Jump-Start Your Financial Plan with NAPFA
NAPFA financial planners took your questions about retirement, taxes, insurance, saving for college and more.
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To read more stories about Social Security, check out Kiplinger's Special Report on Maximizing Social Security Benefits at www.kiplinger.com -
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PJHALL, check out this story on Social Security disability -- www.kiplinger.com -- and for Larry, check out this story on claiming benefits on an ex's record -- www.kiplinger.com
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Tom: Adding to what Debbie has said, here are some question to ask to see if you are a good candidate for a Roth or Roth conversion: www.marottaonmoney.com and a calculation method to go with it: www.marottaonmoney.com -
For those interested in a simple asset allocation, I'd like to highlight our gone fishing portfolio calculator. Enter your age and portfolio value and it will suggest a gone fishing portfolio. It purposefully won't propose portfolios over 70 years old as you should see a comprehesive financial planner before retirement. www.marottaonmoney.com
Here is the accompanying article: www.marottaonmoney.com/marottas-2012-gone-fishing-portfolio/ -
PJHALL, I do not believe it would decrease his benefit if you were to take spousal benefits. However, if you take normal benefits early, such as at age 62, your benefits would decrease by 25%. Im not sure if this is the same for spousal benefits. Id do some reasearch at www.socialsecurity.gov -
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We're two years from retirement and want to figure out how to parse out IRA funds monthly when the time comes, while at the same time incrementally reducing portfolio risk. Any tips for a couple who in addition want to take an annual big trip for 5-7 years and then reduce IRA payouts?
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Larry, you may draw on your ex-spouse's record if you were married 10 years and, big one, IF she is already retired and collecting her benefit. And you are correct that your benefit will be reduced by $1 for every $2 earned in excess of $14160 per year. I suggest that if you are working, you may also have to pay tax on some of the social security you do receive depending on your income. This is a complicated topic. I suggest that at the very least, you set up an appointment with the social security administration to discuss your options. That said, sometimes you don't always get the best advice there so an hour with a financial advisor who is savvy about this might be in order. -
For advice on getting your first credit card, take a look at this column at www.kiplinger.com ... and check out the slide show on the best credit cards for students and young adults
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Insurance for your college age son is something you should obtain. First look at the university. Some provide group student plans that are major medical type of coverage. Look at traditional insurers such as BCBS in his area. If you or he belongs to a group, professional or otherwise, look at any group plans they might have. At his age, it should no be expensive. -
I have a question about Social Security survivor benefits.
My wife and I are planning to delay starting our Social Security benefits until age 70, and take advantage of the 8% delayed retirement credits for waiting after our full retirement age. Assuming she outlives me, I understand that maximizes her survivor benefits. But if I die after FRA but before starting to receive benefits, are the survivor benefits frozen at that point, or can she still wait until 70 and let the survivor benefits increase? If it matters, we are same age, and my wife's PIA is about 2/3 of mine. -
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Thanks, Debbie! MAS, there's actually an article on this very subject in the August issue of Kiplinger's. (Good timing!) You might want to check it out: www.kiplinger.com
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Bill, to be honest I am not sure if you die before you start taking social security benefits, whether she would get benefits based on your SS income as you have not enrolled. I would take a look on the SS page. Sorry I could not be of more help. www.socialsecurity.gov
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Dave Kay: You may want to get a NAPFA member to review your plans if you are two years from retirement. But here is what we would do if you want to do it yourself. We would set aside money for 5-7 years of big trips. Then with what remains, we would compute a safe withdrawal rate in retirement. That involves discounting your retirement assets by 30% because you have to pay taxes on them and then using our age appropriate safe withdrawal rates. (See www.marottaonmoney.com ) This gives you a check to see if you can live off that amount in retirement. This is not a back-of-the-napkin computation.
Retirement is from now until you are 100 years old. This is not your grandparent's retirement where 72 years old was average. You need growth that keeps up with inflation for 35 years. And the biggest mistake is thinking that you can spend all the income in retirement and what you need is income. (See www.marottaonmoney.com ) The optimum asset allocation at age 65 to reach your retirement goals is 75% stocks and 25% bonds (not 50-50). Getting all the parts in place is important for retirement to have the best chance of meeting your goals. -
Elizabeth, it depends on many factors, your income will determine if you are qualified for a ROTH contribution. It also depends on your age, if you are young, a ROTH makes so much financial sense. Do you need the tax deduction? You do not get one contributing to the ROTH. Finally, does your employer plan have good custodians. Many do not, they rely on insurance programs or high fee mutual funds. If that is the case, open a ROTH, you will have as many choices as there are investments.
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From Bill: My wife and I are planning to delay starting our Social Security benefits until age 70, and take advantage of the 8% delayed retirement credits for waiting after our full retirement age. Assuming she outlives me, I understand that maximizes her survivor benefits. But if I die after FRA but before starting to receive benefits, are the survivor benefits frozen at that point, or can she still wait until 70 and let the survivor benefits increase? If it matters, we are same age, and my wife's PIA is about 2/3 of mine.
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Wreckon95, 4.75% is a good rate and lower than the new Stafford loan rates as of 7-1-12. The good news is that your current rate will not increase but I doubt if there are any alternatives for lowering your rate. I'm not sure if your loan is private or public. Some student loans (not private ones)
can sometimes be consolidated for a lower rate (but not likely lower than your current rate) -
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Generally when you convert from tax-deferred plan to a ROTH you'll need to pay the taxes on the converted amount. So, you need to have money available to pay those taxes in addition to the converted amount. The main reason you would do the ROTH vs. the Traditional IRA is because you believe the taxes you would pay now on the converted dollars are lower than what you would pay in the future.
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My husband is 60 and making around $30,000. Before he lost his job in 2009 he was making $110,000 and had been for many years making in the six figures. I am in my third year of teaching, making about $40,000, and 54 years old. I plan on teaching at least 10 more years.
Could you please advise on the complicated matter of Social Security -- best time for my husband to claim it, when I should claim it, will I do it as his spouse or on my own SS earnings, do we switch when he or I reach a certain age, etc. Also, we lost most of our 401(k) in the past three years and only have about $45,000 left, if that factors in. Thank you. -
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Bill: Social Security is a complex piece of legislation that can be worth $150,000 or more between taking it the worst way and taking it the best way. We've taken to offering a Social Security opinion for a nominal amount for clients where that is the only piece they need. We've written a number of article on the topic at www.marottaonmoney.com ). Matthew Illian is our Social Security expert. Contact me here and I will answer your question without any charge: www.marottaonmoney.com
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Hello. I work as a contractor at a military base in Honduras. I get a tax exemption for all income under $87,500, and we don't pay Honduran income tax either. I can't invest in a Roth IRA without incurring a penalty, instantly. How should I be investing? Should I consider contributing a lot more into my company's 401(k)? I'm 48 years old, no children and debt free. Thank you for the help!
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Elizabeth, If you need full time planning on all decisions, you can look at NAPFA. This is an organization for fee only planners. We get fees from only one place, our clients. However, if you are looking for just someone to manage your money, you could look into a stock broker but ask them about their fees first. It all depends on the type and amount of planning you need.
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Bill, there is something called file and suspend. One of you could start drawing now and the other can file and suspend their own benefit and still draw 50% of the spouse's benefit. In your case, you have the higher benefit. You might want your wife to start taking her benefit and you can file and suspend and still collect 50% of her benefit. This leaves your benefit to grow by 8% per year until your age 70. When you die, your wife can switch to your benefit which will be much higher than hers. Now, I want you to check this out either with the social security administration or an advisor who is familiar with file and suspend. This technique is often overlooked and can mean many more dollars to your family if used properly.
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Hello. I had a question about where I should be putting my extra money. I am 24 years old, have a mortgage at 4.5% in California, an auto loan at 7%, and about $8,000 currently in my retirement. I've just started my Masters degree program, so I will have approx. $30-40,000 in student loans (averaging 6-6.8%) in two years.
Since I have been living below my means, my question is what to do with the "extra" money. Do I fund my retirement accounts, start applying to my auto loan, or do I start paying down my student loans? Thank you! -
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I'm 28 and married. In the last year, I have inherited a small block of stock in Prudential and MetLife. Since the bulk of our investments are in diversified mutual funds, should I hold these shares for the long-term or sell them off and use the funds to pay down student loan and credit card debt and add to our retirement savings?
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