1 0 Tag Archives: money
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When is it Ok to Take Money Out of My 401K

A traditional 401K is a special type of investment account that is specifically intended for retirement savings. Employees can opt to participate in their company’s program and a certain amount will be deducted from each paycheck to be deposited in their own retirement account.

The money is not taxed along with the rest of their income, but receives a special tax-exempt status for being put into this savings account. Employers may choose to match the contributions of their employees up to a certain amount, allowing employees to double the amount of their savings.

While this is a great program for saving money for retirement, individuals who are facing a financial hardship in the more immediate future may want to take the money out sooner. This can become tricky because although the money is technically yours, the tax-exempt status and employer-matching add different restrictions to your access. So, when can you take money out of your 401(k)?

There are four means of getting to your money:

  1. Major financial hardship. If you are facing foreclosure or you have medical bills that amount to more than 7.5% of your gross income, you can be granted a hardship exception which will allow you to withdraw some of the funds in your 401(k). However, the amount you can access and the penalties assessed depend on your employer’s restrictions.
  2. Leave your job for another one. When you leave a job where you had a 401(k), you can cash out that account. However, you will be required to pay taxes on the amount that was previously untaxed and additional penalties.
  3. Quit your job, get fired, or become disabled. If you are over 59.5 years old and quit or are fired, you can access your 401(k) without penalties. If you become permanently disabled, you also can access it.
  4. Take out a loan using your account as collateral. If none of the previous three situations apply to you, you may be able to take out a loan from a financial institution using the value of your account as collateral. Generally this will be only for a small amount of the total value of the account and you will be charged interest as on a normal loan.

Otherwise, you can start taking money out of your account the year that you turn 59 years old, and you are required to start taking money out by the time you turn 70. There may be additional options available to you depending on your specific circumstances and the rules of your employer’s account. Only a financial professional will be able to offer you advice on your specific situation.

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03. Mar, 2011
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Financial Spread Betting Compared To Share Dealing

You are into financial spread betting due to the various advantages it provides over conventional stock trading. It is therefore in your interest to ensure that you look at all possible opportunities to reduce costs so that every transaction you make gives you the best return possible. Considering that the number of trades is generally more frequent in this type of trading, even small savings can mean a lot over time.

You must therefore choose a company which allows you tight spread. Wider spreads would erode your profits. Realizing that they are losing customers, some margined trading companies have cut down on their spread and the hope is that customers would get such news from other companies on other instruments as well.

It is worth nothing here that a small spread does not necessarily mean a trade that is cheaper. You have to consider slippage, the chances of a re-quote and other complaints. Similarly, the margin amount that you have to pay with different spread betting companies would be different and you could negotiate for something that is convenient to you. Some companies increase the margins depending on the market volatility and that is not something you can always keep up to. Hence compare financial spread betting companies based on their policy on margins.

Yet another factor is that of stop losses. The stop loss functionality would ensure that you do not lose more money due to a trade going wrong. However not all spread betting companies offer this facility for free and do charge a fee. This could be in the form of a percentage or a flat sum. Some companies offer this facility only for major markets. Policies on this do differ and that is one more reason why you should get it clarified before signing on with a company.

Though spread betting has been seen as an absolute gambling instrument, it need not be so. It is just another form of trading and people who hold positions over a period of a few days cannot be considered mere speculators as they often tend to hedge their positions adequately. It is mainly the intra-day scalpers who can be put in the bracket of speculators and even a one or two point movement on a stock can be beneficial for them.

Last but not the least, even after comparing the various offers of companies, you must sign the agreement only after checking for any fine print.

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04. Jan, 2011