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Early 401(K) Use Possible

Sun., April 21, 1996

There’s a little-known exception to an oft-cited rule that says you pay a 10 percent penalty for withdrawals from your IRA or 401(k) before you turn 59-1/2.

This could be valuable if you’re out of work.

Internal Revenue Code 72(t) allows early withdrawals without penalties if you adhere to strict guidelines: Withdrawals must be part of a series of substantially equal periodic payments made at least once a year, and their size must be based on your life expectancy or, in some cases, the life expectancy of you and your spouse. The payments cannot be altered for five years or until you turn 59-1/2, whichever is longer.

If the payments are coming from a retirement plan you had through your employer, they can begin only after you have left the company.

This is a tricky area, so check with your retirement-plan sponsor or a financial consultant before going ahead.

Social Security limits raised

If you’re over 65 and continuing to work, you can now earn a bit more without jeopardizing your Social Security benefits. The Senior Citizens’ Right to Work Act, recently signed by President Clinton, raises the 1996 earnings limit to $12,500. Previously, it was $11,520.

Future limits: $13,500 for 1997, $14,500 for 1998, $15,500 for 1999, $17,000 for 2000, $25,000 for 2001, $30,000 for 2002.

Low-cost card list available

For a current list of standard MasterCards and Visa cards available nationally that carry low rates and/or low or no annual fees, mail a check or money order for $4 to: Bankcard Holders of America, 524 Branch Drive, Salem, Va. 24153.

(For information on ordering a current list of low-rate and/or no-fee or low fee standard cards and gold cards, as well as rebate cards and secured cards, call CardTrak at (800) 344-7714.)

Bankcard Holders also offers “Debt Zapper”, a personalized plan that creates a monthly schedule so you can pay off all your charge cards as fast as possible.

The Debt Zapper kit gives you a personal report that shows how much you need to pay on each card each month, a payment budget you can afford, and a summary that details your savings.

For $15, you’ll get the Debt Zapper kit, as well as the current list of low-rate cards, and a pamphlet, “10 Proven Strategies to Slash Your Debt”.

To order, use the Bankcard Holders address above.

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