Jump-Start Your Retirement Plan - Live Chats, Q&As: Free Advice on Retirement, Investing, Personal Finance -- Kiplinger

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Jump-Start Your Retirement Plan

Kiplinger is teaming up with the National Association of Personal Financial Advisors (NAPFA), whose planners will answer questions on retirement planning and other financial challenges. Submit your questions here and get free personalized financial advice on Thursday, February 20, from 9 a.m. to 5 p.m. ET.

  • Mike, I almost always recommend to my clients that they visit a local social security office for specific advice. Your wife can take her social security at age 62 if you need the income. Depending on what you earn, 85% of the social security income will be taxed. There are strategies that can allow your wife to take hers, you can apply at full retirement but delay until age 70. David's suggestion to look at Kiplinger's Social Security Solutions in also terrific advice.
  • Hi Monica. If you draw Social Security before your Full Retirement Age (that age depends on your date of birth), the SSA will reduce your benefit based on your work earnings.
  • Good afternoon. I'm 36, max out 401k, Roth IRA, HSA each year. Looking for early retirement. Wife and I collectively at $1M net worth. Want to retire by age 50. Thoughts on shifting to taxable savings to tap between 50-59, 72T rule, other thoughts? Have rental property as part of net worth for future income streams, when paid off.
  • Ronald, I would think carefully about retiring at this age, as you have a a fair amount of time to cover, in terms of meeting your living expenses before it may be prudent to start withdrawing from investments and retirement funds. I would strongly suggest that you meet with an advisor, so that your unique situation can be analyzed fully - it's not really easy to give you an answer based on the information that you provided. I am trying to understand your question about taxes on Roth conversions. These are never considered capital gains so they are not eligible for capital gains tax treatment of any kind. However, up to $3,000 of capital losses (from the current year or carried forward from prior years) can be used each year to offset income from any source, even if you don't have capital gains to report for the current year. I hope this helps.
  • Sorry Monica got cut off there. Here's a link to a SSA publication that goes through how it works: www.ssa.gov
    This year, your benefits are reduced if you take benefits early and earn more than $15,480. They're not permanently lost; the reduced benefits are basically added back into the calculation on the back end.
  • @ThereseGovern 401k allows for both. Have traditional 401k and not Roth IRA.
  • This year my husband is only getting severance from his former company. (Maybe he'll find a new job, but maybe not.) I only work freelance and usually net out to zero, but I have a large capital gain this year. Can either of us contribute to an IRA this year? It's my understand that we can't add to a ROTH or a SEP, but what about a traditional?
  • Another file and suspend question. I'm older than my husband by seven years, but he has been the high earner. My plan is to file for my own benefits this year when I turn 66, and seven years from now, when he turns 66, drop my own benefits and apply for a spousal share of his, which will be larger. He might not want to claim his benefits at age 66, but he can file and suspend. But is my plan the smartest one?
  • Thanks Phil, I appreciate the help. Looks like I got my homework for the weekend!!
  • Okay, Tom, I'm going to assume you're looking for guidance on whether to defer 401(k) dollars into the pre-tax side or the Roth side. Take a look at Fidelity's guide here:
  • SethQue, saving for early retirement takes patience, persistence, and sacrifice. Many folks don't want to make the type of sacrifices that are necessary to achieve early financial freedom. Don't take any unnecessary risks with your investments. Use a sound, fundamental, and proven approach. Remind yourself every day by putting a sticky note on your fridge that says "RETIRE BY 45". Then you can work because you want to not because you have to.

  • Roth 401(k) or 401(k)? How to choose - Fidelity Investments

    Many employers offer a Roth 401(k) and a traditional 401(k). Taxes are the key difference, and an important consideration when choosing between them.
  • Travis, Congratulations on amassing such a nice Net Worth. I will assume that you have taxable emergency savings. You certainly can utilize the 72T rule until age 59.5. But, since you already have maxed out your retirement accounts, it would make sense to begin a taxable investment portfolio. You can invest in tax friendly funds, index funds or individual stocks where you have some control over the taxes owed. Good luck.
  • What is your opinion on indexed annuities? I am 60 and contemplating retirement. My wife will retire in 5 years and at that time we should have enough in SS and pensions to cover basic expenses. I have been advised to contribute 25% of my retirement portfolio to an indexed annuity. Is this a good play?
  • I am 62 and my wife is 60. Since we are close to retirement we decided to go with a financial planner. He said for our age we are too aggressive so we gave him 250,000 from our portfolio to put in conservative funds. We did this all last year and with the market being so good we made about 25% and they made 30,000 and half of their funds were bonds and foreign. I am not to happy with their results in a good market but as I said we are aggressive investors. Thanks!
  • Hi Sheila - severance is considered income, therefore your husband can contribute to IRA and capital gains are not considered income, therefore, you will not be able to contribute based on the cap gains received.
  • I'm 40. Does it make sense to drop your Term life insurance if Social security statement tells that the family will get mostly the same money (ie, putting the Term Insurance money to an Annuity) after death ?
  • Sheila, Because you are making a decision this year, I would suggest contacting the nearest Social Security Administration office near you and schedule an appointment. They would be glad to sit down with you and go over all your options. SSA offices can be found by using the locater at:
  • Thanks Deborah. Have 18 months of emergency fund. Having nice incomes and DINK helps. Just debating on reducing 401k contributions and replacing with taxable investments. Already have $500K in retirement accounts. Would not tap until taxable accounts used up. Believe right path is looking for income streams to tap in our 50s, but always nice to get confirmation from financial planners.
  • Greg, thank you for a question that gets me on my soap box. It is my opinion that one should never invest already tax deferred money into a high fee annuity account. You are paying fees to the insurance company for tax deferral, which you already have in your retirement. You also get locked up in surrender fees. Keep going on the straight and narrow.
  • Travis, what is DINK? 18 months is a lot of emergency money, maybe take 6 months of that or more and begin taxable account. I don't recommend reducing retirement contributions as you will use it for a LONG time. Hopefully!
  • Hi Mary. I'm sensing two issues: you want to be more aggressive, and you want to understand the performance of your portfolio last year. One the first point: the appropriate asset allocation for you isn't a simple matter of your age -- it's based on balancing your tolerance for investment risk, the time horizon for spending the accounts, and your required rate of return. Sounds like you need to go through the asset allocation decision again with your advisor to make sure you're on the same page. As far as performance goes, last year's market returns were basically: 0% cash, 32% US stocks, (-2)% US bonds, and 23% intl stocks. Given how much cash/stocks/bonds you hold, was your return consistent?
  • TomJ, term life insurance at your age is still relatively inexpensive. If you feel you are paying too much you can shop around for better coverage. And it will come to your survivors with no string attached (in terms of applying for benefits) and as a lump sum. The death of a breadwinner can be very shocking and having a nest egg can really cushion this shock to the survivors. And they will get the Social Security benefit in addition. If you would like to shop for a different policy, check out www.nerdwallet.com.
  • I sold a vacation house via Owner Financing and the new owner pays a certain amount each month per the 20 year note. In retirement should this Mortgage Note be part of my Bond Allocation or should it be considered REIT?
  • I left a job in January '14 and am 55 years old. I read that I should not roll my 401K over into an IRA since I can withdraw money without the 10% penalty. I have other funds in a brokerage account sufficient to live on for the next 8-10 years. Is there any benefit to not rolling over the 401K other than maintaining flexibility? Other thoughts?
  • Roger, what an interesting question. I probably would consider it in the bond category. I assume that if they default the property reverts back to you.
  • Hi, im 32 federal employee with 11 of service. I have 112k in my TSP(401k) and 29k in a ROTH IRA. Is there anything else i can do to have secure retirement.
  • Hi,
    I am 59 and my wife is 58. We are currently saving $90k/year. We need about $65k (not including taxes or health ins) to live (well) on. Our kids are grown, our home is paid for and we have no debt!

    Our total net worth is about $1.6 MM, which includes $200k for our home and $1.1 MM in retirement accounts. I have an accrued pension that would pay $27k/yr (50% joint survivor, no COLA) if I retired today. My SS FRA benefit is $2500/mo and my wife’s is $900/mo.

    Do we have enough to retire next year? If not, how much would we need to bring in with part-time work until 65? What should we budget annually for health insurance until we are eligible for Medicare? What % should we discount social security to take into account the likelihood of future entitlement adjustments?
  • I have a Medicare question.
    My current situation is:
    Both my wife and I are 67. I am a Federal retiree who had FEHB coverage through a well respected HMO (Kaiser). We decided to stay with FEHB and not sign up for Medicare because of concerns about that program’s future. Also, we understood FEHB would likely be adding a Self+One premium tier instead of just Self and Self+Family tiers which would lower our premiums.
    Now, seeing that our Kaiser premiums through FEHB are increasing much faster than Medicare plus Kaiser Senior Advantage combined premiums, we are rethinking our strategy. As a couple, we would not likely ever be in the Medicare means tested higher premium tiers but, after the first of us passes, the survivor probably would be. Also, I have heard rumblings that Medicare means testing will probably eventually go deeper. Presently, FEHB doesn’t have means testing.
    My question: should my wife and I put our FEHB coverage in suspense and switch to Medicare plus a Medicare Advantage supplement (Kaiser Senior Advantage) or stay with FEHB? A switch would have us with 20-30% penalties for life and about a seven month temporary overlap in coverage (Medicare plus FEHB).
    Thank you.
  • Hi Rob - Other considerations for not rolling the assets to an IRA. If the expense ratios are very low, relative to IRA options, then maintaining the 401k might be worth it. However, many employer plans traditionally have higher expense ratios.
    Secondly, if you plan on obtaining a new job then you could roll the assets to the new 401k and take advantage of possible loan provisions, if offered in the 401k.
  • I owe 188 K on my house with a 4.78? interest rate. I have enough in a brokerage account to pay it off but feel I earn more where the money is now. I am concerned if my health deteriorates that I will need a nursing or home. What time frame does medicare look at if I find myself in that situation and pay off the house instead of using it to pay medical bills? Am I penalized since I know they don't make you sell your home?
  • Monica, if you are younger than Full Retirement Age (FRA) $1 in benefits will be deducted for each $2 earned above the annual limit ($15,480 for 2014). More importantly, because you take social security before FRA you will have a reduced social security check for the rest of your life. Try to find other ways to supplement your income if you can. Information on social security benefits can be found at the following website: www.ssa.gov
  • Mark, congratulations on your financial planning. If you are living on $65,000, you can see that much of that need is covered by social security and pension once you qualify. If you and your wife have been married for 10 years or longer, she can take 50% of your monthly, so you would still get 2500 a month and instead of 900, your wife would qualify for 1250. I would recommend waiting until full retirement to take SS. I also assume that you would qualify for COBRA on health insurance. I do not know what your health insurance would cost due to the changing landscape, but to be safe, maybe 10k annually for the two of you. Good luck.
  • Hi Carlos. Sounds like you're off to a great start. Planning a secure retirement is all about saving: saving like crazy (as Jonathan Clements, formerly of the Wall Street Journal, liked to say). Maxing out your 401(k), funding a Roth, and then saving even more into plain vanilla taxable accounts will get you where you need to go. Try using the estimator here to see how you're on track. Besides saving? Make sure you're well insured (disability for sure, life insurance if anyone depends on your income, auto & car, etc.). Anybody else have specific advice for a Federal employee -- that's not my area of expertise?
  • what is the tax rate for roth conversions? is it based on the amount converted?
  • We refinanced for a mortgage on our home at 6.8% and have 7 more years to pay it off. The rates are so much lower now...we were looking at a 3.6% loan for 10 years and we were wondering if we should stay where we are or refinance again. We will retire in 2 years.
  • Joan, Medicare is not affected by either home ownership or by paying off your mortgage. I think that you are talking about Medicaid, which is what would pay for nursing home care (Medicare only provides limited coverage for nursing home care). You would need to understand the Medicaid requirements for your state in terms of allowable methods of spending down assets. Generally, paying down "legitimate" debt such as a mortgage is considered permissible since you are obligated by the loan contract to pay off the loan (over time or all at once). In most states, your home is protected as a non-countable asset. Here's some good information for you, but it may be worthwhile for you to consult an attorney who is familiar with the specifics for your state:

    Safe Ways to Spend Down Your Assets to Qualify for Medicaid | Nolo.com

    Nolo.comTo qualify for Medicaid, you may have to first spend down some of your assets.
  • Barb, If you refinance, while 10 years sounds like all would be much the same, it is not. Your current payment is allocated to interest and principle, the deeper into the loan, the more of your payment goes to principle. If you refinanced, you would be starting the process all over again and having more of your payment go to interest. I recommend staying put with current mortgage. Save the refinancing costs.
  • Hi Ronald- Assuming the IRA is all deductible, the amount converted will flow through as income. Your tax liability will depend on your deductions. Therefore, estimate your taxable income, tax deductions, and then you can estimate approximately how much the tax (rate) would be for the conversion.
  • Does the general rule about delaying SS if one can safely draw up to 4% of their other financial assets until then also hold for defined benefit annuities? i.e. I have a cash balance account that will get annuitized when I decide to take it but in general the amount increases each year I delay in taking it,
  • I am 49 years old with about 200K sitting in a previous employers cash balance pension plan earning 2.5%. Should I roll it over into an IRA. Thinking about putting it into a targeted retirement mutual fund.
  • Bob, I think you need someone to look very closely at your question. I'm wondering if a resource like Allsup Medicare Advisor would be helpful?
  • In regard to Asset Allocation in retirement should retirees count their Pension and Social Security as the Bond portion or Fixed Income thereby investing the remainder in equities? That would mean putting about 100% of current investments in equities.
  • Rob, I echo Roberts points. Another benefit to a 401k is that it may, in some instances, provide better protection against creditors than an IRA. Many 401k participants however, will move their 401k to a rollover IRA because of better investment choices in the IRA and lower fees especially if your 401k does not offer low fee index funds. If you do rollover your 401k, make sure it is a trustee to trustee transfer to avoid any inadvertent taxable distribution on your part.
  • Roger, No, I would not consider income payments as fixed income allocations. They are income.
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