Blue Ocean Global Wealth
Certified Financial Planner
Marguerita M. Cheng is the Chief Executive Officer at Blue Ocean Global Wealth. Prior to co-founding Blue Ocean Global Wealth, Marguerita was a Financial Advisor at Ameriprise Financial and an Analyst and Editor at Towa Securities in Tokyo, Japan. Marguerita is a spokesperson for the AARP Financial Freedom Campaign and a regular columnist for Kiplinger. She is a CFP® professional, a Chartered Retirement Planning CounselorSM, a Retirement Income Certified Professional® and a Certified Divorce Financial Analyst.
As a Certified Financial Planner Board of Standards (CFP Board) Ambassador, Marguerita helps educate the public, policy makers, and media about the benefits of competent, ethical financial planning. She serves as a Women’s Initiative (WIN) Advocate and subject matter expert for CFP Board, contributing to the development of examination questions for the CFP® Certification Examination. Marguerita also volunteers for CFP Board Disciplinary and Ethics Commission (DEC) hearings. She served on the Financial Planning Association (FPA) National Board of Directors from 2013 – 2015 and is a past president of the Financial Planning Association of the National Capital Area (FPA NCA).
Marguerita studied at Keio University in Tokyo, Japan, and earned her B.S. in Finance and her B.A. in East Asian Language and Japanese Literature from the University of Maryland, College Park. She is a recipient of the Ameriprise Financial Presidential Award for Quality of Advice and the prestigious Japanese Monbukagakusho Scholarship.
Marguerita’s mantra is “So many people spend their health to gain wealth, and then have to spend their wealth to regain their health” (A.J. Reb Materi).
BS, Finance, Keio University
BA, East Asian Language & Japanese Literature, University of Maryland
Why I AM Different - Rita Cheng
Three Cs of Financial Planning - Rita Cheng
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Laura Virili Interviews Marguerita Cheng, CEO, Blue Ocean Global Wealth
Great question. 401(k) loans, unlike 401(k) early withdrawals do not cause tax consequences when the proceeds are distributed. With a 401(k) loan, you are borrowing from your retirement funds, but you still must pay interest. The interest rate that you incur is based on the standard interest rate plus an extra one or two percent. 401(k) plans are designed to allow you to accumulate wealth on a tax-deferred basis for your retirement. Taking a loan can compromise one of the most exciting features of these plans: dollar cost averaging because you will need to make sure you have enough money coming out of your paycheck to cover the loan payment. Consequently, you may not be able to contribute as much to plan. If you do find yourself in a bind and need to borrow from your 401(k), you will eventually pay yourself back and build up your retirement savings and you will pay yourself interest on a tax friendly manner.
While IRA withdrawals prior to age 59 1/2 usually trigger a 10 percent penalty, there are exceptions, including the first-time homebuyer exemption. The homebuyer exception applies to first time home purchases, but it can also be used if either you or your spouse haven’t owned a principal residence during the past two years.
You can also qualify for the homebuyer exemption rule if you use the funds to help child, grandchild or parent purchase a home.
The maximum amount that you can withdraw from an IRA free of penalties under the homebuyer exemption is $10,000.
However, if you have maintained a Roth IRA for at least five years, you may have more flexibility. Because contributions to Roth IRAs are made on an after-tax basis, you can withdraw contributions to a Roth IRA without incurring any taxes or penalties. However, if you withdraw earnings from your Roth IRA, you must abide by the $10,000 limit.
Remember that the exemption for first-time homebuyer exemption is penalty-free, but not necessarily tax-free. Again, the rules are different for traditional and Roth IRAs.
With a traditional IRA, any dollars that you withdraw will be taxed ordinary income rates. For example, if you’re in the 25 percent tax bracket, if you withdraw $10,000 for a down payment, you’ll only have $7,500.
With a Roth IRA, any contributions that you withdraw will be tax-free because they represent after-tax dollars. If you withdraw more than $10,000 in earnings from your Roth IRA, you will be responsible for paying both ordinary income taxes and the 10 percent penalty.
Because there can be many moving parts, it’s important to consult with a qualified tax advisor prior to making any withdrawals.
Should you predecease your wife, she would be eligible to receive your benefit. As you mentioned, your benefit is the higher one. She can't receive both benefits, but she would be eligible to receive your benefit. If she can collect benefits on her individual earnings history, collecting Social Security benefits on her individual record will not preclude her from receiving a widow's benefit or survivor benefit, which is based on your record.
You can start receiving Social Security retirement benefits as early as 62. However, just because you can receive them doesn't mean you should. Should you receive Social Security and still work? It depends on your situation. If you are below Full Retirement Age (FRA) and earn more than the yearly earnings limit, Social Social Administration (SSA) will reduce your monthly benefit. In 2016, the earnings limit for individuals younger than Full Retirement Age (FRA) is $15,720. In other words, if you start receiving Social Security at age 62, your benefits will be reduced $1 for every $2 you earn above the annual limit of $15,720. Starting with the month that you attain Full Retirement Age (FRA), you can receive Social Security benefits with no limits on your earned income.
Before Full Retirement Age (FRA)
$1 of benefits withheld for every $2 in earnings above the limit.
At Full Retirement Age (FRA)
$1 of benefits withheld for every $3 in earnings above the limit for moths prior to attaining FRA.
After Full Retirement Age (FRA)
No limit on earnings. Withheld earnings are returned, if applicable.