Jim, 401k and 403b contributions
do not limit your ability to save in IRAs.
While Bobbie tackles Janet's long-term care questions, here's our next question from Steve.
David and Matt, of course feel free to answer any of Janet's questions as well. Just trying to get through as many questions as possible in the 10 minutes we have left!
Steve, your brokerage or investment company will have a "journal" form which will allow you to use the CASH in the account (you can't contribute securities) to make a Roth IRA contribution.
Thanks, Matt. Here's a quick question from Steven.
I would love some other input on the LTC question as it is definitely not my specialty. Can one of the other advisors give their opinion? I do not use it for clients who don't have anything or who have a lot. But those who have, say, 500K going into retirement definitely need to take a look at protection.
@Steve: The question to ask is: Can your wife simply distribute money from the trust to herself, or are there provisions on the trust which restrict how much she can distribute to herself. If she can, simply inform the trust's brokerage to sell (liquidated) enough of one of the mutual funds (there may be capital gains tax) and send her the cash. She can then put that money into the Roth. There may be a simple journal to do the equivalent. But the trust provisions are what is important.
No problem, Bobbie. David, Matt?
@Janet Kittlaus: Long Term Care Insurance (LTCI) is constantly changing. They don't make the policy I would want, which is a waiting period of two years and then infinite benefits from that point forward. Most policies are the exact opposite, covering benefits quickly and then having a maximum. As a result, many of our clients choose to self-insure. It is also difficult to find a LTCI expert who isn't making their living selling LTCI. Perhaps some of the other advisors have sources they trust.
Steve, cashing in the policy will probably be your best bet but I would want to ask for an "inforce policy illustration" and see what type of growth you can expect. 6% is about the best return that I've seen from older whole life policies and if this is the case you have some tax benefits for keeping the money invested in the life insurance policy.
Janet, our Ask Kim columnist is very well-versed in long-term care. Feel free to e-mail her some of your questions, and she may just answer them in a column! You can email her directly at email@example.com.
Thanks for the insight, David.
Steve, I would bet that your cash value is accumulating much more slowly and you will be better off cashing the policy in and reinvesting this money.
Alright, looks like we probably have time for two more questions. Here's one from Ken.
Ken, the problem with owning physical gold is that it only keeps pace with inflation. Once you factor in the costs of storing the gold and transaction fees with buying the gold, you are losing money.
Thanks, Richard. Very glad we could help! The advisors are pretty great, huh? :)
Another way to look at protecting your purchasing power is to diversiy amoung different currencies. We are very concerned about US$ inflation which is why we believe that it is very important to invest in other strong currencies including Switzerland, Australia, Canada and the emerging markets economies which all have lower debt and deficits.
I'm not thrilled with gold as an inflation hedge. But other commodities (oil, agriculture, industrial metals, timber) and rental properties could do very nicely in a rising inflation enviironment. I would limit my exposure but include these categories in a diversified portfolio.
Alright, as promised, here is one final question.
Safest haven now seems to be the US as even when our bonds were downgraded, people flocked to them in droves. But I wouldn't count on that lasting. We put AT LEAST 30% of client equities into international markets (as well as diversify the bond holdings to include international) and that gives us some inflation hedge. Will all be the best? No. Will all be the worst? NO! Diversification in everything.
Opps I meant currency hedge (not inflation hedge)
Alright, unfortunately we are out of time for today’s chat. Matt, David and Bobbie, I cannot thank you enough for joining us!
Always very impressed by the advice you offer.
I have to sign off but have LOVED the interaction. Thanks to Kiplinger, the other advisors AND MOST OF ALL, the Kiplinger readers who took advantage of this good opportunity. Hope to see you next time.
Thank you all!! This was lots of fun.
We apologize to all the readers whose questions we didn’t have time to get to. Be sure to join us again in one month for our next live chat with NAPFA planners. So, mark your calendars for June 14!
We second what Bobbie had to say. Thanks to all our readers who joined us today.
Michael, be sure to join us next time!