The Coleman Comment May 2009

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The Coleman Comment May 2009 Tips on Tapping into Your Retirement Funds Though some leading economic indicators have inched higher and pundits are pondering the possibility of a bear market bottom, the recession and its effects are still obvious. Few have been spared from the wrath of tightening credit markets, rising unemployment, dwindling savings or freefalling home values. With fiscal challenges popping up for people on a daily basis, access to cash is a key survival tactic. But is tapping your retirement fund a good option to get you through a financial crunch? The short answer is...no. Although it is your money, the tax consequences and impact to your long-term savings are very serious. If your need is so pressing that no other option will suffice, proceed with caution and know the rules. The Loan: A loan from your 401(k) allows you to borrow against your savings. The loan must be repaid - with interest! - usually within five years. But, if you lose your job or leave the company and still have an outstanding loan, you are required to pay it back (typically) within one to two months. Failure to repay the loan accordingly is considered a default and the outstanding loan amount is fully taxable. Other restrictions may apply so be sure to talk with your 401(k) adminstrator before making this choice. The Hardship Withdrawal: This option provides you with access to your savings under certain financial conditions, i.e. ...

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Publié par	Ebbi
Nombre de lectures	32
Langue	English

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May 2009

The Coleman Comment

Tips on Tapping into Your Retirement FundsThough some leading economic indicators have inched hiher andundits areonderin the possibility of a bear market bottom, the recession and its effects are still obvious.Few have been spared from the wrath of tightening credit markets, risin unemlo ment,dwindlin savins or freefalling home values. With fiscal challenges popping up for people on a dail basis,access to cash is a kesurvival tactic. But is tapping your retirement fund a good option to et outhrou ha financial crunch?The short answer is...no. Although it is your money, the tax conse uencesand imact toour lon-term savins are very serious.If your need is so pressing that no other option will suffice, proceed with caution and know the rules.

The Loan:A loan from your 401(k) allows you to borrow against your savings. The loan must be reaid - with interest! - usuallwithin fiveears. But,if ou lose your job or leave the company and still have an outstanding loan, you are re uiredto a itback (ticall )within one to two months. Failure to rea the loan accordingly is considered a default and the outstanding loan amount is fully taxable. Other restrictions may apply so be sure to talk with your 401(k) adminstrator before making this choice.The HardshiWithdrawal:This otion rovidesou with access toour savings under certain financial conditions, i.e. circumstances that present an immediate and severe need. Examles of hardshis include medical care, the purchase of a principal residence, tuition payments, to prevent eviction or foreclosure, and funeral exenses. Thetwo biest drawbacks?You are permanently reducing your retirement savings and the withdrawal is treated as taxable income.Also, ifou take the withdrawalrior toour ae 59 ½, there is a 10% penalty added to the withdrawal amount.

If you are changing jobs or kissing the work world good-bye, your retirement accounts need special attention.To make your transition easier, keep in mind the following three options for managing your 401(k) or other qualified plans:

Leave the money in your current plan.You may have the option to leave our monein the account where it is.You will want to review thelan's summary description for any restrictions that may apply. Withdraw the money in a lump sum. As mentioned above, withdrawals are not recommended because theare fulltaxable, and ifou are under ae 59 ½, there is an additional 10% penalty applied to the withdrawal amount. Rollover the money into an IRA or new employer's plan. Moving your mone allows outo maintain control overour investment otions. And, ifou have changed jobs before, it allows you to consolidate multiple accounts.You can avoida intaxes andenalties ifou transfer the assets directlto the new custodian as a trustee-to-trustee transfer. One caveat to consider - if you own coman stockin our lan, ouma wantto review an additional otion before you initiate the rollover of that stock.Distributions of company stock from a qualified plan are eligible for favorable tax treatment.A calculation of potentialNet Unrealized Appreciation(NUA) will help you determine what's ri htfor oursituation. If ouhave uestionsabout anof our401(k) otions, contactColeman Financial Group.

Save the Earth (and some money too!)Even before the current economic crisis grabbed the headlines and rattled ourortfolios, the drumbeat of "going green" had be un.While runninout to bu an electric car or harnessing solar or windower manot be a reality for you, there are plenty of small things to do that can really add up over time. Considerusin reusableba sand water bottles, switchinto more ener efficient lighting, unplugging appliances when not in use, printing less and rec clinmore. Ahome enerauditma bea reat laceto etstarted. There are plenty of "go green" resources in the DC Metro area and nationwide.Check out web resources such aswww.livegreen.net, www.goinggreendc.wordpress.com, andwww.thegreenguide.com.

THE COLEMAN COMMENT - timely tips and fiscal facts from Coleman Financial Group that help youbuild confidence into your financial future.

htt ://www.colemanfinancial rou .comColeman Financial Group is a Registered Investment Advisor. Securities offered through H.Beck, Inc. Member, FINRA/SIPC. H.Beck, Inc. and Coleman Financial Group, LLC are not affiliated.