Jonathan N. Castle, CFP®, ChFC®'s Answers and Guides

Typically, this title is only used with representatives that work with a Broker/Dealer, versus fee-only advisors that are registered as Investment Advisors only.

A "Vice President" title usually means that the individual is what is called a "Registered Principal" for a Broker Dealer. This means that he has taken the FINRA Series 24 or 26 test and is now registered with the authority to approve financial transactions. The financial transactions approved may be the sales of other advisors - or merely his own.

Generally, this title means that the individual acts as a "franchisee" for a broker dealer. A more familiar term is "Branch Manager," or "OSJ (Office of Supervisory Jurisdiction) Manager. In simplest terms, that means that a part of this person's job may include recruiting, training, and supervising other representatives for the broker dealer.

The easiest way to tell on the business card is that a Vice President will usually have (perhaps in small print) a disclosure that says "Registered Principal," while a financial advisor who must have his transactions approved and has an "upline" who takes a "haircut" from his commissions will usually have a disclosure that says "Registered Representative."

None of this means anything about the level of service that you receive. Many very successful financial advisors have no desire whatsoever to recruit and train other advisors, and are happiest when working with clients.

Jon Castle http://www.WealthGuards.com

Hello Joanne,

Great West is a big player. I wouldn't worry about the company not being strong enough to handle a 401(k) platform.
Their general reputation in the industry is one of reasonable costs and good investment choices. You can find out more about Great West on Wikipedia here: http://en.wikipedia.org/wiki/The_Great-West_Life_Assurance_Company

If your company is changing plans, it is likely that they went through a due diligence process and had several offers on the table. Recent rulings by the Department of Labor have caused the fees inside employer retirement plans to become much more transparent. Whether the plan change will be beneficial to you will ultimately depend upon the terms of the agreement between Great West and your company. However, as to your initial question - Great West is part of an international conglomerate and I wouldn't be too concerned about whether or not they will close or "go under."

Jon Castle http://www.WealthGuards.com

Hello David,

There are a number of ways that you can tap into your IRA and avoid the 10% penalty that normally accompanies IRA withdrawals for people under age 59 and 1/2.

First, if any of the withdrawals are for expenses related to a first time home purchase, education for yourself/spouse/children/grandchildren, or for unreimbursed medical expenses, then the 10% penalty tax will not apply. However, the withdrawal itself will still be taxed as ordinary income.

In the event that none of these apply, it is time to get a bit creative.

First, if you have a job, and are eligible for participation in your company's 401(k), then you can roll your IRA assets into your 401(k). This will allow you to then take a loan from the company 401k - assuming that the 401(k) allows loans. You need to check the Summary Plan Description (SPD) of the 401(k) and explore the section under loans to see if loans are available. Generally, 401(k) plans will loan up to 50% of the balance, or 50K, whichever is smaller. You must repay the loan, but you can charge yourself interest. This is known as the "Conduit IRA" strategy.

Second - if this strategy will not work, then you may use the 72T strategy. IRS section 72T allows you to take withdrawals prior to age 59 and 1/2 as long as you follow the rules. You must follow the rules exactly, or the penalties HURT!

1. the required minimum distribution method,
2. the amortization method, and
3. the annuitization method.

All three methods require the use of a life expectancy or mortality table. The second and third methods require you to specify an acceptable interest rate.

Essentially, you are required to amortize the IRA over your life expectancy, or a series of substantially equal withdrawals over a period of NOT LESS than 5 years AND (notice AND) your age 59 and 1/2.

2) You must continue to take these withdrawals no matter what the market conditions, the IRA balance, or your needs. If you do not - then ALL previous withdrawals are assessed the 10% tax penalty plus penalties and interest if they apply.

If you HAVE to use the 72T schedule - PLEASE consult with a qualified financial advisor that understands the 72T strategy - AND a CPA. They will set up a separate IRA for you - one that "carves out" the 72T IRA - and set up withdrawals that meet the requirements.

Finally - IF you happen to have a 401k from a previous employer (NOT an active one) then you may withdraw assets from that 401k without any penalties whatsoever as long as you are not working for that employer - as early as AGE 55. The 10% penalty does not apply as long as you have achieve age 55. For this reason, we often recommend clients keep assets in old 401k's if the possibility exists that they will need emergency funds.

I hope you can find within these strategies a nugget of info that helps you in your particular situation. Good luck with it.

Jon Castle http://www.WealthGuards.com

Hi Carlos,

One of the advantages of having a trust is that the individual setting up the trust - and leaving the funds to another person or entity - can do things with a trust structure that cannot be done with a simple will. The trust document itself creates the framework for what happens to the assets in question.

So - in the case that you mentioned - IF a beneficiary should pass away before their share of funds are dispersed - then the trust itself, if written properly, should provide the answer. In some cases, that beneficiary's share may instead be shared among the other beneficiaries that are named specifically in the trust. In other instances, if the deceased beneficiary has children or other heirs, the trust document may stipulate that the deceased beneficiary's share goes to them.

I would suggest that first you consult the trust document itself. It should be easy to navigate; most of them have a table of contents. Look for a section called "distribution of assets," or "remainder beneficiaries," or something similar. Then sit down and actually read the document. That may be the easiest and cheapest way to find the answer.

The next option you have is to seek legal counsel on the document. As each state has different laws - if you cannot find the answer within the trust itself, then you should seek the advice of an attorney licensed to practice in the state of the trust itself. The trust itself will tell you under which state's laws it was drafted.

Good luck. Trusts - while complex - are often wonderful tools for estate planning!

Jon Castle http://www.wealthguards.com

Hi Wesley,

Sometimes. Supposedly the strategy is to sell in May and re-enter the market after the "worst" month in the year - which has historically been October.

Last year, getting out in May and re-entering in November would have been a fabulous strategy. You would have avoided the painful markets that began in July and didn't end until about November. It would have worked like a charm.

In 2010, however, the strategy would have worked against you, because the year's only market drop actually occured a month early - about April. Selling in May and re-entering the market in November would have caused you to miss out on a 15% rise in the market.

In 2009, the strategy would have worked even worse- you would have missed out on a 20% gain in the market.

So... if you know for sure what the market is going to do - AND if the market is going to drop in the summer and recover only after October - then yes, it is a great strategy.

But, if you are HUMAN like the rest of us... and can't see the future with absolute precision... then continuous investing in a portfolio designed to YOUR specific risk tolerance is the best way to build wealth. And if you have already built your nest egg - then keeping your portfolio built to your risk tolerance, and using tax-efficient withdrawal strategies is probably your best bet.

Market timing strategies and rules of thumb rarely work consistently. They work just enough to be attractive to market newbies - but they are wrong often enough to undo the profits they make when they are right. Additionally - selling in May or similar high-turnover strategies performed in a taxable (non-IRA) account add the additional pain of short-term capital gains taxes into the mix, further reducing your chance of actually accomplishing anything in your account but a bunch of non-profitable activity.

Dan,

OK it looks like everyone else has dished up the required "lecture" about taking retirement funds earmarked for your future and using them for today, as well as having adequate emergency funds, so I'll avoid those topics. Here is a possible solution:

1) First, make sure your NEW job has a 401(k) that accepts rollovers from old 401(k)'s. Make sure your new 401(k) also allows you to take a loan from it just like your existing 401(k) does. Make sure you can IMMEDIATELY enroll in the new company's 401(k) - that there isn't an extensive waiting period before you can enroll. Then take the new job.

2) Borrow the money from your relative that you mentioned.

3) Use the money you borrowed from your relative to pay off your existing 401(k) loan. If you don't do this - the loan gets automatically "forgiven" when you leave - but the money you pulled out is treated as an early withdrawal with a 10% penalty in addition to being taxable.

4) Change jobs and roll your OLD 401(k) into your NEW employer's 401(k).

5) Borrow the amount of money you need to pay off your relative from your NEW 401(k).

You will now find yourself in EXACTLY the same position that you are now - except with a different job. No big deal. NOW work diligently to get that 401(k) loan paid off, as 401(k) loans can effectively "job lock" you if you don't have the money to pay them off.

The "rollover IRA" concept that you mentioned is, in fact, correct - it is known as a "Conduit IRA." However, you must roll the "Conduit IRA" into your new 401(k) and THEN take a loan from the 401(k) - you cannot simply withdraw the funds from this IRA to pay off your relative or to pay off a 401(k) loan without the 10% tax penalty.

Jon Castle http://www.WealthGuards.com

Hello Louis,

You are correct; you may lose some of your social security benefits if you have earned income - but that depends upon your age.

In 1996 Congress passed, and President Clinton signed, the Senior Citizen's Right To Work Act of 1996. This allows individuals who have reached their FRA (Full Retirement Age) to earn additional income as a result of employment - without losing social security benefits.

However, earning income ("earned" income - in this case means "by the sweat of your brow," not pension or investment income) PRIOR to reaching your FRA may decrease your Social Security benefits - IF you are already drawing retirement benefits.

So - in any year PRIOR to your Full Retirement Age (Age 66 and some months for most people currently drawing Social Security) - you can EARN up to $14,640 before losing any Social Security benefits. If you earn more, you will lose $1 for ever $2 you earn ABOVE $14,640.

IN THE YEAR of your FRA - you can EARN up to $38,880 and not lose any Social Security benefits. However, if you earn more, you will lost $1 for every $3 you earn ABOVE $38,880.

It is also interesting to note that if you earn income and do lose some Social Security dollars - the wages you earn still contribute to your "Social Security Account" and you may have increased benefits later.

The best thing to do is to make an appointment with the Social Security office and talk to one of the Social Security representatives there. Let them know your plans - and if you DO decide to work - let them know that too. They will adjust your Social Security payouts so there are not any unpleasant surprises next year and help you decide what it best for you.

Also, you may want to take some time and visit Social Security's website: www.SSA.gov. It is truly a VERY user friendly and robust website that is quite helpful. Contrary to one's general impression of the government - they did a great job on it.

Jon Castle

http://www.WealthGuards.com

Hi Edward,

What a great question? I didn't know the answer either; I know what my personal experience has been in working with clients, but each client's retirement plan varies.

So, I found this help page that was compiled as a result of several studies asking just that.

Go to this link to see the study:

http://www.401khelpcenter.com/benchmarking.html

Jon Castle http://www.WealthGuards.com

Hello Amos,

This is a really tough area and there are pros and cons to both arguments.

Education IRA's are tax free for education - but limit the amounts that you can put in quite a bit.

529 plans are also tax free for eduation - but are quite often laden with high fees which greatly reduce returns. Additionally 529 plans count heavily against the student on the FAFSA form (Free Application for Federal Student Aid) and are essentially expected to be spent down to fund college.

UTMA or UGMA accounts - accounts where you or another person are the custodian (trustee) for the account - but the assets are legally the childs - and then revert to the child's name upon reaching the age of majority - also count heavily against the student on the FAFSA form and will count as a asset available for funding college when it comes to determining financial aid.

Accounts held directly in the child's name also count heavily on the FAFSA. Oddly enough - so does the studen't income - which doesn't make a bit of sense to me because if a student earned money in an after-school job during high school, it is likely they would no longer have that job once they started college. However, student income counts heavily against the student when it comes to determining need-based financial aid.

The best way to know what counts and what doesn't - and what counts MORE and what counts LESS - is to check out the FAFSA itself. Here are links to websites where you can find the info you need. It is not easy - and the more information you have - the better armed you are:

www.FAFSA.gov - this is the Department of Education Website www.FAFSAOnline.com - this is a service of the Student Loan Network - you have to enter your information, but you can download a great comprehensive guide to filling out the FAFSA - what assets go on the FAFSA, and what does not.

I would also ask that you read the guide I uploaded to this site - it is a good place to start. It is called "Strategies for Funding College - and Not Just Saving For it." Here is the link to it:

http://www.brightscope.com/financial-planning/advice/guide/3193/Strategies-For-College-Funding-Not-Just-Saving-For-It/

Good luck with your college funding. It is a challenge. The more you know, the better off you'll be.

Jon Castle http://www.Wealthguards.com