Volunteers from a rescue squad received money over the years - done!

[WITAXLADY]

So the volunteers received government money in a 401K type fund over the years for helping out thru a special government program,.

The squad is shutting down and dispersing the money and said it cannot be rolled over into anything.

So he is 52 and faces the early penalty unless he

a - takes the check and puts it into another IRA

b- takes a chance the CARES Act provision is extended for 2021

c- no hardship? Covid?

d - any other option?

(he wants to use it to buy a rental property - ~$ 21,000)

He asked me to think...

Thank you

 

 

[Lion EA]

If it was really a 401(k), then why can't he roll it over? Perhaps it was a nonqualified plan. If so, I don't think he can do a. B and c would depend on if he's affected by Covid and if that exception is renewed for 2021.

He can pay the taxes on the disbursement. He can contribute more to his existing retirement plan(s), because he has the disbursement to live off of.

He can buy a rental property or spend his disbursement any way he wants. Tell him what percentage to save to cover his federal and state taxes.

Make sure you have the paperwork describing the government money in a 401(k)-type fund over the years for helping out through a special government program. Part of his compensation package?

Seriously, where do you get clients with these complex financial situations?!

[Lee B]

Lion is right, you need to get all of the information available with respect to the plan, before you even speculate as to what can be done.

[WITAXLADY]

 

hmm I do not know where my post went to - try again

 

funny!

I do not understand why it could not be rolled over - but as I see it  - he does not want to anyway.

so unless the Cares extends - he has a choice - pay the penalty or reinvest,

Thank you!

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

funny!!

You tell me!

I look up what I can and then come here - for HELP!

I do not understand why it cannot be rolled over - but he does not want to - = penalty unless Cares is extended -

Isn't that how it is supposed to work!!

 

Thank you,

Darlene

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[Lion EA]

What do you mean by reinvest? Take the former retirement distribution and invest in a fully-taxable account? Really no savings unless he can and wants to rollover into another retirement account. Anything else is a taxable distributions and then a new investment or purchase or savings or...

Have him get you a copy of the plan so you can see what you're dealing with.

[Lee B]

Exactly, we still don't know what we are dealing with except we're gaining a lot of circular momentum