Never use a 401(k) to pay off debt

The number of people 65 and older that have filed bankruptcy has tripled since 1991. Those struggling with debt often tap into their 401(k) to pay it down, in an effort to pay their bills and to not have to file bankruptcy. Here’s what you need to know if you find yourself in this position. 
Funds in your 401(k) and IRA’s are protected in bankruptcy by federal law. So even if most of your assets are seized to repay your creditors, your retirement account is considered exempt and can’t be touched.
 The exemption of 401(k)s in bankruptcy started with the Employee Retirement Income Security Act of 1974, a federal law that sets minimum standards of protection for individuals who voluntarily contribute to retirement accounts and healthcare plans in the private sector. 
The special thing about a 401(k) is that it isn’t considered property of the [bankruptcy] estate. But if you transfer any or all of your 401(k) out your employer-sponsored account and into your regular checking or savings account, that money is no longer protected. Not only do you lose your retirement savings when you tap your 401(k) to pay down debt, but you also have penalties if you’re under age 59½. Outside of certain limited circumstances, the IRS imposes a 10% early-withdrawal penalty on funds in a traditional 401(k) withdrawn before that age, on top of the ordinary income taxes that you owe on the money you take out.  
If you have questions call 320-679-5183.

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Your Safe Money Show highlights for April 27th show

For this weeks Your Safe Money Show (April 27), as another school year is wrapping up, seniors are looking at their next step, and technical colleges are changing the way they recruit students. The trades are fighting back against the 4-year college as the only choice. We’ll look into that.
Also, if you paid more in taxes in 2018, I have something for you to consider that might help with taxes this year.
And I have the biggest reason you should never use your 401(k) to pay off debt.
Listen at 7:30 a.m. Saturdays at 95.5 FM KBEK.
They stream live at kbek.com.
To hear recent shows go to the podcast page at yoursafemoneyshow.com.

Travel Insurance

Social Security debt card

Retirees who don't have bank accounts or prefer not to use one can have their payments loaded on a prepaid Direct Express Debit Mastercard. 
There can be fees with these debt cards, here’s how to limit those fees. Debit card users can withdraw cash from Direct Express network ATMs for free once per deposit to the account each month. Additional cash withdrawals at network ATMs are 85 cents each. Since ATM withdrawals are limited, it's often more convenient to shop with the Direct Express debit card instead of using cash. This card can be used to make a purchase anywhere that a debit Mastercard is honored, which is just about anywhere, so use the card to make your purchases rather than using cash.
When you use your Direct Express debit card at retail locations, you can request cash back with your purchase. The smart thing to do with the card is to use it to shop, use it to pay bills, and then if you need to get cash back, you can do it at the point of sale. If you do that the card can be used virtually fee free.
While multiple ATM withdrawals trigger fees, you can get access to the cash loaded on to your card from a bank or credit union teller for free.
A paper statement mailed to you costs 75 cents per month. This fee is easily avoided by accessing your account information online. A funds transfer from your Direct Express debit card to a personal U.S. bank account costs $1.50 each time. You can avoid this fee by signing up to have your Social Security payments directly deposited into your bank account instead of applied to the debit card. Plus you get interest in a bank account but not with a Direct Express debit card.

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Closed on Good Friday

Sjoberg & Holmstrom Financial Services will be closed on Good Friday. 
You can leave a message at 320-679-5183 we will return your call as soon as possible.
We hope you have a blessed Easter.