Year-end review of your retirment accounts

As we head into the final few months of 2019 you should take some time to review the contribution limits of your retirement accounts and determine if you can make additional contributions before the deadline for 2019. You should also take this opportunity to review your records to make sure you avoid the number one retirement account mistake.

Contribution Limits

    • For a 401(k), 403(b) or 457 your maximum contribution for 2019 is $19,000. If you are 50 or older before the end of 2019 you can contribute an additional $6,000 for a total of $25,000
    • For a traditional or Roth IRA plan your maximum contribution for 2019 is $6,000. If you are 50 or older before the end of 2019 you can contribute an additional $1,000 for a total of $7,000. Remember that this limit applies to each spouse separately. A married couple both over the age of 50 can contribute a total of $14,000 to traditional or Roth IRAs for 2019.
    • For a Simple IRA your maximum contribution for 2019 is $13,000. If you are 50 or older before the end of 2019 you can contribute an additional $3,000 for a total of $16,000.

If you are not able to max out your contributions before the end of the year you can continue to contribute until April 15th, or October 15th if you file for an extension.

The Number One Retirement Account Mistake

One of the biggest mistakes you can make with your IRA or other retirement account is to not have accurate beneficiary forms on record for your account. The beneficiary form identifies who you want to receive the funds in your account after your death. Missing or outdated beneficiary forms can create legal or tax nightmares for your family.

These beneficiary forms take precedence over any other legal documents such as a will or divorce agreement, which can result in your funds going to the wrong person, even when it is clear who you intended to receive the funds. In a recent U.S. Supreme Court case, William Kennedy failed to update the beneficiary form for his 401(k) following his divorce. In Kennedy’s divorce agreement with his wife, she agreed to waive her rights to his 401(k), however he never updated the beneficiary form with the account holder.  This led to an eight-year legal battle for his daughter, trying to recover the $402,000 he intended her to receive. His daughter ultimately lost when the Supreme Court unanimously decided that the outdated beneficiary form took precedence over the divorce agreement and Kennedy’s will. Had Kennedy simply taken the time to update the beneficiary forms for his 401(k), he would have saved his daughter years of hassle and guaranteed she receive the funds he intended for her. 


The lesson here is very clear:  Whenever there is a major change in your life, make sure that you update the beneficiary forms for all your financial accounts. Major changes would include getting married, having a child, getting divorced or the death of a family member. If you have not reviewed these forms since the last time one of these events took place you should take some time before the end of the year to do so.

Will vs. Trust: which is right for you

Have you ever thought about who you would like to give your money, real-estate, or that special family heirloom to after you pass away? Most of us have, but have you taken the necessary steps to ensure that your belongings are received by that person or persons? The two most common methods of transferring your assets to your loved ones after your death are a will or a living revocable trust. What is the difference between them, and which one is right for you?


A will is a written document that allows you to establish how you would like your personal assets to be distributed amongst your family and friends after you have passed away. You can also dictate, within reason, how you would like your assets to be used by their recipient.  A will can be changed at any time throughout your life but becomes irrevocable at the time of your death. A will also allows you to designate a guardian for any minor children you may have. Without such guidance in your will, it will be up to a judge to appoint a guardian as they see fit.


    • Easier to set up. A will is generally easier and cheaper to set up than a trust as it does not need to be actively managed or funded.
    • Can be used to designate a guardian for your minor children


    • More restrictive. A will does not provide as much freedom as a trust to control the distribution of your assets after your death.
    • Court intervention. Transferring your property through a will requires the beneficiaries to go through probate court, which can be a time-consuming process and makes your financial affairs part of the public record.


A living revocable trust is a legal entity that you set up in order to manage your assets while you are alive and transfer them to your beneficiaries after your death. Unlike a will, there is no court intervention required to transfer property to your beneficiaries. One of the major differences between a will and a trust is that a trust must be funded in order to be valid. A trust can only be used to transfer property that was placed in it before your death.


    • Greater control. A trust allows you to dictate how and when a minor child will receive any money left to them. It can also be used to set up specific funds such as for a child’s education.
    • Avoid court. Transferring your property through a trust allows you to bypass the time-consuming process of probate court and allows for your financial affairs to remain private. Any assets placed in a trust can be transferred immediately to your beneficiaries after your death.


    • More costly to set up. Trusts are more expensive than wills because they require continued management after the initial setup and they can only control assets that have been placed into them.
    • Cannot be used to designate a guardian for your minor children.


You should consider the unique circumstances in your life to determine if a will or a trust would be more beneficial. In some circumstances it may make sense to have a trust but to supplement it with a will. For example, if you have one or more minor children you may consider setting up a trust so that you can establish college funds or hold money for them until they reach a certain age, and then you may want to supplement that trust with a will to designate a legal guardian for your children if you pass away before they reach adulthood.

What you shold know about the Secure Act

The SECURE Act was signed into law by President Trump in December and went into effect on January 1st of this year. The new law was intended to expand opportunities for individuals to increase their retirement savings, but also brings about some significant changes to retirement and financial planning.

Here are the two most important changes along with six notable provisions that you should know about regarding the SECURE Act: 1) Increased Access to Retirement Plans for Small Business Owners and 2) The Elimination of the Stretch IRA.

1. Increased Access To Retirement Plans For Small Business Owners: The SECURE Act expands the ability for small businesses to offer retirement plans because it allows small-businesses to pool resources with other small businesses to offer 401(k) plans at lower costs. This piece of the legislation could help more small businesses take advantage of employer-sponsored plans. This is good policy. If you are a small business owner, we encourage you to reach out to us to see how this may affect your business.

2. Elimination Of The Stretch IRA: One of the biggest changes from the Secure Act comes from the elimination of the “stretch” IRA on inherited retirement accounts. This means that younger beneficiaries can no longer stretch the distributions over their lifetime, but now must distribute the entire account within 10 years of the account owner’s death. This does not apply to spouses who inherit their deceased spouse’s IRA or minor children of a deceased account owner.

The elimination of the stretch provision presents significant changes, including the need to review current estate plans to avoid unintended consequences. This change may require you to look at other options for giving retirement accounts to your beneficiaries. Roth Conversions, life insurance and charitable trusts may now look a lot more attractive in light of the new laws.

In addition to what we just shared, there are six notable provisions from the new law:

1. Age Limit Removed For IRA Contributions: There is no longer an age cap on contributions to a traditional IRA. Before the SECURE Act, there was an age cap of 70 ½ for contributing to a traditional IRA. Individuals who continue to work can now continue to save for retirement in an IRA, regardless of their age, as long as they have earned income.

2. Required Minimum Distribution (RMD) Age Extended to 72: The SECURE Act delays RMDs from retirement accounts until age 72 (up from 70½). Anyone who is over 70½ must continue taking RMDs.  

For those under 70 ½. this extension basically means that investors have a longer time horizon to keep their investments tax-deferred in their IRAs… and this has direct implications on how you should be investing your taxable assets to produce income in retirement.

3. Penalty-Free Withdrawals For New Parents: The SECURE Act now allows new parents to pull up to $5,000 from their retirement plans penalty-free, if they do it within a year of the birth of a child or adoption. Income taxes will still apply to any withdrawals from a traditional retirement account, but this provision allows new parents to pull money from their retirement plan to pay for some of those first-year child expenses and not incur any penalties. 

4. Student Loan Repayment Through 529 Savings Plans: Individuals can now withdraw up to $10,000 from 529 savings plans to make student loan payments. This is a small step forward in helping Americans manage the growing costs of college education by empowering the 529 plan with one more tool to help students.

5. Retirement Plan Conversion To A Lifetime Annuity: Retirement accounts can now be converted to a lifetime annuity. Essentially, this piece of the legislation gives investors the ability to lay off their longevity risk onto an insurance company who will gladly take on that risk for a healthy annual premium that they collect from investors. This is good in that it gives investors another option, but it also puts them at risk of being taken advantage of by insurance companies.

6. Lifetime Income Disclosure For Defined Contribution Plans: Employers are now required to disclose to employees the amount of sustainable monthly income their balance could support in their 401(k) statements. This is not a big deal, but it could be a helpful resource for investors as they look for guidance on how to prepare for retirement.

If you take away anything from this article, take away this: The Secure Act has essentially pushed you to review your retirement and estate plans to make sure they take advantage of the good provisions of the new law while employing strategies to mitigate the bad provisions of the new law.

If you have additional questions, or need help putting together a holistic plan that takes the Secure Act into account, please reach out to Telos Asset Management Company at (312) 858-3209

What will happen when social security runs out

You have likely heard that the Social Security fund is projected to run out of money around 2035. With that deadline only 15 years away it is likely to impact everyone who is not already enrolled in Social Security as well as many who are. What will happen when the fund runs out? You may have heard that benefits will stop being paid once the fund runs out, but that is not likely to happen. We have laid out some of the changes that are likely to be made to Social Security, over the next 15 years or after the fund runs out around 2035.

Reduced Benefits

If no changes are made before the fund runs out, the most likely result will be a reduction in the benefits that are paid out. If the only funds available to Social Security in 2035 are the current wage taxes being paid in, the administration would still be able to pay around 75% of promised benefits. While a 25% reduction in benefits could significantly hurt the retirement plans of those who are relying on their Social Security benefits, it is far less damaging then the program being shut down entirely.

With the potential for benefits to be reduced, some retirees may be tempted to apply for their benefits early to receive as much as they can before the fund runs out. However, if you start taking your benefits as soon as allowed, they will be reduced to 70% of your full-retirement age benefit. Comparing this to the 75% that could be received even after the fund runs out, you would still be hurting your retirement by applying early.

Increased Wage Taxes

To avoid benefit reductions, congress may vote to increase the Social Security taxes charged on employee wages. If the increase were put in place immediately, the employee portion of the tax would need to increase from 6.2% to 7.55%. This would represent an additional $675 in taxes paid annually for an employee making $50,000 per year.

If the increase is not put in place until 2035 the employee portion would need to increase to 8.025%, representing an annual tax increase of $912 for an employee making $50,000.

Increased Full Retirement Age

Even if the fund does not run out, the full retirement age needed to receive your full Social Security benefit is likely to go up in the future as life expectancies increase. Since the Social Security program was first started the average life expectancy has increased 7 years and yet the full age retirement for Social Security has only increased 2 years. As the fund begins to run out, it is likely that the full retirement age will be raised even further, along with harsher benefit cuts for those who apply early.


While Social Security benefits are unlikely to be completely eliminated 15 years from now, there is a strong possibility that they will be reduced significantly if revenues are not increased in the next few years. To make sure that your retirement plan is secure, you should analyze your retirement income stream under the assumption that your Social Security benefits will be reduced and determine what changes need to be made if that happens.

The impact of your pension on your social security benefits

Many public sector workers do not pay into Social Security because they pay into a separate state or local pension fund. Since Social Security benefits are based on the Social Security wages earned during working years, public-sector workers who do not pay into Social Security will not be eligible for Social Security benefits at retirement.

There are other public sector workers however, who have paid into the Social Security pool because they work second jobs or began working in the public sector later in life or retired and began a second career. Public sector workers who have paid into Social Security can qualify for benefits on top of their pension, but those benefits may be reduced based on the number of years they paid into Social Security.

How Are Social Security Benefits Calculated?

Social Security benefits are based on your average wages for your 35 highest earning years. If you pay into Social Security for 29 years, your benefits will be calculated using the 29 working years plus 6 years of zero wages. Your annual wages are also adjusted for inflation to prevent your early earning years from hurting your benefits.

After adjusting for inflation and averaging your 35 highest years, your annual wages are divided by 12 to produce your Average Indexed Monthly Earnings (AIME). Your monthly benefits are calculated using 3 percentage brackets of your AIME:  90% of the first $926 of AIME, 32% of the next $4,657 of AIME and 15% of AIME after that.

Example: If you work for 35 years and have average adjusted wages of $72,000 per year, your Social Security benefit calculation will use $6,000 for your Average Indexed Monthly Earnings and calculate your benefits as follows:

How Your Pension May Limit Your Social Security Benefits

If you receive a pension from an employer that does not withhold Social Security taxes, your benefits may be reduced by the Windfall Elimination Provision (WEP).

This provision reduces monthly benefits by reducing the first bracket benefits from 90% down to 40% in 5% increments depending on the number of years worked. If you paid into Social Security for at least 30 years then the WEP limitation will not apply. But if you paid in for less than 30 years the first bracket percentage will be reduced by 5% for each year under 30 until it bottoms out at 40% for 20 years of contributions. This limitation can reduce your base Social Security benefits by as much as $5,500 per year.

Example: To demonstrate how this limitation reduces your benefits we have calculated the monthly benefits you would receive if your AIME was $6,000 under two scenarios: 1) where you have 30 years of Social Security wages and 2) where you only have 20 years of Social Security wages:

The lower percentage applied to the first $926 of wages when the WEP limitation applies reduces your benefits by $463 per month or $5,556 per year.

What Can You Do to Eliminate the Pension Penalty?

The Equal Treatment of Public Servants Act of 2019 was recently introduced in congress to repeal the WEP limitations by replacing them with a new formula that treats public servants more favorably. With the bill’s future uncertain, we want to focus on steps you can take right now. 

The first step in the process is to determine your Social Security benefits by creating an account at This account will allow you to view your estimated benefits based on your prior work history. Be aware that the estimates provided by the Social Security Administration will not account for any WEP limitation that may apply to you.

After you find your estimated benefits you will need to subtract $46.30 per month for every year short of the 30-year window. If you are more than 10 years short of the 30 year mark, only subtract amounts for the first 10 years that you are short.

If you are short of the 30-year threshold, you may want to consider working a few extra years at a part-time job or starting a new career at retirement. These additional years of contributions will not only increase your potential Social Security benefit, they will also decrease the limitation put on those benefits by the Windfall Elimination Provision.

Six myths about health savings accounts

If you qualify for one, a Health Savings Account is an incredibly compelling way to pay for your future medical costs. Not only does it allow you to bypass the 10% threshold for deducting your medical expenses, it also provides for tax-free growth when you use the proceeds for medical expenses. With significant medical expenses in retirement all but guaranteed, a Health Savings Account is a great tool to save for retirement. As compelling as HSAs are, there are a number of misconceptions about how they work and how you can use the funds held in them. Our goal today is to dispel some of the common myths that surround Health Savings Accounts.

1. You need to use HSA money before the end of the year

HSAs are frequently mixed up with flexible spending accounts, which require you to use the funds in the account before the end of the year or lose them. With an HSA the money in the account is yours to keep until you need it.

2. You can’t use your HSA after enrolling in Medicare

While you cannot continue to contribute money to your HSA after enrolling in Medicare, you can continue to use the funds that are already in the account to pay for your medical expenses. In fact, once you turn 65 you can also use your HSA funds to pay your Part B and Part D Medicare premiums. If your Medicare premiums are paid directly out of your Social Security benefits you can withdraw the same amount from your HSA to reimburse yourself.

3. You can only open an HSA if your employer offers them.

As long as you meet the eligibility requirements, you can open an HSA and start contributing on your own. Many banks and other financial institutions offer Health Savings Accounts. However, if your employer does offer an HSA you are likely better off setting one up through them since many employers make direct contributions to employee’s HSA and will likely also cover the administrative fees of the account.

4. You need to withdraw funds in the same year you pay your medical expenses.

Many HSA providers will give you a debit card that you can use to pay your medical expenses directly out of your HSA. However, you can also pay your medical bills out of pocket and then withdraw funds from the account to reimburse yourself. There is no time-frame in which the reimbursement needs to be made. As long as a medical expense is incurred after you set up your HSA, you can wait five, ten or even fifty years to reimburse yourself out of the account. However, the longer you wait the more difficult it may be to prove that the expenses were not already reimbursed in a previous year if the IRS chooses to question the reimbursement so it is best not to wait too long to reimburse yourself.

5. You can only use HSA funds for family members covered under your insurance plan

The amount of money that you can contribute to your HSA is dependent on whether your health plan covers your family or just yourself. You can contribute up to $3,500 annually if you have a single plan or $7,000 if you have a family plan. However, even if your health plan only covers yourself and your other family members are on a separate plan, you can still use your HSA funds to cover any medical expenses for your spouse or dependents.

6. You don’t need one if you are healthy.

Even if you don’t expect to have significant medical expenses anytime in the near future, you are very likely to have large medical expenses later in life. When viewed as a retirement planning tool rather than an emergency medical fund, the HSA beats both traditional and Roth retirement accounts by allowing for pre-tax contributions and tax-free distributions when used for qualified medical expenses.


The Health Savings Account is a powerful tool to prepare for any unexpected medical costs while also saving for retirement. If your healthcare plan qualifies as a High Deductible plan you should strongly consider the benefits offered by an HSA and if you are choosing a new healthcare plan you should look at plans that will qualify for a Health Savings Account.

Roth vs Traditional IRA

In our last article, Year-End Tax Planning Strategies, we briefly discussed the potential benefits of a Roth IRA over a Traditional IRA. This article will dive deeper into the differences between these two retirement planning options and provide some guidance on when one makes more sense than the other. 

Contribution Limits

You can make 2019 contributions to a Traditional IRA or a Roth IRA until April 15 of 2020. The maximum amount you can contribute in 2019 is $6,000. If you are over the age of 50 then you can contribute an additional $1,000 to either one. Additional limitations apply differently to Roth and Traditional accounts based on your income level and whether or not you are covered by a retirement plan through your employer. These additional limitations are complicated so we won’t get into them now. If you want more information on these limitations you can read “Income Limitations” at the end of the article.

Which Account Is Right For You?

The primary distinction between a Traditional and Roth IRA is when you pay taxes on the money in the account. With a Traditional IRA you deduct your contributions from your taxable income and do not pay any tax on that money until you withdraw it in the future. With a Roth IRA you pay the tax now but can withdraw the funds tax-free in retirement. One clear advantage the Roth has over the Traditional IRA is the earnings of the account can be withdrawn tax-free after age 59 1/2. With the Traditional IRA you pay taxes on the earning as well as your original contributions when you withdraw them.

So what is the advantage of the Traditional IRA if it requires you to pay taxes on your earnings? In the past, the argument in favor of Traditional IRAs was that you were likely to be in a lower tax bracket when you retire so it made more sense to defer taxes today so that you could pay them later at a lower rate. However, with the Tax Cuts and Jobs Act we are currently in one of the lowest tax environments our country has seen in decades. And with the national debt growing at an accelerating pace there is an increasing chance of significant tax hikes in the future. If tax rates rise significantly in the future you could find yourself in a higher tax bracket in retirement, even if your income decreases. With that possibility, deferring taxes now to pay them in retirement may not be the best decision.


The decision between a Traditional or Roth IRA comes down to your expectations for your tax bracket in retirement compared to your tax bracket today and the length of time before you retire. If retirement is still 20 or 30 years away, you may be better off investing in a Roth IRA to take advantage of tax-free growth for all of those years. If you are planning to retire in the near future, the benefit of a tax deduction today may outweigh the potential increase in taxes a few years from now, if your income drops significantly when you retire. 

For a deeper discussion on which account makes more sense for your personal situation, please reach out to us. 

Income Limitations

Roth IRA: To contribute the full amount to a Roth IRA in 2019 your Modified Adjusted Gross Income (MAGI) needs to be less than $122,000 if you file single or head of household and it must be less than $193,000 if you file a joint return with your spouse. If your MAGI is between $122,000 and $137,000 ($193,000 and $203,000 if filing a joint return) then you can make a partial contribution. Once your MAGI exceeds $137,000 ($203,000 if filing a joint return) then you are no longer eligible to contribute to a Roth IRA.

Traditional IRA: If neither you nor your spouse are covered by a retirement plan at work then there is no income limit to your Traditional IRA contributions.

If you are covered by a retirement plan at work and file single or head of household, your Traditional IRA contribution begins to be reduced once your MAGI reaches $64,000 and is eliminated once your MAGI reaches $74,000.

The rules become even more complicated if you file a joint return and either spouse is covered by a retirement plan at work. If you are covered by a retirement plan at work, your contribution begins to be reduced once your MAGI reaches $103,000 and is eliminated once your MAGI reaches $123,000. If you are not covered by a retirement plan but your spouse is then your contribution begins to be reduced once your MAGI reaches $193,000 and is eliminated once your MAGI reaches $203,000.

How to save for your child’s college education

The cost of a college education is rising by three to four percent a year, so it is never too early to start saving for your child’s future college tuition.  Before you start saving however, make sure to consider the options that will maximize your savings while minimizing your tax burden.

529 Plans

A 529 plan allows you to contribute to a tax-advantaged account in order to fund college tuition. While contributions to a 529 plan do not provide a federal tax deduction, you may qualify for a deduction on your state tax return for your contributions. Additionally, you can pull out your contributions and earnings from the account tax free when you use them for qualified education expenses. Qualified education expenses include tuition, fees, books, supplies, and equipment required for enrollment. If your child is enrolled at least half-time (6 or more credit hours per semester), room and board are also considered to be qualified expenses.

529 plans come in two varieties: Prepaid tuition plans and college savings plans.

Prepaid Tuition Plan

With a prepaid tuition plan you can pay for your child’s tuition ahead of time, based on the current rates.  For example, if your child is 8 and one year of qualifying college tuition is $10,000 today, you can contribute $10,000 to the fund today and your child’s first year of tuition will be fully covered when they start college in ten years – regardless of the cost of tuition at that time. You are not required to prepay a full year at once, you can pay into the fund over multiple years but each year the required amount will increase. With a prepaid tuition program, you do not need to worry about how well the fund is performing, or about tuition costs. The fund bears the risk, not you.

College Savings Plan

A college savings plan operates more like a traditional investment account such as an IRA or 401K. You contribute funds to the plan that grow over the years until you are ready to withdraw them to cover education expenses. While a college savings plan does not provide the same guarantee as a prepaid tuition plan, it provides more flexibility on how the funds are used. It also has the potential to provide a greater return on investment than the prepaid tuition plan where earnings of the account will be no greater than the rise in tuition cost.

Roth IRA as a Last Resort

If your child is about to enter college and you do not have a 529 plan in place to cover the tuition, you can pull funds from your Roth IRA without incurring the early penalties and taxes that you would normally face when taking early distributions. We caution against using a Roth IRA to cover your child’s college expenses, because the Roth IRA is one of your best retirement tools. It is however a valid option. If you choose to tap into your Roth IRA to cover education expenses you need to meet two requirements to avoid taxes on the distributions:

    1. Wait Five Years: You need to wait at least five years after first funding your Roth IRA before you withdraw any of the earnings of the account.
    2. Qualified Expenses: You must use the entire distribution for qualified education expenses. Be sure that you do not take out more than what is needed to cover these qualified expenses.  

Failure to meet these two requirements will result in you paying the normal tax rate on the earnings of your account, effectively eliminating the tax benefit of your Roth account. Additionally, you will pay a 10% early withdrawal penalty on any distributions that don’t meet these requirements.


A 529 plan provides a tax-efficient way to save for your child’s college education. A Roth IRA can also provide tax-efficient savings for education, but your goal should be to not touch your Roth until you retire. You should consider all the options with the following priorities:

    1. In an ideal world, you would first max out your Roth IRA contribution of $5,500 per year (if you are married your spouse can contribute another $5,500 per year to their Roth).
    2. You would then contribute to a 529 college savings or prepaid tuition plan. (You should not contribute to a 529 plan if you have not already maxed out your Roth IRA as the 529 Plan creates more restrictions).
    3. If you cannot contribute to a Roth IRA due to income limitations, you can still contribute to a 529 plan.

Be sure to reach out to TAMCO if there are any questions about how to fund your children’s college education or the tax implications of an existing account. We are here to help you keep more of what you earn.

Avoid the Hidden traps of retirement plan loans

When you are looking for a loan, one option you can consider is to take out a loan from your retirement plan. These loans do not require a credit check, and they generally have very favorable interest rates. For employees who are having trouble securing a loan, borrowing from their retirement plan can be an easy way to secure a loan. However, these plans can be dangerous if not treated with proper caution.

There are complex rules that go along with these loans, and defaulting on the loan results in the remaining balance being considered a taxable distribution from the plan and can be subject to the 10% early distribution penalty.

Defaulting on the loan results in the remaining balance being considered a taxable distribution, subject to a 10% penalty

Requirements for retirement plan loans

There are 3 requirements that must be met in order to receive a loan from your retirement plan:

  1. The entire loan balance must be repaid within five years, except in cases where the loan is used to purchase a principal residence.

  2. The loan must be repaid using equal payments on at least a quarterly basis, meaning you cannot make small payments for 4 years and one large payment in the last year.

  3. The loan balance cannot exceed $50,000, or one-half of the account balance, whichever amount is lower.

Repayment of loans

In order to avoid the loan being treated as a distribution, you must make all of the payments on time. Plans will generally offer a grace period on missed payments up to the end of the next quarter after the payment was due. However, some plans offer smaller grace periods or no grace period at all.

What happens when you leave your job while you are still repaying a retirement plan loan? Most companies don’t want to deal with collecting payments from individuals who no longer work for them. When you leave your job you will be given 60 days to pay off the balance of the loan. Any amount not paid off in the 60 days will be deducted from the balance of the plan and will be considered a distribution, which will be taxable and subject to the 10% penalty for early distribution.

Key Takeaway

Taking out a loan from your retirement plan can be an easy way to secure a loan. There are no credit checks or high interest rates. However, the tax penalty can be painful if you are unable to make the required payments.

8 security tips in light of the equifax data breach

Earlier this month, Equifax – one of the largest credit reporting agencies in the country – announced that a security breach resulted in the theft of sensitive information for 143 million Americans. Information stolen included social security numbers, birthdates, addresses and credit card numbers. Even if you don’t believe you are a customer of Equifax there is a strong possibility that they have your information from your bank, credit card company, or a lender. In light of this massive breach of information, we wanted to provide you with 8 tips to guard yourself against identity theft.

1. Carefully review the charges on your bank and credit card statements every month. If you see any charges that you don’t recognize inform your bank immediately and they should halt the suspicious payment until they conduct a more thorough investigation

2. Use credit cards in place of debit cards. If someone steals your credit card number you will have more time to challenge the charges before payment is due. Whereas if your debit card number is stolen you will only be alerted to fraudulent charges after payment has already been made, and you will have a harder time recovering your money.

3. If you discover that fraud has actually occurred, you should immediately put an alert on your credit report and send a copy of the ID theft report ( to all credit reporting companies. Without this you won’t have the proper documentation to show you reported the issue and are working with the authorities.

4. Keep a close eye on your credit report. These reports can have simple errors that could impact your ability to get a mortgage or a car loan. Monitoring your credit report will also provide you with an opportunity to review all of the accounts that are open in your name to make sure there are not any fraudulent accounts. You can check your credit for free at

5. Consider putting a freeze on your credit. This will prevent anyone, including you, from opening any new credit using your name or social security number. Although this will add an extra step the next time you need to open credit, it offers the highest level of protection for your credit security. When you need to finance a new car or apply for a mortgage, be sure to give yourself a week to unfreeze your credit beforehand.

6. If you believe you are the victim of identity theft you should also contact the local police and the FTC to file official reports. Copies of these reports should be kept in your files. This not only helps the authorities, but it protects you as well.

7. Regularly change the passwords for your financial accounts, and avoid accessing any of your sensitive accounts on public Wi-Fi where it is easier for criminals to use keystroke monitors to capture your information.

8. Use the Social Security fraud hotline ( if you find that your Social Security number is being used fraudulently. If identity theft goes too far, you will not only have to fight to prove your identity, you will have to apply for a new Social Security number.