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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 16544
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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Two questions: 1) I have been recently off and have a

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Two questions:
1) I have been recently laid off and have a daughter that is in the final stages of wedding plans. I have three 401plans, but one older 401 that has about 150k (I am going to be 60 in two months). This particular plan is a "lump sum" plan so I need to take all funds. I was thinking of taking 50k for the wedding now and rolling the remaining 100k into something? ??

2) To make matters more interesting, her twin is now talking about a wedding so I may need to have additional funds for that (just being fair) . Where can I put the monie so that I can get to it easily?

Megan C :

Thank you for your question. My name is XXXXX XXXXX I will be happy to help you. Your requested professional is not online right now, so I would like to assist.

Megan C :

I'm sorry to hear that you have been laid off.

Megan C :

If you take the whole $150,000 now, you will be taxed on the entire amount, so I think it's smart to take what you need and then roll the rest into an IRA

Megan C :

So, that answers both questions - what you are doing sounds smart, and you should put in an IRA so that you can get to it easily.

Megan C :

You are over 59.5 so you will not have any penalties when you withdraw funds from the account

Megan C :

An IRA will keep the funds tax deferred until you are ready to use it, but it's relatively easy to make a withdrawal. It might take a couple of days, but at least you're not taxed on the entire $150,000 until you need it.

Customer:

Thank you Megan, is there a particular process used to accomplish this (visit a bank, do it on-line, etc)? What rate will the 50 k be taxed with and how would it affect this years taxes (filed jointly with yearly income at 150k) ?

Megan C :

You will need to open an IRA - simply go to a bank and open one. Then, you will go to your 401(k) holder and request a rollover

Megan C :

You will give them your new account information and they will send the funds directly there

Megan C :

The $50K would be taxed at your ordinary income rate, with your income it would be around 25%

Customer:

Thanks again, would any monies taken this year be added to our yearly income . . . . . if taking 50k, then added to our 150k salaries would total 200k ?? Q: new tax bracket?

Megan C :

Yes, you would be in the 28% bracket, so you would be taxed at 28%

Customer:

Figures, last question (I think) Q: what is the break between the 25% and 28% brackets and is there a charge to open an IRA at a bank (if I walk in, do I need something to open an account so that I have an account to tell my 401 group to use)

Megan C :

The break is actually at 142,000 - so that's when you cross over into the new tax bracket. Also, you would have to call the bank first and ask them if anything is required to open the account. Each bank is different

Customer:

so it may make sense to wait until next year to do this. Landing a position at 60 is getting tougher and our joint income would be about 2/3rds reduced. I realize that we're probrably only talking $1500 but the market is favorable right now. (just using you as a sounding board)

Megan C :

Yes, it would make sense to wait until your income is lower. Every little bit saved helps!

Megan C :

And we are so close to the end of the year...only a few weeks until January

Customer:

Again, thank you for your advice. Have a great day . . . . . .

Megan C :

You too. Please rate me positive so that I may receive credit for assisting you today

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Thanks for the positive rating!