IRA Rules

Posts Tagged ‘law’

Question: Should I contribute more to a PRE-TAX invest. acct like 401K or into a POST-TAX invest. acct like Roth IRA?

The fees for my POST-TAX(income tax) Roth IRA is only $12 a month for 6 free investments and I have wide range of ETFs and stocks to choose from. I can take money out but with some penalities and or none at all based on the rules. I anticipate making a huge withdrawal to pay for a house.

The fee for my PRE-TAX(income tax) is .50 for every $1K but I have a small range of funds that I can invest in. I can’t take the money out of this account until i retire. There are certain rules that allow me to take the money out for things such as purchasing a house, but I would have to pay that money back. So it’s like taking a loan out on my own money.

What would be more beneficial for me?

Answer: You may want to rethink the idea of taking anything out of a 401(k) because if you leave the job, the money needs to be back there ASAP–there are penalties, etc. associated with that.

As for a Roth IRA, I prefer maxing out IRAs whenever possible because you have more choices and freedom with an IRA than a 401(k). IF your employer offers something in matching for a 401(k) it’s probably worth contributing to max out what he’ll put in as it’s effectively free money.

I think you need to read this, though, as if I’m following you, I think you may believe you can pull money from either kind of account for a house without worries–there are conditions in both cases:

http://www.kiplinger.com/columns/starting/archive/2006/st0309.htm

Good luck!

Slagle Financial – Roth IRA Conversions, New Tax Policies

Question: Hardship withdraw from 401k tax exemptions?

On 11/2010.  I withdrew 15,000.00 from my 401k to put down on a primary residence(first time homebuyer).  My understanding is that IRS has certain tax rule exemption on Hardship withdrawl up to 10,000.00.  Does anybody know the rule to the exemption early withdrawl from a 401k? if so, what is the IRS form that I need to fill out, what is the CA-FTB form that I need to Fill out? what I’m finding out that rule only applies to early withdraw from IRA accounts.

Answer: We had to take 2 hardship withdrawals this year for emergency home repairs.

We were allowed to not have taxes withheld from our disbursement check, and acknowledge they will be done at tax time 2012 for the 2011 filing year.

Ours were smaller, around $3500 each, and we were not informed of any tax exemption…only offered to elect to not have the taxes taken directly out of the disbursement at this time.

I hope any of that helps you, but I’m also answering so I can find this question again, so if someone has info for you about that, then it will help us out, too.

Good luck!

How to invest in Tax Liens with your IRA or 401K IRA Alternative