IRA early withdraw to fund another. (Update)
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re: IRA early withdraw to fund another. (Update)
Posted by Ric Flair on 10/7 at 4:00 pm to SippyCup
I'd leave the IRA alone, and try to get by with a credit card for the next three months (maybe a new card with a low teaser rate). Since he is self employed, maybe take extra salary if possible, and float the rest on his business account.

I find it curious that this advisor has him in an IRA, but didn't recommend a 3-6 month emergency fund. Of course, they don't make commission on an emergency fund. For someone who is self employed in an industry that sounds like it fluctuates significantly, I'd recommend a 6 month (of expenses) emergency fund.



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Posted by ZereauxSum on 10/7 at 4:39 pm to frb1951
quote:

after years and years of seeing rock solid couples (you've seen them...you would NEVER suspect in a million years that certain couples would part ways) split and have awful battles with community property issues


Totally agree, but this kind of stuff always happens. Its a risk just like all the other risks that he is supposed to be helping his client manage. A financial advisor can't base all if his advice on just this one risk.

Like slim thug pointed out, he could have just added a disclaimer, or if he thought it was a high risk, suggested the couple draw up a contract or something. But to tell him outright that its a bad idea just because the two might divorce is bad advice IMHO.



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Posted by ZereauxSum on 10/7 at 4:42 pm to Ric Flair
quote:

I'd leave the IRA alone, and try to get by with a credit card for the next three months (maybe a new card with a low teaser rate).


Based on the original scenario, this wouldn't work. The couple doesn't have the cash to increase the contributions so presumably, they would be unable to pay off the card.

quote:

Since he is self employed, maybe take extra salary if possible, and float the rest on his business account.


If he could pull this off this is probably a better idea than using the IRA.



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Posted by frb1951 on 10/7 at 6:19 pm to ZereauxSum
I'm still more concerned about the offer from the company than I am about how the couple will fund the contribution. Is it just me?

Does anyone ever question investments any more? Maybe because I've recently uncovered a scam one of my clients was unknowingly involved with. I would imagine investing is going to require a lot more of prior personal research from all of us than in the past as these economical times seems to be a breeding ground for bad and/or scam investments.



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Posted by foshizzle on 10/7 at 7:01 pm to frb1951
quote:

If I have the following facts right, stop and do a little investigation before making a decision:

1. Wife's company usually matches "a high amount" of employees 401(k) accounts but did not match at all in 2012..

2. "Last week" the company announced they will match up to 15k of any contribution for the remainder of the year.



I wonder about this as well. Your hypothesis that the company is borrowing from future benefit obligations could be correct. It is hard to say for certain, but it does bear closer scrutiny.

Maybe she could make a small deduction and wait to make sure it is received by the 401 administrator reasonably timely before doing more.



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Posted by tigerrocket on 10/7 at 7:31 pm to foshizzle
In Louisiana retirement accounts are considered community property if contributions came from income earned while married.


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Posted by frb1951 on 10/9 at 9:55 am to tigerrocket
[quote]Posted by tigerrocket
In Louisiana retirement accounts are considered community property if contributions came from income earned while married.

[/quot

I agree. Community property (especially $)
unfortunately, is primarily responsible for
greed, arguments, additional attorney fees,
and at times creates an unnecessary tax bill
when dealing with retirement accounts and
unforeseen events such as a death (not unforeseen....untimely would be a better description) or divorce. In Louisiana, especially, it is hard for any advisor to give a "yes" or "no" answer because of what the advisor has experienced with other clients. Bottom line, an advisor can give a clients his 2 cents (some advisors explain the "why" of their advice better than others) but ultimately it's the clients' decision as what route to take.

An advisor that wouldn't discuss the possibilities of what can happen in certain situations wouldn't be worth a dime!



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Posted by SippyCup on 10/9 at 10:03 am to frb1951
quote:

I'm still more concerned about the offer from the company than I am about how the couple will fund the contribution. Is it just me?


Dont be. This is not the first time they have increased their contribution limits. They dont provide cash bonuses, so this is their alternative. Its a small company.






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Posted by Poodlebrain on 10/9 at 11:42 am to frb1951
quote:

I'm still more concerned about the offer from the company than I am about how the couple will fund the contribution. Is it just me?
The company has requirements for when its matching contributions must be paid to the plan administrator. It's not like the company gets to write an IOU for contributions. That only happens with defined benefit plans, not defined contribution plans.

The divorce angle cannot be avoided in Louisiana. It's not terribly difficult to split the assets in a retirement plan unless one of the spouses was participating in a plan prior to marriage. In that case the balance of the account at the date of marriage is the separate property of the participant spouse, and it remains separate property (including income earned on the seperate property portion during the marriage). Allocating the income of the plan between the separate property and community property portions is always fun since the contributions and dates of income being earned don't ever match. I've done retirement account analysis for several divorces, and there is always one spouse who is dissatisfied with the results, but the law is pretty clear as to what the result must be.



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