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Focus on one growth fund near retirement; Withdrawl from 401k for medical expensesPosted by Retirement on: 2005-09-20 08:31:26 in category:
401(k) [ Print | Permalink / 0 Comment(s) ] AP DataFeatures Midland Reporter Telegram BY ERIC TYSON Investors Guide Q: I began investing in mutual funds late in life (in 1997), and since I will be retiring from teaching -- probably next year -- I have been putting as much as I can in my 403B account, Vanguard Growth Index. I now have $59,000 in that fund. In addition, I have about $7,000 in Vanguard Wellington, about $7,500 in Vanguard 500 Index, and about $15,000 in Vanguard Windsor II (IRA). I owe about $72,000 on my house mortgage. I do not have any other debt. The 403B Growth Index account is sure helpful at tax time, but the Growth Index fund is not doing well. I'm putting as much as I possibly can into this account. Does it make sense to continue to pour the bulk of my savings into this Growth Index? I'm 61 years old. I do not worry excessively over money. Although I don't have much, I enjoy good health and feel that I am truly blessed with the ability to delight in many things in life that do not require a lot of money. I would, however, like to be able to travel a little during retirement. A: In my opinion, you have way too much money already in and continuing to go into one fund that is not that well-diversified. The Growth Index fund invests in larger-company growth stocks in the U.S. The other Vanguard funds that you hold lesser amounts in also focus on larger-company stocks. Compared with so-called value funds, your growth index fund is more aggressive and risky. I suggest you first discontinue making new contributions into this fund and instead use a more-diversified fund such as LifeStrategy Moderate Growth, which invests in U.S. stocks of all-size companies, foreign stocks and bonds. It is a fund of funds, so it is incredibly diversified. You should then consider transferring your balance in Growth Index into this new fund. Q: My husband was diagnosed with colon cancer that has spread to his liver and abdomen. His medical prognosis with chemotherapy is about two years. He was diagnosed in July. We have gone through our savings. We were initially informed that we could apply for a cash-out of his life insurance with his employer, but we have been informed recently that we can only use it when the prognosis is 12 months or less. Is it an IRS ruling that we can't withdraw our 401(k) money unless my husband resigns? We do not have a large amount in it. We have a $10,000 outstanding loan currently and know that the rules of borrowing only allow 50 percent of the net balance. What we would like to do is withdraw the balance after satisfying the loan. We realize that we will be paying the taxes and the penalty. I have been unemployed since January 2004. I have been actively seeking employment, but have not been successful. A: I am so sorry to hear of your husband's health problems and your unemployment. I hope that both of these situations improve soon. According to Glenn Sulzer, senior tax analyst with CCH, your husband is a prime candidate for a hardship distribution if his retirement plan allows for such a distribution. He might also take out money if he is over age 59 1/2. A final option would be to qualify for a withdrawal based upon disability. Speak with his employer's employee benefits director or department, and ask for a copy of the plan terms and get up to speed. E-mail Eric Tyson, author of the best sellers "Investing for Dummies" and "Personal Finance for Dummies" (Wiley), at: eric(at)erictyson.com. (c) 2005 Eric Tyson Distributed by King Features Syndicate Inc. Homepage Please support are sponsors. To design you custom retirement plan. http://www.retirement-plan.us For planing a IRA rollovers. http://www.ira-rollover.us Professional asset allocation and the wonders it can do. http://www.asset-allocation.us Professional money management: National ranked performance. http://www.roth-ira.us Managers selected to fit your needs. http://www.money-managers.us |
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