No. of Recommendations: 3
Hi,

First time seeking help, but really need it. Not sure if this is the best board b/c it covers a broad range of questions, but decided to start here. I'll make this as simple as possible. The facts are pretty simple, but my best options are unclear in my very chaotic head.

Income:
I have been self-employed for over a decade. I actually began to work from home for a company I worked for onsite for 5 years prior, but as a “contractor” so no benefits. None. Period. No unemployment, no benefits, no SEP, no medical spending account, etc. The work was waning, and then stopped in January. I got a little work from someone locally but it was temporary. Ended in April. No income since then.

Debt:
I have pared down all my monthly bills as much as possible, but my rent is almost $1000/month. W/everything else, my minimum is about $1600.

> This includes a $195 car pyt that ends in Oct.
> I have a Credit Union Card at 14.9% (some at 12.9%) with balance of about $2000.
> I have a cat with cancer and big vet bills – accrued mainly for diagnosis, doing very little treatment, most at home. (please don’t tell me to put her down, it will be soon enough and it’s not free).

> I have a deferred interest card (Care Credit) which is for dental, vet and eye care. I had been fine with those pyts but do not want to put anything more on it because I REFUSE to EVER pay a dime of interest on it. I have been using it for years and manage it fine. Not putting vet bills on it for this reason so any dental or vet is out of pocket.

> I can’t find a new apt. w lower rent w/o a job

$$$/ IRA:
My savings are gone, I do not have family who can afford a loan (one brother eked out $1000, I need to repay by next May.

> IRA. I have a meager rollover IRA (rolled over from my 401k 13 years ago. Actually into a Calvert Fund which ended up at Vanguard a year or so later) which has a mere $4300. It is not great, wish I’d made some changes, but did not. I am going to HAVE to get money for July rent (non-negotiable) and the IRA is it.

* I DO understand that whatever I take out I have to pay 10% penalty
* I DO understand that I will have to pay income tax (maybe this is a good year b/c my income will be so low –$5500 to date).
* I DO understand that if I somehow can pay it back in 60 days the fees are waived.

In April, my IRA was worth $4600. I have watched it go down to $4100 and slowly back up to $4300. I am getting worried I will need it when less and less is there.

Questions

1- Does it matter if I take it out a little at a time or should I take out as much as possible while it is there?
2- Should I use part of it to pay of the car (as of today payoff is $800). This would ALSO lower my car insurance b/c I could get rid of collision (mandatory w/loan) which is about $200/year.
3-should I use part to make pay off a big chunk of credit card bill (I only have a limit of $2500 so hardly have room for an emergency car problem) I try to pay $75-100 on card each month, but it is hard to do that. My mind is about $50 (hate to do that!)
4- Doing either of the above would minimize my monthly bills (considerably), BUT might use up $$ for rent if I am out of work much longer.
5- Should I take out the entire IRA (bite the bullet) and put it somewhere else where it will be accessible and maybe make a little in interest than my savings account?

So, you can see I have thought most(?) some(?) of this thru but I just keep going around in circles as I look for work. I could use any facts I am missing as well as thoughtful input, suggestions, advice into my way of thinking.

Btw, I am single, 57 y.o. woman, no dependents.

Thank you!
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1) My understanding, which may be wrong, is that when taking from retirement accounts the thing that matters is tax year... If it were me, and there were no fees associated with taking it piece by piece vs. all at once, I'd take out as little at a time as necessary (perhaps a month at a time). If you take it all out, then find a job, you will be faced with taxes due on money that was never used and is sitting in the bank.

2) My opinion of your situation is that you need cash on hand more than reduced payments. Also, dropping collision would mean you'd really be up a creek if the car were damaged and could not be repaired for under $2500... so that seems like the wrong way to save ~$20/mo at the moment.

3) See #2, you need cash more than reduced payments... though the rates are high, with a $2000 balance you're talking about $20/mo or so I think? That $2000 might be close to 2 months of rent and payments, keeping the cash seems more prudent.

4) Yup, so you really can see the answer here...

5) I'd consider minimizing the risk to the IRA capital, perhaps put it into a money market, or maybe even a short term CD with low penalties... one that is at your checking account bank might make the most sense in terms of ease for transference money. That ~$4300 isn't going to go terribly far unfortunately.

Someone with more experience might be able to clue you in as to whether there are some advantageous timing loop holes with regarding to 401k/IRA roll overs... I did a 401K roll over a few years ago and I believe I had the entire calendar year to put it into another IRA account before it was considered a distribution. So that might be a way to maximize cash on hand?

It seems like finding some income needs to be your #1 priority, anything to pay the bills keeping you floating until you can sort it all out with a higher income again. Everything else seems to be more along the lines of rearranging the deck chairs.

Also, I'm sorry to hear about your cat, I could never bring myself to "put down" a pet for any reason other than to relieve it of pain and misery. When I had cats they were my buddies, I'd do what I had to do to treat them as best I could (that would include using that Care card and paying interest).

Good luck
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First of all - as someone whose 17-year-old kitty was just diagnosed with cancer - I sympathize totally with the vet situation. It's very hard, and very expensive. Just love her as much as you can in the time she has left.

Anyhow...I think you are in crisis mode. So stop paying the CC's for a while while you pay the essentials (food, rent, car). DO NOT pay off the credit card bill, that's a waste of your money right now. It will do you no good to have a brand new shiny empty CC and no place to live.

Secondly, and I know this is not what you asked, but you should sell yourself as a contractor to other employers in the industry or similar industries. As someone who has been self-employed for 8 years (and HATES marketing myself), I think you may be approaching it the wrong way. Rather than seeing it as losing a job, look at it as losing one client. You can sell those same skills - AND the flexibility it brings to them to hire a contractor - to many other companies. Companies love hiring contractors because it doesn't require lots of added support, and (in my case but not always) it doesn't hit their overhead but often can be a project cost. Sell yourself as a professional who brings years of experience that can supplement in house staff to target solving particular problems. That can be just a few hours, or more depending on their needs. It might serve you better to string together 2-3 clients each taking a few hours of your time than to put eggs all in one basket with just one big client and one FT job.

Just my thoughts...
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Income:
I have been self-employed for over a decade.


Have you contacted temporary staffing agencies? Finding a permament job immediately is unlikely to happen.

* I DO understand that whatever I take out I have to pay 10% penalty

Your state may add an additional penalty. In California, the penalty is 2.5%.

Read IRS Publication 590, and see if there are any exceptions to penalties that might apply.

* I DO understand that if I somehow can pay it back in 60 days the fees are waived.

If repaid in 60 days, the penalties are waived because it is a rollover. If there are any fees assessed by the brokerage, they are not refunded.

1- Does it matter if I take it out a little at a time or should I take out as much as possible while it is there?

As far as taxes are concerned, it doesn't matter when during the calendar a distribution is taken.

You can move the holdings in the IRA to a fixed income investment. Look for a cash account that is covered by FICA. The interest will be minimal, but you won't need to worry about the market going down. Given the timeframe in which you need the money, it should not be invested in stock.

2- Should I use part of it to pay of the car (as of today payoff is $800). This would ALSO lower my car insurance b/c I could get rid of collision (mandatory w/loan) which is about $200/year.

Given the limited amount in your IRA, I would be hesitant to do this.

3-should I use part to make pay off a big chunk of credit card bill (I only have a limit of $2500 so hardly have room for an emergency car problem) I try to pay $75-100 on card each month, but it is hard to do that. My mind is about $50 (hate to do that!)

No, keeping a roof over your head and food is more important

5- Should I take out the entire IRA (bite the bullet) and put it somewhere else where it will be accessible and maybe make a little in interest than my savings account?

See answer above to item 1
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While you are looking for work -- whether contractor work, temp work, or permanent job -- could you get a part-time job in the evenings. I know the pay isn't great but even working fast food or as a server or even Dave Ramsey's favorite - delivering pizzas - could get you enough money to be able to keep a roof over your head.

I don't how large where you live is. Any possibility of getting a roommate to cut expenses? Any family that you could move in with?
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Oh, another thing. While you may not be eligible for unemployment (I take your word for that), what about other forms of assistance such as Food Stamps? Also check other social service agencies.

There are various websites where you can screen for benefit eligibility. You should look at one for federal government and for your state. Also you might check for any private social services that might be available such as through the United Way, etc.
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Hi ems79,

Thanks for all your thoughts/info. Some good points brought to light, others I guess I just needed to be reinforced in my head - like the small amount I'd actually be saving monthly on car ins.

RE: IRA/401k - this was a 401k when I left the company back in 1998 and they allowed me to let it sit for a while. I then rolled it over to an IRA - at the time I could not afford to pay the taxes up front for a ROTH.

The interest on the Care Credit is deferred for 6-12 months (depending on amount and plan the office has). I have several of those going right now which amount to about $75/month - just paid off a big one in May. The point on the CC interest is that if I default/stop paying it is around 29% and goes back to the initial date of transaction. I have $42 left on a balance due in July and then $122 due in Aug. If I default on either of those I have to pay all that BACK interest, which I just can't do - and sleep at night. After that I have several smaller more manageable ones due. I will probably have to put her euthanasia on it. She is diabetic and I am getting some help with those expenses via a program - thank goodness for the felinediabets.com community!
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Gingko100

So sorry to hear about your kitty :( It really sucks. I have a couple other animals that need care, but I do it all myself and just keep hoping no vet emergencies arise with them right now.

DO NOT pay off the credit card bill, that's a waste of your money right now. It will do you no good to have a brand new shiny empty CC and no place to live.

This is exactly the sort of thing I just stopped thinking clearly about. My one Visa (Credit Union card) I guess I will just make the minimum payments on, but the Care Credit - see above reply to ems79 for that info.

Secondly, and I know this is not what you asked, but you should sell yourself as a contractor to other employers...

Unfortunately, it is not quite that simple. The CAD software I used all those years (I am a mechanical drafter/detailer) is licensed with that company. I had a rather unique situation, most contractors don't have $1000's worth of software available to them for free on their home computers. I am listed with agencies looking for contract work. I live in a rural town on the NH/VT border so finding work in my field is limited w/o traveling up 80-100 miles each way :-/ Of course, I am looking for ANY type of work.

Bets of luck with your kitty - there is a helpful feline-cancer board on yahoogroups.com
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You can move the holdings in the IRA to a fixed income investment. Look for a cash account that is covered by FICA. The interest will be minimal, but you won't need to worry about the market going down.

thanks! I will look into this as an option.
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Hi d-mom,

...but even working fast food or as a server or even Dave Ramsey's favorite - delivering pizzas - could get you enough money to be able to keep a roof over your head.

To top everything else off, I had hand surgery in May and still gaining full use of that hand. It was a difficult decision to go thru with it (had been scheduled for a couple months) considering everything else that was happening, but I couldn't risk further nerve damage. This has impeded the type of work I can even look for. There were some local jobs I applied for in the hopes they could accommodate, but going in with a huge bandage and having to tell them of the limitations I'd have and for how long...well, you get it. healing well now and of course I am still looking for anything.

I don't how large where you live is. Any possibility of getting a roommate to cut expenses? Any family that you could move in with?

Unfortunately, no. I live in a small, expensive, full apt. with cats, and a handful of other animals. I have a garage that my car can't even live in b/c it is used for storage (I moved from a place over 2x this size). Btw, I AM selling things, but not much of value :-/

All my family is out of state and have their own lives, families, problems...


Oh, another thing. While you may not be eligible for unemployment (I take your word for that), not clear on that - when you are self-employed, no one is paying into unemployment like a company does for its employees, therefore, there is no $$ available.

what about other forms of assistance such as Food Stamps? Also check other social service agencies.

Thanks, yes. I just got food stamps (had my meeting yesterday! :) and Lifeline (a small amount off phone bill). What really stinks about many of these gov't/state programs is that if you are self-employed they go by previous year's taxes - which obviously has no bearing on current situation. Not only that, but they go by your gross, not AGI. Very unfair. I assumed food stamps was the same so did not apply, then spoke with someone and THEY offer an alternative method of income proof. Wish I'd known this before. They are the only one I have found so far that will do that. I do have some financial assistance thru my local hospital and on a payment plan, but I take 5 daily meds and a few as needed - some cheap (I have found some great resources including two for free from manufacturers), some $40-$70 at a time. It all adds up...
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Unfortunately, it is not quite that simple. The CAD software I used all those years (I am a mechanical drafter/detailer) is licensed with that company. I had a rather unique situation, most contractors don't have $1000's worth of software available to them for free on their home computers. I am listed with agencies looking for contract work. I live in a rural town on the NH/VT border so finding work in my field is limited w/o traveling up 80-100 miles each way :-/ Of course, I am looking for ANY type of work.
I'm in construction & yes, it's certainly been a rough time for our industry. here are some ideas for you to step outside the focus of that particular software...

- Many A/E/GC firms need office gophers to deal with filing, processing paperwork, organizing samples in the sample room, logging in sub bids, etc etc, etc - and they would rather have someone with construction or architecture experience than not. Is there anything you have done for your former clients that isn't just drafting (tracking design changes? Responding to building department comments? updating drawings to address code deficiencies?). If so, try to sell that aspect of what you have done.

- Try large companies - or even medium-sized local ones - who have in-house construction teams. They won't need drafters (all that is outsourced to A/E), but they often do need facilities or construction admins.

- See if construction companies that do design-build need people to draft up permit drawings for them. You could do that remotely.

Yes, the cat thing is so hard. I'm just doing palliative care, and have decided it's too stressful on him to haul him in to the vet for chemo every few weeks just to maybe get a few more weeks or months. But the steroid shots that I do at home seem to be helping a lot. I know they are not curing anything, but he's eating again, and happy for the moment.
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Not only that, but they go by your gross, not AGI. Very unfair.

There has to be a line drawn somewhere - as someone who is also self employed, I understand your situation, I am self employed and have a ton of work travel, my gross is sometimes nearly twice my AGI.

But most good Social Services people know what to do in a situation like yours- example:
using 90 days of bank statements for qualification (showing no deposits) and including your current surgery as a an obstacle to current employment.

Now that it is midsummer, you may not be thinking about it, but start asking at your local Social Services office for what is required to qualify for heating assistance for winter.
Check with your power company and see if they offer a *payment matching* program for low/no income individuals.

Also- have you looked to your local food pantry/food bank?
The one at which I volunteer (in my small NE Town) does not require any qualification - one just has to show up.
Even if it is associated with a church (many are), being part of the congregation is seldom a requirement.
Or even volunteer to put cans on shelves occasionally, which you could do one handed, just slow. Many of the volunteers at mine are also clients, and it can be a good way to find out about other programs of which you may not be aware.


peace & maybe not much help
t
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I am self employed and have a ton of work travel, my gross is sometimes nearly twice my AGI.
Yeah, me too. That makes no sense to look at gross. A huge chunk of my gross is just pass-through $. I pay it, and then I get it back.
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Hi Gingko-

thanks for the ideas! I do mechanical, so arch/construction isn't really my field, but I have contacted some local Eng. firms and done cold calls, but just for my work, so might try a different approach. I have done documentation mgt/control and been around it long enough to be capable of other things.

I agree on chemo and lots of treatment. Most of the bills were for diagnosis as this is a rare cancer that my vet had never even heard of before. We opted to not even remove anymore tumors than the first. They just keep coming and I just keep bandaging. Since mine is diabetic she cannot do steroids, but is actually on a med that I take for arthritis (except hers is tuna flavored!) which helps with the tumors and pain. While she still eats, purrs and gives me kisses I know she is not ready to go.
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But most good Social Services people know what to do in a situation like yours- example:
using 90 days of bank statements for qualification (showing no deposits) and including your current surgery as a an obstacle to current employment.
They have state mandated formulas to go by so there is no wiggle room. I did apply for fuel assistance and was denied b/c my income was $240 over their limit. I can reapply in the fall. I am on a budget plan with my electric company, but b/t that and the back owed I am paying almost $80/month - and they won't budge on it :-/

But thanks for the other ideas re: volunteering, etc. :)
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Perhaps this has changed, but when I had my first 401k, it was an option to remove money without penalty for first house purchase and HARDSHIP.

Has that changed? Wouldn't this qualify as hardship if still an option?

Mara (glad my kitties are still young after having almost maxed credit cards on the dying of my prior pair)
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Perhaps this has changed, but when I had my first 401k, it was an option to remove money without penalty for first house purchase and HARDSHIP.

Has that changed? Wouldn't this qualify as hardship if still an option?


Sorry, it hasn't changed, but for 401(k)s there hasn't ever been a penalty exception for either home purchases or hardship. The law does require that plans set rules dictating whether or not you can withdraw at all (not all plans allow withdrawals). Under the law, things like hardship, preventing your home from being foreclosed on, or purchasing a home can be allowable reasons for withdrawals, so that may be where the home purchase and hardship rules you are thinking of came from. Here is a link to an IRS tax topic that lists the exceptions for 401(k) plans: http://www.irs.gov/taxtopics/tc558.html Here is an article that provides more information about what 401(k) withdrawals are allowed for: http://www.401khelpcenter.com/401k_education/hardship_withdr...

However, since the OP has already rolled the money over into an IRA, the 401(k) rules aren't the applicable rules anyway - the IRA rules are.

Unfortunately, IRA exceptions for penalties http://www.irs.gov/taxtopics/tc557.html don't include hardship, either. They do include medical expenses (unfortunately, not for the cat's expenses), with some caveats, so the OP may have some exemption from the penalty, but would still owe the taxes on any withdrawals. IRS Pub 590 http://www.irs.gov/pub/irs-pdf/p590.pdf has more details.

Having read through this thread, I will say, it is very concerning to me that the 57 YO OP has only $4,300 towards retirement, and is apparently going to have to tap that for living expenses. Unfortunately, I didn't have any additional advice to add to what has already been said, namely -

- Get a job, any job
- Figure out how to cut expenses
- sell or give away EVERYTHING that's in the garage

I am concerned that if nothing changes, once the OP runs through the $4,300 (3 months max, at the burn rate of $1,600/month) there isn't anything left, which means she's going to be homeless in 3 months, plus however long eviction proceedings take in her state (a few days after eviction, whatever's in the garage is going to be sold or tossed, too). And another few months after that, she is going to be on the hook with the IRS for taxes that she has no money for.

AJ
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Yeah, if it turns out you can't find work where you are, have you considered moving? It's a huge, huge change but if you aren't tethered to where you are, you can find rent for a lot cheaper than 1k if you move.
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I think if she is broke, has an apartment FULL of pets (including a cancer stricken cat and a vet that gets her situation), has a hand she cannot use, and is finally getting *into the system* of social services in her area -
that a move might just be a huge expense that the OP cannot handle ...

peace & change
t
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Something just arose that made me revisit this thread. I thought it might be interesting to note that since I was last here...

1- I am still unemployed
2- I found out in October that I was misclassified as self-employed and in fact considered an employee (by my state employment security) and am now collecting a meager benefit.
3- Yes, I did move (over the c'mas/new year) b/c I had no choice. It is not ideal in that I have to be out by mid-May. I am paying to store all my belongings, but I have shelter for my few remaining animals and myself
4- My cat was euthanized July 13th. Another pet died two days before and I lost another two in Sept. just two days apart. One of those was positive, as it was a wildlife release.

My IRA is pretty much gone and I will have to deal with the tax and penalty issue in a couple months, but I had no choice. Too bad I did not know about my classification before.

So that's my story. Thanks for everyone's input, as it was much appreciated.
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