Saving and investing are two areas America needs to know about, but rarely reads up on. It can cost you in money, in years before retirement, even happiness or your possessions. Of course, when it comes to investing to a goal that’s immediate, there are a few key things I can suggest to you. First of all, remember to consider your immediate goal and how immediate it really is. Remember that debt also means it will cost you more in the long run, with interest. It’s also very hard to pay off debt before retirement, and even harder during retirement. This goal has to be worth what you’re spending.
Secondly it’s important to remember that investment means you expect something back from what you’re investing in. Of course with investment, there is also risk. Never risk more than you can afford to lose! I have to repeat that, because it’s vital: never risk more than you can afford to lose. Let’s use the analogy of gambling. Gambling is an extremely risky investment, you could score big and get extreme profit, or you could walk out with empty pockets. Some men gamble away their children’s college funds and can’t pay their own bills. Though this is an extreme case, it exhorts the amount of caution needed.
Okay, you’ve made your choice: now what? First of all, don’t let your bills slide to make an investment. If the investment flops, so does your bill money. Many would say if this is a case of closer certainty, use your normal saving money. Either way, there are people who went to school and trained and have much experience in these very issues. Consult one of them before you invest in any goal. They are available to give you the confidence or warning you may need to take the plunge and advice on how to not go broke doing so. Making investments can be important to your future, if your investments go well that’s a nice, healthy retirement!
Paying taxes can be stressful and annoying. A lot of things also change when you’re considering retirement or in retirement. Retirement is something America is still trying to figure our correctly. When social security started, it was to help us out of the depression and was a temporary fix. Later in our history, that was changed. It didn’t turn out to help us much-- the average social security check is $838.00, which is not enough to support most people’s cost of living after retirement. All of that said and done, how do you pay taxes on retirement account withdrawals, penalty-free?
According to SmartMoney.com, “You probably know that taking withdrawals from a tax-deferred retirement account before age 59 1/2 generally results in a 10% penalty. The penalty applies to payouts from traditional IRAs, simplified employee pensions, or SEPs, and qualified retirement arrangements such as pension plans, profit-sharing plans, stock bonus plans, 401(k) plans, Keogh plans and the like. So we are talking insult added to injury here. While I certainly discourage raiding a tax-deferred retirement account before actually reaching retirement age, it sometimes can't be helped. In these situations, a key objective is to dodge that darned 10% penalty whenever possible.
Confusingly enough, the list of exceptions for IRAs and SEPs isn't identical to the list for qualified retirement plan accounts. One exception available for all types of accounts is taking annuity-like withdrawals over your life expectancy. You can use this calculator to figure the amount of penalty-free annuity-like withdrawals that you can take from a particular tax-deferred account. The annuity-like withdrawals must be taken at least annually.†Because that may be confusing, most experts would suggest you consider talking to a trained professional, someone with skills and experience in these areas. Make sure you trust this professional, as slip ups in these areas could really cost you.
