In-Service Withdrawals from Employee Retirement Plans

You might be able to take money out of your 401(k), 403(b), or 457 plan while still working. If you withdraw money out of a workplace retirement plan in your fifties, will you be penalized for it? In most cases, the answer is yes. Distributions taken from a qualified retirement plan before age 59½ usually trigger a 10% IRS early withdrawal penalty. The key word here is “usually,” for there are ways to make these withdrawals with no IRS penalty, even while you are still working for your employer.1 You may have a strong reason to make such a withdrawal. Maybe you want the money now. Maybe you are tired of your plan’s limited choices and high fees and want to invest those assets in a different way. In fact, some of these withdrawals are made just so the assets can be transferred to an IRA. An IRA allows you many, many more investment options than the typical employer-sponsored retirement plan.1,2 You can avoid the 10% penalty through an in-service, non-hardship withdrawal. Some 401(k), 403(b), and 457 plans permit such distributions for plan participants who are still working. You may be able to arrange one, but you must pay attention...
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Is There Still Value in Value?

Despite a strong 2016, there may still be some value in value. While value has lagged growth so far in 2017, based on the Russell style indices [Figure 1], we see several reasons to like value stocks, including accelerating economic and profit growth, and an improving outlook for the financial sector. But the growth side has enough going for it that we recommend investors maintain balance across the styles. Here we discuss our latest style views. SLOW GROWTH NO MORE? Economic and profit growth are both poised to improve in the coming months in our view, creating a more favorable backdrop for value stocks that have historically outperformed when growth is accelerating. Economic growth has been subpar during the entire economic expansion (approximately 2% growth on average in gross domestic product [GDP]), which is one of the reasons why growth stocks have outperformed value during the current economic expansion. The logic here is that when economic and profit growth is scarce, you want to own stocks that can generate their own growth without the need for a macro tailwind. Value stocks tend to need help from the economy to grow. When all companies get a macro lift, and growth is...
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Could Education Debt Shrink Your Social Security Income?

$1.1 billion has been garnished from retirement benefits to pay back old student loans. Do you have a federal student loan that needs to be repaid? You may be surprised at what the government might do to collect that money someday, if it is not paid back soon enough. If that debt lingers too long, you may find your Social Security income reduced. So far, the Department of the Treasury has carved $1.1 billion out of Social Security benefits to try and reduce outstanding student loan debt. It has a long way to go: of that $1.1 billion collected, more than 70% has simply been applied to fees and interest rather than principal.1,2 How many baby boomers & elders are being affected by these garnishments? Roughly 114,000 Social Security recipients older than 50. In the big picture, that number may seem insignificant. After all, 22 million Americans have outstanding federal student loans.1,2,3 What is not insignificant is how quickly the ranks of these seniors have increased. According to the Government Accountability Office, the number of Americans older than 65 who have been hit with these income cuts has risen 540% since 2006.2 A college education is no longer an experience...
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