The gentleman mentioned in the article below, Chris Bird, is an outstanding resource. Sharnee and I have listened and read a fair amount of his advice. Chris is a former I. R. S. agent and is a great income tax resource.
Daily Real Estate News | November 7, 2008
Stop Worrying About Stock Market Losses
If you're worried about how much money you lost from your retirement account over the past few months, it’s time to refocus your thoughts.
The stock market will regain strength and your investments will grow over time, certified financial planner Chris Bird told a packed audience Thursday at the 2008 REALTORS® Conference & Expo in Orlando. Getting caught up in short-term fluctuations will only cause distress.
"Don't believe the talking heads who say the sky is falling," Bird said at the Women's Council of REALTORS® financial planning seminar.
Bird said a 401(k) account is the best vehicle for saving and growing money for retirement—offering far more benefits than an IRA.
Not only are annual deposit limits higher in a 401(k), but if you're 50 years old or older, you can put extra money into your account annually, enabling you to "catch up" for the years you missed.
The other beauty of a 401(k): flexibility to borrow money from the account without taking a tax hit. IRA plans, on the other hand, don’t allow you to borrow, only withdraw. And when you take money out, you’ll have to pay taxes and penalties.
So what if you already have an IRA and you need some extra cash right now?
Bird suggests rolling over your IRA to a 401(k) so you can write yourself a loan. It’s as easy as can be: "All you have to do is check a box," he said. "You don't even have to say what you're going to use the money for."
However, borrowed money does have to be paid back within five years or you face a penalty. But at a reasonable interest rate (about 6 percent currently), the payback isn’t overly burdensome.
For people with kids, Bird offered up another flexible savings idea: Socking money away in a tax-exempt "529" college savings plan. You can borrow money against that account, the majority of it tax free, by temporarily making yourself the designated recipient.
"Stealing from your kids" isn’t an ideal strategy unless you really need the money, Bird said. If you must take money from the account, you should pay it back and redesignate your child as the recipient.
—Robert Freedman
