penalty

L1: penaltymy wife retired at age 55 and had a qualified profit sharing account which she could make pre 591/2 withdrawals from without paying the 10% penalty. The investments were very limited so I consulted a financial adviser at local bank and was told three times we could roll over the money to him in a IRA he would put it in a mutual fund and she could get monthly checks and not worry about any penalty because she was retired.After reading your post I think he may have lied to us.HE is a Senior vice president of investments with a national bank that starts with A Wachovia now if we get stuck with back taxes and penaltys would his bank not be responsible.2006-08-30 20:52, By: smoker, IP: [166.82.131.239]
L2: penaltyHello smoker:
Yes, your banker has given you bad information but he did not necessarily lie to you. He may have been simply mistaken. Further, where distributions made directly from a PSP can be unstructured and remain penalty free; your banker might have been intending to start your wife on a SEPP plan which might similarly be penalty free. Tough to tell without having all the details.
However, let”s assume the worst — you are assessed the 10% surtax. Is the banker liable? YES. Can you prove it and is this really a course of action that you want to pursue?
I suggest you seek competent counsel (CPA or tax attorney) who is expert in this arena and advise you as to detailed courses of action.
TheBadger
wjstecker@wispertel.net
2006-08-31 07:55, By: TheBadger, IP: [72.42.66.36]

L2: penaltyGood morning, Smoker:
Three things bother me about your post, and all point toward “inappropriate investments” and “inaccurate advice.”
1. Like TheBadger said, the advisor at the bank may have been planning to set up a SEPP Plan for your wife. Make certain whether or not your wifehas a plan in place. If she does then you”re OK. If not, then you got problems.
2. In this world of investments, there are “money managers” and “money gatherers,” and rarely can one person do both jobs successfully. So a team approach is best. If the “Senior VP of Investments” that you dealt with is a “money manager,” then you were dealing with the wrong person. Good money managers focus on “running the money” and leave the job of “money gathering” to folks who focus on knowing the rules for such things as 72(t) and putting together a good investment portfolio to manage growth and risk and set up distributions.
3. I must assume that your wife”s PSPcontained a significant amount of money, like several hundred-thousand dollars. If this is the case and you were advised to invest in “a mutual fund,”meaning”a single fund,” then you got bad advise. However, if this meant a single account with a diversified investment approach, then it”s probably OK. If the account size was really big, then you may be in a “separately managed account” which is in effect an “individual, stand-alonemutual fund.”
Please check into these items to determine exactly what your situation is. As to the point that “she could get monthly checks and not worry about any penalty because she was retired,” this is a problem, assuming no SEPP Plan is actually in effect. Any money held in a Traditional IRA be it a “contributory” or “Rollover IRA” is subject to the 10% penalty for early withdrawal, absent one of the exceptions like 72(t). Your wife retired at age 55. I retired from the US Air Force at age 45. Both your wife and I share the same problem when it comes to IRA”s … we have to deal with the age 59 1/2 early withdrawal penalty issue, eventhough we are both “retired.” It seems like the advice your wife got about this issue was inaccurate or atleast incomplete, based on the information you have provided.
Good luck.
Jim2006-08-31 08:53, By: Jim, IP: [70.184.2.72]

L2: penaltyI was a bit surprised that the ”banker” could be held liable for any tax penalties due to incomplete or erroneous advice. I had always believed the IRS stuck to a strict ”caveat emptor” (let the buyer beware)attitute regarding these matters and held the taxpayer liable for any penalties, regardless of where his advice came from.
I know this holds true for income tax preparation. 2006-09-01 12:13, By: Francis3, IP: [151.203.215.99]

L2: penaltyRe-read Bill”s post – you are right, the IRS would not hold the banker liable, but using today”s court system, the IRA owner could attempt to recover any losses from the banker, the bank or both.2006-09-01 12:40, By: Gfw, IP: [172.16.1.73]

L2: penaltyThanks for the info. The man at the bank that got us in this mess told us we did not need a 72t because my wife had retired. we trusted him because someone else we knew had rolled over their money and had been collecting checks for over two years with no problems we thought he knew what he was doing. we were told we could withdraw any amount we needed without fear of paying penalties or we would never have rolled it to start with because in a 72t we were restriced to what we could draw.we asked about 72t and was told we did not need to go that way. Smoker2006-09-01 12:59, By: smoker, IP: [166.82.131.239]

L2: penaltysmoker,
Don”t take this the wrong way; however, I think that your trust in this financial advisor is ill-fated. Just think about it; after all the years you worked, and all that you have been through (e.g., life experience, etc.), to put all of your assets into the hands of abanker, without doing your homework first is really dangerous. Many of my friends have invoked the services of a 24ish financial advisor and if you can”t see the risk there, then may you be blessed with an exception. I can”t see for the life of me, how anyone, who has worked thier entire life, to accumulate a large amount of money, would walk into a bank, and “trust” an a-typical banker, to advise them on investments for the rest of their life. I”m really hoping you are an exception in this area; however, if not, take your money an run to someone reputable ASAP.
gus2006-09-01 21:36, By: gus, IP: [70.110.151.50]