EricM
Member
Cash: $ 3.55
Posts: 16
Joined: 18 Nov 2010
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First off, I'm 27 years old and have not the slightest clue about anything dealing with retirement.....
I changed jobs last year, and recently received a "Funding Breakdown" about a pension that I had at my previous job ( I didn't even know I had one).
It mentions a Payment Type which is Lump Sum or Mandatory Cashout, and also an Advice Number and Advice Date.
What do I do with this?
My new employer is a very small company compared to my previous employer which was a corporation, and I haven't qualified for any retirement options with my new employer quite yet.
Is this something I can cash out? I've read that there are penalizations on stuff like this, but I currently have an auto loan with an extremely high interest rate that I'm putting any money possible on to get paid off.
Any help would be greatly appreciated!
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Mon Jan 23, 2012 6:37 pm |
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Vensik
New Member
Cash: $ 0.80
Posts: 4
Joined: 24 Jan 2012
Location: Richmond, VA
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Congratulations on having money you didn't know you had. The company contributed this money in your name, and it sounds like they are now letting you know there is not enough in there for them to manage it and that it will be disbursed. It is up to you to tell them how you would like it disbursed. As a financial advisor, I help clients through this every day.
Rolling the money into an IRA is the easiest option, the full amount would move into an IRA with no taxes or penalties on it.
Typically if you cash it out you will pay your income tax rate plus a 10% penalty to get to the money. It could easily be 30% of the money in the account. This is an expensive option on where to find money to pay off a car loan. If you are paying 10% interest per year, this would take 3 years at a minimum to make sense. That is assuming you did not roll the money into even some conservative investment making 5-6% per year, which you would not be making if the money was used toward the loan.
I hope that answers your questions on at least what it might cost, in the end it is a personal decision and up to you.
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Tue Jan 24, 2012 3:14 am |
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EricM
Member
Cash: $ 3.55
Posts: 16
Joined: 18 Nov 2010
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Thanks alot folks...
I found out that they had to roll it over into an IRA. I had moved and apparently a document did not make it to me in time.
Its through Fidelity, and I read up on their website after I activated my account. I decided to go ahead and cash it out, as the sum is only $3100. Their website allowed me to deduct for taxes, and after finding my tax bracket which is 15%, I had them take out 25% total on Federal.
The only thing I'm unceratin about was the state taxes. I could define a percentage, or elect the state minimum. I opted to go with the state minimum which was like 7%.
All in all, I think I was left with around $2200. At this point, I really need to get this toxic interest rate, upside down vehicle of mine, paid down so I can either pay it off, or trade it in now that my credit is back in good standing.
Thanks again for all of the advice. I feel like I have a better understanding of what I'll need to do when I'm eligible at my new job for retirement benefits.
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Tue Jan 24, 2012 6:15 pm |
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Vensik
New Member
Cash: $ 0.80
Posts: 4
Joined: 24 Jan 2012
Location: Richmond, VA
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Well it sounds like you at least understood a little more what they were doing with it and why it cost so much to take it out. 32% is alot to lose but in the end if it helps you sleep better at night than the mental capacity can be worth every penny.
Good luck out there.
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Wed Jan 25, 2012 1:48 am |
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