Getting Your Tax Money

L1: Getting Your Tax MoneyMy plan was to keep my company saving plan and remove my after tax money prior to setting up a 72(t) disbursement. I was recently told by my fund administrator that my after tax money could not be separated from the money it earned in my company savings plan. This leaves me open to a huge tax liability if I want my after tax money plus a penalty because I’m 53 years old.
However, I’m told if I roll my company plan into a roll-over IRA, I can receive a check for my after tax contribution with no strings attached.Why does the IRS want to force you out of your defined plan and into an IRA with these crazy tax rules? If I want my money now, do I have any alternatives? Your expert advice is appreciated.2005-09-16 10:18, By: Jim, IP: [166.87.255.133]

L2: Getting Your Tax MoneyHi Jim:
First of all, quit trying to figure logic in the laws. There generally is no logic and it isn’t worth the gray matter thinking about it.
Since you willretirebefore age 55, you don’t get the option to remove funds from your K-plan without the 10% penalty. So move on to the IRA Rollover option.
When the rollover processes, using the “Trustee-toTrustee” method rather than the “send-a-check-payable-to-me” option, you will get at least two checks. One check will be payable to you for your “after-tax contributions” which are not taxed to you at this time. There won’t be any growth dollars included in this check, just the actual dollars you put into the plan “after-tax.” You are free to use this money as you wish with no tax liability.
The second or more checks will represent the “pre-tax” dollars and all growth on all dollars from your K-plan. They may send the physical check to you but it will be payable to the IRA custodian. When / if you get these checks, don’t have a heart attack, but get them to your IRA custodian ASAP. More and more companies are using this method, and it counts as a “trustee-to-trustee” transfer.
Now it’s time to plan, either by yourself or with a financial advisor, to set up accounts for growth, and fordistribution using 72(t). Your advisor will know what to do to build the best plan for you. If you DIY, then study well before making decisions. One check in the wrong box can really screw up your day.
Hope this helps.
Jim2005-09-16 11:50, By: Jim, IP: [70.184.1.35]

L2: Getting Your Tax MoneyWhat are you going to do with the “after tax” money that is so important that you NEED it NOW ?????
Can’t you wait until January, 2007 (the year in which you will become 55) ? Then, since you are retired and separated from service, you can get the after tax money, and any other amount you want to pay taxes on (without the 10% penalty), and rollover the balance to a self-directed IRA to make your own investment decisions.
In the interim 16 months, why not take a loan from your 401-k, if the employer allows it, of up to $ 50,000. You can repay it in January 2007 from the proceeds you get/take out at that time. Meanwhile, the loan is tax free at this time.
Don’t worry about criticizing or rationalizing the tax laws. Get a good tax or financial advisor who understands the rules, and is sharp enough to know how to use them properly, and legally.2005-09-16 12:29, By: dlztaxes, IP: [4.175.9.236]

L3: Getting Your Tax MoneyP.S. You said you ARE 53.If you will become 54 before 12/31/2005, then you can do the 401-K maneuvers in January 2006.2005-09-16 12:38, By: dlztaxes, IP: [4.175.9.236]

L2: Getting Your Tax MoneyNow it’s time to plan, either by yourself or with a financial advisor, to set up accounts for growth, and for distribution using 72(t). Your advisor will know what to do to build the best plan for you. If you DIY, then study well before making decisions. One check in the wrong box can really screw up your day.
Most “financial advisors” are commissioned based. This means they set up a plan for you using funds that pay them a commission. In my view they are not financial advisors but simply salespeople whom you pay to help you ACQUIRE an investment. I would rather see you pay no one to help you ACQUIRE the investment. This can be accomplished by buying direct from the mutual fund group. These investment companies charge no commissions (no-load). If you then feel you require investment advice I would retain the services of a fee-only advisor who will bill you directly for advice.2005-10-09 12:11, By: Joel, IP: [68.197.111.95]

L2: Getting Your Tax MoneyThere are actually two (or more) every good reasons to separately take out one’s after-tax contributions from a 401(k) plan and only rollover the before-tax contributions & earnings:
1. The after-tax $$$ can & should serve as a separate nestegg to handle life’s emergencies that will inevitably arrive, most often at the worst time.
2. After-tax $$$, if left in the plan or co-mingled with before-tax $$$ in an IRA willcontinue to create earnings. These earnings will be withdrawn eventually & will be taxed at one’s highest marginal tax bracket then prevailing; likely to be 25%, 28%, 30%or more.Conversely, if the after-tax $$$ are separately distributed and placed in a regular brokerage account; thosesame $$$ can be invested to predominately produce dividends & capital gains; all taxed at a maximum of 15%.
TheBadger
wjstecker@wispertel.net
2005-10-09 12:22, By: TheBadger, IP: [66.250.23.21]