, these are going to be momentum investments which are entered into after there seems to be confirmation of a trend, and the positions are closed out when there seems to be confirmation that the trend has ended. Continue reading...

Does IRS Rule 72(t) Provide a Way to Take Early 401(k) Withdrawals Without Penalty?

Rule 72(t) allows the owner of a 401(k) or IRA account to take “substantially equal periodic payments” from an account without owing the 10% early withdrawal penalty. Taking money out of a401(k) or IRA before age 59½ will generally cause someone to owe a 10% early withdrawal penalty. One of the ways this penalty can be avoided, however, is if the participant uses 72(t) distributions. IRS rule 72(t) is the section of the code that describes early withdrawal penalties, but it also allows “substantially equal periodic payments” to be taken from a 401(k) or IRA without owing the 10% penalty. Continue reading...

What if I Need the Money in My IRA Before Retirement?

It is possible to withdraw money from an Individual Retirement Account without incurring a penalty, but it should be used as a last resort. If you withdraw the money before age 59½, you will pay both a 10% penalty and regular income taxes on the amount you withdraw from a Traditional IRA. However, there are special circumstances that allow you to make withdrawals without being charged the 10% penalty. These circumstances might include: paying for college expenses (whether for you, your grandchildren, etc.), paying for costs associated with a disability, medical expenses (must be greater than 7.5% of your adjusted gross income), and first-time home purchase. Continue reading...

What Are the Vesting Rules for My SIMPLE IRA?

Employer contributions to SIMPLEs are immediately vested to the employee. The employer’s contributions into SIMPLE IRAs do not have any vesting restrictions. In other words, the contribution belongs to you immediately after it has been made, notwithstanding standard IRS rules for withdrawals from retirement accounts. SIMPLEs do have some restrictions during the first two years, however, that are known as the ‘Two Year Rule.’ Continue reading...

How Can Investors Use the Rule of 72, and What Is It?

​​​​​​​ In the world of finance, there are numerous formulas and rules that investors use to make informed decisions. Among these, the Rule of 72 stands out for its simplicity and usefulness. This rule provides a quick method to estimate the time it takes for an investment to double in value. But what exactly is the Rule of 72, and how can it be effectively utilized? Continue reading...

What is an Uptick?

An uptick is an incremental increase in the trading price of a security. Uptick is a slight increase in the trading price of a security. The word comes from the "ticker price" of a stock, which used to be printed out on ticker tape from a printer connected to telecommunication lines which reported updates in trading information throughout the day. Now tickers run electronically across the bottom of television screens and so on. Continue reading...

What is Investment Banking?

Investment banking activity is different than traditional banking. Investment banks often serve as intermediaries that underwrite a new issue of stock and help to distribute it. They also trade in their own accounts, run hedge funds, and generally invest and speculate in ways that most institutions can’t. Investment banks can assist with new issues of stocks and bonds, purchasing large blocks of them to distribute at a premium. Continue reading...

What is the Glass-Steagall Act?

The Glass-Steagall Act was passed in 1933 to place a dividing wall between commercial banking and investment banking. It was in an effort to protect consumers and the economy from the risks of speculative investment banking. JP Morgan and other large institutions were targeted. The act was partially repealed and replaced in 1999 by the Gramm-Leach-Bliley Act. After 2008, some opined that the repeal of the original act contributed to the financial crises, and they instituted the Volcker Rule, which reinstated part of the original Glass-Steagall act. Continue reading...

What is an Investment Banker?

Investment bankers are proficient analysts themselves, but they have subordinate financial analysts that crunch the numbers for them. They are primarily in the business of procuring clients for deals such as IPOs which their investment bank will underwrite. Investment bankers are employees of investment banks whose role is to acquire clients for the bank and to be the liaison between clients and the back office of the investment bank. Continue reading...

What is a Plus Tick?

A plus tick is a transaction which occurs at a price higher than the transaction before it, also called an uptick, but often used in relation to a zero plus tick, which is explained below. A plus tick is an indication that the security in question is not declining at a given moment in time. In other words, the most recent traded price of a security is higher than the price it traded at prior. The term ‘uptick’ refers to the same thing, but "plus tick" is used in reference to the first part of a zero plus tick event: an uptick occurs in which the price traded is higher than the previous price, and then a trade occurs in which the price remains the same. Continue reading...

What Is the Rule of 72, and How Can It Boost Your Investment Strategy?

Unlock the power of the Rule of 72, a simple yet effective tool for investors. This formula offers a quick estimation of how long it takes for an investment to double, challenging traditional financial beliefs. From its origins to its practical applications, the Rule of 72 provides insights into investment growth, rate of return, and the intricacies of compound interest. Whether you're a seasoned investor or just starting, understanding this rule can be a game-changer in your financial journey. Dive into the world of finance and discover how to make informed decisions with the Rule of 72 at your fingertips. Continue reading...

What Happens If I Withdraw Money From My Cash-Balance Plan Before I Retire?

In general, this won’t even be an option for many. Cash balance plans do not permit partial withdrawals. If you have separated from service at the employer, you can take your entire vested amount with you. You can cash out your balance and pay income taxes on it, as well as a 10% IRS penalty if you’re younger than 59 ½. This penalty may also be avoided if you separated a from service after age 55; these rules are the same for 401(k)s and other qualified plans. Continue reading...

What are the Tax Implications for Taking Money Out of a Roth IRA?

Distributions taken from a Roth during retirement are not subject any income taxes. Interestingly, the “cost basis” or contributions made to a Roth can be taken out at any time, including before age 59 ½, without tax or penalty. Contributions are recorded on IRS form 5498 and a copy is mailed to you, but you need to keep up with your contributions if you might want to tap into your Roth early. The earnings that accumulate must satisfy the 59 ½ requirement and the five year rule, or be used for first-time homebuyers expense, to avoid the 10% penalty and taxation. The five year rule says that the earnings in a Roth may be taxable if the Roth account is under 5 years old. Continue reading...

What is Form 8891?

IRS Link to Form — Found Here Form 8891 was previously used by individuals with retirement plans held in Canada when they were living in America, each time they took distributions. The process proved to be cumbersome for many good-natured Canadians, and caused the IRS a lot of trouble as well. This form has been retired in favor of an acknowledgement on the IRS Form 1040. Form 8891 is no longer used, which came as a relief to many Canadian-Americans who had retirement plans from work they did in Canada. Certain filing requirements still exist, such as a new form replacing the FBAR, for foreign bank accounts, now called the FinCEN Form 114. Continue reading...

When are My IRA Withdrawals Penalty Free?

The surest way to make tax-free withdrawals is to wait until you are older than 59½, but there are a few other ways. If you are 59½ or older, you can make penalty-free withdrawals. Of course, you will need to pay income taxes on the amount you withdraw from your Traditional IRA. There is a 10% penalty assessed by the IRS on early withdrawals (withdrawals made before age 59½) and these are generally not a good idea. Continue reading...

What are the 403(b) Contribution Limits?

The contribution limits are increased over time with cost-of-living adjustments. 403(b) contribution limits are currently the same as 401(k) limits, and are adjusted for inflation at the same rate. As of 2016, if you are under age 50, you may contribute up to $18,000. If you’re over 50, you can also make a catch-up contribution of up to $6,000, for a total of $24,000 for the year. 403(b)s also allow an additional form a catch-up for employees who have been at the job for over 15 years and whose contributions in the past average out to less than $5,000 per year. These catch-ups are called Fifteen Year Cap Expansion Option or just service-based catch-ups. Continue reading...