Exactly one year ago Girl Ninja quit her teaching job in San Diego to come move up north and join me in Seattle. It didn’t dawn on me until last week, that Girl Ninja didn’t just leave her former employer behind, but she may have also left behind some retirement savings in her old 403b. Having no clue how much she may or may not have in this 403b, I had her call the school district and get some information.
Turns out, homegirl had nearly $4,000 in her 403b. The school district told us we had three options for that money:
1. Keep the money in her SDUSD account.
2. Withdraw the money and put it in our savings account.
3. Transfer the funds to a personal IRA Girl Ninja hasn’t yet created.
We ruled out option one in the blink of an eye. There is no way we were going to leave the funds in a School District account that she can’t access. Option two, although appealing (who wouldn’t want a couple extra grand in their bank account?) also was a bad deal since we would have to pay federal and state income tax on the funds…plus an additional 10% penalty for taking an early withdrawal. That would have ended up as a net $3,000 payment to us, but nearly $400 in fees being paid to the IRS. Who the frick wants to give the IRS $400 of money they don’t deserve? We sure as heck don’t, so we did the responsible thing and created a personal IRA for Girl Ninja so we can have all $4,000 rolled in to her new account. What’s more, I’ll get to include that $4,000 in our next Net Worth update which, if you couldn’t guess, makes me a happy camper. This story had a happy ending…
Now let me share with you a story that makes my heart hurt.
Someone I know recently passed away. He left behind a pregnant wife (lets call her Jane) and three children. I also know, when he filled out his life insurance forms six years ago (before he had any kids), he put his wife as a 60% beneficiary, and his parents as 40% beneficiaries of his $175,000 policy.
The tragedy in this story, aside from the untimely death of this young man, is that I can say with reasonable confidence had he actually thought about the life insurance paperwork he filled out (pre-family) in 2006, he would have made sure his wife/kids were the sole beneficiaries on the policy in 2012.
Instead, I’m literally watching the money his parents received be squandered away. They even had the nerve to approach Jane at their son’s funeral and ask her when they could expect their cut of the life insurance policy… so they could buy a new car. Ugh 🙁
Jane is forced to watch her ex-in laws blow $70,000 on things like cars and washer and dryers (they posted a picture of their new W/D on Facebook last week), instead of having that money go towards a house, groceries/diapers, or college tuition for her kids. And to think, this whole ordeal could have been avoided if that old life insurance form was simply updated.
If this doesn’t serve as a kick in the butt to get your unfinished business taken care of I don’t know what will.
What unfinished business (financial or otherwise) have you been putting off? Creating a will? Changing your name? Opening an IRA? Finishing up those last few classes to get your degree?
p.s. I just realized I still need to make Girl Ninja the sole beneficiary on a few of my pre-marriage accounts.
I’m surprised you didn’t also mention the fact 175k in life insurance seems very low with 3 kids and another on the way. Not knowing the situation, I’m not trying to judge, but the other message here is to make sure you have more than enough to maintain a reasonable standard of living.
My guess is it was probably set up when he was married but before they had any children… otherwise yeah that’s not enough!
Gus is absolutely correct. His life insurance was severely underfunded, appropriate to a single person without dependents but far below what it should have been.
As for me, I do have a will, but I do need to make up a personal inventory to send my lawyer with a list of all my possessions and various accounts. I need also to update my IRA so that the beneficiaries match those specified on my will, as the IRA beneficiaries take precedence.
You do not need to fight, beat up anyone in the family to be crappy parents …. that’s all I have to say.
Thanks for the kick in the butt Ninja. I’ve updated my insurance policy, but the two of us need to get an appointment made with a lawyers ASAP to make sure we get our will and guardianship plans in writing should something happen to us.
Wow. Hopefully Jane has the presence of mind to keep those grandparents out of her children’s lives.
They sound like horrible people and would probably be a terrible influence on those children. Just because you have a blood relation to someone doesn’t mean you should get to spend time with them (in my opinion)
Wow, that’s a sad story. I can’t imagine grandparents not giving the money back to help their grandkids. Yikes! It doesn’t seem like $175k would be that bad of an amount if it could pay off their house and she had a good income on her own. Not that that matters now given the outcome. 🙁
I still need to create a “if I die” binder. I’m single, so my mom is currently the beneficiary of my “worldly possessions” and I need to create something that if I pass away she knows all my life insurance, savings, retirement, etc.
Sweet! +$4000 for you guys =)
That story makes me sick.. I can’t believe they asked for the money at the funeral. Ugh. That’s completely heartless. How can you be like that about your own son??
That is horrible. 🙁 I’m sorry to hear that Jane is going through that.
I agree with the above posts that 175k seems low for having 3 kids. 🙁
What a sad story! I need to send a couple of thank you cards/presents that have been sitting around my house. I should do that this week…
That IS a sad story. I don’t have kids yet, but that’s probably not too far away. Good thing to add to the “when I have kids to-dos.”
You do not want to leave the money there because you will incur fees. It is best to move it to an IRA.
That’s a tough story to read. The comment made at the funeral is unbelievable. It really stresses the importance of making sure you update your beneficiaries after significant life events.
Wow. I don’t know the parents, and maybe they’re crazy with grief…but that seems very selfish.
We need to get a will going and plan how to leave our assets to our soon-to-be-born little one should anything happen to both of us 🙁
Not so fun to think about, but super important!
It is what it is. People are people and will do what they do. That is the reason I have very little faith in others. I used to be generous, but after getting shafted for so long by so many I’ve become more selfish as I get older. Ignorance is bliss, truly.
It does not seem unreasonable to me that the parents bought a new washer/dryer. To me it is a necessity of life. Same goes for a car, unless it is some obnoxious luxury car. I need more information before I can crucify the parents, I guess.
Add a couple of zeroes and substitute parents for ex wife:
http://www.myjourneytomillions.com/articles/verify-your-retirement-accounts-beneficiary/
A United States Supreme Court Case that follows your message
Hmmm, how about you take the taxation of the 4k you didn’t know you had, and give the 3k to this family of your good friend? You didn’t even realize you had it, she’s going through the most painful time of her life, makes sense to me, no? I thought that was how you were going to end this post to be honest.
We are putting off a will re: guardianship because we don’t agree/know what is the best choice…a conversation does need to be had and a will drawn up, thanks for the reminder.
SO GLAD I stumbled upon your blog through a carnival we were both mentioned in. Love your posts and style. Sorry to hear about your friend, but I’m glad you are using it as a tool to remind everyone to get their financial affairs in order.