Before we start, a few words about the National Association of Personal Financial Advisors. NAPFA is the leading professional association supporting Fee-Only financial planning. NAPFA-Registered Financial Advisors follow some of the strictest professional competency guidelines in the financial planning profession. They provide comprehensive financial planning and use the Fee-Only compensation model, meaning that advisors do not receive commissions based on the financial products they recommend. We appreciate this opportunity to answer your retirement and financial questions. Thank you, NAPFA
Happy Thursday and welcome to our Jump-Start Your Retirement Plan Day!
For the next 8 hours, NAPFA planners will be on hand to answer your questions. You can find a Fee-Only financial planner in your area at www.NAPFA.org
Thank you to all who submitted questions early, and to those of you who will be joining us live today.
We received a number of questions in advance, and questions will be answered in the order they were received. Each question will be held for moderation until an advisor is available to give you a detailed, personalized response. So, if you don’t see your question right away, don’t be concerned!
If you have a follow-up question, please submit it, and we will bring it to the advisors’ attention right away.
Good Morning! I'm Bobbie Munroe, a NAPFA registered, fee-only financial planner. My company, Supporting Your Choices Inc, has offices in Tallahassee, FL and Atlanta, GA. I am SO pleased to be able to work with NAPFA and Kiplinger to provide these sessions. So bring on the questions.
Joining us for the first part of our chat, we have advisers Bobbie Munroe, Brent Perry, Walt Mozdzer and Mark Ziety. Welcome!
Alright. Here comes the first question!
Good morning Andrea. When you say you will be making much more in a couple of years, what kind of numbers are we talking about? What do you think your retirement income is going to look like (amount) to include social security if you get it and your pensions?
While we wait to hear from Andrea, here's one from Beth:
Beth - the short answer is that 'yes, include everything going into your retirement bucket.' You should be saving at least 10% of your gross income, but that percentage could go higher as you get older and depending on how much you've salted away already.
Beth, I think you definitely count those amounts. The ugly truth is people should save at least 15% of their income to replace that income in retirement (you have to take pension benefits into consideration). So let's say you are contributing 10% to your 401K, your employer matches with 3% and you also have 3% set aside annually in some sort of deferred comp plan. When I work with clients we count that as 16%.
So, add up all the dollars you and your employer are contributing on a monthly basis, and take that sum and divide it by your gross monthly income. That will give you the %.
Walt, I love to see what other advisors say on these chats. Beth, one of the best things to do would be to go to an advisor and run some projections. How much any individual needs to save is largely based on what kind of retirement they want (trips around the world or just going fishing most days).
Six bonds funds could include the following: U.S. government treasurys, corporate bonds, high yield, international developed, emerging markets debt, and short duration. There are six completely separate bond types. You need to find out what asset classes you hold.
I agree with Walt. We use a total bond fund as core and then add other bond funds to include the ones he mentioned and perhaps a GNMA or TIPs (inflation protected) bond fund.
Hollis - I think it comes down to a question of control. If the account is eligible to be rolled over to an IRA, then you may want to pursue that because of the estate planning involved. In other words, you can leave an IRA to your beneficiaries if you pass away prematurely. If you annuitize, normally the cash remaining in the plan does not go to your heirs. Who knows whether Hewitt will be solvent. That's hard to control for.
Hi Roger! These chats are something we are going to be doing quarterly. So, there will be three more chats after this one this year.
Andrea, I am working on it.
Lyn - you cannot combine Roth and pre-tax money types. You will be able to avoid the mandatory withdrawals only on the Roth money. At retirement you can roll the Roth TSP money to a Roth IRA and the pre-tax money to a traditional IRA. Hope this helps.
Andrea, first let's address the ability to make contributions to any kind of IRA. For married filing separate, the ability to make such contributions phases out between $0-$10K in income. So if one of you participates in a work retirement plan, you can't make any contribution as you both make more than $10K.
Roger - Here's my take. There's always benefit to having different "buckets of money". For example, if you have some pretax money, some Roth money and some investments that are subject to capital gains, in relative balance, then you can manage your retirement tax bracket better than most. Just keep saving towards your goals and don't sweat the details too much. Capture your company match--that's a must.
Andrea and all, just remember that even if you can't contribute to an IRA you can still save the money in a taxable account. Indeed, many of my clients who only have money in retirement accounts find out that it would be nice to have some outside of retirement accounts. For instance, if you want to retire at 55, you will have to pay a 10% penalty on withdrawals from retirement accounts if that is all you have to fund your expenses.
That's a great point, Andrea!
Katherine - I think it's almost always best to roll old retirement plan accounts to either your current employer or an IRA. Here's why: Employers sometimes change plan providers and sometimes old employees move around the country. Keeping track of the administrative details is the problem. Do they have your new address? Did you old funds get mapped over to the new investment company when your old employer changed investment companies? I've see things break down when that stuff occurs. Not worth it in my opinion.