Lemons to Lemonade

Finally, I have found a couple of good things about Hurricane Rita. The first thing is that it has shaken me up and made me reevaluate what I want to do with the rest of my life. Before Rita I was content with my routine and not too aware of what was going on around me in my neighborhood and the city of Beaumont. After weighing the pros and cons, I decided that I really wanted to move from Southeast Texas.

 

Those of you who regularly read my blog know all about Frisco Lakes and my plans to move there. I have been considering and worrying over the financing options for the new house. I want to pay cash for the house but will not have enough money without tapping tax deferred retirement accounts until after my house sells. The tax consequences of taking money out of the retirement accounts is something I want to avoid. I thought I was going to have to obtain some type of interim loan until my house sells.

 

Last night I was checking out irs.gov. I downloaded Publication 4492: Information for Taxpayers Affected by Hurricanes Katrina, Rita, and Wilma. I found that the rules for those living in the areas impacted by the hurricanes allow you to make up to $100,000 withdrawal from a qualified retirement plan by January 1, 2007 and spread the tax payments over three years. In addition you have a three year period starting the day after the hurricane distribution is made to repay the distribution and pay no taxes on the distribution. I have spent a good part of the morning talking to financial advisers to make sure I have interpreted the rules correctly. It appears that I have. Surely my house will sell within a three year period, and I am hoping that it sells within a month or two. I can repay the hurricane distribution to the retirement plan. The only cost will be the lost earnings on the distribution before it is repaid. This is my lowest cost option.

 

Now I feel that Hurricane Rita has a bright side after all. I strongly recommend that anybody who lives in the areas affected by one of the three hurricanes read Publication 4492. You might find your glass of lemonade, too.