The 'Find' Print

  In case you hadn’t noticed, Friday is Valentine's Day — and, as usual, there’s been the typical seasonal promotions for flowers, candy, teddy bears (and other stuffed creatures) and even pajamas.

I’ve been pretty good over the years remembering those type events — anniversaries (wedding AND dating), birthdays and, yes — Valentine’s Day. But sometimes the time gap between my remembering the date and actually getting around to doing something to commemorate it has been problematic. With Valentine’s Day that can be particularly painful, if only because so many others are scrambling to do the same thing — and at a time when delivery services (and costs), not to mention growing season(s) can be in short supply, relative to the need.


Several years back, I was running exceptionally late in my preparations — and spotted an email touting a dozen roses for $24.99 (they’re a LOT more expensive now — and apparently caught up in all this tariff stuff). Of course, for that price (even then), you could only get them in red (though it was Valentine’s Day, after all), and you actually got a glass vase included in that price (with options to “upgrade,” of course).

So, at that point I was feeling pretty good about my bargain-hunting “skills” — well, at least until the “other” charges emerged. As the final payment screen popped up, I discovered that “standard” delivery was another $12.99, and — at least at that (late) date, it cost (another) $9.99 to guarantee Valentine’s Day delivery, yet another $14.99 if you want it there in the morning. Oh, and there was a “care & handling charge” of $2.99, regardless of delivery date or time. In fact, by the time you add in taxes, those $24.99 roses will run you… well, quite a bit more than $24.99.

Not that you’ll see that all presented in one place — well, until the very last screen, anyway.

Hardship ‘Shifts’

I wonder sometimes if that isn’t how those who request a hardship withdrawal feel —though, disclosures notwithstanding, it’s not like they can see what it’s actually going to cost at the point they make the request. Those surprises tend to come…later.

Oh, they know the amount they need and presumably request. But then there’s the 20% withholding that comes off the top, but then, come tax time (probably months after the event), they’ll “discover” if that 20% withholding was “enough.” At the same time, they’ll likely discover the 10% early withdrawal penalty (for those who aren’t yet 59½[i]). Less obvious is the retirement savings “ground” they’ve lost to the customary six-month suspension of contributions (and match). And that’s not considering the 401(k) loan they likely had to take first because, after all, we have to make really, really sure that you absolutely have no other way to get to that money.

The good news — of a sort — is that those “surprises” are likely to be lessened with the emergency savings and withdrawal provisions of the SECURE 2.0 Act of 2022.[ii]

Retirement ‘Find’ Print

And then there are the surprises that come WITH retirement. That’s when you “discover” the DIS-advantage of pre-tax savings, as Uncle Sam (and his state and city “cousins”) line up for their postponed “cut.” It’s also when Social Security (and Medicare) look to that as fresh income against which benefits (and the cost of benefits) are now means-tested (a.k.a. reduced/taxed). And remember[iii] that your Medicare premiums are based on INCOME.     

Now, if all that seems like a particularly depressing theme for Valentine’s Day, fear not. The fine print impact of these “hidden” costs — like the hidden costs of that floral arrangement can be muted, if not mitigated, by not waiting until the very last minute to make preparations…

- Nevin E. Adams, JD

 

[i] There are some other exceptions. See Retirement topics - Exceptions to tax on early distributions | Internal Revenue Service.

[ii] Speaking of “fine print,” while hardship withdrawals are allowed only for "immediate and heavy" financial needs, under this new provision, you can withdraw up to $1,000 per year for unforeseeable emergency needs without the 10% penalty — you can (do not have to) repay that within three years. However, that amount is subject to tax, though not if you repay it. No other emergency distributions can be taken in the following three years — unless the original distribution is repaid, or the aggregate elective deferrals and employee contributions equal the amount distributed.

[iii] See The Biggest Surprise About (My) Retirement.

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