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

Kiplinger Live Chat

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.

  • Hi Michael: I'm not familiar with the specifics of Oregon's 529 plan (I'm quickly glancing at it now). Generally, what is most important when savings for college is making sure that the money is there when your child enters school. Being too aggressive could mean the college savings pot could fall below what you put in and come up short on funds.
  • I am 67. For ease of calculation how would I invest 1,000,000 to last till 92. I am considering a fixed lifetime annuity for about 400,000 of it. With the remaining cash I want to invest in stocks and bonds, but I need an income stream for the next 25 years. I really need to find a way to generate 30-40 thousand from the remaining 600,000. How can I do that. Is buying the fixed immediate lifetime annuities a wise idea to make my money last?
  • Chuckie, it depends on which CFP you get:-) While I am sure there are some great advisors who work for those companies, I have heard advice from them that I don't agree with. This is largely because they don't know that much about you, the client. Target date funds are certainly an easy and viable solution. But I suggest there is a third alternative. Several NAPFA advisors will work on an hourly basis. They could help you look at the bigger picture (what do you want you assets to fund?) and then you could see what kind of return you would need to make to satisfy those goals. The investment allocation would flow from that. I've often wondered how investment advisors decide how to allocate investments without knowing this important piece of the puzzle. In any event, the charges for such sessions would likely be very reasonable and most of those advisors (if they are fee only) are going to use low cost investment vehicles like Vanguard funds.
  • Dennis, we've written a lot about SS claiming strategies at Kiplinger. This article is one of many that might help --

    Strategies to Boost Your Social Security-Kiplinger

    www.kiplinger.comThese moves can increase lifetime Social Security benefits by thousands of dollars.
  • 1. I have two CDs that will expire in 2014 and 2105. I want to put them in my brokeage Primary Money Market fund and also contribute money to this same account. I currently have an annunity contributing $4600. I plan on stopping this payment the end of this month and contribute this amount to my brokeage account. Is this a good idea? I am max out on IRAs, 401k. My annunity is a flexable retirement annuity, like a savings account; however, I do not want to exceed the $250,000 insurance limit for the state of Texas. I am not sure where to put this $4600. Thank you for your support.
  • I am 62 and have a 7 figure IRA which I'm trying to convert to a ROTH as much as possible before I hit 70 1/2. (I can't do this anymore after that - right?). My tactic is to make conversion(s) early in the year after December distributions when the prices are lower and/or when the market is down. My idea is to move as many shares as possible so they'll grow in the ROTH. I've made 3 conversions this year and will recharacterize the 2 with the highest share price, i.e. keep the one that moved the most shares to the ROTH. All 3 conversions were for the same amount, so the tax hit is the same for each. Everything I read says to recharacterize the ones where the price has dropped the most, but that makes no sense to me for my strategy. Am I missing something?
  • Dennis and others, I'd be remiss if I didn't mention Kiplinger has a tool -- there's a fee to use it -- to get personalized SS claiming advice that can boost your lifetime benefits significantly. Check it out at
  • Hi Sky: Having a $600,000 portfolio generate $30k-40k per year for at least 25 years might be a bit of a stretch as you'd be spending 5-6% of your portfolio per year. There is real risk you could run out of money. That said, it still may be possible if you are willing to adjust your spending in the future depending on how your portfolio performs.
  • Linda, Kiplinger's Jeff Kosnett just wrote about good options for $$$ from an expiring CD --

    Where to Keep Your Savings Now-Kiplinger

    www.kiplinger.comIf you're hoping to earn a decent return on your money, the best place to stash it depends on how soon you'll need it.
  • Linda - I'm not familiar with the insurance limit you mentioned for Texas, but your question really revolves around your savings habits I believe. Since you said you're already maxxing out your 401(k) and IRA contributions, you're doing an awesome job of saving. Keep up the good work. Regarding the annuity, I'm not sure I completely understand your question. So you have a $4,600 contribution going into an annuity that you'd like to redirect to a brokerage account? It's impossible to answer that specific question in this forum for lack of information. My hunch is that you should just keep saving and not stress out too much about which savings vehicle you're choosing. Thanks for your question!
  • I am a 62-year-old widow, retired one year ago with no debt and a current pension of about $12,000/year, adjusted annually in May. I began drawing Social Security in August, currently $1730/month. I have a traditional IRA of $174,000, Roth of $80,000, 457 accounts of $135,000 cash and $130,000 equities. I also have taxable investments totaling about $267,000 in cash and equities.

    I had planned to begin converting the traditional IRA to Roth this year but have had to obtain health insurance through the marketplace. I qualify for a monthly subsidy of about $300 and would lose some of that subsidy if my income increased due to an IRA distribution. Is a conversion treated the same as a distribution? Am I allowed to contribute 'new money' into the Roth using my pension as qualifying income?
  • Sky: re: buying an annuity. An annuity can makes sense in certain circumstances. So folks like having the security of knowing they have a reliable monthly stream of income. For some, I suggest getting an immediate annuity that covers only their basic costs of living.
  • 1 spouse is retired ( only pension income) and the other just got laid off can either contribute to previous or current year regular or Roth IRAs?
  • Jan - Converting an IRA to a Roth IRA is a recognition of taxable income, so it could alter benefits you are currently receiving such as a subsidy that depends on keeping your income below a certain threshold. You cannot use pension income to fund a Roth IRA. A Roth contribution has to come from 'earned income'. That's not pension income. Sorry.
  • My wife and I currently have $240,000 in trad. IRA and $250 in my companies 401k. We earn net about $68,000 a year and are both 53. Have 10 years left on mortgage of $450 a month. QUESTION: should we now start a ROTH IRA and build one up? Or better to convert Trad. IRA over to Roth? Cost to convert if so and best way to do so?
  • What is the approximate wait time to have questions answered? Will this session be archived so we can view the response later?
  • Mike - It's hard to give a time estimate, but this chat will definitely be archived so you can come back to it at any time!
  • Hi Chris - Rather than incur the tax bill of converting IRA money, why not just fund a third bucket of money and open a personal investment account? I don't know what your retirement tax bracket will look like, but given your income, you're only in the 15% marginal tax bracket. If you fund a joint taxable investment account, any appreciation would be taxed at the 15% long term capital gains rate, which for taxpayers in your current braket is 0%. Consider this as an alternative to your Roth idea. Thanks.
  • Thank you. I am 52 and may just want it for 2nd income stream. We have significant money in retirement and 350 k in liquid. I have a child going to medschool in a couple years as well as another entering college. From the calculator I could get 12k a year without affecting this particular nest egg. I believe i could do the withdrawals from 54 to 60 without triggering the penalty. Are most people successful in doing the withdrawals or is it risky?
  • Lots of questions about Roths today. Here's a Kiplinger slide show with 10 things you must know about Roths --

    10 Things You Must Know About Roth Accounts-Kiplinger

    www.kiplinger.comRoth accounts offer big benefits, but the rules can be complex.
  • Hi Connie: Contributions can be made to a regular or Roth IRA in a year you (or your spouse) receive compensation and have not reached age 70.5. If you don't work then contributions cannot be made to your IRA unless you receive alimony, nontaxable combat pay, military differential pay, or file a joint return with a spouse who has compensation.
  • I have money sitting in a cash balance pension plan at a previous employer earning 2.5% annually. Should I roll it over to an IRA. Thinking about a Vanguard Target Fund
  • Karen, several thoughts on this. First, why do you want to convert? You will have to pay tax on every conversion whether you end up using that money or not. Now this might make sense if you have grandchildren as beneficiaries as they could get YEARS of tax free growth in a ROTH they inherit. But for you, why pay the tax if you don't have to? As for timing the market, I suggest that you never know when "prices are lower" than they will be. Finally, it sounds like you are using a fairly complicated strategy. You are converting money in the same amount (not shares) into 3 different ROTHs. The ROTHs should be invested in different assets classes...perhaps one is domestic stock, one in international stock, and one is some sort of bond fund (perhaps high yield if it is a ROTH). Over the year, you can see how they perform relative to each other. Then, if one of them drops in value during the year, you can re-characterize it back to the traditional IRA and then covert it back to a ROTH. The idea is that you would reduce the amount of tax paid on the conversion because the when you re-characterize, it wipes out the first conversion and you pay tax on the lower amount converted after you re-characterize. This is a fine plan on paper. But with the wild market volatility we see in the markets from day to day, I suggest that you could loose all the benefit of such a strategy during the time it takes to enact it.
  • Mulbyte - I think your question was around the 72(t) withdrawal, right? The strategy isn't inherently risky, but once the withdrawal amount is determined, it can't be changed until you extract yourself from it after at least 5 years or reach age 59-1/2. So if the value of your IRA crashes during this period, it could cause further losses due to the irrevocability of the 72(t) election. I hope I made sense here. Thanks.
  • Hi all, this is Andrea again, I have to head out to work so I can't provide any more info. My initial question was, given all the circumstances/details I provided earlier, How much, as a percentage of gross income, would it make sense for us to contribute to a 401(k)? And is Roth 401(k) vs. traditional 401(k) better?
    Also, given Bobbie said IRAs were capped at $10k contributions per year for our filing status, are 401(k)s also similarly capped.
  • And finally, one last, any basic retirement planning books you guys would recommend as primers on the subject?
  • Hi all! If I max out both my Roth and 401K for the year, is purchasing a whole life insurance plan a better option than investing in mutual funds/index funds on my own through an online brokerage? What's the real consensus on whole life insurance?
  • Thank you very much for providing all this info on the chat, I look forward to reading the transcript later!!
  • Andrea, we're glad you could join today!
  • I plan to retire in3 years and will have an IRA, Pension, Savings Account and Security. I have two questions, (1) should I put my pension in a fixed annuity account to offset risk because the stock market fluctuates; and (2) when I retire, should I start taking money out of my IRA first as opposed to Social Security?
  • Thank you to everyone who has submitted questions so far! We're taking them as quickly as we can. But, if you have to hop out before your question is answered, the transcript will be available after the chat.
  • Hi Mike: earning 2.5% isn't terrible in our current interest rate environment. This money is the bond/fixed income part of your portfolio. If moved it to a target dated fund (a mix of stocks, bond, and cash) that would likely be a major shift in your overall asset allocation. Is increasing your allocation to riskier asset what you want to do?
  • Andrea, the 401K contributions are NOT capped because of income limits and your tax filing strategy which makes them attractive as opposed to the limited IRA possibilities for Married Filing Separate. As you are young now and expect to make more later, I suggest you forego at least part of the tax deduction now that would be provided by a traditional 401K contribution and do at least some in the ROTH. Definitive answers are hard to come by so I often suggest clients do a little of each. When you income is higher, the tax benefit of the traditional 401K deduction will be bigger as your tax rate is likely to be higher. Also, you will be older so the benefit of the ROTH, while still nice, is not as impactful. At that time, I would go strictly for the deductible, traditional 401K. Does that make sense to you?
  • Question: we have $10,000 in credit card debt at 15% interest. Should we convert to our home equity loan at 5.6% ?? The BOA interest rate has been the same for past year. I know nothing about the interest rates in home equity loans and would like to know what the likely trend up is?? The interest rate is not likely to spike up and they traditionally go up gradually? We have about $12,000 in our home equity loan now. We are paying approx $2,300 a month minimum on these debts which total about $22,000. Can save on interest on ccards or is their a risk to have all debt in home equity loan? How would this effect our credit rating which is around 760? Both of us are in good health and have stable jobs: Walmart manager and school teacher. Thank you for your time and helpful advice and thoughts!!! Chris and Teresa Olson
  • Deborah - there are pros and cons to the answers to your questions. If you take your pension and SS then you will have two unalterable income streams which is a good thing. However, the cost of living adjustments are small to none. So to account for inflation, you could supplement rising expenses with draws from your assets such as the IRA and savings. However, if you are able to roll your pension amount to an IRA, you could have two IRAs--one with low risk investments and one with moderate risk investments. The first one could kick out a monthly amount to you that feels like a true pension and the second one could act as more of a growth bucket of money for higher cost of living later in life. There are multiple ways to construct a plan for you and due to the brief nature of these chats, it's hard to give you a final answer. Social security will be higher the longer you delay, so you need to answer that question in the context of your family history and how long your parents and grandparents lived. My personal bias is to delay and take the higher benefit. After all everyone likes to think they're going to live a long life, and you have to play to win.
  • Andrea, please contribute enough to your workplace retirement plan to get any match.
  • Recent Kiplinger subscriber and enjoying ever page. My wife and I are both 66 with social security, a small pension, and part time workers. Beginning next month we plan to take 4% after taxes from our $600,000 IRA account. We plan to have $180,000 designated for a fixed annuity with a guaranteed lifelong payout. However, the annuity rates are now lower than in past years. Should we spread the annuity purchase over time during the next 4 years in hopes that the rates go up?
  • Hi Caley. By the way your question is worded, it sounds like you are using whole life insurance as an investment and not necessarily for the insurance. So, let's focus on the cash value growth versus an investment and omit the death benefit. The majority of the time, you will do better with an investment account rather than an insurance policy to build assets. The argument for life insurance is the tax free withdrawals and tax free loans. However, after insurance expenses and loan interest, the investment account should provide more income than an insurance policy - even after paying taxes on the investments. This assumes normal market conditions. Of course, there are those few times like 2008-2009 where the guaranteed growth of cash value would be better than a volatile investment account.
  • Tom - I'm deliberating on your question. The issue of interest rates is fiercely debated in professional financial circles and I can tell you there is not clarity on the near-term direction of rates. Most agree that they will head up before they head down, but that's purely speculation. If you're committed to the annuity route, you should consult with your annuity salesperson on timing, but if you're looking for alternative advice, consider parking the $180,000 in a short-term "yield-oriented" bond portfolio which might get you to the same place. I'm sure Kiplinger has some ideas around that.
  • I retired last year at 61 and just turned 62. I don't need to take Social Security yet and would like to let the benefit grow. Since I'm no longer paying into the system will the benefit amount, at some point, begin to decline?
  • I am in my early thirties, have no mortgage, and have a Roth IRA that I already contribute the max to each year. I have saved about $10K that is just sitting in a low interest money market. What would be the best thing to do with this $10K?
  • Hi John M: No, your benefit will not decline. In fact, the longer you wait to take SS, the benefit will increase (up until age 70). If you returned to work, even part time, that could actually increase your benefit as well.
  • Chis and Teresa, it is true than home equity lines of credit/loans ARE exposed to variable interest rates. In this environment, those rates are likely to increase over time. But it probably will happen slowly AND they would have to increase VERY much to equal that 15% you are paying on your credit card debt. So the smart book answer IS to pay off that credit card using the home equity loan. But you do have to remember that if you do so, your home is pledged against that debt. Are you comfortable with that? If I am reading your question correctly, you are paying enough every month to have the $22K paid in full in about a year. That short time period reduces your exposure on the home equity line. As for your credit score, typically credit card balances negatively impact your score more than loans so if you pay the card off, your already good score might go up.
  • Hi Kevin -- We have your question in the queue. We're answering the questions in the order they were received, but we will get to yours soon! If you have to leave, the chat transcript will be here later.
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