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Unemployment ending -- need to withdraw to finance education
Old 03-12-2011, 03:52 PM   #1
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Unemployment ending -- need to withdraw to finance education

I'm 49 and was laid off 2 years ago after 20 years -- final unemployment check to be received in about 3 weeks. From work, I have about $50k in a cash 403b account that is only earning about 2%. I have about $80k in a fidelity 403b which is doing much, much better.

I've been hurt in the job market because I never completed my bachelors (in accounting), and quite frankly, I would rather do hotel management and have the opportunity to travel. What can I say, I love hotels!

My thoughts (plan?) is to move the $50k to a new account and withdrawl the needed net $2500/mo for living expenses. I know I'll have to pay the 10% penalty -- I'm not worried about the income taxes as I will be in a low tax bracket as this, plus a $10k a year consulting contract, will be my only source of income. So I think I can milk this for 1.5-2 years -- the time it will take to finish my degree.

Questions:
A) As I'm only 49, is the money directly used for education expenses, exempt from 10% penalty?

B) I'm not good at managing investments. <blush> -- so I'm thinking of rolling over the $50k to a portfolio account (i.e. mutual fund) similar to what I have the other retirement funds in fidelity. Of course, I want the best fees, good return, and not outright crazy risk -- but would like to put the money in an aggressive account that will pay me more than the .01% the Chase IRA account would earn!

c) I've looked into just taking out a loan for school -- BUT because of my single, independent income over the last two year -- I wouldn't qualify for a guaranteed student loan -- so I would be looking at a > than 6% compounding interest loan -- which would end up costing more than the 10% penalty in the long run. I think I would be better off taking the money I would have been using to payoff the loan after school and replenishing my retirement income.


Help. Is my reasoning sound? I hate drawing down what little retirement I have but think it's the best option. Does investing with Fidelity, rather than Chase make sense? Thoughts?!

I know how to add 2+2 - but investments, oy vey!
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Old 03-12-2011, 04:12 PM   #2
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I have some comments, but first, why have you gone 2 years unemployed without returning to school? It seems that at your age, some urgency time-wise would have been appropriate.

Is it just a matter that at first you thought you'd be able to find a job but that now after 2 years of intense searching you see that you can't due to your lack of a BA degree?
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Old 03-12-2011, 04:17 PM   #3
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Here's a link to details for withdrawals

401k Withdrawal

The one you mention in option A) would be subject to the 10% penalty.

Look at the last no penalty option, it's IRS Rule 72T, which may work for you. It's calculated using your lifespan.
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Old 03-12-2011, 04:28 PM   #4
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Hi youbet -- there are many, many reasons I did not go back to school, some legit and some just a mistake on my part. So now, head hung low, I'm trying to rectify and see what is best for me to do with the final 15-20 years before retirement.
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Old 03-12-2011, 04:59 PM   #5
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Hi doraflood and welcome to the board.

It's hard to know where to start. You're 49 and you've been out of work for 2 years and now are looking to go back to school for another 2 years living primarily off your retirement savings. At that point you'll be 51 and will have been out of work for 4 years. Not a real attractive situation.

1. If/when you do move the $50k from your 403b, DO NOT put it anywhere other than into a liquid, interest bearing, vehicle. You mentioned wanting something "aggressive" and that isn't what you want to do with money intended to meet short term needs.

2. If you're going to school to complete your bachelor degree and, based on your 2 years of agressive but unsuccessful job searching, you feel that having the bachelor degree will be a significant help, go for it. If you're talking about going back to school for some sort of certificate in hotel management, I hope you've done your research and know with confidence that a good job will result.

3. Is there anyway you could expand your part time consulting job to earn more? Spending your retirement savings at 49 yo to finance not working full time for 2 more years is really hard for me to get comfortable with.
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Old 03-12-2011, 05:11 PM   #6
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Have you tried to get a job working in hotel work. Have you asked at those places if a 'certificate' in hospitality is worth the paper it is printed on??
Give us the name of the school you are thinking of? A school or a mill?

I wish you luck. I was lucky when I moved to VA they were looking for any warm body to fill slots in accounting. I had a 2year degree but most credits didn't transfer.I took classes at night for 3 years -and working 10hour days. I never did manage to patch together a bachelors.
My take is that 50k isn't enough to ever help a retirement-so using it is not sure a bad deal for you. But get a job and go to school part time. Too late for this year but those walkin tax services hire a lot of parttime help.
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Old 03-12-2011, 05:16 PM   #7
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Thanks youbet --

I do plan on expanding my self-employment income whenever possible, including a weekend job at a walmart-type job!. Even now, instead of listing I've been unemployed on my resume, I list my self-employed 'company' and me as principal.

As for education -- I'm planning on hitting this in two directions: To apply for most federal accounting-type jobs, I am really competing against those who have about 18 credit hours in accounting -- which I do not, coming from a liberal arts background but landing a job as a financial analyst/project manager for the last 20 years! So goal 1: Get the Assoc Degree in accounting -- I'm 15 credits short for that and can do cheaply at the local community college. Goal 2: Is a bachelors in business management with a hotel management concentration. (I could also change to project management concentration - debating). I'm about 45 credits (15 classes) short of that. So with 20 'current' classes, I think I can be more marketable and self-confident.

So yes, 4 years out of working for a company -- but explained by doing self-employment while finalizing my degree -- and hopefully, I'll be hitting better economy in two years.
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Old 03-12-2011, 05:20 PM   #8
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What were you laid off from? How sure are you that a degree in hotel management means a job in hotel management? Where will you get this degree? Have you been looking for work for two years? Personally I would guard my retirement savings, not live off them, and take whatever job I could find, and then go back to school part time in hotel management.
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Old 03-12-2011, 05:22 PM   #9
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Yes, Lemming -- actually I have done a bit of research on hotel management: I am planning on finishing my bachelors via APUS, American Public University, online, as they do accept all my transfer credits and are only $750/course -- AND I know that large hotel changes, such as Starwood (Sheraton brand) and Intercontental actually DO recruit with them. Definitely not a certificate.

Right now, in Arizona, I'm getting job offers at no more than $10 per hour -- and I did try some of the local accounting firms/HR Block type offices for tax assistance prep jobs (I'm actually really good with taxes) -- but without an accounting degree (even associates), they don't pay more than $8/hour.

Thanks!

Keep questions coming as it helps me get things clear in my head!!!
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Old 03-12-2011, 05:30 PM   #10
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I did a little digging around...

This site may be of use to you.

Workforce Resources for Jobseekers - Arizona Workforce Connection

This will definitely be of use
https://www.azdes.gov/main.aspx?menu...e_148_0_2046_4
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Old 03-12-2011, 05:37 PM   #11
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What about working (part time at least) in the hotel business. I'm sure you'll be more desirable to potential employers if you've got real work experience in the business PLUS this degree. In addition, maybe some of the larger hotel companies MIGHT do some matching with regard to tuition payments--worth checking into, anyway. Plus, there are mechanisms for getting college credit for real-world experience. At the very least, you'll have plenty of fodder for any case-studies or papers you have to write. As a bonus, you'll see if this business is really for you, there's no better way than to be behind the desk when the drunks/girls/rowdies stumble in at 3 AM. You'll also find out more about which companies and situations you'd like to sign on with.
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Old 03-12-2011, 05:37 PM   #12
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That sounds better. At first, like lemming in his post above, I feared you were going for one of those Hotel/Hospitality certificates from a for-profit school. You know...... the ones you see advertised on late night TV.

I agree with the AA for immediate help in the job search followed by the BA. Hurry up.

In terms of paying for it, increase current income as much as you can possibly handle. Spend as little of your deferred retirement savings as possible and when moving money from your 403b, choose investment vehicles designed to maintain constant value as you'll need the money in a short time. Talk to the folks where you move the money to about the fact you'll be withdrawing periodically and understand their procedure for doing so.
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Old 03-12-2011, 05:46 PM   #13
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Doraflood.....

Just to add a bit of positive commentary.......

My son's BIL is the restaurant/banquet manager at a major Marriott resort complex. His preparation was a bit "unplanned" as yours is turning out to be. He was a music major at a state university (played tuba!) and wound up not being able to find a job. Accepted some weekend and night shift work at the local Marriott complex and now, about ten years later, is a significant manager at another complex in a distant state. He says it's hard work, involves a lot of nights and weekends but the pay is OK and he feels he has some job security.

I hope it works out for you......
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Old 03-12-2011, 05:47 PM   #14
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OK -- doing a little research as well -- Does this sound like a good loop-hole?

1) Calculate how much I will be spending on "qualified educational expenses (QEE)" -- tuition, books, etc.

2) When I drawdown from my 403b account --- split it thusly:
a) Roll over what I need for QEE into a Roth IRA (I don't have one). I'll have to pay taxes (but I have to pay taxes anyway). Then use the Roth IRA to pay the QEEs - because that is one of the few exceptions for not having to pay a 10% penalty for early withdrawal.
b) The rest is put in a fidelity or vanguard IRA account that I can withdrawal as needed (and yes, I hear everyone loud and clear that I need to work at least part-time!). This part IS subject to the 10% early withdrawal penalty.
c) Additionally, remember that all of my QEEs, as long as I am in school part-time, is eligible for the American Educ Opportunity Credit - thus negating some of the taxes on the money passed through the RothIRA.


I'm just now trying to get up to speed on a RothIRA -- do I have this right

You guys are great!
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Old 03-12-2011, 05:58 PM   #15
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I don't have time to look it up but check and see if you can withdraw tax free from the Roth before the money has been in the account for 5 years.
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Old 03-12-2011, 06:46 PM   #16
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I am no expert in Hotel Management, but imagine if I were hiring for hotel management positions, I would strongly prefer someone working their way up from a couple years of $8/hour positions to a recently minted (old) graduate of a Hotel Management degree with no practical experience. Why do you turn your nose up at 8-10 dollar positions and prefer instead to pay for schooling. How much do you know about Hotel Management? I'd be astonished if they like to hire brand new managers fresh out of school, even if they are somewhat older, at top salaries.

As for covering up a 4 year gap in employment with a fictitious self-employed consultant position, you will be immediately eliminated from consideration if anyone asks you for details and figures out what you did. You do want to put your experience in a resume in a favorable way, but if you get caught in a lie, your candidacy is over. If you do get the job and later your fabrication is discovered, most places will fire you for the misrepresentation.
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Old 03-12-2011, 07:13 PM   #17
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Hey - growing older -- thanks for a response, though I think you are getting off topic a bit and making some really bad assumptions, i.e. that it's a "fictitious self-employed consultant position."

a) I'm not "turning up my nose" at $8-$10 hour jobs: An $8 per hour doesn't pay for rent, utilities, and medical bills -- much less food. So it's not a full-time option. It is an option only to help curb my draw down on my retirement.

b) I'm well aware that I wouldn't get a top-paying position straight out of school. But I have done my research here on what it would take to get into a major brand management program.
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Old 03-12-2011, 07:34 PM   #18
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Originally Posted by doraflood View Post
.... financial analyst/project manager for the last 20 years! ....
Since you have been in a project manager role, what is the possibility of testing for the PMP... Project Management Professional certification from PMI? PMI membership, books, and exam should be less than 1k and can be accomplished in a few months is my guess based on your background.

You have to do you own research to see is there any demand in your area, but by me, I see a fair amount of positions listing that cert in their postings.

If you get into a company, you can leverage the benefits to cover additional schooling.

Just a thought
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Old 03-13-2011, 12:03 AM   #19
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but explained by doing self-employment while finalizing my degree
There wasn't much to go on here, except you mentioned 2 years unemployment, followed by two years in school, that you intended to cover on your resume by claiming you were self employed for 4 years. Sorry if I misinterpreted your plan, as you never mentioned what you were doing for self employment.

In any case, the advice was meant to be helpful not as criticism. Be super cautious about making stuff up to put on a resume. If you get caught out during interviews, you will not get hired. If you get caught out after being employed, in some cases even years after starting work there, you run a risk of being fired.
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Old 03-13-2011, 12:32 AM   #20
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What about working (part time at least) in the hotel business. I'm sure you'll be more desirable to potential employers if you've got real work experience in the business PLUS this degree. In addition, maybe some of the larger hotel companies MIGHT do some matching with regard to tuition payments--worth checking into, anyway. Plus, there are mechanisms for getting college credit for real-world experience. At the very least, you'll have plenty of fodder for any case-studies or papers you have to write. As a bonus, you'll see if this business is really for you, there's no better way than to be behind the desk when the drunks/girls/rowdies stumble in at 3 AM. You'll also find out more about which companies and situations you'd like to sign on with.
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