Norman Blieden, CPA in Arcadia: FAQs

The Chinese
use two brush
strokes to write
the word 'crisis.'
One brush stroke stands for danger;
the other for opportunity.

In a crisis, be aware
of the danger ---
but recognize the opportunity.

- John F. Kennedy

FAQs

Why should I outsource my accounting and payroll services?

Many companies today try to outsource those functions of businesses that are not directly related to generating income. More specifically, outsourcing accounting and payroll services gives businesses the freedom to pass on non-core yet important functions of its administrations to individuals and companies who specialize in those very aspects. Outsourcing gives businesses the freedom to spend time doing what they do well and especially in working with their customers. Time and effort spend on solving bookkeeping problems add little or no value to building customer relationships, yet no company can choose to ignore payroll, accounting and bookkeeping.

Outsourcing is cost-effective. Outsourcing your accounting services enables you to eliminate operating and overhead costs related to employing an in-house bookkeeper which can be expensive since it does not only include his or her salary.

The benefits of outsourcing accounting services are as follows:

Dumps non-core functions and allows focus on core competencies

Reduces overhead and operating costs

Frees up resources for use where they are needed most

Avoids capital expenses

Access to cost-effective yet highly specialized skills

Saves on manpower and training costs

Improves speed and service

Should you withdraw funds from your 401(k)?

This has been a painful year for Americans with retirement savings in 401(k) accounts. So is this a good time to take your retirement savings and run? The short answer is probably not. Historically speaking, the broad stock market has provided returns that exceed inflation, and despite the ranting of some in the financial press, it's likely to provide such returns again over the long term.

Raiding your 401(k) plan should always be considered a last resort. For one thing, if you're not at least 59 1/2 years old, you'll be hit with a 10% penalty for early withdrawals (except in certain limited cases). Also, money you withdraw will be taxed at your regular tax rate. Say, for example, you're 35 years old and in the 25% tax bracket. If you pull $50,000 from your 401(k) account, your taxes will run a whopping $17,500. And that's not all. Even if your 401(k) account earns a measly annual return of 5% over the next 30 years, your $50,000 could grow to over $215,000. So a $50,000 withdrawal taken and spent today could cost you $232,500 in taxes and lost opportunity. A heavy price to pay.

Bottom line: If at all possible, find other ways to pay your bills. Here are three suggestions.

Cut back on expenses. Yes, it may be painful to forego that double latte and deli sandwich at lunchtime. But if you're struggling to pay the mortgage, it may make sense to redouble your efforts at reducing expenses.

Take a second job. Perhaps only one spouse is bringing home a paycheck. In the short term, a second income may provide enough cash to forestall foreclosure or keep the creditors at bay.

Contribute less. It's always wise to contribute up to any matching funds your company provides for retirement. For a time, however, you might consider reducing contributions that exceed the matching amount.

Although some companies allow 401(k) loans, that option should be considered a last resort as well. Again, money that's not in the account won't grow. Also, lose your job and you'll have to repay the outstanding loan balance or face withdrawal penalties.

Now is the time to take a deep breath, retreat a little from the hubbub, and calmly take inventory.