We're so happy you could join us Sandra!
HI John. I love the idea of funding your retirement, but realistically, with an 8% interest rate, you are probably better off paying down your debt. To get an average 8% return on your Roth over time would mean a pretty aggressive portfolio, with no guarantees. Compare that to paying 8% each year no matter what the markets are doing. Pay down the loan.
Keep those questions coming! We're answering them in the order in which they are received, so you may not see your question pop up immediately.
JH, my first take is that it's usually (but not always) best to delay collecting Social Security for as long as possible since the benefits are permanently lower if you start early. If you were working with an advisor, I'm surprised that he or she didn't tackle this question for you (looking at taking Social Security earlier versus opting for the ACA subsidy, to see what the best outcome could be). You will be waiting about 3 years before you qualify for Medicare, at which point your cost should come down - I can't tell from the information that you provided whether or not your spouse is already on Medicare (with your retiree coverage serving as Medigap coverage). So, you might want to consider delaying Social Security benefits for 3 years in order to qualify for the subsidy, drawing from your portfolio to cover living expenss. Then, you can apply for Medicare and consider starting Social Security coverage (for you and your spouse) at age 65, as the subsidy may be less valuable at that point. Without knowing your expense details it's a bit hard to give you a more comprehensive answer - I would suggest taking this question back to your advisor (or finding one that can run a more personalized analysis for you than we can do here).
Hi Pete, it is would to assess whether you are on track without knowing your expected expenses in retirement. That said, you appear to be doing all the right things as far as savings. Depending on your current income and tax bracket, a Roth IRA might be a nice tool to give you some tax diversity to your 401k. Your allocation is very aggressive. Even at your age I would recommend at least 20% in diversified bond funds. You should also have enough after-tax savings to tap into should an an emergency or opportunity arise. Keep up the good savings habits.
If you aren't able to stick around until your question is answered, don't forget that the transcript will be available here after the chat!
HI JWH. Congratulations on your upcoming retirement. sounds like you and your wife will be in good shape! The 1% you will be paying to the Ameriprise advisor will be to manage your investments, whatever they may be. This will probably not include any other financial planning advice. My suggestion is to shop around a bit if you feel you want some advice, but aren't sure what you need for ongoing management. Check out NAPFA's fee-only advisors in your area - they won't be tied to a specific company who sells proprietary products and many have graduated fee levels that could result in you paying less than 1% for investment management). Or if you prefer to have someone get you set up in a portfolio you can manage yourself, you should also look at hourly CFPs. Check out NAPFA and the Garrett Planning Network for hourly fee-only planners in your area.
No problem Confused, your answer should be up momentarily!
Confused. Start by paying off the 8% credit cards and then reduce the balance on the 6% cards. If you needed to fully pay off the 6% cards before starting on the 8% cards to reduce your payment, that is also an option. If neither option gets
you below the thresholds, I would think very carefully about whether it is the right time to buy a house. I don't have all of the information about the stability of your income and expenses ut I would be concerned that a unexpected housing repair/expenses could pop up.
Hi Roman, Therese has signed off for the day, but we will see if any of the other advisers can take your follow up.
Thanks for participating sharon!
Confused, it sounds as though you have some flexibility to manage your tax bracket. If you are already in the 25% bracket, I'll assume you have other taxable income sources. If that is the case, consider taking fro the retirement accounts up to the limits of the 25% bracket and then using the Roth IRas for additional funds. Just keep in mind that the inherited accounts have a Required Minimum Distribution - you will want to take at least that amount.
Hi JWH, I have an obvious conflict of interest here but I think you need to ask yourself what you are looking for in an advisor. If it will be purely an investment focused advisory relationship, ask yourself how you have navigated the the markets over the last 10 years. Have you maintained your disciplined allocaiton and earned the market returns of an appropriate benchmark? On the investment side, much of our value comes from helping clients avoid mistakes and stick with their strategy. ...
There have been several recent studies that have attempted to quantify the value of an advisor and an internet search will likely turn up many results. Kiplingers and NAPFA also have materials about working with an advisor. The other side of most advisory relationships is simply having a professional helping you keep tabs on all aspects of your financial life.
Roman, I believe reverse mortgages are a back-to-the-wall, last resort tactic to provide cash flow in retirement once all other assets are nearly depleted. They are often pushed on folks for all of the wrong reasons; your friends mean well I am sure but friends and family members don't always give the best advice... Home ownership does indeed provide some tax benefits, but those benefits are incidental - I don't believe in buying a home just for the tax write-offs (I also don't recommend having additional children to get more exemptions ;-) ) and should not be the main inspiration for a home purchase. Purchasing a home is a lifestyle decision (purple bathrooms! Man cave!) with financial ramifications. I can understand the wish to minimize taxes on your income, especially if it is fixed, but don't let taxes dominate your decision making.
HI JWH - Just to clarify my earlier answer - if your $9,000 a month in pension income will cover your expenses and therefore, you are talking about managing the $1M in investments for longer term needs, I would recommend paying an hourly planner to set up a simple portfolio you can manage yourself - IF you want to take on that responsibility, as Adam notes in his response. Otherwise, you should pay someone (and 1% is a pretty standard fee) to manage it for you.
Happy to hear it confused! Thanks for reading.
Hi Artist, although your income may be less regular than a salary, the need to save is the same. Live within your means and save as much as you can. A 401(k) may not be available to you but you could form a business entity to give you more tax deferred savings options. Regardless, don't limit your "retirment savings" only to tax-deferred accounts.