SEP IRA

Archive for April, 2007

Question: I took out this year bout 10,000 dollars out of my SEP IRA and I paid the 10 percent penalty already. ?

I took out this year bout 10,000 dollars out of my SEP IRA and I paid the 10 percent penalty already. I had to do it for some personal issues. How would I claim this on my taxes and if I dont claim it, what will they do, will they find out? Is this a must do? Its Fidelity!

Answer: There is still a tax that you will have to pay on the money that you took out, and that’s based upon the Tax Rate that you are in. There is a form that you can fill out to have the penalty abated, Form 5329, but it’s harder to get the IRS to do that. You will receive a 1099-R and you will have to use the information from that to enter it on your tax form, or you will need to provide that to your tax preparer.

Yes, if you fail to file on it, at that amount the IRS will send you a “nice” letter to remind you that you didn’t use it, and that you owe them a lot more money. Sorry.

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Question: Old people say they are on a fixed income, could they mean they are getting 50K month in income?

If it’s from an annuity or a pension it would be FIXED.
Also money from CD investments, and dividend paying stocks would be fixed.
So why are all these old people complaining about being on a fixed income?

Why don’t they just say all they have is social security?
It would make it much more simple to understand.

When I think of fixed income for some reason I see vairous amounts of retirement accounts that have been well invested and planned with products that pay steady income. I see pensions and RMD’s out of ira accounts.

Fixed income to me means well invested wealth that is coming in.
Why does it mean to old people that they have nothing to their name.
Is it an expression?

Isn’t everyone that is retired on a fixed income.
Even if you are sitting in stocks, you are probably following a certain rule such as 4% out a year, and adjusting for inflation.
Thats’ Fixed.
Even ss gives you an inflation adjustment. You follow the same number for your retirement.

Answer: A fixed income generally means you cant increase your income through job changes, promotions and performance raises and bonuses. In retirement you’re generally more in a spending phase than a savings and investment phase. Generally you get only cost of living raises and whatever your savings and investments return, which is probably less than it was before retirement because you cant afford to take as much risk. And then there is inflation and maybe taxes. Health care costs can be higher too. If one has saved and invested well and keeps costs low they can live well in retirement though.

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