Early withdrawal from IRA WITHOUT 10% penalty.

Sharing buttons:


hey Dustin Tibbets here financial

adviser with jazz wealth managers how's

it going today I thank you so much for

watching I know it's difficult to

entertain people during these times and

give them advice and help in tips and

stuff and I really do appreciate you

guys watching and I of course wish that

you're safe as can be and hopefully not

stirring up too crazy in your homes

there anyways we're going strong here

and continue to help and educate you

guys and I've got a really quick one

here for you today that has to do with a

stimulus bill last week I did a class

for our customers that went through the

whole stimulus bill it's eight hundred

and eighty pages long no I did not read

the 880 pages to them but I went through

all the different topics that may be

affecting them I want to share one of

them with you here today and maybe give

some more detail if you're asking that

question because there's a lot of

questions out there and sadly the cares

Act or stimulus bill really left a lot

open there there's a lot of

interpretation to what the new law is so

I at least want to lay one out for you

here and this has to do with your IRA

the basically what they said is if you

need to take out money from your IRA you

could take out up to one hundred

thousand dollars from an IRA if it's a

pre-tax IRA you owe the tax still but

you won't have to pay the penalty so

let's go over here and just explain real

quick because I know a lot of people are

having a hard time and you know you

might have to take money out of your IRA

I definitely would not discourage that

you have to do what you have to do to

survive and nobody you know that thinks

otherwise really just probably doesn't

know what's going on out there so let's

say that this is you you have a business

and you don't qualify for the grants and

loans that are out there now you just

have no other option to survive and you

want to take out a hundred thousand

dollars from your IRA well what they're

basically saying is the ten percent

penalty that you would normally pay the


well that's gone right they're not going

to they're not going to hit you with the

penalty you still have to pay taxes on

it but there's some catches here so hang

with me on $100,000 withdraw let's say

well you're in the twenty two percent

tax bracket right let's say you don't

have a job this year you're in the

twenty two percent tax bracket something

happens you know I mean we can do the

math here you're going to

thousand dollars in taxes you have to

pay that you're gonna get to avoid the

$10,000 penalty but fair is fair this

money was pretext so the IRS is saying

you were going to take it out at some

point and pay us tax if you want to do

it now we'll just waive the penalty

so it's $22,000 here's sort of the bonus

or the catch that works in your favor

you've got three years to pay it off you

got 20 20 20 21 20 22 you also have to

three years to put it back so what

happened here is if took out a hundred

thousand dollars or whatever the number

is you owe ordinary income tax there so

whatever tax bracket you're in just

imagine that is your rate there but

you've got these three years to pay it

back and it's evenly taxed over the

three years I'm sorry not pay it back

you have three years to pay the tax you

don't have to pay it all in 2020

so imagine $22,000 you've got 70 300 ish

7373 hundred is what you would owe if

you wanted to spread it out you don't

have to by the way but if for some

reason you wanted to and things don't

pick up for you and your life you've got

those three years to do it now here's

kind of a cool point if you take twenty

two thousand out normally you can't put

money back you take money out of an IRA

you're only allowed to contribute up to

your maximum contribution for the year

in this case they're saying whatever the

number is that you take out if you want

to put it back in any three of these

years they will prorate the taxes that

you would have owed so let's say you

take twenty two thousand and you pay

seventy three hundred in this year is

seventy three hundred and this year

you've got seventy three hundred left to

pay in the taxes but in that third year

things start picking up you want to put

the money back or some of it you can

actually prorate the taxes that you

would owe on that now this rule this 10%

penalty waiver is actually for people

affected by the virus either you got it

your family member got it you were laid

off because of it

furloughed you name it just if it

affected you in my mind that pretty much

affects everybody right so I don't know

how they're checking that I think the

Treasury secretary actually said we're

kind of going on the honor system or

gentleman's code here and I imagine you

wouldn't take money out if you didn't

want to take out money anyways that's

kind of what they're imagining but that

breaks it down for you so that's the

early withdrawal from the traditional

IRA without the 10% penalty but you will

have to pay the taxes stretch them out

over three years if you put the money

back they'll prorate the taxes you won't

have to pay any more of those again I

know it's odd times man just really

interesting to see you might know where

we're at quick story this is not we

don't have an office we're like the only

financial adviser that chose not to have

a fancy office we built a TV studio and

we work in the TV studio that to teach

our customers and everything and it's in

an industrial Plaza right I mean you so

industrial Street they do granite they

do all kinds of stuff ghost town

absolutely we have the whole place to

ourselves we've riding scooters and

skateboards up and down the street

because there's nobody here to infect us

so kind of sad what's going on out there

then bottom line is there's a tip for

you if you're one of our customers go

into the dojo I went through the whole

stimulus bill in a short class for you

or of course if you have any questions

let me know but for the rest of you just

be safe right just keep learning keep

focusing on ways to keep your dough

straight we're gonna work through it if

you're going through some tough times

right now do not make silly decisions

get somebody to help you don't be scared

to talk about financial difficulties any

stresses going on in your life you know

when everybody's going through it you

can talk about it nobody's going to

laugh at you or be embarrassed or you

don't have to be embarrassed you know

work through it don't do anything silly

out there and hey we'll talk to you soon

I hope you enjoyed the video enjoy

thanks for watching

why should you choose jazz wealth as

your retirement or long-term investing

service our portfolios are managed by us

not some faceless mutual fund manager

our private classes will teach you

everything about investing and getting

your dough straight best of all our

fiduciary standard means your best

interests comes before ours