1	Books The Migrant Project looks at what it takes to put food on America’s tables; a conversation with the author of Mexican Enough. read more...
2	Film & TV Getting psyched with actor James Roday; the surprisingly varied career of Rey Valentin. read more...
3	Music Indie rocker Julieta Venegas unplugs; the boys of Plastilina Mosh mellow out. read more...
4	Ask Julie Tapping retirement accounts for funding. read more...
5	Calendar Outstanding events around the country. read more...
6	Picture This Wilfredo Lam in North America. read more...

Latin Forum

Ask Julie

NO MONEY For School or to purchase A Home?

UNCLE SAM CAN HELP

You have applied for financial aid, government and private loans, cashed in on the promise Uncle George and Tia Consuelo made to you if you got accepted to college, and you still don’t have enough money to cover your tuition.
Just when you feel you have exhausted every single source of funding for your higher education, your Individual Retirement Account (IRA) may hold the answer to your prayers.
If you have been disciplined enough to put money away for retirement in an IRA account, and you use the funds to pay for your college tuition, books, supplies—even room and board—you may be able to withdraw it without having to pay the 10 percent penalty that applies to anyone using their IRA money prior to 591 /2 years old. And that’s not all; this benefit extends beyond your personal use of the money and includes expenses for higher education for your children, your spouse and your grandchildren.
In order to qualify for the penalty-free withdrawal, you must make sure that the eligible student attends an IRS-approved institution. These are any private, public or non-profit colleges, universities, vocational institutions or any other post-secondary schools that meet the requirement for federal student aid. One way to verify your school’s qualifications is to visit the official financial aid website of the federal government at www.fafsa.ed.gov
You may also tap into your nest egg before the official deadline of almost scratching your 60s if you are buying your first home. You are considered a “first-time-home-buyer” if you have not owned a home in the previous two years. If that is the case, you are entitled to use up to $10,000 toward the purchase of the home. If you are married and your spouse qualifies as a “first timer” too, add another $10,000 from his/her IRA, giving you access to $20,000. This benefit applies for home purchases for you, your child, grandchild or even your parents.
Note that, even though you are circumventing the early withdrawal penalty from the government, you will still have to pay taxes on the amount you withdraw based on your personal tax bracket, which could range from 10 percent to 35 percent, depending on your income level.
But, what if you have a Roth IRA? Good news for you, too. As long as your Roth IRA has been opened for at least five years, you are entitled to the same benefits to buy your first home. If this is the case, you will not only avoid the 10 percent penalty from Uncle Sam for withdrawing your Roth prematurely, but you will also receive any gains on your money tax-free—a double treat!
However, if the Roth IRA has been opened for less than five years, the account holder will be able to bypass the 10 percent penalty, but might owe taxes on the earnings that are withdrawn. Here, you have some control of your tax bill, because you can avoid having to pay taxes on your gains by withdrawing up to, but not exceeding, your original deposits and leaving the earnings in the account. This is possible because Roth IRAs will distribute your own money first and earnings last.
To let the IRS know that you have withdrawn money for permissible purposes, you need to file Form 5329 when you report your taxes. You will be asked to enter a code that will entitle you to the penalty-free withdrawal.
There are other instances in which you would be entitled to a penalty-free early distribution from your IRA account. Under present law, you have access to your IRA account prior to “becoming of age” if you take your money on a specific schedule, according to the life expectancy table calculated by the IRS. Unfortunately, most of the other conditions that would qualify you to cash in on your retirement accounts are hardship situations for which no taxpayer would want to compete.

They are:
• Payment of excessive medical expenses that are not reimbursed by insurance.
• Premiums paid for medical insurance while unemployed.
• Disability, as long as it’s permanent
and total.
• Proceeds that are paid to a beneficiary after the account owner’s death.

Listen to Julie Stav’s
radio program Monday through Friday on your
local Univision radio station. For more information visit www.JulieStav.com