Celebrating Your Financial Freedom

Independence Day or “the Fourth of July” is a federal holiday in the United States commemorating the adoption of the Declaration of Independence in 1776, which declared freedom from what is now known as the United Kingdom.  This day is commonly full of celebrations including fireworks, parades, barbecues, carnivals, fairs, picnics, concerts, baseball games, family reunions, and more.

 

In honor of Independence Day and our logo, “Money is freedom. Freedom is fun,” we would like to recognize a few of the many characteristics of being financially free.  If you find that you meet these characteristics or are continuously striving toward them, then you should have even more reason to celebrate this year!

• You are happy with what you have and you are grateful for your blessings.
• You have financial goals and you are continuously moving forward toward them.
• You are patient and work for what you want.
• You are prepared with an emergency fund and an extra savings fund for life's little "what if's".
• You understand that financial wealth takes time and effort.
• You are responsible with your money and properly handle your debts.
• You manage your spending and always have money left after your paycheck.
• You invest in a long term strategy that builds wealth surely and steadily over time.

On this year's holiday, we wish you lots of love and laughter, and as always we hope you have happy and safe celebrations!  Happy Independence Day from the entire FIC family!

How To Plan For Retirement

Danford, MBA, CRSP, of Family Investment Center, explains the need to start increasing your savings now, what type of growth investments you should be utilizing, and the importance of developing an emergency fund.




For more about this topic, click here.

Dad's Divorce: emergency savings

In this week's edition of Money Made Easy on Dad's Divorce.com, host Dan Danford answers this financial question from a viewer: How many months worth of emergency savings do I need? What about if I am approaching retirement and will have a very stable income of my pension and social security benefits?

Dan Danford, MBA, CRSP of Family Investment Center, debunks the general rule of thumb for emergency funds and offers financial advice on how to prepare for retirement.

Listen to the podcast for all your personal financial help.

Question of the day: Roth IRA withdrawal rules

We get questions from blog readers and followers on Twitter (@family_finances), and we're always happy to answer. Today's question is answered by Elaine Coder, Director of Client Services for the Family Investment Center. If you have a question for us, please post it in the comments section or e-mail robynsekula@sbcglobal.net.

QUESTION: I have a Roth IRA, and I have a few questions. Does a Roth IRA have the same withdrawal restrictions as a traditional IRA? I’d like to know because I have a Roth IRA, but do not have a sizable emergency fund yet, and I’m wondering if I could take money out of a Roth IRA should some sort of emergency come up before retirement.

ANSWER FROM ELAINE CODER: An advantage of the Roth IRA over a traditional IRA is that there are fewer withdrawal restrictions and requirements.

Because Roth IRA contributions are not tax-deferrable, withdrawals are generally tax-free, but not always. Direct contributions to a Roth IRA may be withdrawn tax free at any time.

The earnings from your principle contributions can not be withdrawn until you reach the age of 59 1/2 without paying a 10% early withdrawal penalty. There is also a provision on being able to withdraw your earnings after 59 1/2 called the 5 year rule. You can only withdraw your earnings from your Roth IRA at 59 1/2 and have them count as qualified distributions if your Roth IRA has been open for for at least 5 years. Example, if you opened your account at 57, you would need to wait until you were 62 to withdraw any earnings on your principle.

Money in a Roth IRA due to conversion from a traditional IRA may be withdrawn up to the total of the converted amount without penalty, as long as the 5 year rule has been met.

The order of distributions is setup in order to help you avoid paying fees or penalties. Your contributions (tax and penalty free) come out first. Next come conversion or rollover amounts followed by earnings on your contributions, which could be assessed penalties if not a qualified distribution.

There are exceptions to the 10% penalty. If you need to take a distribution from your Roth IRA for a non-qualifying reason you can avoid the 10% early withdrawal penalty but will pay income tax. Some of the exceptions are:

* If you have un-reimbursed medical expenses that exceed 7.5% of your adjusted gross income.
* You are paying medical insurance premiums after losing your job.
* Education expenses
* Qualified disaster recovery assistance distribution

It is best to have a sufficient emergency savings (6-12 months of annual expenses) trying to avoid tapping retirement funds. The point of a retirement account is to have the money going in, growing tax free using the power of compound interest, withdrawing the money defeats the whole process.