ask THE EXPERT

Why does Sunmark put a hold on the checks I deposit?

Generally, the first $100 of a day's deposit is available to you the next business day.

Checks drawn on the U.S. Treasury made out to the person depositing the check are also available the next business day.

Local checks are available to you within two business days following the deposit.

Checks that are not local, but in-state, are made available to you within four business days following the deposit.

Checks deposited to new accounts.

Large deposits.

Checks that have already been returned unpaid.

Checks deposited to accounts that are repeatedly overdrawn.

Checks that we doubt we will be able to collect.

Deposits made under certain emergency conditions, such as a computer failure.

If you have another Sunmark account with a balance large enough to cover the funds, ask to have a hold placed on that account instead. If you don't have another account, now's a great time to start saving. A savings account can provide more flexibility if you need immediate access to deposits.

If the check is coming from your employer or another organization that offers direct deposit, sign up to have your check deposited directly into your Sunmark account.

If a check is drawn on a local bank, cash it and deposit the cash into your Sunmark account. That way, availability is immediate.

Previous Issues

I'm Looking To Buy My First Home ...

"The only account where I have enough money to come up with a down payment is my retirement account. Don't I get some sort of a tax break if I use money to buy a home?"



Before I can determine exactly what the consequences would be if you were to take money from your retirement account, I need to know a couple of things - the type of retirement account you have and your age, for starters.

I'll narrow my answer to the three most common retirement accounts and make the assumption that you are under age 59 ½:

If you have a Traditional IRA -
There is a first-time home buyer's rule that says you can withdraw up to $10,000 penalty-free if you use the money for your first-time home purchase.

But, don't rush out home shopping just yet. The money in your traditional IRA has never been taxed. What this means to you is when you withdraw the money from your Traditional IRA, it becomes taxable income. In other words, if you were to withdraw $10,000, your taxable income also increases by $10,000. Although the exact impact is dependent on your tax bracket, one thing is for sure, you'll pay federal taxes, as well as New York state taxes, leaving you with less buying power than your original $10,000 withdrawal amount.

Let me give you an idea. Say you're in the 28% tax bracket and live in a state with 5% income tax. Your $10,000 withdrawal would net you $6,700 for your down payment. If you needed to withdraw more than $10,000 for a down payment, you'd pay a 10% penalty for the amount over the initial $10,000 withdrawal, plus income tax.

Here's one more thing to think about. What would that money be worth when you retire if you were to leave it where it is? If you were to earn 11% on your $10,000 retirement investment, 30 years from now it would be worth about $250,000. (Even though there are no guarantees on investment return, the market did average roughly 11% over the last 30 years.)

If you have a Roth IRA -
And you've been contributing to it for 5 years or more, you can also borrow up to $10,000 for a first-time home purchase - penalty-free. Unlike the Traditional IRA, if the $10,000 is money that you contributed with your after-tax dollars, the distribution will not increase your taxable income. However, if you borrow from the earnings portion of your Roth IRA, this would be considered taxable income which would be subject to federal and state income tax.

Even though this might be the best option tax-wise, bottom line is you still should consider the future impact of taking the money out now versus leaving it where it is. Are you willing to shortchange your retirement?

If it's been less than 5 years since you began contributing to your Roth IRA, you would pay a 10% penalty on the amount withdrawn. In addition, you would pay income tax on any portion of the earnings withdrawn. No tax break here.

If you have a 401(k) -
You can borrow (on most plans) up to 50% of your vested balance or $50,000, whichever is less. Typically you have 5 years to repay the loan, although some plans allow a longer payback period when you're borrowing for a first-time home purchase. As this is a loan, you do not pay a 10% penalty. But, wait before celebrating the tax break - there's a few more things you should know.

Remember this is a loan. So even though you're borrowing from your 401(k) money and paying yourself back with interest, there may be fees associated with processing the loan that will be deducted directly from your vested balance, which you will not recoup through loan repayment.

Not only that. The money you borrow is pre-tax dollars, but the money you pay back will be after-tax dollars. For example, if your monthly interest payment were $300 and you were in the 28% tax bracket, you'd pay $416 in gross earnings to cover the $300 payment. Then, when you retire and withdraw from your 401(k), you will pay taxes on that money again.

If you fail to repay the loan, the withdrawal is considered a premature distribution and will not only be subject to federal and state income tax, but to a 10% penalty as well.

Borrowing from your 401(k) will disrupt your retirement savings plan since your money will no longer be appreciating in value from interest, dividends and/or capital gains with the rest of your 401(k) investment.

Is it worth it? It is ultimately your decision, but you might want to explore other options such as borrowing from a family member, looking for a lease-purchase deal or just saving up for a couple of years.