Financial Advisors for Seniors

Just like a brain surgeon doesn’t operate on themselves, you should always hire financial advisors for seniors who are especially trained for those over age 60 who are planning their retirement.  There are so many different tax changes and legal restrictions, that only a trained professional who keeps in good standing with their profession, can service your needs.

For instance, did you know that there are penalty-free withdrawals from qualified plans for those pre-age 59 1/2?  In the current distressed economic environment, a retirement plan is often the largest asset one has.  With financing difficult to obtain, accessing those funds may be critical, especially without incurring any early-withdrawal penalties.

The Government Accountability Office (GAO) estimates that 15% of participants have taken some form of early withdrawal.   Over the past year and perhaps in recognition of this, the IRS has devoted considerable attention to updating its gui9dance regarding early withdrawals from qualified accounts.

There are often different rules for 401k and other ERISA plans as opposed to various forms of IRAs.  However, the rules are the same for penalty-free withdrawals from a 401k or IRA if the account owner:

  • Becomes totally disabled;
  • Has medical expenses that exceed 7.5% of adjusted gross income
  • Is required by court order to give money to a divorced spouse
  • Is separated from service (through permanent layoff, termination, quitting or taking early retirement) in the year the account owner turned 55 or later; or
  • Takes withdrawals in substantially equal amounts over the owner’s life expectancy that:
  1. Must be paid at least once each year;
  2. Must be based on the life expectancy of the plan participant or the joint life expectancy of the participant and a designated beneficiary; and
  3. Must not be modified before the later of five years after the first distribution or the date on which the plan participant reaches age 59 1/2.

In addition to the above options that you may be considering while engaging with a financial advisor for seniors, there are three additional means of withdrawing funds pre-59 1/2 years of age from an IRA – but not from a 401k:

  1. To pay health insurance premiums during a period of unemployment lasting at least 12 consecutive weeks;
  2. To pay for higher-education expenses for the account owner or the account owner’s spouse, child, or grand-child, but only if the distribution is used to pay for tuition, fees, books, supplies, equipment or room and board and is net of any scholarships; or
  3. To pay up to $10,000 of the cost of purchasing (not refinancing) a first home, defined as someone who did not own (and whose spouse did not own) a principal residence in the two years preceding the distribution from the account.

There are no hardship withdrawals from IRAs.  However, IRA funds can always be accessed for any reason and at any time but the 10 percent early withdrawal penalty will apply.

Sound like a minefield of restrictions?  Well, it can be, but the best way to navigate the changes is with the help of a trained professional.

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