Debbie, here's a question from Lynn.
Lynn, of course this depends on your current income and when you plan on retiring. But, my advice would be to pay to retirement fund. Make sure that your retirement accounts are well diversified and conservative. At age 61, you couldn't afford a large decline.
You might check to see what kind of rate you could get on a consolidated loan but if it is the same as you are currently paying, why switch? Indeed, you can pay the minimum on one and extra on the second one to pay it off sooner (rather than the same amount on both). No, you won't get them paid off any faster this way but I promise you that the good feeling you will have when you get one of these loans retired and only have one to go will justify this method. When working with money, we all have to understand the good technical answers. But it would be a mistake not to realize that we are all just people and the way we "feel" about things is as important as what we "think" about things. Indeed, it is the feelings unexplored that get people into trouble (can you say buy high and sell low? :-)
Congrats on being cheap --- more people should give it a try. It pays great divdends. I share you pain in the fees we advisors charge. As member of NAPFA, I would encourge you to review the advisors in your area. Assuming you are looking for the one time type of advice. Look for planners that charge a flat fee for a plan or charge hourly. A small number of us do live planning sessions that are generally cheaper -- no written report. If you really are on track (or you will find out if you really are) this type of meeting may be all you need. So first and foremost, youi are looking for a planner that offers more than just Assets Undermanagement. They you are looking for someone that seems to fit. No doubt some planners are better than others, but for the most part they are all qualified - but look for if they may specialize in your industury, that you have compatable personalities or they give some form of money back if you are not satisfied. You obviously need to feel you can trust this person. The NAPFA website is www.napfa.org. Picking up the phone and calling a few should give you a feel for those that are a better fit.
Jamie
Thanks, Bobbie. Can we ask you to answer one more student loan question?
You sure know your stuff!
I've e-mailed Kiplinger's college expert to see if she can jump-in, as well (she's certified by the National Institute of Certified College Planners).
Anyways, onto our next few questions!
Jamie, here's a question from Lee Leon.
And Debbie, one from Tom.
Hi Leo, If I miss understood your question ask again. Teh stocks are in an IRA. You can't move them to a regular account without paying the tax on teh distribution from the IRA. IF you mean, should you sell them in the IRA and repurchase them in the regular account -- you can, but I'm not sure you need to. This question is really a "it depends" question. From RMDs, I like to generally have next year's RMD in cash. So, if you had to sell a stock (or part of it) for this year's RMD, I'd likely sell enough for next year's RMD as well. Just so you konw, this really depends on a number of factors and I happen like cash! Jamie
Thanks, Jamie. Don't we all love cash ;) Here's another question from FalseAmazon.
Ah Chris MDL, this is one of those questions where the good answer and the technical answer might not be the same. Frankly, I did not know that there was a provision for cancellation of student loan debt for federal employees with 10 years of service. Check to make sure what conditions apply for forgiveness and that you meet them or WILL meet them at that future date (I looked on the web but didn't get much info). Since I don't have all the details I cannot calculate the exact amounts but strictly from a money point of view, you would probably be better off paying the minimums until the anniversary and then have the loans cancelled. But that leaves them hanging over your head for another 8 years. Wouldn't you like to have them off the books in say 3-4 years (which would help your credit and ability to get loans)? And, if the loan program was important to your ability to get your education and you want as many people as possible to be able to benefit from the program, paying them off would be the way to go. Totally your call, your judgement.
Some great points there, Bobbie. Thanks for tackling these questions! Here's the next question from Momin Baig.
Tom, are you talking about a loan from your 401(k)? Have you asked your empoyer? Is this a ROTH plan? Unless the rules have changed, I think that unless it is a loan, the hardship rules still apply and the 10% penalty is imposed. OTHER Answers??? But specifically, a $10,000 withdrawal is gross, and taxes would reduce the net.
HI FalseAmazon, Great job in creating and funding the reserve account. I'm Mr. Negative when it comes to home ownership. I own more than one and they always need something. First, I'd probably build up the reseve to 6-9 months -- as I said in a earlier post, I like cash. You will not earn much (if anything) on cash, but you can search the internet and find maybe 1% of so on mnoey market accounts that are FDIC insured. But assuming you want to ivnest the money, consdier a Roth account and to get started consider an allocation fund (stocks and bonds). I like Vanguad's Star account and Vanguard's Wellington fund (this fund has a higher minimum investment. Jamie
Tom, if it IS a loan, there would be no taxes owed, but you would need to pay it back
Debbie, let's wait and see if we hear back from Tom. In the mean time, here's a question from vsound.
Greetings to all. I am a NAPFA advisor from Richmond, Virginia and look forward to chatting with you today!!
Hello, my name is Richard Frazier and I am a Certified Financial Planner with Frazier financial consultants. We are based out of Chapel Hill, NC.
Great! We have two more advisors joining us today so we can try to get to all of your questions!
Welcome Richard and Matt. We appreciate you being here!
Mornin Baig, there are companies that will administer real property in an IRA. But typically the fees charged are high (up to perhaps 5%/year). Are you talking about a vacant lot or rental property and how close are you to having to take distributions? It can be very difficult to struct real property so that required districutions can be made. And if you really expect to make good money with the property, you give up favorable capital gains treatment by putting it in an IRA. To ther extent possible, I suggest that clients use retirement accounts for things that do not receive favorable tax treatment (bonds, REITS) and put things that receive favorable tax treatment (capital gains) in taxable accounts.
Sorry Debbie, there's your question from vsound
Matt, you can start by tackling this question from MSRI
And Richard, here's one from KD
vsound, in my opinion, the ROTH IRA is the greatest gift the government has given us. So, I recommend fully funding to the best of your financial ability the ROTH IRA. Good going for getting stared early.
Jamie, how about you take this one from GreenJake
Bobbie, here's a question from ScottB.
Nicole, in addition to Debbie's great advice, here's Kiplinger's Special Report on LTC.
Lynn, of course this depends on your current income and when you plan on retiring. But, my advice would be to pay to retirement fund. Make sure that your retirement accounts are well diversified and conservative. At age 61, you couldn't afford a large decline.
I know I can take 10k out of my 401k for first-time homeowner expenses without having to pay the 10% early withdrawal fee, though I do have to pay the taxes on it. My question is that if I take out $10,000, but my housing expenses only come to $8,500 (all of which came from the withdrawal), how much of a penalty am I going to have to pay? It seems that if I owe ~20% taxes on the $10,000 withdrawal, I can't spend the full $10,000 on expenses, so does that mean I can really only spend $8,000 out of the 10? Much thanks.
