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What is a Lump-Sum Distribution from a 401(k)?

Lump sum distributions are when the entire balance of an account is paid out at once. After you retire, you can elect to receive your money in a lump sum. Of course, you will end up paying income taxes on the entire distributed amount that year. There is also what’s called the mandatory 20% withholding, which requires custodians to withhold 20% from retirement plan distributions if they are not part of a trustee-to-trustee transfer (such as funding an IRA). Continue reading...

What is the Best Age to Start Receiving Social Security Benefits?

Generally speaking, the closer you are to age 70, the better. But everyone will need to take all of their options into account and use some planning tools or the assistance of a professional planner to arrive at an ideal cash flow scenario for retirement. All assets should be brought into consideration, as well as the possible social security benefits of both spouses and their spousal benefits. There is no one “best age” to start receiving the Social Security benefits. Everyone has a Normal Retirement Age (NRA), which determines the age at which you can receive your “full” Social Security benefits, but you can defer your benefits past this point to receive an 8% increase for every additional year you deferred your benefit. Note that benefits cannot be deferred past age 70. Continue reading...

What are ICOs?

ICO is an acronym for Initial Coin Offering, and it is the primary way that new companies can use blockchains to raise capital. Many entrepreneurs have gotten their start in the last decade through crowdfunding sites such as Kickstarter, where anyone can contribute funds to help an idea get off the ground. Obviously, such funding methods were bound to reach new heights when peer-to-peer blockchains came onto the scene. Blockchains allow transfers of value anywhere in the world without regulatory... Continue reading...

What are Periodic Distributions from a 401(k)?

Periodic distribution is a planned intermittent payment of cash from a 401(k). If you choose to have your money distributed periodically, you will usually have a choice between monthly, quarterly, or even annual payments. Money distributed periodically is not subject to the same 20% withholding the lump-sum payment is. The periodic payments are treated as wages, and, because plan participants taking these payments in retirement may find it easy to calculate what their income will be for the year, they can instead plan for their actual tax bracket, or opt-out of withholding if they prefer. Continue reading...

When Will Social Security Go Bankrupt?

Most estimates project that the Social Security Trust Funds will be depleted by 2037. The system could still function at 70% of their full obligations by transferring cash flow directly from social security taxes to the retired beneficiaries, which most people don’t realize when they spread the news that the system is tanking. Adjustments to the system and interest rates could change how this plays out and keep it operating closer to full capacity. Continue reading...

Why do ICOs Matter to Ethereum and Bitcoin?

ICOs can help the market and developers test the waters for new concepts using blockchain technology. When a new idea succeeds or fails after using an ICO, it could be said that the company had made use of every advantage at its disposal and that it had the best chance at success in that environment as it could have had anywhere else. It could have done so more cheaply, and with less interference, than in the “real world,” generally speaking. Continue reading...

How Does My Retirement Age Impact My Social Security Benefits?

Social Security benefits are calculated using the Normal Retirement Age (NRA), which is 67 for people born after 1960. If you take benefits early, your payment will be reduced by as much as 30% if taken at age 62. After NRA, your benefit will be increased by 8% for every year you defer benefits. You cannot defer taking Social Security past age 70. As a rule of thumb, the closer to age 70 you retire, the higher your Social Security benefits will be. Of course, there are some specific guidelines. Everyone has an NRA (Normal Retirement Age), which determines the age at which you can receive your full Social Security benefits. Continue reading...

When Can I Start Receiving My Social Security Benefits?

You cannot claim your own social security benefit until you have reached age 62, and you have to start taking them by the time you reach age 70. You can actually start receiving benefits while you are still working, but your benefits will be reduced if you are younger than Normal Retirement Age. Currently, you have to be 62 years or older to start receiving Social Security benefits, and this includes spouses who wish to claim spousal benefits. You must start to receive benefits at age 70. Keep in mind that the longer you defer your benefits, the greater your Social Security payments will be (until age 70 of course). Continue reading...

How Does Ethereum Work?

Ethereum uses a blockchain that looks very similar to Bitcoin’s until you get into the details. Ethereum is a platform on which transactions can be made using Ether or other tokens which have been made using the protocol, and smart contracts and decentralized applications (Ðapps) can be executed using the distributed computing power of what’s called the Ethereum Virtual Machine. When viewed from different angles, Ethereum is an open-source coding environment, a market upon which to distribute new blockchain-based applications, and a distributed computing machine that processes functions of the blockchain applications across a broad network. Distributed computing itself is not that new, but distributed computing on a blockchain is. Continue reading...

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 is an Accelerative Endowment?

Cash-value life policies can be structured for certain endowment ages, and dividends from the company can accelerate the endowment age. Traditional life insurance policies, especially older ones always had an “endowment age,” which meant that if the insured reached that age, their death benefit would be paid out in one lump sum, to be used however the insured wanted. The endowment age used to be about 95 or 100 years old, but in the last few years most companies have moved the age of endowment back to about age 120, since people are living longer and longer, and it looked like they were going to be paying out too many contracts at endowment age instead of at time of death in the future. Continue reading...

What are the Withdrawal Rules for My SEP IRA?

SEP IRAs are subject to the same withdrawal rules as Traditional IRAs. SEP IRA contributions and earnings may be withdrawn at any time, but there are penalties that may apply, using the same rules as those applied to Traditional IRA withdrawals. If you are under the age of 59½, you must pay a 10% penalty fee in addition to income taxes on your withdrawal. Of course, there are certain exceptions to the penalties: first time home-buyers expenses up to $10,000, medical bills, educational expenses, and a few others. Continue reading...

When Do I Have to Start Taking Money Out of My IRA?

The IRS requires IRA owners to take distributions starting at age 70 ½. By April 1st of the year following the year you turn 70 ½, the IRS needs to see a distribution from your IRA that satisfies the Required Minimum Distribution rule. The RMD is calculated using a table published by the IRS, and each age is assigned a different “factor.” The factor is a number, and you divide the balance of your IRA or 401(k) by that number to reveal the amount that will satisfy your RMD obligation. The factor decreases incrementally as the ages increase. 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 Withdrawal Rules for My Money Purchase or Profit Sharing Plan?

The standard withdrawal rules for 401(k) accounts apply to these plans. Once you are age 59½, you may begin to make penalty-free withdrawals and only pay income taxes on the amount you withdraw. If you decide to take out money before age 59½, you will have to pay a 10% penalty fee in addition to income taxes on the amount of your withdrawal. Of course, there are exceptions that would allow you to avoid this early withdrawal fee. 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 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 are Required Minimum Distributions?

RMDs are withdrawals that are mandatory for an individual to take from an IRA or 401(k) after the person has reached 70 ½. The government created laws that help and encourage people to save for their retirement by deferring taxes on the growth on certain qualified retirement investment accounts. On Traditional IRAs and 401(k) accounts, they are only waiting to get the tax revenue from distributions/withdrawals that are fully taxable as income. Continue reading...

How Much Does (and Will) Social Security Pay?

Social Security uses a formula that applies a factor to your average monthly income from the 35 years in which you earned the most. The benefit will be calculated for your Normal Retirement Age (67 for most people today), and you should receive statements in the mail keeping you updated on your projected or actual Social Security Retirement Benefits. Every year, you should get a statement from the Social Security Administration that provides you with exact numbers. The amount depends on the age at which you retire, and the contributions you made to Social Security over the years. The formula uses the 35 years in which you earned the most, and divides it by the total number of months in 35 years, which is 420, which leads to your Average Indexed Monthly Earnings (AIME). Continue reading...

What Should I Know About Roth IRAs?

Roth IRAs are a very popular and useful accumulation vehicle, and there are some things you should be aware of. Along with Traditional IRAs, Roth IRAs are very important retirement tools and should be taken into careful consideration while deciding upon the account that is right for you. The first thing you’ll want to know is whether you can contribute, based on income limitations, so check the current IRS website to find out. Continue reading...