Why Wait Until Age 59 To Get My Money?

Our personal finance contributor offers tips on how to deal with weird banking rules, how to go to college for free and what books you need to read to save lots of money.

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ALEX COHEN, host:

From NPR News, it's Day to Day. Everyone is hoping for an economic turnaround this year. And until that happens, many of us are looking for solid financial advice to keep our heads above water. Here to answer your personal finance questions is Michelle Singletary. Hi, Michelle.

MICHELLE SINGLETARY: Hi.

COHEN: So we're going to start off with a letter about a rule known as the 72(t) rule. It comes from Joan Fantasia(ph). She lives here in Los Angeles. She's a retired journalist from the L.A. Times. She's 53 years old. And she asks, can you explain the 72(t)? There is no way I can hold out until age 59-and-a-half to get my 401(k) money. What's going on here, Michelle?

SINGLETARY: Well. The 72(t) rule is a rule from the IRS that states that if you have an IRA, an individual retirement account, you can withdraw a fixed amount of money for a minimum of five years or until you're 59-and-a-half, whichever comes last. That's an important point. So, let's say you're just a year into this and you turn 59-and-a-half, you still have to play out that five-year rule. So it's whichever comes last. And basically owners have to still pay ordinary income on the distribution, but you don't have to pay that 10 percent penalty. So, since she's so close, she could utilize this. But you have to be very, very careful about that because if you miscalculate and you don't take enough or you take too much, you're going to be hit with that 10 percent penalty.

COHEN: Here's a more general question. This comes from Loreen Lynn(ph). And she says, I am a fool with money. Is there a general book or books that cover the basics of finance? What do you recommend, Michelle?

SINGLETARY: You know, there are a couple of books that I really love. Let's start with college savings. "How to go to College Almost for Free" by Ben Kaplan. This is a young man who went to, I think, it was Harvard and raised like $90,000 in scholarship money. It's a great book, kind of leads you on how to apply for various scholarships. And these aren't just scholarships for, like, the brilliant and the genius. He just walks you through how to get as most money as you can for college. The other book is "The Best Way to Save for College: A Complete Guide to 529 Plans," by Joseph Hurley.

For retirement, check out "How to Retire Happy: The 12 Most Important Decisions You Must Make Before You Retire." It's by one of my former colleagues at the Washington Post, Stan Hinden. And the good thing about this book is he's addressing the issues that a lot of people sort of forget about it or don't think about, even some of the mistakes that he and his wife made. So, it's really a very honest look at the things that you need to consider when you retire. "How To Retire Happy."

Now, for a general, basic financial book, get "Smart and Simple Financial Strategies for Busy People" by Jane Bryant Quinn. I love Jane's work. It's a really easy book to read. You don't even have to read it from beginning to end. You can skip chapters as it applies to you.

COHEN: OK. Last question, Michelle. This comes from Jennifer Melsaff(ph) from Mulino, Oregon. She's married to a construction superintendent who recently was laid off. They're worried about their mortgage. The payments are about $650 a month. Jennifer has already turned a 30-year mortgage into a 12-year mortgage, which means she doubled each of her monthly payments. She asked if she should pay off the mortgage quickly, making higher payments now, or should she put the put the money into savings and stick to the low $650 payment.

SINGLETARY: Because her husband has lost a job, I would stop making the extra mortgage payments. They need to preserve cash until he gets another job. So if it takes longer for her husband to get a job, they have the money to pay for the everyday expenses like food and utilities and such.

COHEN: Michelle Singletary answering your questions. Thank you so much, Michelle.

SINGLETARY: You're welcome.

COHEN: Michelle Singletary hosts a housing special on TV One. You can check your local listings for that. She is also Day to Day's personal finance contributor.

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