Amy says she hit “rock bottom” with her finances. She says she struggled to ask for help before her situation became an emergency. How can others ask for help sooner?
Dylan wonders if the IRS Rule of 55 applies to Roth 401k accounts.
Anne Marie switched jobs. What should she do with her old retirement accounts?
Rebecca is a mother of four, which means she’s juggling four distinct college timelines and 529 plans. How does she make a withdrawal plan when there are so many unknowns?
Former financial planner Joe Saul-Sehy and I tackle these four questions in today’s episode.
P.S. Got a question? Leave it here.
Here are the details:
Amy asks (at 05:14 minutes): Follow-up call from Episode 435.
I hit rock bottom shortly before you answered my last question.
I had to borrow money just to pay my credit card minimums, and I finally sought out help from a financial planner.
He created a plan to consolidate my debt while keeping my savings and investments intact.
This solved my immediate problem, but it didn’t teach me how to stay out of trouble.
That’s when you and Joe suggested I switch to a cash-only plan with a weekly paycheck. Your advice saved me.
My two main takeaways were: find the most lucrative ways to raise my income and lose the credit cards.
Since going on a cash plan, I’ve had to get creative for some weeks, but it’s been worth it.
Looking back, I realize how frozen I was. I was afraid to ask for help and it took me more than two years to call you.
So many people look to a pro for investing advice, but what about someone who’s stuck in a rut?
I’d love it if you could speak to the idea of asking for help before you get to where I was.
Dylan asks (at 28:16 minutes): I’m confused about the IRS rule of 55.
I’m trying to avoid the 10 percent penalty for early withdrawal from my 401k.
I understand that in the calendar year that I turn 55, I’m able to withdraw funds from my current 401k penalty-free.
But I haven’t read anything that makes the distinction between a Traditional 401k and a Roth 401k.
Does the IRS rule apply to both types of accounts?
Anne Marie asks (at 39:44 minutes): Should I consolidate my inactive retirement accounts from previous employers into a single place?
I’m in my early 30s and I have five accounts in total: a pension, a Roth IRA, a Simple IRA, and two Traditional 401ks. I don’t want to touch the pension or Roth IRA.
My other three accounts are:
- A no-fee Simple IRA with Schwab. I have $5,000 invested in Vanguard Total Stock Market ETF (VTI)
- A fee-based Traditional 401k with Empower. I have $16,000 invested in a range of mutual funds.
- A second Traditional 401k with Empower. This plan is active with my current employer but I’m limited to a select number of funds.
I’m hesitant to roll everything over to my 401k because my investing options are so limited, but that seems to make the most sense because it’s active.
Or is there another option I haven’t thought about?
Rebecca asks (at 52:10 minutes): We have four kids, each with their own 529 savings accounts and unique timelines for college.
How do we decide between using those savings or our monthly cash flow to pay for school expenses?
We’ve saved a total of $82,000 in our kids’ 529 accounts: our college-bound son has $32,000, the 15-year-old has $22,000, and the youngest two have $14,000 each. The plans are invested in index funds through Fidelity.
My eldest starts college this fall. He’ll receive a full tuition scholarship, leaving us $10,000 a year to pay for room and board. I make enough money to cash flow this expense and allow his 529 to continue growing.
Four years from now my daughter will start college and we’ll have two tuitions to pay for. We could use our son’s larger 529 plan to pay for his senior year, then rinse and repeat with my 15-year-old daughter.
The other option is to cash flow all four years of my son’s undergraduate college. His 529 plan could then go towards grad school, his sisters, or his children in the future.
My questions are:
- How soon before we use the 529 funds should we withdraw the money?
- When 529 funds are withdrawn into savings, is it a reportable asset under FAFSA guidelines?
- How do we juggle all four of our kids’ accounts when there are so many moving parts?
Due to market volatility, we’re just breaking even on the 529 accounts. I don’t want to lock in losses, but I don’t think I should be invested in the stock market if we need the money within three to four years.
The problem is we’re not sure if we’ll need the money, and when. How do we plan for so many unknowns?
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