My biggest mistake
My husband lost his job in 2009. He had to roll his pension into another qualified account which we did. Then, we went and spent $25,000 of it on a beautiful boat. Only one problem, by taking the $25,000 as an additional distribution we added an additional $6,000 onto our income taxes for 2009. Big mistake.
How it affected my finances
Add that along with the 401-K loan we were forced to take as a distribution because of his job loss and we have increased our taxes owed by 50% for 2009. Money that will now have to come out of our remaining retirement funds to the tune of $21,000 fed and state tax combined. OUCH.
Lessons Learned
- Make sure you know all the ramifications of your large and small financial decisions before you act. We have since hired a financial adviser and spend a lot more time chatting with our account (CPA) before making any additional plans for our money.