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.
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Ellen, A lump sum allows for greater flexibility if you need access to large sums of money (buy a house, health expense, help a child, etc) quickly. If you don't spend all of the lump sum, it continues for your beneficiaries via a stretch IRA (two generations of tax deferral. Taking the pension as a monthly payment helps with budgeting and allows you to be more aggressive with the rest of your assets because you have this guaranteed income source. When you and/or your spouse dies, depending on the survivor option you choose, then the pension stops. -
HI Dan. I've been noodling over your question on the Roth conversion. There is probably a very sophisticated mathematical equation we could create that would answer your question better than this but it seems to me that if you are paying an incremental 10% in year one to convert the dividend paying stock to a Roth and then receiving 6% a year after that tax free, you have recouped your "cost" by year 2, a pretty short timeframe. If you then add on what the tax burden would be to keep it in the IRA and take it out as RMD at 70 1/2 I suspect you will have an even clearer indication if paying 25% now is worth reducing what you will pay at 70 1/2 and beyond. -
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This story covers why adding a Roth to your nest egg is beneficial -- Consider a Roth IRA for Tax-Free Income -
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Julia, you're right in asking if your 'future self' would benefit more from the Roth IRA than the 401k. The answer requires us to make several assumptions and make several projections, but that's what we do. The answer varies from client to client depending on your entire situation.
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hi, a few questions on preparing for retirement (or possible layoff) for me, age 60, and my 61-year-old husband. The layoff thing isn't just a throwaway line, I work for a troubled company and he works for a tiny company with no benefits and many financial ups and downs.
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Help thanks - you certainly are facing challenges. I think your best option would be to connect with a debt counselor. Check here and be very careful about who you work with:National Foundation for Credit Counseling
NFCC is a non-profit organization representing Member Agencies that provide free or low-cost individualized, confidential credit counseling in-person, by phone, or on-line. Personal assistance is offered to help people in stressful financial situations as well as those seeking financial education, increased financial literacy, or trying to reach specific financial goals, and is provided by trained Certified Consumer Credit Counselors. -
I'm 68, wife 66. Nearly $1mil in net worth. Paying healthy sum monthly for combo of term and whole life insurance ($500K+). Can convert whole to paid-up and/or stop term. Monthly household income of about $6000 gross. House paid for. No other debt. Question is: how much life insurance does one need after age 65?
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Wayne, it sounds like your wife will retire at age 69, has already begun social security and is still working. She'll need to begin her Required Minimum Distributions (RMDs) from her 401k/IRA at age 70 1/2. This income will be added to all of your other income (both social security checks, pensions, dividends, etc.). Depending on the size of your wife's plan, the RMD could push the two of you into a different tax bracket. You'll want to evaluate this issue and potentially 1. retire early, 2. or retire at 69 and take the distributions as needed. This is an overly simplified answer, but it's a good start.
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Here are a couple of Kiplinger's stories on life insurance -- Life Insurance After 50 and Cash From Your Life Insurance
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Dean, unless you have significant debt that can't be covered by assets, there is virtually no need to carry insurance after you have retired. Since you don't have debt, you don't need the insurance. Some people like to carry insurance past retirement to provide an inheritance for their loved ones, but that's an expensive proposition. If that is part of your intention, then stop the term policy and covert the whole life policy. Otherwise, you can safely drop it all (and may get some cash value back from the whole life).
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Whoops, didn't realize paragraph mark would put it in comments. We have put two kids through college, and have one more to go in a year and a half. We have $105,000 saved in her college account and are saving at a rate of $13,000 a year for college. We have $180K in rainy-day cash savings, and $1.05 million in a combination of 401(k)s and IRAs. I am putting the max, about $22K a year, into my 401(k) the holdings are conservative...yes, there is some stock, some mutual funds, but I also have about half my money in the safest (lowest growth) option Vanguard offers. He has about a third of his in cash IRA savings with Fidelity that earns low interest. Our combined income is $220K because he recently overcame unemployment and got a bump in salary to $100K. Our house payment is $1,700 a month (includes $250 extra paid straight to principal) and at this rate we'll have the house paid off in seven years. Should we be putting more risk into our retirement accounts? doing something that gets higher interest with our rainy-day funds, which are earning like 1% interest a year? They are rainy-day funds, they need to be available, but we could probably live on half that amunt for a year, even if we both lost our jobs. We also will get corporate pensions that total about $2,000 a month. What should we be doing differently for retirement? Do we have enough?
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