Freeman's Blog


January 16th, 2020 by

If you receive a distribution from a qualified retirement plan such as a 401(k), you need to consider whether to pay taxes now or to roll over the account to another tax-deferred plan. A correctly implemented rollover avoids current taxes and allows the funds to continue accumulating tax-deferred.



If you decide to take a lump-sum distribution, income taxes are due on the total amount of the distribution (except for any after-tax contributions you’ve made) and are due in the year in which you cash out. Employers are required to withhold 20% automatically from the check and apply it toward federal income taxes, so you will receive only 80% of your total vested value in the plan. (Special rules apply to Roth accounts.)

The advantage of a lump-sum distribution is that you can spend or invest the balance as you wish. The problem with this approach is parting with all those tax dollars. Income taxes on the total distribution are taxed at your marginal income tax rate. If the distribution is large, it could easily move you into a higher tax bracket. Distributions taken prior to age 59½ are subject to a 10% federal income tax penalty. (Special rules may apply if you were born before 1936.)


If you don’t qualify for the above options or don’t want to pay current taxes on your lump-sum distribution, you can roll the money into a traditional IRA.

If you choose a rollover from a tax-deferred plan to a Roth IRA, you must pay income taxes on the total amount converted in that tax year. However, future withdrawals of earnings from a Roth IRA are free of federal income tax after age 59½ as long as the five-tax year holding requirement has been met. Even if you are not 59½, your distribution may be tax-free if you are disabled or a first-time home purchaser ($10,000 lifetime maximum), as long as you satisfy the five-year holding period.

If you elect to use an IRA rollover, you can avoid potential tax and penalty problems by electing a direct trustee-to-trustee transfer; in other words, the money never passes through your hands. IRA rollovers must be completed within 60 days of the distribution to avoid current taxes and penalties.

An IRA rollover allows your retirement nest egg to continue compounding tax-deferred. Remember that you must generally begin taking annual required minimum distributions (RMDs) from tax-deferred retirement plans after you turn 70½ (the first distribution must be taken no later than April 1 of the year after the year in which you reach age 70½). Failure to take an RMD subjects the funds that should have been withdrawn to a 50% federal income tax penalty.

Of course, there is also the possibility that you may be able to keep the funds in your former employer’s plan or move it to your new employer’s plan if allowed by the plans. (Make sure you understand the pros and cons of rolling funds from an employer plan to an IRA before you take any action.)

Before you decide which method to take for distributions from a qualified retirement plan, it would be prudent to consult with a professional tax advisor.

Let me guide you through your retirement planning decisions. Contact me for a FREE retirement strategy consultation at my office in Upper Marlboro, MD. 

Contact me TEL: 1-833-313-7233.

Retirement Specialist Freeman Owen, Jr.
May 2nd, 2018 by

Should you pay off debt or save for your employer-sponsored retirement fund?

That’s a very good question and one that does not have easy answers. For one person, they may need to pay off debt. Another may benefit from money in the employer sponsered retirement fund. So, the answer boils down to how your money can best be put to work for you.

pay off debt

1. Debt interest rate vs possible financial instrument growth

If you make extra payments on a specific debt, you are essentially earning a return on the interest rate of that debt. For example, if you’re paying a credit card with a 14% interest rate, you are basically getting the same benefit as if you put away that money & earned a 14% growth on it. That rate of return would be difficult to match in your retirement portfolio on a long-term steady basis. So, if you’re carrying a balance on a high-interest rate credit card, your money may be best put to work paying down that balance.

However, paying down a house debt could be important to you. But, if you pay off debt of your house in lieu of setting aside money for your retirement, you may be making a mistake. That’s because the house interest rate debt is low (maybe like 5%). But, the compounded interest increases your earning potential over a long period of time. Therefore, the time-value-of-money will bring more benefit to you than trying to shave off a couple years on your mortgage. But, yes, there may be a good reason to want to pay off your mortgage debt. Entering retirement age debt-free is strategic & wise move.  Therefore, the key is to think strategically & carefully about growth versus debt interest rates in relation to your overall goals & circumstances.

2. Do you get matching contributions?

If you get matching contributions from your employer for your 401K account, it’s free money. That free money can increase the growth potential of your retirement plan account. If your employer offers it, try to take full advantage of the matching program. However, if your company does not offer a match plan, there are still huge tax advantages & long-term growth potential of even small contributions.

Planning & money discipline.

With a little budgeting & financial discipline, you may be able to pay off debt and save for retirement through your employer-sponsored plan. Contact me for a FREE retirement strategy consultation at my office in Upper Marlboro, MD. Contact me  1-833-313-7233.



August 16th, 2017 by

401(k) loan

Considering the high-interest rates that apply to many credit cards and other types of consumer loans, is it a good idea to take a 401(k) loan instead? It often depends on your job security and how you intend to use the money.

About 87% of participants are in 401(k) plan that offers a 401(k) loan. But just because you can get a loan doesn’t mean you should.

Taking a 401(k) loan

Know the rules. Under IRS rules, you can borrow the lesser of $50,000 or 50% of the vested account balance. 401(k)Loans must be repaid within five years (longer terms may be allowed for a home purchase). However, each plan is allowed to set its interest rates and repayment policies. Even though the plan will charge interest, the happy news is that the interest returns to your account.

Understand the risks. Borrowed money isn’t pursuing investment returns, which could result in a retirement income shortfall. Also, if you leave your employer, the loan generally must be repaid within 60 to 90 days. The outstanding balance may be a distribution if you fail to repay on time. Distributions from employer-sponsored retirement plans are subject to ordinary income tax. Early withdrawals taken before age 59½ may also incur a 10% federal income tax penalty.

Taking out a 401(k) loan could be a better option than carrying high-interest debt. But as always, you should be careful to avoid borrowing to maintain a lifestyle you cannot afford. Learn more about how to manage your 401(k) account.

Retirement Planning That Includes Your 401(k) Plans

If you have multiple 401(k) accounts from different employment locations, we can consolidate them into one account.  It’s far easier for you to manage. Moreover, I can advise you on how to create a retirement you can never outlive.
Let’s meet for a FREE retirement strategy consultation at my office.
Contact me 1-833-313-7233.



February 13th, 2017 by

U.S. workers change jobs every 5½ years, on average.1 These changes often include a significant decision regarding the assets in their former employer’s 401(k) or other defined contribution plan. Unfortunately, about 45% of people cash out their balances in workplace plans when changing jobs, and the percentage rises to 55% for those with balances of $5,000 or less.2

When you take a distribution from your 401(k), you will owe ordinary income tax on the withdrawal and possibly a 10% early-withdrawal penalty if you are under age 59½. The biggest penalty, however, might be the loss of future retirement dollars. Consider that even a $5,000 401(k) balance could grow to more than $30,000 over 30 years, assuming a hypothetical 6% annual growth rate.3 Cashing out a larger balance would have greater consequences.

Careful with Your 401(k)

Preserving Tax-Deferred Money

Depending on your situation, you may have several other options for your 401(k) assets when changing jobs. All of them keep the tax-deferred status of your retirement funds and offer the potential for continued tax-deferred growth.

Keep money in former employer’s 401(k).

This could be a conveniently short period option (if allowed by your old employer), but you will not be able to make future contributions. Keep in mind that many employer plans may automatically transfer balances under $5,000 to an IRA and automatically cash out balances under $1,000.

Transfer monies to a new plan.

If your new employer offers a 401(k) or other workplace retirement plan that accepts rollovers, this strategy might make sense if you are comfortable with the fees and options in the plan and expect to stay with your new employer for some time.

Roll monies to an IRA.

IRAs typically provide a wider variety of options than employer plans and enable you to consolidate your retirement assets in a single account. Moreover, the IRA is yours to control, regardless of your employment situation.

For either type of rollover, it’s more efficient to execute a trustee-to-trustee transfer from your old plan to the new plan (or IRA), either directly or in the form of a check made out to the new trustee. If you receive a check payable to you from your former employer’s plan, 20% will be withheld for federal income taxes. You have 60 days from the date of the check to roll over the entire distribution — including the tax withheld — to an IRA or another employer-sponsored plan; otherwise, the amount not rolled over will be considered a taxable distribution.

Distributions from traditional IRAs and most employer-sponsored retirement plans are taxable as ordinary income. Withdrawals before age 59½ may be subject to a 10% federal income tax penalty, with some exceptions.

1) Employee Benefit Research Institute, 2015
2) InvestmentNews, February 17, 2015
3) This hypothetical example of mathematical principles is used for illustrative purposes only and does not represent the activity of any particular financial instrument. Fees and expenses are not part of the calculation, and they may reduce the activity or increases described. Actual results will vary.

Freeman Owen, Jr -Retirement Specialist

Allow me to guide you through your retirement planning and strategy. I want to help you keep your money secure!  Let’s talk.

Meet me for a FREE retirement strategy consultation at my office at 1-833-313-7233. 


April 12th, 2016 by

managing your 401KMore than 73 million Americans actively participate in employer-sponsored defined-contribution plans such as 401(k), 403(b), and 457 plans.1 If you are among this group, you’ve taken a big step on the road to retirement, but it’s important to understand your plan and what it can do for you. Here are a few ways to make the most of this workplace benefit.

 1. Take the free money.

Many companies match a percentage of employee contributions. When managing your 401(k) plan, you should aim to receive a full company match and any available profit sharing. Some workplace plans have a vesting policy requiring that workers be employed by the company for a certain period of time before they can keep the matching funds. Always find way to take the free money.

2. Bump up your contributions.

Saving at least 10% to 15% of your salary for retirement (including any matching funds) is a typical guideline, but your personal target could be more or less depending on your goals. Managing your 401K plan enables you to defer income taxes on the money you save for retirement, which could enable you to save more. In 2016, the maximum employee contribution to a 401K plan is $18,000 ($24,000 for those 50 and older).

3. Rebalance periodically.

The percentage of your portfolio dedicated to certain types of products or vehicles should generally be based on your risk tolerance and planned retirement timeline. But results from those products can drift over time. Rebalancing your plans so that it remains in line with your overall retirement goals. Consider reviewing your portfolio at least annually and learn retirement strategies for people 55 and older.

4. Managing your 401K by knowing your vehicles.

Examine your  options and choose according to your personal situation; some employer-sponsored plans may automatically enroll new employees in default plans. Many plans have a limited number of options that may not suit all of your needs and objectives, so you might want to add additional funds outside of your workplace plan. Just remember to make choices that best suit your long term goals.

5. Keep your money working.

When managing your 401K, some plans allow you to borrow from your account. It is generally wise not to use this option. But if you must do so, try to pay back your loan as soon as possible to give your nest egg the potential to grow again. Remember that all products and vehicles are subject to market changes, and they come with risks!  Withdrawals prior to age 59½ may be subject to a 10% federal income tax penalty.

Source: 1) American Benefits Council, 2014


Freeman Owen, Jr -Retirement Specialist

There is expert guidance available to you for your retirement planning goals. Start by managing your 401K. Let me help you get it done right!

Meet me for a FREE retirement strategy consultation at my office at 833-313-7233 | MD, VA & DC. 


February 17, 2015
February 17th, 2015 by

American employers are increasingly dropping pension plans, and that means workers are increasingly counting on 401(k) retirement accounts to provide financial security in their golden years. To get the most out of your account, be sure to avoid these 401(k) mistakes that could derail your retirement account.

1. Withdrawing Your Money:

One of the worst things you can do with your 401(k) account is to cash it out when you change jobs. Many people do just that. Recent data from Fidelity Investments, which administers many companies’ 401(k) plans, shows that 35% of those plans’ participants cashed out their accounts last year when leaving their jobs.

You should put a percentage of your overall salary into a retirement savings account, rather than accumulating money temporarily in a separate account. Considering that fewer and fewer Americans have the luxury of guaranteed pensions for retirement, and the average Social Security benefit is about $1,328 per month as of January 2015 (that’s only about $15,900 annually), most of us need to be stocking away lots of money on our own for retirement.

Fidelity also noted that among its plan participants in their 20s through 40s, the average cashed-out account balance was $14,300. Sure, after cashing out, you might start contributing to a new 401(k) account. However, you will have lost a significant sum, thereby affecting your overall retirement plan.

2. Paying High-Cost Fees:

Another huge 401(k) mistake you can make is paying more than you have to in fees.

Over time, the difference between 0.50% and 0.05% in annual fees is massive. Think thousands of dollars of potentially lost money over the course of your career. So, you need to pay close attention to funding choices in your 401(k). Sometimes a better deal is right under your nose.

3. Not Taking Full Advantage of Employer Contributions:

One of the biggest 401(k) mistakes is not making full use of money that your employer is willing to contribute to your account. Many employers make contributions in two different ways. Based on your percentage of your overall salary, they add profit-sharing contributions to employee accounts. Also, they match any contributions that you make up to a certain amount. Both of these types of contributions amount to free money from your employer, and it’s worth the minimal effort to claim it.

Most of the time, you don’t need to do anything to receive profit-sharing contributions. But with employer matching, it’s critical to save at least enough to maximize the amount of your employer’s contribution. Typical 401(k) plans will include provisions that match half of your contributions up to a maximum of 6% of your total salary. However, some contributions are much more generous. You could receive matching contributions (dollar-for-dollar) or matching contributions on higher percentages of your total pay. Even though employer matching and profit-sharing are sometimes subject to vesting requirements, your contributions are always yours to keep. Therefore, there’s no risk for your saving potential.

Source: USAToday: Feb 1, 2015 -3 critical 401(k) mistakes to avoid

I want to help you with your 401(k) plan and outline a plan for a retirement income you cannot outlive. So, let’s get started today! Contact my office at 1-833-313-7233 | MD, VA & DC. Freeman Owen, Jr - Host of SAFE MONEY TALK on CBS The Big Talker 1580AM
May 21st, 2014 by

Social Security Benefits Maximized for Retirement

People who claim Social Security early get smaller payments over more months versus more money per month. You get more money by far if you claim later.

Here are some strategies for getting the most from your Social Security check:

  • Claim later to get a larger benefit amount. Though 62 is one of the most popular times to claim Social Security, waiting makes a difference, and each year you wait increases the amount you will receive each month.
  • Work longer at a higher income. Since Social Security uses your 35 years with the highest income, you can increase your benefit amount by working extra years at higher income
  • Coordinate when you claim as a couple. If the higher-earning person in the couple claims early, it can significantly lower the amount the surviving spouse receives. It’s often better for the higher earner to wait as long as possible and at least to 66, if not to 70. For four out of every 10 widows past 65, Social Security is all the income they have.
  • Claim later if you’re single. If you’re able to work, claiming later will give you a higher monthly benefit. This is especially true for women who typically have earned less than their male counterparts, live longer than men and generally have fewer other resources to rely on during the years beyond 70.

Source: US Money, Jan8, 2014

Don’t Do Retirement Planning Alone

Yes, you need to be knowledgeable about your retirement. However, there are just some things only a professional can help you discover. So, employ the help of a professional who knows how to keep your money safe and will strategize with you for a worry-free retirement. Call me for a free, no-obligation consultation.
Just Ask Freeman | 1-833-313-7233 | MD, VA & DC.

June 20th, 2013 by

Welcome to “Skills To Pay The Bills” and segment. Please welcome our co-host, Mr Freeman Owen, Jr, President and CEO of Financial Sources, Inc.

Tia: When we were talking about employer sponsored retirement account, men can contribute 6% and their employers will contribute 6% also. When women contribute to their retirement accounts, they can only contribute 4% because they don’t make as much money.

Freeman: Well, Tia, when you said “match”… many employers are not matching anymore. No, they are not contributing to building a retirement account. I’ve seen the matching process within various companies go completely away completely. In some instances, the employers terminate any contribution to the employer sponsored retirement accounts. They just don’t put money in there. When you look at today, since many employers don’t offer a defined pension plan, what is happening is that many ladies who have setup their 401K and 403b need support and help [with those accounts]. So, when you mention matching, that is pretty much archaic today.

Check out my other blogs for more information about how to plan for a better retirement. Moreover, I offer free, no obligation consultations
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