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Tag: Wealth Management

IRA Withdrawals that Escape the 10% Penalty

An IRA, or Individual Retirement Account, is a tax-advantaged account that is subject to special rules regarding contributions and withdrawals. One of the central rules of IRAs is that withdrawals prior to age 59½ are generally subject to a tax penalty.

 

Yet, policymakers acknowledged that extenuating circumstances might require access to these savings. In appreciation of this, the list of exceptions for waiving this penalty has grown over the years.

 

Penalty-Free Withdrawals

 

Outlined below are the circumstances under which individuals may qualify to withdraw from an IRA prior to age 59½, without a tax penalty. Ordinary income tax, however, is generally due on such distributions.[i]

 

Death – If you die prior to age 59½, the beneficiary(ies) of your IRA may withdraw the assets without penalty. However, if your beneficiary decides to roll it over into their IRA, they will forfeit this exception.[ii]

 

Disability – Disability is defined as being unable to engage in any gainful employment because of a mental or physical disability, as determined by a physician.[iii]

 

Substantially Equal Periodic Payments – You are permitted to take a series of substantially equal periodic payments and avoid the tax penalty, provided they continue until you turn 59½ or for five years, whichever is later. The calculation of such payments is complicated, and individuals should consider speaking with a qualified tax professional.[iv]

 

Home Purchase – You may withdraw up to $10,000 toward the purchase of your first home ($20,000 for a married couple). You cannot have owned a home within the last two years.3

 

Unreimbursed Medical Expenses – This exception covers medical expenses in excess of 10% of your adjusted gross income.3

 

Health Insurance – After a job loss, there are rules in place that allow the purchasing of health insurance, without penalty.3

 

Higher-Education Expenses – Funds may be used to cover higher-education expenses, such as tuition, student fees, textbooks, supplies, and equipment. Only certain institutions and associated expenses are permitted.3

 

Active Duty Call-Up – Reservists who make an IRA withdrawal during a period of active duty of 180 days or longer do not have to pay a 10% early withdrawal penalty.3

 

As always, be sure to speak with a tax professional about your specific situation.  Contact www.capsouthwm for more information.

 

Investment advisory services are offered through CapSouth Partners, Inc., dba CapSouth Wealth Management, an independent registered Investment Advisory firm. Information provided by sources deemed to be reliable.  CapSouth does not guarantee the accuracy or completeness of the information.  This material has been prepared for planning purposes only and is not intended as specific tax or legal advice.  Tax and legal laws are often complex and frequently change.  Please consult your tax or legal advisor to discuss your specific situation before making any decisions that may have tax or legal consequences.

 

This article contains external links to third party content (content hosted on sites unaffiliated with CapSouth Partners). The policies and procedures governing these third-party sites may differ from those effective on the CapSouth company website, as outlined in these Disclaimers. As such, CapSouth makes no representations whatsoever regarding any third-party content/sites that may be accessible directly or indirectly from the CapSouth website. Linking to these third-party sites in no way implies an endorsement or affiliation of any kind between CapSouth and any third party, including legal authorization to use any trademark, trade name, logo, or copyrighted materials belonging to either entity.

[i] https://www.marketwatch.com/story/gearing-up-for-retirement-make-sure-you-understand-your-tax-obligations-2018-06-14

 

[ii] https://www.investopedia.com/articles/personal-finance/102815/rules-rmds-ira-beneficiaries.asp

 

[iii] https://money.usnews.com/money/retirement/slideshows/ways-to-avoid-the-ira-early-withdrawal-penalty

 

[iv] https://www.investopedia.com/articles/retirement/02/112602.asp

 

Cyberattacks: Help Keep Your Electronic Financial Data Secure

These days, the majority of people have sensitive electronic financial data online. In fact, 72% of Americans mostly access their banking accounts online or through mobile apps, continuing a growing trend, which can equate to an increase in cyberattacks.[i]

 

As our lives become increasingly digital, so does our personal and sensitive information. If we don’t take precautions to protect our data, then we risk becoming victims of breaches and cyberattacks, which are on the rise. During the three months ending in June 2018, there were 765 million cyberattacks, affecting billions of people worldwide.[ii]

 

From your investment accounts to your tax details and beyond, these three tips may help better protect your electronic data:

 

  1. Strengthen your passwords.

An easily hackable password is like leaving a door locked with your key in it: You’re inviting someone to take advantage. To create a secure password, avoid using personal details (like your child’s name), words found in any dictionary, or the same password across various accounts.[iii]

 

  1. Use a Virtual Private Network (VPN).

VPNs help shield your identity, location, and data by routing your internet traffic through an encrypted, virtual tunnel. You can choose from a number of VPN apps for your computers and mobile phones. As a quickly growing method to safeguard data, VPNs are an easy way to help provide powerful protection.[iv]

 

  1. Encrypt browsing sessions.

Whenever you visit a URL that uses “HTTP,” you aren’t on a secure site. As another layer of protection, you can install browser plugins that turn unsecure websites into secure, encrypted connections via “HTTPS.”[v]

 

The Takeaway

While no one can completely remove the threats from storing electronic data, you can take steps to help better safeguard your sensitive information. These tips are a starting point for protecting your and your family’s security with minimal effort.

 

Visit www.capsouthwm.com for more information.

 

Investment advisory services are offered through CapSouth Partners, Inc., dba CapSouth Wealth Management, an independent registered Investment Advisory firm. Information provided by sources deemed to be reliable.  CapSouth does not guarantee the accuracy or completeness of the information.  This material has been prepared for planning purposes only and is not intended as specific tax or legal advice.  Tax and legal laws are often complex and frequently change.  Please consult your tax or legal advisor to discuss your specific situation before making any decisions that may have tax or legal consequences.

 

This article contains external links to third party content (content hosted on sites unaffiliated with CapSouth Partners). The policies and procedures governing these third-party sites may differ from those effective on the CapSouth company website, as outlined in these Disclaimers. As such, CapSouth makes no representations whatsoever regarding any third-party content/sites that may be accessible directly or indirectly from the CapSouth website. Linking to these third-party sites in no way implies an endorsement or affiliation of any kind between CapSouth and any third party, including legal authorization to use any trademark, trade name, logo, or copyrighted materials belonging to either entity.

[i] https://www.aba.com/Press/Pages/101618MCResults.aspx

[ii] https://www.usatoday.com/story/money/2018/12/28/data-breaches-2018-billions-hit-growing-number-cyberattacks/2413411002/

[iii] https://www.us-cert.gov/ncas/current-activity/2018/03/27/Creating-and-Managing-Strong-Passwords

[iv] https://www.pcmag.com/article/352757/you-need-a-vpn-and-heres-why

[v] https://www.wired.com/story/google-chrome-https-not-secure-label/

https://www.techworld.com/security/best-8-secure-browsers-3246550/

Social Security: By the Numbers

Social Security has been a pillar of retirement life for several decades, but how much do you really know about it? Here are a handful of facts that might surprise you:

 

The Social Security trust fund exceeds the gross domestic product of every country in the world except: China, the United States, India, Japan, Germany, Russia, Indonesia, and Brazil.[i]

 

For 61% of retirees, Social Security is a major source of income.1

 

Benefits are subject to federal income taxes, but it wasn’t always so. Amendments to the Social Security Act made benefits potentially taxable beginning in 1984.1

 

Benefits are determined by your average earnings during a lifetime of work, based on your 35 highest-earning years.1

 

If you receive Social Security, you no doubt welcome cost-of-living-adjustments (COLAs) to your benefits. Did you know that Social Security COLAs once required an act of Congress? That was the case before 1975, when they were finally pegged to advances in the Consumer Price Index.1

 

In the middle of 2018, more than 1 in 6 Americans were collecting Social Security benefits. Older Americans constitute about 80% of Social Security recipients, and their average monthly benefit in June 2018 was $1,413.[ii]

 

When should you begin taking Social Security? That may depend on several factors, but many people choose to claim benefits as soon as they are eligible. You can receive benefits beginning at age 62, but if you take them before reaching Social Security’s Full Retirement Age (67 for those born in 1960 or later), your monthly benefit will be fractionally reduced. You can wait until age 70 to claim your maximum potential benefit.

There are many factors to consider when determining the age at which you should begin taking benefits. We believe this decision should be made in conjunction with your overall financial planning process.

 

We would welcome the opportunity to discuss this further or to begin a conversation regarding your financial plan and how Social Security benefits fit into the plan.  Contact CapSouth at 800.929.1001.

 

To read more about financial and retirement planning visit http://capsouthwm.com/services/financial-estate-planning/

 

Investment advisory services are offered through CapSouth Partners, Inc., dba CapSouth Wealth Management, an independent registered Investment Advisory firm. Information provided by sources deemed to be reliable.  CapSouth does not guarantee the accuracy or completeness of the information.  This material has been prepared for planning purposes only and is not intended as specific tax or legal advice.  Tax and legal laws are often complex and frequently change.  Please consult your tax or legal advisor to discuss your specific situation before making any decisions that may have tax or legal consequences.

 

This article contains external links to third party content (content hosted on sites unaffiliated with CapSouth Partners). The policies and procedures governing these third-party sites may differ from those effective on the CapSouth company website, as outlined in these Disclaimers. As such, CapSouth makes no representations whatsoever regarding any third-party content/sites that may be accessible directly or indirectly from the CapSouth website. Linking to these third-party sites in no way implies an endorsement or affiliation of any kind between CapSouth and any third party, including legal authorization to use any trademark, trade name, logo, or copyrighted materials belonging to either entity.

[i] https://www.waddell.com/explore-insights/market-news-and-guidance/planning/9-facts-about-social-security

 

[ii] https://www.cbpp.org/research/social-security/policy-basics-top-ten-facts-about-social-security

 

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