johnbarnesiii
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Hello!
Looking for some advice on my IRA account. I have around $200 in my IRA account with Chase. The money has simply been sitting there with no movement for a few years.
Trying to figure out what the best thing to do is? Is it more advantageous to simply transfer this to a savings account and if so, what are the penalties involved in a transfer like this?
Also is it possible to transfer this money into my small business account with Chase? If so, what are the penalties?
Thanks in advance for your suggestions.
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Sun Jun 24, 2012 1:31 am |
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oldguy
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When you take it out of the IRA you will pay your normal federal tax rate plus your state's tax rate. (You used pretax money when you opened the account so the taxes have never been paid). And if you are under age 59 1/2 there is a 10% penalty for early withdrawal.
It doesn't matter where you move it to - a savings account or a small business account - the act of removing it from the IRA is what triggers the costs.
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Sun Jun 24, 2012 1:45 am |
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johnbarnesiii
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Thank you... so do you have a suggestion on what I can do with this money? I either want it to grow, or put it to use somehow. Right now its just sitting there steady at $200. What would you suggest?
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Wed Jun 27, 2012 5:39 pm |
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clydewolf
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Johnbarnesiii,
You provide very little information about your financial situation.
But then this is $200.
Where do you think it would do you the most good?
That is where it should go.
Do you have another TIRA?
Could you transfer the money to that TIRA? This would avoid any tax and penalty impact.
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Wed Jun 27, 2012 6:24 pm |
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oldguy
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quote:
Right now its just sitting there steady at $200. What would you suggest?
You can invest your IRA dollars in whatever you like - savings, CD, bonds, stocks. That choice is what determnes whether it grows, stays the same, or goes down.
When I was young (working & in my wealth building years) I used the SP500 (often Spyders) for my investing - in my 401k, my URA, my Roth IRA, and in my taxable account. That provided a steady average return of over 11%/yr for over 30 years - personally, that ius exactly what I would do if I was starting today.
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Wed Jun 27, 2012 8:08 pm |
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johnbarnesiii
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Cash: $ 1.10
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Joined: 24 Jun 2012
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Thanks guys!
Well here's a little more about my situation... I'm in my early thirties. I'm only now gaining an awareness of the importance of saving money and building assets. Up until now, I've simply been living paycheck to paycheck, living a very creative life as a musician and graphic designer. My priority has been my art, not my finances. However I see no reason why not to focus on both at this time. We all develop financial awareness at different times in our lives and for me this is now.
My salary is only $60,000 per year and is my sole source of income. However I do have a small band business in addition to my day job which is currently in the beginning stages of being set up to make money via touring, merchandise sales (online store), iTunes digital downloads, etc.
Many creatives are known not to have the best grasp of handling money and for me this has definitely been the case. However, again I think it only takes an awareness and willingness to learn.
So I'm totally open to suggestion. The challenge for me... how can I take what I make, even at the level I'm currently at, and use it to build some assets and capital?
This obviously goes beyond the $200 in the IRA but at least its a start. I like the idea of transferring it to a different IRA and investing (ie the SP500 you suggested) to build something.
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Wed Jun 27, 2012 10:59 pm |
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oldguy
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quote:
This obviously goes beyond the $200 in the IRA but at least its a start. I like the idea of transferring it to a different IRA and investing (ie the SP500 you suggested) to build something.
Goal. If you invest $10,000/yr at 11%/yr, you will have $2 million in 30 yrs. That is the kind of goal that you need to make for yourself - if you want $1M, invest $5000/yr, if you want $3M invest $15,000/yr, if you want $4M, invest $20,000/yr, and so on. But the $2M goal is probably realistic for your salary and age.
Mindset. Each month, you must invest your monthly amount FIRST and then live on the rest. If you do the reverse - buy what you want/need and then invest what is left over at the end of the month, you will fail badly (there will seldom be anything left.) The good part of the mindset isthat after you get used to having $10,000/yr auto-deposited, you can enjoy spending your whole paycheck (safe in th eknowledge that you're on track to have $2M).
The IRA account may not need to be transferred, you can buy whatever you want inside the account that you have. The limitation is that you can only invest $5000/yr. If you have access to a 401k plan, that allows up to $17,000/yr - ie, way more room. But if the only account available is an IRA, then invest anything above $5000 into a regular mutual fund company.
I would use an SP500 Index Fund - Vanguard has one, so does Fidelity, so do most brokerages and banks. Or you can buy shares of Spyders (SP500).
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Thu Jun 28, 2012 1:29 am |
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clydewolf
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Johnbarnesiii,
Oldguy has given you very good suggestions.
I would modify the IRA suggestion you use a ROTH IRA.
In your ROTH IRA, you make after tax Contributions.
The real benefit is that Qualified Distributions are Tax Free (think retirement).
Good luck with your band.
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Thu Jun 28, 2012 3:11 pm |
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