Laid Off in San Diego

IRA accounts are designed for retirement. If a person decides they want to access their account prior to age 59 1/2, they will incur a Federal Income Tax penalty for early withdrawal of 10% of the amount withdrawn. In addition, the amount withdrawn is deemed ordinary income and taxed as such. If that weren’t bad enough of a deterrent from early withdrawals, some states also have an early withdrawal penalty, for example in California it is 2.5%. So, if a person taking an early withdrawal is in the 25% income tax bracket, they would pay 25% income tax, plus 10% Federal penalty, plus 2.5% California penalty for a total tax of 37.5%.

This is intended to discourage people from invading retirement plans early. And, it generally works.

However, there are occasional cases in which a person simply must begin taking funds from their IRA. There is a way to avoid these penalties. It is known as the SEPP or “Substantially Equal Periodic Payments” plan also identified by the tax code as 72(t). These payments must continue until the person is age 59 1/2 or 5 years, whichever is later. If these payments are modified, all of the prior payments become subject to the penalties. You must be very careful about violating the rules if you embark on this plan.

Here is the story about someone who innocently got stung by “modifying” her payments. (more…)

There are probably as many perceptions of what a financial Advisor is, or should be, as there are people who hire them. Let me take a little time and a few pixels to comment about this.

For those who value an Advisor for their ability to deliver positive investment returns year after year, irrespective of the state of markets, you are probably very disappointed this year.

And for those who look for an Advisor to have expertise as a consistently accurate forecaster, you probably have serious doubts by now.

But I would like to expand the expectations of consumers of financial advice beyond just market dependant performance. The value of a good Advisor is not dependent on the state of markets. Indeed, their value can be even more evident when markets are down and fear is running high.

The best of these Advisors play multiple and nuanced roles with their clients, depending on the stage of the relationship, and these clients are amply rewarded for the manifest skills their Advisors bring to the table. (more…)