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!
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.
Julia, Great job on your savings rate. The answer to your question is somewhat complex. You might consider reducing your 401k contribution and putting money in a Roth IRA if you thought you would be in a similar or higher tax bracket when you retire, relative to today. If you think you'll be in a lower tax bracket in retirement, putting all of your retirement savings in a 401k works great. Be sure to have money saved outside of retirement accounts for liquidity. Roth IRAs do allow you to get at your principal prior to 59 1/2, so their is some liquidity there. I hope this helps.
xxxx, Given that your pension income exceeds your expenses by a health margin, I would tend to agree that early retirement is very possible. The ability to find work if needed or desired would also bolster your ability to retire sooner.
I submitted a comment before this opened today (about 5 hours ago), but I don't know how to find a response (if any) in these pages of chats. It had to do with making multiple ROTH conversions and recharacterizing all but the one with the lowest price/share in order to retain as many shares in the ROTH account as possible vs common advice to rechar. the one that has dropped the most in price. Am I missing something?
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
Julia, Great job on your savings rate. The answer to your question is somewhat complex. You might consider reducing your 401k contribution and putting money in a Roth IRA if you thought you would be in a similar or higher tax bracket when you retire, relative to today. If you think you'll be in a lower tax bracket in retirement, putting all of your retirement savings in a 401k works great. Be sure to have money saved outside of retirement accounts for liquidity. Roth IRAs do allow you to get at your principal prior to 59 1/2, so their is some liquidity there. I hope this helps.
