08-10-2007 - I want to address two things in your situation. The first is the Tennessee personal income tax. Most people think that Tennessee does not have an income tax, but we do. It is called the Hall Tax. It is not a tax on ordinary income, but on dividend and interest income only. There is a 6% tax on any dividend or interest income that is paid by an out of state business. So, most income from stocks, bonds, or notes receivables are taxable once they exceed the $1,250 individual exemption or the $2,500 joint exemption. With that being said, all qualified money (e.g. 401k's, IRA's, pensions) income is treated as ordinary income, and is not subject to the Hall tax even though you may have that money invested in interest and dividend bearing investments. As always, I have to include my little discalimer that I am not a CPA, and I recommend that you consult one before you begin receiving your income. The second thing I want to address is your thought process of moving your investments into a conservative mix. I strongly urge you to listen to our radio show on 850 AM from 12:00 PM til 1:00 PM Monday through Friday. On the show we regularly address the fact that retirees need to plan for at least 30 years of income. We talk about inflation and how it erodes purchasing power. Inflation for most people has averaged 3% anually, but for seniors it is higher, primarily because of medical care. Your concern of generating income and protecting principal is correct, but it is my opinion there are right ways and wrong ways to do this. Again, please listen to the radio show, or give me a call at the office. J. Larry Cox   « less

08-28-2007 - Most people are not aware that a few years ago congress decided to allow people to hold real estate inside of their IRA's. This is not something that I recommend, and most financial institutions do not allow it. One of the reasons is the question you pose. If the Required Minimum Distribution is due, and there are not enough liquid assets in the account, you will have to withdraw a piece of that property. You do this by deeding a portion to you as an individual. This creates potential problems because you have to have appraisals done to insure that the land withdrawn was properly valued. It also involves lawyers, deeds and recording fees. Another reason most financial institutions do not want to be the custodian of an IRA that holds real estate is because of the several factors that could cause the IRS to totally disallow the IRA causing it to become 100% taxable. I suggest you consult a CPA knowledgeable in this area prior to making your first distribution.   « less

09-18-2007 - Jeri it sounds like your husband rolled a previous 401k plan into a 401k with a new employer. If this is the case, and the administrator says there are no provisions in the plan document to allow partial withdrawls, then there isn't much you can do. This is one of the reasons we recommend that when a person leaves an employer that they roll their 401k into an IRA and not leave it at the employer, or roll it into another 401k with a new employer. 401k's are great savings vehicles, but there can be some problems when it comes to taking distributions. Please feel free to call me with any other questions in this, or other investment matters. Larry Cox   « less

09-24-2007 - Mary I really need more information to answer your question specifically, but maybe I can give you the information you need. There can only be two types of penalties; one from the fund family itself, or from the Internal Revenue Service. If the mutual funds she owns has a surrender penalty for early withdrawls there is typically nothing you can do. I am not aware of any mutual fund that will waive the surrender fee for medical emergencies. If there is not a surrender fee from the mutual fund family, but the money is invested in an IRA, then there could be some penalties incurred from the early withdrawl of an IRA before the age of 59 1/2. The IRS will waive this penalty under some instances, but it depends on the emergency. To answer your question completely I would recommend your daughter contact the person she purchased the mutual funds from, or the fund family. Either one should be able to answer your question, but ask about both penalties. If you are unable to find the answers you need feel free to call my office at 865-251-0808, and we will do our best to help. Larry Cox   « less