In a Bind? A Few Ways to Get Money from an IRA Penalty-Free

December 12, 2011

Lost your job?  Unexpected HIGH expense?  Unless you have a good nest egg put away for a rainy day, you might be scrambling for funds to cover unexpected expenses, and your IRA might be a place to look for that needed cash.

Are you aware that funds withdrawn from an IRA are taxable, and if you are under 59-1/2, you will pay a federal penalty of 10% and possibly a state penalty too?

Withdrawing funds early from your IRA will affect your standard of living when you retire.  We hope that you never have to do that, but if you do, here are a few ways to beat the early-withdrawal penalty.  (Of course, you still need to deal with the IRS and income taxes – no way to get around that)

·       Annuitize: Under IRC Sec. 72(t) you can avoid penalties by taking a series of substantially equal periodic payments until you are 59-1/2 (but not less than five years). To estimate how much you can withdraw each year, use the 72(t) calculator at Bankrate.com (See:: http://www.bankrate.com/calculators/retirement/72-t-distribution-calculator.aspx

·      Buy a Home:  If you have been renting, had alternative living arrangements, and have not owned a home for at least two years, you can withdraw up to $10,000 to buy a house in your name or in the name of a spouse, child or grandchild.

·      Pay for Education: You can go back to school, or withdraw funds for college tuition and related expenses (books, materials, fees) for your spouse, children or grandchildren.  Be aware that certain income limits apply.

·      Cover Medical Expenses: If your medical expenses (for you, your spouse or dependant) exceeds 75% of your income, you can withdraw from your IRA penalty-free.

·      Pay Medical Insurance Premiums: If you have been unemployed for at least twelve (12) weeks, and receive unemployment compensation, you are eligible to withdraw funds to pay for your medical insurance premiums.

·      Pay Back Taxes to the IRS:  If the IRS has placed a levy against your IRA, you can withdraw funds to pay the back taxes.

·      Disability: If you are “totally and permanently disabled” by IRS definition, you can take distributions from your IRA without penalty.

·      Death: Did you know that when you die, your beneficiaries must begin taking distributions from your IRA, and there will be no penalty to them.

This blog is written based on my observations and experience.  I am and not a CPA, tax planner or tax attorney.  I am a mediator and former family law attorney. All data and information provided on this site is for informational purposes only. wpthemesplugin.com makes no representations as to accuracy, completeness, currentness, suitability, or validity of any information on this site and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. All information is provided on an as-is basis.



Choose your #divorce atty carefully: Mak

December 3, 2011

Choose your #divorce atty carefully: Makes the diff btwn low vs high-animosity & low vs. high cost settlements http://ow.ly/7NBkG


GOOD NEWS – I am Divorced and Can Still Claim My Ex-Spouses Social Security

December 2, 2011

There can be good news a about divorce!  Did you know that if your marriage lasted at least ten years, you can claim social security benefits on the entire earnings history of your ex-spouse?

Here are a few important qualifiers you need know:

  • You must be unmarried. If you remarry, you cannot collect benefits on your former spouse’s record until your later marriage ends (whether by death, divorce or annulment).
  • You must be 62 years old or older.
  • Your ex-spouse must, him or herself, be entitled to Social Security retirement or disability benefits.
  • Your own personal social security benefit, based on your own work, must be less than the benefit you would receive based on your ex-spouse’s work.

It’s an either-or situation – you’ll get your own Social Security benefits, or one-half of your ex-spouses benefits (“derivative benefits”), whichever is greater.  Of course, the amount of benefits you get has no effect on the amount of benefits your ex-spouse or their current spouse may receive. (Their benefits are not reduced because you get ½ of your ex-spouse’s benefits!)

How you ask?  Below are a few answers to questions you may have:

1. How many ex-spouse’s can claim derivative benefits?
As many ex’s as there are, as long as each marriage lasted 10 years.  Mickey Rooney’s seven ex-wives got left out since none of the marriages lasted more than 10 years, but three of Johnny Carson’s marriages lasted over 10 years and all his ex’s were eligible for benefits.

2. If my ex-spouse dies, do my derivative benefits end?
This has good news and bad news. The bad news: If he/she dies, the derivative benefit ends. The good news is that now you can collect survivor benefits, which are 100% of his benefits, not just 50%.

3. Can I receive both public employee benefits and social security?
Under the Windfall Elimination Provision (WEP), benefits received from a non-Social Security covered job (teacher or other civil service job) may cause Social Security benefits to be reduced by several hundred dollars. The Government Pension Offset (GPO) applies to derivative benefits, which will be reduced by 2/3 of the pension benefits received by an employee from a job not covered by social security.  (This is where you really need to talk with a knowledgeable representative at the Social Security Administration.)

4. Can I receive benefits on my ex-spouse if he/she has not yet filed for benefits?

If your ex-spouse has not applied for retirement benefits, but can qualify for them, you can receive benefits on his or her record if you have been divorced for at least two years.

As in any case where government benefits are involved, these rules are subject to change. So, when you are ready to claim social security benefits, be sure to let the Social Security Administration know that you were married for more than ten years, and be prepared to furnish your ex-spouse’s full name and social security number.

The Social Security Administration will be able to calculate what benefits will give you the highest monthly payment, and will recalculate those benefits if your ex-spouse dies while you are collecting benefits.

For more information visit the page “If You Are Divorced at the Social Security Administration’s website.

All data and information provided on this site is for informational purposes only. Graine Mediation and its owner, Robin Graine, make no representations as to accuracy, completeness, currentness, suitability, or validity of any information on this site and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. All information is provided on an as-is basis.

 


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