Unemployed & need 401 funds
I am 47 years old and lost my job from missing to much work. I am unemployed mainly because I have an sick parent and missing work for them. I have become tied into taking care of the parent longer than I expected to because of their slow recovery. I would like to be able to with drawl some of my IRA for bills etc. without a %10 penalty for early with drawl. I did with drawl already once for the yearly 8-week option and returned the money. I have a need to with drawl funds again. I have read some discussions about 72T exemptions-qualifications but do not know anything about them. I am not sure if 72T even applies to me. I am really not able to work full time because of sick parent. Is there any way I can get around the %10 with drawl fees.
Sincerely,
Terry W.
Permalink Submitted by Alan Spross on Fri, 2010-12-03 18:13
Possibly you would qualify for one of more of the exemptions in Sec 72t. Need more info –
Do you provide over 50% of the support for this parent, counting only actual money spent, not your time and effort?
Have you collected 12 straight weeks of unemployment or have started to and it will reach 12 weeks?
It is good you are aware that you cannot do another rollover from the IRA account for 12 months from the date of the last distribution.
Unrelated note: In some states your layoff for this reason could violate state law. We don’t get into those details here, but you should check into that.
Permalink Submitted by Terry Wagner on Mon, 2010-12-06 02:04
My father is financially able to support himself. I do not technically by paper trail supply money to the house hold. Here is basically what happened. I was originally injured from a car wreck and missing a lot of work using most of my FMLA up. Then my father became ill and I needed to assist him from a botched open heart surgery operation. So I eventually ran out of FMLA time to use and was fired for missing to much work. At the time I was told did not qualify for unemployment. So I have not received any unemployment benefits. I have been fortunate that I did have a fair amount of money stashed away as a nest egg. I was able to maintain my own residence for over a 1 1/2 years helping my father recover with out working because of his lung damage from pneumonia (because of botched heart operation) he was stable but in extremely frail condition. My father actually spent 7 months in a recovery hospital after his operation. I was fired for taking to much time off to assist him during recovery.
( I was out of FMLA) My fathers health continued to get worse and developed epilepsy with severe seizures. His seizures are not under control yet. He is not able to drive himself to and from the doctor appt. because of seizures. He is monitored quite frequently by doctors. 9several doctor appointments) The doctors say if he becomes free of seizures for 6 months his epilepsy would be considered under control for him to drive. He has not met that criteria yet. So he has been on an mandatory self suspension of his drivers license. He has been hurt from seizures needing stitches because no one was around him at the time of the seizure to help him. So I moved in with him. My goal was to get him through the heart problems and pneumonia after the botched heart operation and then go back to work. But then came the seizures so I am really stuck probably for another 5 months until he may become seizure free. I have not worked in several years as a full time employee with a company. I was employed 22 years with the State of Texas previous to this. I rolled my 401 into a less inexpensive IRA broker because the 401 plan was costing me considerably more yearly These problems just avalanched on me. All I am trying to do is one of the two following goals.
1. Take out some money as a hard ship with the intent to return it. So far I can not see how I qualify for this.
2. Figure out how to take out some of the money with out being penalized the %10 early with-drawl.
I am aware of any way to do this. Any help would be appreciated.
Sincerely,
Terry Wagner
Permalink Submitted by Terry Wagner on Mon, 2010-12-06 02:24
Dear alan-oniras,
I may need to clarify after looking at my response to your questions. If this helps any my father was diagnosed with epilepsy since September 2008. So I have been trying to get him self sufficient from the epilepsy for over 2 years and living with him. I do not know if this is any help or not in any qualifying for hard ship. He has a new doctors specializing in epilepsy only. They feel like he will be seizure free by June 1st 2011 with their plan of treatment. I would just like to get over this hump by using my 401 if possible.
Sicerely,
Terry Wagner
Permalink Submitted by Alan Spross on Mon, 2010-12-06 23:42
Hardship distributions do not apply to IRA accounts, just employer plans, and in any event they are subject to penalty and cannot be rolled over.
The IRA 10% penalty waivers do not apply based solely on your anwers with one possible exception.
For your own medical costs including your medical insurance costs, amounts you withdraw in excess of 7.5% of your gross income are free of penalty. Since your gross income is probably quite low, the 7.5% limit would be a low threshold to exceed. Now IF your father was considered a dependent because you provided over half his support, you could include his medical expenses as well. But it sounds like most of your assistance was in the way of personal labor and not direct financial assistance.
His total support will vary each calendar year, but if he has insurance his medical costs are mostly covered and the premiums would represent most of his medical costs. Any income he has is obviously considered contributed by him, so it does not appear that you meet the 50% requirement to consider him as a dependent. The real problem is that you cannot assign a value per hour of your medically related assistance that were not out of pocket payments for you.
Note that there is a penalty exception for substantially equal payments, but if you start such a plan it must continue until you are 59.5, and neither these expenses OR your IRA balance would probably last that long. If you change the exact amount you are allowed to distribute you would then owe the penalty back to the beginning of the plan. Therefore, starting such as plan would not be appropriate for your situation because you would eventually break that plan. The most you can get out of such a plan is less than 5% of your IRA balance.
Permalink Submitted by Terry Wagner on Tue, 2010-12-07 23:27
Well I really appreciate your information bringing you experience to the table. I see and understand what you are offering. You are right I do not plan on being unemployed past the next 8 months. Even with your proposal this would be a strict tight rope to walk for a small amount of money. If there is any other proposals I am open for suggestion.
Sincerely,
Terry Wagner