I’ve mentioned before that some of us don’t have retirement plans. Because of this, a few members of our elite demographic may not be aware of the difference between a Traditional IRA and a Roth IRA (I’m not even getting into backdoor, SEP or SIMPLE IRAs here). In case you don’t know (and this will be vaguely important later), let’s get real quick and dirty:
An individual retirement account (IRA) allows you to save money for retirement in a tax-advantaged way. – Fidelity.com
Traditional IRA: you pay taxes when you retire and withdraw the funds. – Theblance.com
Roth IRA: you pay the taxes now, before you contribute to your plan. – Thebalance.com
What these two retirement plans have in common is that, while you can withdraw your cash at any time, you could get dinged with a “10% penalty and a tax bill if you take out your money before age 59-1/2” (Nerdwallet.com). Like every rule in the book, there are certain exceptions. For example, you might be able to avoid penalties for early withdrawal if you use the cash for medical bills, higher education, first time home buying and disabilities (Thebalance.com). However, to claim an exemption for a disability, you must “have your doctor certify that you are completely and permanently disabled” (Thebalance.com) and unable to work enough to support yourself.
In 2018, Kathryn Gillette tried to test out the disability exception with the US Tax Court. Ms. Gillette had been a soldier, worked as a firefighter, owned rental properties and was married to a cop. Kind of seems like an upstanding, law-abiding couple, right? And they probably would have stayed that way, but then Ms. Gillette was diagnosed with Restless Leg Syndrome. To combat her affliction, she was put on medication (Accountingweb.com). According to The Mayo Clinic, these medications “increase dopamine in the brain.” One of the short-term side effects of the increase causes “impulse control disorders, such as compulsive gambling.”
And did Ms. Gillette gamble? Let’s just say she was worse than Worm in the 1998 film, “Rounders”. For example, early one day, she won $162,000. By the end of that day, it was gone. Her rental property fees went to casinos, she hit up friends (and didn’t pay them back), she stole from her husband and, finally, she withdrew money from her IRA in 2012 (Accountingweb.com).
When it came time to file her tax return, Gillette maintained she wasn’t responsible for the IRA penalty because of her affliction (Accountingweb.com). The Tax Court decided that “her condition didn’t prevent her from doing regular activities” (The Kiplinger Tax Letter, Vol. 95, No. 3). Earning and losing $162,000 in a day isn’t exactly regular, but I get their point. Also, the Tax Court said that her “disability” was of a short-term nature: stop with the drugs and you’re A-OK, basically.
Chances are, you won’t suffer from drug-induced impulse control issues this year. However, emergencies happen and you might be tempted to cash out your IRA early. Before facing penalties, why not meet with your Bourke Accounting tax preparer or bookkeeper? Bourke Accounting doesn’t have a magic word to make your troubles disappear, but they can offer knowledgeable insight into ways to avoid touching your retirement.
Come see us any time. Our number is 502-451-8773 and don’t forget to visit our website at www.bourkeaccounting.com. See you soon!
Written by Sue H.
If you or someone you know has a gambling problem, please call the Nation Problem Gambling Helpline at 800-522-4700.
My brother couldn’t sleep. When we were kids, he would wake me up in the middle of the night and request that I tell him stories until he could. I think I started writing because of my insomniac brother.
There is nothing worse than having a sleepless night. The rest of the world slumbers in peaceful oblivion and you’re left behind, staring at the ceiling.
Maybe you’re worried about all the things you have to do at work tomorrow. Maybe you have a condition that causes you pain. Maybe someone said something rude to you and you just can’t let it go (after-the-fact, middle of the night “I wish I had said that” comebacks drive us all insane). No matter what the reason, insomnia is evil. The next day, you don’t only feel tired, you feel angry, nauseous and just not all together together. Like the insomniac narrator in Fight Club said, “when you have insomnia, nothing’s real. Everything is far away. Everything is a copy of a copy of a copy.”
I have it on good authority (my mom) that one way to combat insomnia goes like this: if you are unable to fall asleep within 15 minutes, get up, go to another room with soft lighting and read a book. Don’t turn on the television or any sort of music. Reading a book will take your mind off the irritating things of the day and, hopefully, calm you. You don’t want to watch television or play on your iPad because, as Sleep.org tells us, “electronics emit a particular type of blue light that is capable of triggering the brain to stop making melatonin.” Melatonin, if you didn’t know, is a neat little hormone that helps you sleep.
I stay in bed when I can’t sleep. I take deep breaths and picture a blank wall (I usually color it a gentle hue). I pretend that I’m in an art gallery, actually. When thoughts about work or my infuriating boss (Hi, Bill!) intrude, I visualize velvet ropes and focus on the blank wall. I keep distressing thoughts at bay and give myself a self-esteem boost by being a virtual VIP.
Of course, there’s also warm milk. It’s not just an old wives’ tale that warm milk helps people fall asleep. Tuck.com informs us that “milk contains tryptophan.” You know when you get tired after Thanksgiving dinner? Yup, the same chemical present in turkey is also in milk, warm or cold. So before you try Tylenol PM, give a nice glass of milk a try.
There is a myriad of things that can keep you up at night. However, if you meet with one of our wonderful Bourke Accounting specialists, at least one of those things can be taken off your Hit Parade of Stress. Seeing a Bourke Accounting associate means that you won’t have to worry about your financial affairs. Our Bourke Accounting experts won’t tuck you in at night (well…), but knowing that your bookkeeping and accounting needs are in very capable hands should give you some very restful nights.
Come see us any time. Our number is 502-451-8773 and don’t forget to visit our website at www.bourkeaccounting.com. See you soon and pleasant dreams!
Written by Sue H.