Question:
I would like to use my pension in a way we can take advantage of the first time home buyer rules. Should I cash out and fund a Roth IRA, or roll it over into a Traditional IRA? I have $8,000 of contributions from a vested pension with my old employer that are earning next to nothing.
Answer:
First-time homebuyers can withdraw up to $10,000 from an IRA. The rule allows a one-time exception from the early distribution penalty taxes due on a withdrawal; however, regular income taxes apply. If you’re married, and you and your spouse are first-time buyers, you each can pull from your retirement accounts, giving you $20,000 in cash.
If your pension is all pre-tax money, and you roll the funds to a traditional IRA, you should not incur any tax. The funds can then be used under the first-time buyer’s credit.
The rules are a bit different for Roth IRA funds. You can take out the $10,000 for your first home as a qualified distribution as long as you’ve had your Roth account for five years. Since Roth earnings are tax-free for qualified distributions, you should have no IRS bill. However, you need to be aware of the order in which funds are withdrawn from a Roth IRA. The first money withdrawn will be annual contribution money, which is never taxed or penalized. Next out would be conversion money. Conversion money would not be taxed or penalized, provided it has been in the Roth for five tax-years. The last to be withdrawn would be earnings.
Question:
What do you think of the Carlyle Group? It’s been in the $30-$38 range since the beginning of the year, compared to when I first started watching it in 2012.
Answer:
Global alternative asset management firm, The Carlyle Group L.P. (NASDAQ: CG) has only been public for about two and a half years. The company specializes in buyouts, hedge funds and private equity. The company’s earnings are expected to decline by 3% over the next three to five years. The past year has been hard for hedge funds in general. Generally if you are invested in hedge funds, you often have a transparency issue. We would be very uncomfortable to own this company, and recommend avoiding it.
Question:
I own SanDisk. I bought it around $59 in Oct 2013. Should I recognize my gains? Do I continue to hold shares, or has it reached its peak?
Answer:
SanDisk Corporation (NASDAQ: SNDK) designs, develops and manufactures data storage solutions in a range of form factors using its flash memory, controller and firmware technologies. It trades a little ahead of the market at 18 times earnings. However, it is expected to grow at 18%. If your shares comprise more than 5% of your portfolio, you may want to trim your holdings. We think the company is in a good space; however, SanDisk does not meet Henssler’s strict criteria for investment.
Question:
I’m planning to retire before I’m old enough to take the money out of my 401k without a penalty. Should I still put money in my 401k?
Answer:
Yes. When you retire early, it is always a good idea to have a mix of taxable and tax-deferred accounts to draw from in retirement. You also do not want to forgo any matching contribution your employer may offer. You could be leaving free money on the table. Contributions today will also lower your taxable income.
Since you are retiring early, we assume you have considerable assets outside of your retirement accounts. You will generally use that money to get you over the bridge until you are able to withdraw from your tax-deferred accounts without incurring early withdrawal penalties.
Question:
What are the fundamentals of stock analysis?
Answer:
This is a long and complicated topic, which we have made a career out of. Basically, fundamental analysis involves an in-depth review of a company, including its products or services, current financial condition, operating efficiency, and management performance. It is divided by quantitative analysis and qualitative analysis. Qualitative analysis is the study of what a company does; what makes it special, and what its competitive advantage is. Quantitative analysis measures the company’s growth ratios, balance sheet, debt to equity ratios, and valuation. We recommend reading “Security Analysis” by Benjamin Graham and David Dodd.
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Disclosures
This article is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.
