I know I wont have to pay the 10% penalty at age 59 1/2…And I want to take it all out. I have doubled my original investment. So If I do have to pay taxes ,will it be on all of it or just the amount I made above original investment? And if I do have to pay taxes, what would the rate be in CA?

Return of your original investment is typically not taxable IF there was no tax favored treatment of the account with original invest and interest gained, etc.

If you were to remove or "cash out" 6 figures that could throw you into a high tax bracket. Example you take out 300,000 the IRS will tax you 100,000 just on the federal alone. Which leaves you with 200,000 quite a lot to hand over to the IRS plus don’t forget the state.

You need to talk the the account manager or someone at the financial institution handing the account to be sure of the tax treatment.

When choosing a lottery payout option, making it based solely on tax avoidance is a fool’s mission.

You should always base ALL financial decisions on MAXIMIZING WEALTH, not just minimizing taxes. While the tax aspect has to be considered it must be given its correct weight, no more and no less.

Keep in mind that the principal way that you minimize taxes is to minimize taxable income. You’ll NEVER maximize your wealth that way! As long as tax rates are below 100%, ALWAYS take the extra income and pay the tax. You’ll have MORE money in your pocket when the ink dries on the check that way.

While an annuity certain gives you the total number of dollars offered and does minimize the tax burden you have to keep two things in mind, neither of which can be predicted.

First off, the effects of inflation will erode the value of those dollars in the future. That $400k annual payout looks great on paper today but if those dollars are worth less than $80k in 20 years you will have lost a LOT to inflation. It would only take a burp of double-digit inflation like we experienced in the late 70s and early to mid 80s to permanently skew those numbers in the wrong direction. Since it’s not possible to accurately predict the pressures of inflation the only way that you can protect yourself is to deal with it in today’s dollars. That leans heavily in the direction of taking the reduced lump sum.

The next unpredictable issue is taxation. Sure, under the present law you’ll pay less tax in the long run if and only if tax laws stay static. Since laws are at the whim of Congress you can’t depend upon taxes remaining the same. There would be nothing to stop them from passing a law that would wipe out the tax advantage of future annuity payments. Again, advantage to the reduced lump sum as you know what todays tax burden will be for certain.

The overriding consideration is the time value of money. You take out a loan, you pay interest. You put money in savings, they pay you. Pretty simple stuff, really. Now I’d never recommend dumping a major lottery hit in a bank savings account — unless you could negotiate a much more favorable rate which may be entirely possible; money does talk, and loudly so — but careful infestment of the entire proceeds of the reduced lump sum payout even after paying the increased tax bill right now puts far more dollars to work for you right now, not 10, 15, 20, or more years in the future when those dollars may be worth 1/5th of what they are today.

Any tips, advice, techniques or information.

I must admit I’ve never heard of these exams but then again I’m only 14.

Several years ago my financial planner was putting together my portfolio which included some stocks, annuities etc. that my parents were going to give me as a gift. Well, my father was out of the country and he told me that he wanted to be present when All of these gifts were switched from his name to mine. I fully understood and told the planner we’d need to wait. Well, when my father returned in 3 weeks I received a call from him and he was extremely upset. He asked how I had taken nearly $75,000 from his stock/annuity accounts without respecting his wishes to be present.

I had no answer and I called my planner to ask him. Only to find that she said that she just went ahead and took care of it as she had my fathers information (bank numbers/passwords and SSN).

Well, my father was furious but he calmed down and it was excused.

Now to 2009…….my husband and I have decided to divorce and to be honest, it’s getting quite ugly as we are not agreeing on asset distribution. Well, the other day I was going through some financials with the paralegal at my lawyers office and there is a large sum of money (about $50,000) that is unaccounted for. I was sure that the planner (yes, we both still use her) had just moved it and it would all make sense. Then I called a credit card company only to find out that the account (in my name) had been canceled. OK, now something is wrong.

Well, I have our cell phones in my name (5 of them- me and my husband and 3 kids). All are in MY name and I called to see if we had gone over on our plan (thanks to the kids) and I learned that my bill was about $35 less than normal. This made no sense so I looked further and the person at the cell company explained that "I" had called in last month and asked to have one of the phones (husbands) placed into a new account and that I had lost rights to this phone. The representative explained that the call was recorded and it could be proven. Well, I knew exactly what had happened. They were able to tell me the date and time when "I" had called in and guess who my husband was with at that exact time/date…yep, our financial planner who I had watched first hand lie to multiple banks and even an insurance company claiming to be someone she was not. Don’t misunderstand, I saw nothing wrong with what he was doing as it was usually just her calling claiming to be me at my request since I didn’t want to go throught the hassles. Now, it’s painfully obvious that she is steering my husband throughout this divorce behind my back.

Is it worth my time to subpoena for this digitally recorded phone call which I feel 100% certain will show who the real "ME" is using my personal data (SSN etc.). No, in the big scheme of things losing this number is no biggie, however, it is obvious to me that this once trusted friend (professional) sees where she can benefit most by aiding my husband throughout this divorce process and she’s willing to do this to make it happen.

I don’t want her in trouble with the law as I just don’t operate that way. However, if my lawyer gets this record and it’s clearly her, what are the different scenarios that could happen?

It is possible that it’s my daughter and if that’s the case then I’ll just laugh but if it’s someone outside of my family I have a very big problem with that.

Thank you in advance!

Pat

You have a lawyer so he/she should be handling this, not you. You are too personally invested in this matter to make decisions about this. It’s possible that you husband had a friend call the phone company (he certainly knows your SS#). He could also have cancelled your credit card just to be vindictive. You have no proof at this time that your financial planner is causing you these problems. However, if you no longer trust the woman, then pull your money out of her control because you don’t need any additional grief at this time. Check with your lawyer.

Lump sum payout. I may not be here next year.