A neighbor who owns a commercial rental property beside us was talking last night about her financial situation. She was in a horrible accident last year and has been unable to work since. She applied for Social Security permanent disability which she just won. She will begin receiving $1100 a month starting February of next year, there is some kind of waiting period before she starts getting benefits. Anyway, She now has 5 more months before receiving the disability payments and makes about $800/month from her rentals and she has completely drained her savings. She said she has around $25K in a 401K and was talking about rolling it directly over to a IRA and then cashing it out. I told her that I didn't think she could open an IRA since she had no income this year, that Rental income does not qualify you... is that correct? She seemed to think that was a better option that just cashing out the 401K directly. I just don't know why?? She tried to explain it but it made no sense to me.
Since she is permanently disabled does she get a break on the 10% penalty? She seems to think so but I think I read that you had to have the IRA open for at least 5 years, but now I can't find anything to that effect.
She is not good on computers and I told her I would look around on the internet but have found very little. Any knowledge or advice to pass on?
Since she is permanently disabled does she get a break on the 10% penalty? She seems to think so but I think I read that you had to have the IRA open for at least 5 years, but now I can't find anything to that effect.
She is not good on computers and I told her I would look around on the internet but have found very little. Any knowledge or advice to pass on?