The Truth About Retirement Plans
There are a number of myths surrounding retirement plans and when you are in the process of doing your estate planning, you should be able to sort truth from fiction. So here, finally, are some unvarnished truths about retirement plans:
You can take money out of your 401(k) before you retire without penalty. Most 401(k) plans have exemptions to early withdrawal penalties. You can take early withdrawals to pay medical expenses, if you lose your job and you are between the ages of 55 and 59 ½, if you set up substantially equal periodic payments (which you can do at any age) or if you are taking dividend distributions from employer stock within an employee stock ownership plan (ESOP). You won't have to pay early withdrawal penalties, but the IRS will be expecting you to pay income tax on those withdrawals.
You can take money out of your traditional IRA before retirement age without penalty. Yes, there are several ways you can take money out of a traditional IRA before you are 59 ½ without an early withdrawal penalty (but not without paying income tax!). Your estate planning attorney can provide you with information on how to do this - including setting up installment payouts, paying for college or buying a first home.
You do not have to automatically take money out of an IRA or 401(k) when you turn 70 ½. You are required to take a minimum amount out of an IRA once you reach the age of 70 ½; however, if you own a number of IRAs you can subtotal the amount from each and take the grand total out of just one. If you are still employed at age 70 ½, you do not have to take money out of your 401(k) unless you are the owner of a business.
The Flanigan Law Group provides Southern California residents with personal attention for estate planning, administration and litigation legal services. When disputes between families, arise, they are very successful in resolving legal estate issues quickly and efficiently while preserving financial and emotional resources. Contact the Flanigan Law Group at 949-450-0041.