Interesting Little Tidbit Of The Day

I had no idea, until a few weeks ago, that money laundering can occur in retirement planning. This is not something that usually comes up in conversations, but when I found out about it I was shocked. The process involves turning the dirty money into clean money. "How does this happen?" you may ask yourself.

Well sneaky money launderers or those acting on behalf of them will come into the Financial Advisor's office, or just go to the company website of choice, and sign up to withdraw, transfer, or buy into an investment. Now think back to a previous posting about the 60-90 window of retraction. Well the launderers pay in the money in a lump sum, let it sit, and then make a retraction request. The mechanics behind it are so simple yet so unbelievable. Well, now the fund company or brokerage firm has to distribute the money back to the investor from their own money. This makes the money "clean money" and untraceable by the government.

That is why Financial Advisors are so picky and selective about some of their clients. Noone wants to go to jail for aiding in the money laundering process. So just be weary when someone wants to invest a very large lump sum of money all at once like that, without it being a company sponsored retirement plan.

Now that I am thinking about it, I did receive a random call once from a guy claiming to have won the lottery somewhere and wanted to put it in an investment for safe keeping. The red flag went up immediately because of the way he worded his requests. Not wanting to get into an arguement over the phone, I did what I do best and just transferred the call to another department. Yes, I really did do that and still do that with calls that I do not want to deal with at the moment. Ha ha.

Moral of the story? Crime only pays when someone pulls the wool over your eyes.

Rumor Concerning The Future

So what I was told a couple of weeks ago was that the government was going to make some changes regarding inheritance benefits. Usually when dealing with investments the beneficiary will receive inheritance distributions based on the original account owner's tax association. This is usually measured in basis points, which directly effects how an investment is perceived on the market and how it is regulated and taxed. So the rumor is that next year the basis point will go up. What does this mean for the average Joe? Well consider all of the capital gains that the deceased has earned on the investment now taxable income. So that big chunk of money, the deceased earned over the lifetime of their investment, is now based on the value at death not inception. Yes this sucks big time for everyone who has loved one's leaving them alot of money in the future. The moral of the story? It does not pay to die. So live long and prosper.

New item learned about 401K's

So today I have discovered something very interesting about 401K rollovers. I have dealt with these quite frequently, and this is the first time I have had to answer this question. We have been setting up an IRA rollover for a client to rollover his 401K. Something you probably didn't know is that any person initiating one of these has the right to retract their request within a specified window of time. When dealing with most financial investments this window is 60 days. In the case that you do retract your application for rollover it is sent directly back to your 401K to be invested elsewhere. The main reason that someone would do this is if they were laid off from one job and then found another one after initiating the application for rollover.

Ok, so back to what I had learned today. The call came in about whether or not you can retract the rollover request if you had already used some of the money to pay bills. I had no idea at first about this and needed to consult with my boss. So what I did find out is that yes you can do a partial rollover retraction within the 60 day window. This prevents the 10% early withdrawal penalty from occuring, as would be the case if he had already went through with the rollover and then decided to move it back. The only down side is if you had already paid taxes on the rollover when you initiated the application. You will not get any paid taxes back on the rollover retraction, whether or not is was within the 60 day window.

So I consider this very important information to have on hand for future client matters. If you read this it will also help along the way if you are ever in the same situation.