What if you could use some of your retirement funds now, without the widely-warned- about early-withdrawal penalties? Are you younger than 59-and-a-half years old and having trouble waiting? Has the economy “put a hitch in your get-along” financially?
Now, I have to begin this article with a disclaimer: I am not a financial planner, nor am I a tax expert–nor an investment guru.
I just have really good advisors who are all those things.
In this case, my advisors are part of the team at Ron Valentine, CPA in Kaysville, Utah. Ron (pictured above) is the tax expert and a former federal auditor. His investment guru is Rob Simons of Simons & Carerra Financial. And believe me, together, they make quite a formidable team.
You’ll have to ask Ron and Rob how it works to get the expert, legal take on it–but here’s my lay understanding of how it works:
You convert your 401k to an IRA, if necessary, then set up the IRA as an annuity. You divide up the entire amount of the retirement fund by a certain number of months, based on your spouse’s age, to get the monthly amount you can take for up to eight years–in some cases, it’s five years–again, the timeline depends on your spouse’s age. Well, you don’t do all that; Ron and Rob do it for you–and they prepare all the paperwork for free. I trust them implicitly based on the way Ron has handled my tax questions; he really knows his stuff.
Are you borrowing or even “stealing” from your future self? Well, yes, I suppose that’s technically so, but consider this: You can use some or all of the funds–after reserving a good chunk for taxes!–or put some or all of them into another investment vehicle that may very well have a higher yield.
The specific way Ron and Rob will invest the rest of the retirement funds, via the annuity, has had uncommonly good returns for the past 25 years: last year the return was 14%. They can’t guarantee the performance of the investments, of course, but that’s a pretty darned good track record. Some of their clients have taken the monthly payments and, at the end of the eight years (or whatever time they had), the remaining amount was the still roughly the same as the original amount in the fund before the years of monthly payments–or even higher.
It sometimes takes a little over a month to get the first payment, and I’m sure that this plan works better for some people in some circumstances than others. The only way you can be sure if it will work for you is to talk to the experts.
As a bonus, you can get your tax questions answered, too.
Ron Valentine, CPA can be reached at 801-444-3710. His office is just south of the DATC campus at 579 S. Main St. in Kaysville.