by Joe
on October 8, 2008
The Pension Protection Act of 2006 was supposed to allow (read that as “require the employer”) a 401(k) beneficiary to roll the 401(k) account into an IRA as a beneficiary IRA. While this is still ‘permitted’ the rules do not mandate that the employer must allow this.
So, as part of your planning, and for sake of keeping your affairs in order. you should consider moving (rolling over) your 401(k) to an IRA upon a change in employers. There are certainly times where you might not want to do this. If you retire/quit from a company and are 55 or older, you have the opportunity to make withdrawals with no 10% penalty. At 54 or under, there are few reason now to make the move.
Joe
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by Joe
on October 6, 2008
The allusions to pork in every bill congress votes on often makes me want to swear off bacon for good. I’m sure that Friday’s bailout was no different. 451 pages? That right or was I reading an article that tried to make reference to Farenheight 451? One bit of tastey pork that someone slipped into the $700 Billion Bailout package was an extension of the solar energy credit. Back in June in my post Bad Energy Mojo, I complained that congress let the credits for wind and solar expire. Now it’s back and better than ever, a 30% credit with no limit. More details available from the SanFrancisco Business Times article Massive Solar credit Ok’d with Bailout.
I talked some numbers in April’s Waiting for the Sun, where I offered that a 1KW system would cost about $9500 installed, and give the user $360 worth of power each year. Now, with a 30% credit, the cost is down to $6650, and that $360 of electricity is a 5.4% return, an attractive rate given the alternatives. I remain optimistic that this snowballs into a competitive alternate energy source, ultimately offering the US energy independence.
Joe
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by Joe
on October 4, 2008
This is a bit more than a cartoon, but let’s hope it’s a dream we wake up from, not a prediction.
(The above is used with permission of the artist, Davis Dees)
Joe
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by Joe
on October 3, 2008
Between the market, and lack of sleep due to JaneTaxpayer 2.0 getting her braces and being uncomfortable, it’s been quite a week. The highlight of this week was being invited to offer a guest post at the Fraud Files blog on some of the math behind my pet peeve, the Money Merge Account. I received one of the kindest complements there I could hope for, “Joe is possibly the most active and effective person warning the public about the Money Merge Account. His points are well-written and in a calm tone, and completely bulletproof.” This makes writing worthwhile for me.
But I digress. We seem to back to the vote on the bailout package that may pass later today, but meanwhile I found yet another primer on the origin of the mess we are in which I will add to my Subprime Meltdown links, titled “Great Depression 2.0: Tracing the Meltdown“. A good, brief, clear, explanation.
Joe
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by Joe
on October 2, 2008
If you have not yet done so, please read part 1, part 2, and part 3 of this series first, then read on.
Last week, I discussed the classic MMA example. $5000 net income each month. How much income would it take to net $5000 each month? Ignoring state taxes, I calculate $81,000. Here’s my math;
| Gross |
81000 |
| 401k |
8100 |
| Net |
72900 |
| Item |
16000 |
| Exemptions |
7000 |
| Net Taxable |
49900 |
| Tax |
6683 |
| SS |
6197 |
| Net Income |
60021 |
The first point I’d make is this; $81K is an income that puts a family close to the top 20% of earners, it’s not average by any means. Yet, this is the example that’s out there. Second, I’ve been reading how our saving rate has gone negative, as a country. It’s pretty convenient that the example chooses a couple who can manage after saving 10% to their 401(k) to still have 20% of their net income still available to pay down their mortgage. Of course, there is no budget offered in any example. Just observing the economy and human nature tells me that few people would be able to come up with that kind of money and actively choose to take all of it and apply it to their mortgage. Problem is, if they showed you an example using just $100 extra per month the savings wouldn’t be so dramatic (a 24 year, 6 month payoff, hardly the 10.4 years! you can get by prepaying $1000/mo) and you’d be less inclined to part with your $3500. Agents will tell you there are qualifications for the client to pass before being sold the program, but I have yet to hear of one getting rejected. For that matter, one can become an agent by having the high credentials of a breath and a pulse, little more.
Next week – a discussion of the “HELOC shuffle”.
Joe
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