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.

  • I am 55 and looking at retirement / semi-retirement. We have have a net worth of about $2M, including our primary residence ($500K) and a rental condo worth $200K. Half of the remaining $1.3M is in retirement funds and half in taxable accounts. The only debt we have is a $100K mortgage (3.5% 30 year fixed). My wife will have a pension of $750 / month starting at age 65. Our average annual spending since 2009 has been $66K and our 14 year old daughter's college fund has $100K+ in it.
  • Hi Ray. So you have a cash balance plan; that's terrific! So...I assume if you retire, the company no longer makes contributions on your behalf, but the balance continues to earn the guaranteed rate of return until you annuitize?
  • Mike, There is much to find out about the cash balance pension plan. Some calculations should be made. You may want to look at the present value of the stream of income due from the pension, compare that to a rate of return you might get from your IRA, considering bad years as well as good ones. This is particularly true if you are managing it yourself. I would tend to keep it in the pension and count is as the fixed income of your portfolio. It is tough to safely get that rate of return in the current marketplace.
  • My wife will be turning 66 in July 2015 and I will be 63 in February 2015 but we both have been retired since 2011 although she works part time. She plans to take SS at FRA. Can I still collect spousal benefits and let my benefit continue to grow until age 70 even if she does not file and suspend. I was the higher income earner by 40 %.
  • @DavidMuhlbaum-Kiplinger I'm not a big fan of retirement calculators as they don't properly take in to account inflation/market risk in my opinion. Also I have nowhere to add in post "retirement" income (part time work once financially free) and also my wife and I own a couple rental properties that are currently generating income and plan on adding more. That's why I was hoping to get more help than a calculator could provide.
  • Therese, thanks for the link. Any thoughts about distributions when you have taxable and nontaxable funds in 401k?
  • to continue.... Retirement calculators say we are in good shape but we still have questions: 1) allocation of cash, bonds and equities given our age and expectation to live to 100 years old; 2) weather to buy an individual bond ladder with Fidelity with the Bonds ($500K+) with fees of 0.35% to have it managed vs. bond funds with Vangauard; for Equities, we are leaning towards the VG
  • sorry i keep hitting the return key... For equities, we are leaning toward the VG Total US Stock market fund combined with a total international index fund for the remaining ($500-$600K). feedback on these thoughts and questions from each of my comments is welcome. Thanks,
  • Hi Rob- back of the envelope calculation is approximately a 5% withdrawal rate if you retired today. Most of your inflows (income) will start approximately 66 (SS and pension). Yes, you can start SS earlier but I am making more conservative assumptions. You have a rental property, positive cash flow?, I don't know the school that your daughter will attend but if Ivy... estimate a total of at least $250-$300k without merit money or scholarship. I also don't know if you will pay all/some of the expense. Based on these assumptions and current savings rate, I would recommend working a little longer and evaluate each year, net worth and cash flow. Semi-retirement could also work. I did not make any assumptions regarding health care... do you have benefits after your retire or will it be all out of pocket. I hope this helps.
  • Will, it is my understanding that one of you has to apply and suspend payments to qualify for the upgrade in payments. please check with www.ssa.gov or your local social security office, they are a wealth of information.
  • Rodger, Interesting question. I look at investing based on when you need the money. If your retirement expenses are covered 100% by your social security and pension income, then your remaining retirement funds may not be needed in the near term. This may warrant having a greater portion in equities especially if you don't need to tap your retirement portfolio for at least ten years or so. However, as inflation eats away at your fixed income sources over time, it may be necessary to draw down your portfolio. Using a bucket approach, any funds needed within 10 years would not be in equities.
  • is there a penalty from medicare for paying off my home immediately prior to going into a nursing home?
  • Hi Tom. Take a look at

    Distributions from Designated Roth Accounts - Fairmark.com

    Fairmark.comThe main rules for taking distributions from designated Roth accounts are similar to the rules for Roth IRAs, but with a few differences. Access to the money This is one area where 401k and similar accounts differ from IRAs. If you want to take money from your Roth IRA, all you have to do is …
    to understand the issues with Roth distributions. You'll cross that bridge when you come to it, though, in terms of whether you want taxable income on your return in a given year (withdraw from traditional side) vs. not wanting taxable income in a given year (withdraw from Roth side). Will depend on what else is going on in your life, tax-wise, at the time, and your long term plans. And tax law of course!
  • Ms Gardner. There is not any penalties from Medicare. Are you speaking of Medicaide.
  • In addition to my wife's $750 / month pension, we have gone to the SS website and estimate that we will have about $3,800 to $4K / month if we wait until age 70. The plan is to do some part-time work over the next 10 years. Unlikely that our daughter will go Ivy. We will pay for our own health insurance. What do you think about bond funds vs. individual bond laddering? Thoughts on long-term care insurance vs. self funding given our situation?
  • The school originally told me and others that whatever wasn't covered by loans would be covered by the school with no interest, then later we find out that these loans were issued in our names at the high interest rates. This is the problem. A lot of us feel the school should be held accountable for this activity and we are looking for direction in how this can be done. We wouldn't have a problem paying the original principle amount that we had originally agreed to, but now these loans hang over our heads and the lenders will not work with payments, they say this is what you need to pay per month or we will report negatively to credit agencies, no payment arrangements etc to offer.
  • I have a 23 year old daughter that may possibly be legally disabled. Are there different benefits available if she's declared disabled before 24 years of age, versus after 24?
  • Tom, generally speaking, and ensuring you don't incur any tax penalties, you may want to take distributions on taxable accounts first at least up to a point where you bump yourself into a higher tax rate. Then if more retirement funds are needed you would take distributions from non-taxable accounts. To the extend possible, you would want to defer your non-taxable funds and let them grow tax free. This is called tax diversification of retirement accounts possible by having both taxable accounts and ROTH non-taxable accounts.
  • Our rental property does have positive cash flow. We will probably pay the loan off within the next couple of years to be debt free and since we will need the income ($1550 / month rent). Thoughts on this?
  • Hi Dick; I think you need to see an attorney who's got special needs expertise to help you.
  • I have $20.000 for a sailboat fund and will add to it over the next seven years. I will spend the money in seven years. Where should I keep it to experience some risk but preservation of capital? Thank you.
  • Hi Rob - I like the fact that you are considering PT work. My only concern if you retired early and did not consider PT work, would be the withdrawal from the portfolio to cover the years until pension starts and then SS starts. Consider social security spousal strategies for maximizing benefits. Is health insurance factored in the $66k a year expense. If not, consider increasing that number by about $7k. Individual bonds have less interest rate risk than bond funds but have less diversification and have more concerns about default (although small). If you are buying bonds yourself, you will have to understand the risks and the companies that you buy. Bond laddering is interesting if you are matching cash flows. Bond funds are subject to investor sentiment (selling is oftentimes accelerated and nothing you can do). Individual bonds one can hold to maturity. If this environment if you can manage a bond ladder, effectively, costly, and timely, they are a good alternative. Consider LTC... if you have assets in excess of $5m, self insuring might be attractive. Consider hybrid policies of life and LTC. I hope this helps. Good luck
  • Hi Robert. If you are willing to take SOME risk over the next seven years, I would consider using a Balanced mutual fund with a mix of stocks and bonds. Seven years is a fairly long time in terms of market cycles, so you should definitely see some growth over that time period. However, if your bigger concern is preservation of capital, using a CD ladder timed from 1-7 years will allow you to earn a little interest and give you some flexibility to add new money and take advantage of any rise in interest rates as the shorter maturities come due...
  • Need a good cashflow model to simulate what a Florida or other warm climate real estate apartment/home would do to net worth as time progresses. I have already identified expenses, income, withdrawal amounts, etc. Inflation has been included in the spreadsheet simulation, but a gut feel tells me that an established model would be better to use. JD
  • Hello, Fifteen years ago we invested in a variable annuity with the Hartford. Now that we are ready to retire, we're pulling all our assets together. We don't need the income from the annuity but will no longer contribute to it, and fear the fees will exceed any gains we've made to date. How can we get out of it without incurring penalties or big taxes? All the advice we've received is to exchange it for ANOTHER annuity. =:
  • Belated by grateful THANKS to Deborah Frazier & Pat Jennerjohn for your advice.
  • Jeffrey.Davis you might want to try this one from AARP:

    Investment Property Calculator - Calculate Investment Property Return, Rental Property Investment--AARP

    AARPThis calculator is designed to examine the potential return you might receive from an investment property.
  • Hi Robert. If preservation of capital is a primary goal, a CD or individual bond are the best route. The obvious downside is the very low yeild available. I tend to agree with Lea Anne. 7 years is a long time you could allocate a portion (maybe $10k) to a broad-based equity index fund and then use several CDs to create yoru own balanced fund.
  • My SS is scheduled to be 122 per month if I retire at age 60. I have spent the last 15 years working part time as a guest teacher and have not been contributing to SS. I am scheduled to receive 168 per month if I choose to retire at age 60 through CalStrs. My husband is in the highest income bracket for SS and will receive a fair amount when he retires at age 70. (He likes his job). My question is if he should pass away, how much, if any, SS widowers benefit will I be entitled to? Would it be best if I had all of my contributions to CalStrs rolled over into a retirement account and have any further deductions taken out for social security and not Calstirs any longer.
  • Thank you for giving me the opportunity to ask about this financial problem where the possible choices have confounded me. I think maybe I am one of those fortunate taxpayers with the option to vary my income in order to qualify for an Affordable Care Act (ACA) subsidy. FACTS: I no longer work so I suppose you could call me retired. I collect a modest pension that will never increase. Later this year I'll turn 62 with the possibility to begin my early Social Security benefit. My spouse will turn 65 March 2015 and has no Social Security earnings record. My retirement portfolio contains enough after tax assets that enable me to fund my accustomed standard of living along with my pension for about 4 years after which I would first begin withdrawing from an IRA and then finally a Roth IRA. My financial advisor ran a Monte Carlo trial that indicates an 80% chance I'll have enough assets to last until I am 85. This tax year 2014, I was able to truthfully claim within the ACA application that my expected income was low enough to qualify for a substantial ACA subsidy over this year's retiree medical insurance premium ($1,081 vs. $ 246) which will save me $835/month or $10,020/year. QUESTION: Which is better, delay collecting Social Security + Spousal Social Security and use/deplete my liquid cash (after tax) assets in order to qualify for 2015 - 2018 ACA subsidies or begin early Social Security and spousal benefits which will push me over the limit for an ACA subsidy and cost me ~$10,000/year? Thanks in advance for any insight you may shed on this financial dilemma of mine.
  • For Sharon and other readers interested in Social Security strategies, Kiplinger's has a special report on maximizing Social Security benefits...the report includes stories on the impact of a public pension on Social Security benefits and survivor benefits. Check it out here -- http://www.kiplinger.com/fronts/special-report/social-security/
  • Hi Sharon. Before you get to the widower's benefit, you are likely elegible for a spousal benefit on your husband's record that is equal to 50% of his Primary Insurance Amount. Based on what you have said, the spouse's benefit will likely be greater than your own. If you were to pass away, you will receive your husband's full benefit. All of this comes with the caveat that you should make an appointment to meet with social security. Coordination with pensions can unique circumstances.
  • HI Kathy, You're right - it is hard to get out of annuity without paying taxes if you don't exchange it for another annuity. Without knowing the specifics on fees and subaccounts for your particular annuity, I have two different suggestions: if you don't need this for your own retirement, consider it a part of your estate planning. By doing that, you could be pretty aggressive with your subaccount choices (since the investments will be in the market for a long time before your heirs receive it) and therefore, your growth over that time frame should outpace the fees. My second suggestion is to do a 1035 exchange with a lower cost annuity provider (such as Vanguard) so that you have more flexibility about how aggressive you need to be to recover your fees. This type of exchange is tax free. My sense is you would really just like to get your money back, but to liquidate an annuity will have a tax effect.
  • My relative has two children in college with scholarships and loans and both are over 18 years of age. They both have ugtm funds that are not being used for college and earn approx. 8%/year. Should the mother transfer ownership to the kids or let the funds continue to grow with her continuing as the custodian?
  • I am 4O yr single guy, no debts and great health. I have $60K in Roth IRA, and $300K in 401K. Have term life insurance. Mortage is 40% paid and remaining 135K is at 3% fixed rate. I do max out my 401K and IRA. Investments are 60% domestic, 30% international and 10% bond index fund. Love my job as a professor and not planning on retiring before 60 ys. Am I on track to retirement and can I invest any better without exposing myself to more risk?
  • JH, There are a lot of inter-related issues here so your fnancial advisor might be able to run some different scenarios for you. I would recomemnd that you aproach the decision to maximize wealth and not necessarily to qualify for the subsidy. I am usually biased to delay social security since the inflation indexing is incredibly powerful as retirement income "insurance". At 66, your wife should be able to claim a spouse's benefit on your record while you continue deferring your own benefits. If that is the case, you might still be able to qualify for the ACA subsidy.
  • Kiplinger's Kim Lankford explains in this story how to calculate the health insurance subsidy --

    Calculating the Health Insurance Subsidy-Kiplinger

    www.kiplinger.comIncome, age, family size and location all factor into the calculation for the tax credit to help pay premiums for policies purchased on the exchanges.
  • JH, that strategy would likely require to use for after-tax assets in 2014, with the withdrawals reduced in 2015 by the amount of your wife's SS benefit
  • Here are some ideas for those who want to retire now but also want to delay taking Social Security -- http://www.kiplinger.com/article/retirement/T051-C000-S004-mind-the-gap-if-you-delay-social-security.html
  • JH, a small correction. Since your wife does not have a SS earnings record, she should not have to wait until 66 to claim SS benefits.
  • Depending on the state in which these custodial funds are registered AND whether these accounts are UGMAs or UTMAs, the mother may not have a choice. If it is an UGMA in a state that requires transfer of ownership when the child reaches 18, the account is supposed to be re-registered in the child's name... If it's a state where this type of account (UTMA) doesn't require mandatory transfer of ownership until age 21, the mother has more flexibility. If the kids applied for financial aid, these accounts should have been considered the child's asset to be used for college and therefore, probably reduced the amount of aid available. Not sure if that's important in your situation, but if the loans are at rates anywhere near the 8% return (which I assume is not guaranteed), it might be prudent to use up this money for college after all. As to turning it over to the children before age 21? If they are responsible with money, it's okay to hand it off now. If the mother is at all concerned with their handling of personal finance, I would say use the remaining time until they are 21 to pay college expenses and/or teach them how to manage the money. They get what's left by age 21 no matter what!
  • Pat, the real estate is a second home rather than for rental. I was seeking to examine the cash flow (out of assets) to pay for the 2nd home. ultimately, would like to compare with cost of renting in a warm climate - all while keeping the primary residence.
  • Which would you do: max out a roth IRA for 2013? or put that money toward a loan (loan has a 8% interest rate).

  • Thank you for your response! This is a wonderful service that you are providing to your readers. I'm looking forward to reading all the Q and A's at the end of the session. There is good information for everyone!
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