advice on cashing in IRA from a past 401K due to t

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L1: advice on cashing in IRA from a past 401K due to tIn March 2007, During a reorganization of a utility company, I was terminiated from a job that I had been doingfor 15 years as a contractor/employee. This event occurred just five months before I turned 55 years old. The local Unemployeement office says I am a displaced worker, due to my type of work is being outsourced overseas. Who knows…At termination time, I did a roll over on my401Kto an eighteen month IRA. Now, eighteen months, later, my health is not good,and I am consideringto cash the IRA so that I canpay my bills in full.I owe about 25K in credit card debt and 2 car notes. I have two mortgages, as well. I have tried to sell the 2nd home mortgage, but, invain, no prospects.I turned56 years old in August 2008. Thiseighteen month IRA is maturing on Nov 04, 2008, and I planned to roll it over to a 60 day CD, to get me through to January 2009. My thoughts were to struggle the rest of this year (2008) and then in January 2009, cash the 60 day IRA/CD. I was thinking this timingwould give me another year (12 months atleast) to try and earn wages enough to pay the taxes due on $133K cashed in.Historically, during the 2008 year, Iworkedas a contractor for about seven and ahalf months on a 1099 for two differing companies and locations… This latestcontract is ending mid October 2008.For some weird mixup on my part, I have not filed anyquarterly taxes, I kept thinking I would do it later, but never did. Part of my problem, health wise, is my logical thinking and ability to be methodical and analitical.As obvious,my health issues are mental capacity.I am a programmer analyst that requires soundthoughts and ability to follow through. And this email is as close to trying something logical as I can think of.Please advice if there is any hope/guidance for me at this time before I do something even more dumb.BrainDead2008-10-11 14:21, By: braindead, IP: []
L2: advice on cashing in IRA from a past 401K due to tWow… where to start!?First, people are generally either contractors or they are employees. Contractors generally have to supply their own tools and equipment. They also set their own hours. Employees are provided with all they need to do their jobs and have fixed hours when they must work.Employees usually are paid less per hour but receive a number of benefits. Contractors usually are paid more per hour but receive few, if any, benefits.I’m sure that it is more complicated than this but this is a basic description. It would be useful to know which of these you are.Merely because someone loses their job does not mean that they are been displaced by job outsourcement. It could be for that reason but does not have to be. I think that there are some benefits that can be applied for if job loss is due to outsourcing their position.In order to take money from your 401k without paying the 10% early withdrawal penalty tax, your 401k plan must allow for partial distributions AND you must turn 55 in the same year as you become separated from service. If your plan does not allow partial distributions then this option is not available to you. IRS regulations allow 401k plans to offer partial distributions but do not require them to do so. Unfortunately, since you have already rolled your 401k plan money into an IRA, this option is no longer available to you.If you do use your IRA to pay your bills, you will pay income tax on any money in there that has not been taxed AND the 10% early withdrawal penalty tax. This could cost you up to 40% of your IRA money. A $100,000 IRA would actually only be worth about $60,000 under these conditions, so you may not have as much money available for paying those bills as you think. If you do raid your IRA, what will you do in retirement? You have another 6 years to go before you can start collecting minimal social security payments, so will need to work and earn money for living expenses between now and then. Once IRA money is spent, it is very difficult to replace.Two mortgages… is that two mortgages on the same house or on two houses? Clearly, in your current situation, you need to minimize your living expenses and this is not the way todo that. If you do have 2 homes, you need to sell one of them as soon as possible and get that expense off your back.I do not know what “an 18 month IRA” is. I suspect that this money is in an IRA that was invested in an 18 monthCD. If so, then this is probably the good news in all this. You have not participated in the great stock market bubble deflation of 2008. Rolling this CD over into a new 60 day CD should not be a taxable event, so your 2008 taxes will not suffer from this move.Finding additional work should be a top priority for you. If your health does not improve from here on but deteriorates to the point that you cannot work, that would be extremely bad for your financial situation.Failure to pay your estimated taxes is a major financial error. Fortunately, the IRS has been fairly forgiving of people who come forward and make a clean breast of things. If they have to discover this error, they will be considerably less forgiving.My advice to you is to: 1) sell that 2nd house, 2) find all the work that you can; 3) get your tax mess cleaned up; and try to pay your bills without raiding your IRA. It is clear that your capacity to handle these problems has diminished. You probably need some help with all this. A good fee only financial advisor, a tax attorney,a realtor, and perhaps a CPA would be useful to you in straightening out all these problems. Their advice will not be cheap but it may turn out to be the least expensive option you have at this point.Ed2008-10-12 07:49, By: ed_b, IP: []

L2: advice on cashing in IRA from a past 401K due to tBased on your post, specifically the multitude of complications of your financial situation and, as you have described, your health issues, my suggestion is for you to contact someone who can sort out your mess and give you some sound advice, to include helping you apply for disability with the Social Security Administration. I suggest you contact Bill Stecker who posts as TheBadger on this site. Contact him at Bill is a CPA who specializes in 72(t) issues and I believe he can work with you on the other issues.Good luck.Jim2008-10-13 18:22, By: jim, IP: []