Finacial advise from pros

[scottlr]

OK, here's the situation. I have been on unemployment for 2 years while going to school under the Trade Act. We just found out that 5 weeks ago, my funds ran out (nobody sent us anything saying so). Anyway, so we ended up with about $1500 or more LESS than we thought was in our checking account, and even though I have 4 weeks left of school, finding a job has moved to the front burner. Over the summer, we had some unexpected medical expenses, and the portion we owe after insurance totals maybe $3000 more or less. What I want to do is take the money to pay these debts off out of one or more of our Roth IRAs, since that money was post tax. They are also very secondary accounts in the grand scheme of our retirement funds. Our financial advisor told me there is no penalty, but we may have to pay taxes. I don't see how we'd have to, though. We paid tax on the principles before it was invested, and we have certainly lost anything we may have gained from the accounts. Either way, this seems to me the best way to right the boat short term, until I can find a job. I am fairly confident I'll find something within the next 2-3 months, if not sooner. Wife is well employed.

Any suggestions, or things I am not thinking of?

[XKnight]

This is the last place I'd rely on for financial advice. Good luck!

[Tinman]

Is there enough in the Roth to cover these debts? Is the current value of the Roth more or less than the amounts you contributed to it? Was any part of the Roth funded by converting a traditional IRA to a Roth?

[scottlr]

This is the last place I'd rely on for financial advice. Good luck!

Understood, but there ARE some pros here, which is who I posed the question to.

Is there enough in the Roth to cover these debts? Is the current value of the Roth more or less than the amounts you contributed to it? Was any part of the Roth funded by converting a traditional IRA to a Roth?

Yes, there's plenty to cover with much left over. I'd have to look to see if all of the gain has been eaten up by the current bad scene. None of the Roths were converted from IRAs. I am thinking these 2 secondary accounts total maybe $10k give or take. One for each of us. My thought is that if I took 50% of each, even if there was still a slight gain in there, I'd certainly not go below our contributions.

[Bones]

sounds like you need to buy a new guitar, a nice Nocaster Relic would be my suggestion.

[Tinman]

Well, it sounds like you could use the Roths without paying income tax or penalties. I'm not going to weigh in on whether or not that's your best option without spending a couple hours with you. While qualified retirement accounts are a great tool, I counsel my clients not to have all of their investment assets in them. Obviously, your FA knows more about your situation than anyone here, so if you trust her, you should probably follow her advice.

[scottlr]

sounds like you need to buy a new guitar, a nice Nocaster Relic would be my suggestion.

I wish LOL

Well, it sounds like you could use the Roths without paying income tax or penalties. I'm not going to weigh in on whether or not that's your best option without spending a couple hours with you. While qualified retirement accounts are a great tool, I counsel my clients not to have all of their investment assets in them. Obviously, your FA knows more about your situation than anyone here, so if you trust her, you should probably follow her advice.

My FA is a guy (not that that matters), and yes, I trust him. These Roths are not our only retirement accounts. I think we have 5-6 accounts, of which only 2 are Roths. As for best options, until I find a job, it is either do nothing and hope for the best, or use some of the Roths to cancel these debts. Obviously I'd rather just leave the accounts alone, but they are our smallest accounts and the only ones that are funded after taxes. So they seem like the way to go if we want to right ourselves for the time being.

[leofenderbender]

If you are under 59 1/2, the only part of a Roth distribution that is taxable is the part that represents the income from your investment; a 10% penaly will also apply to that amount - though there are exceptions under IRC 72(t).

If you withraw less than your investment, you will still get a 1099R for the distribution. Report the gross distribution on your return but with zero taxable.

[scottlr]

Thanks, that's what I thought. I am pretty sure that any income from these accounts was lost over the last few months. I'll have to dig the statements out to be 100% sure.

[triple_vee]

Understood, but there ARE some pros here, which is who I posed the question to.
correction. there are people who CLAIM they are pros here.

[leofenderbender]

correction. there are people who CLAIM they are pros here.

A financial pro? I don't even know what that means any more.

[Sir M]

dude.. you need...


Clark Howard!!! http://www.clarkhoward.com (http://www.clarkhoward.com/)

call the show and talk directly with Clark or one of his team...

2 years unemployment... bro, you couldn't find work for 2 years??
.... unacceptable

[spectreman]

2 years unemployment... bro, you couldn't find work for 2 years??
.... unacceptable

wow...walk a mile

Anyways, I would follow the plan mentioned in the OP. Nobody has gains given the collapse, so this makes the most sense.

Best of luck to you and your family.

[Sir M]

wow...walk a mile

Anyways, I would follow the plan mentioned in the OP. Nobody has gains given the collapse, so this makes the most sense.

Best of luck to you and your family.

what the heck are you talking about pal... you telling me you cant find work for 2 years??... 2 years??... you walk a mile to the nearest town and get a job, buddy, is what my wife would say...

[scottlr]

Did you guys even read my original post? I haven't even looked for work for 2 years. I have been attending college full time. My job of 10 years was outsourced to India, and under the Trade Act, the government paid for me to go to school, and allowed me to be on unemployment the whole time. I have 4 more weeks of school left before I get my degree. The unemployment ran out because I wasn't able to start college right away when I was laid off. The UI was only for 2 years, but it'll actually be more 26 months when I graduate. I am certain I will then find a job. I always have. That is not the problem, or question.

[spectreman]

Did you guys even read my original post? I haven't even looked for work for 2 years. I have been attending college full time. My job of 10 years was outsourced to India, and under the Trade Act, the government paid for me to go to school, and allowed me to be on unemployment the whole time. I have 4 more weeks of school left before I get my degree. The unemployment ran out because I wasn't able to start college right away when I was laid off. The UI was only for 2 years, but it'll actually be more 26 months when I graduate. I am certain I will then find a job. I always have. That is not the problem, or question.


Yes, I read the OP and think the plan you outlined is the best option.

Again, best of luck to you and your family.

[scottlr]

Thank you, spectreman. Obviously I wasn't referring to you. :) I guess I shouldn't have said you guys, but I usually don't single out anyone here. Sorry.

[Navigator]

Depending upon whom you have the IRA accounts with, you may be able to BORROW from or against your own account. This can be advantageous in that, once you're back on your feet, you pay yourself back, and are able to put the money back into the IRA accounts it came out of. If you simply withdraw the money, you can not replace the contributions from those previous years. You'll be subject to the maximum contributions for the year in which you actually put money back.

[scottlr]

Depending upon whom you have the IRA accounts with, you may be able to BORROW from or against your own account. This can be advantageous in that, once you're back on your feet, you pay yourself back, and are able to put the money back into the IRA accounts it came out of. If you simply withdraw the money, you can not replace the contributions from those previous years. You'll be subject to the maximum contributions for the year in which you actually put money back.

I understand. But I think my original thought would work best right now. It's not likely we'd have that much cash to pay it back or put it back anyway until my job situation get settled in.

[leofenderbender]

Depending upon whom you have the IRA accounts with, you may be able to BORROW from or against your own account. This can be advantageous in that, once you're back on your feet, you pay yourself back, and are able to put the money back into the IRA accounts it came out of. If you simply withdraw the money, you can not replace the contributions from those previous years. You'll be subject to the maximum contributions for the year in which you actually put money back.

NOT TRUE. Borrowing against an IRA is a prohibited transaction and is the equivalent of a distribution - it is expressly prohibited. You are allowed to borrow against a 401K if the plan documents allow the privilege under conditions of hardship. Certain 401Ks yes, IRAs no.

[HoboMan]

If you are under 59 1/2, the only part of a Roth distribution that is taxable is the part that represents the income from your investment; a 10% penaly will also apply to that amount - though there are exceptions under IRC 72(t).

If you withraw less than your investment, you will still get a 1099R for the distribution. Report the gross distribution on your return but with zero taxable.
__________________

NOT TRUE. Borrowing against an IRA is a prohibited transaction and is the equivalent of a distribution - it is expressly prohibited. You are allowed to borrow against a 401K if the plan documents allow the privilege under conditions of hardship. Certain 401Ks yes, IRAs no.


A serious Thank You for that information. Very good to know.

[soulohio]

all your jobs are belong to us

what the heck are you talking about pal... you telling me you cant find work for 2 years??... 2 years??... you walk a mile to the nearest town and get a job, buddy, is what my wife would say...

[scottlr]

well, mine anyway :roll