Hello, Rich Frazier CFP with Frazier Financial Consultants here!
Hi Bonnie and Rich, and welcome to today’s Jump-Start Your Retirement Plan Live Chats!
Good Morning, Allison Berger with Financial Symmetry
We received several questions in advance, and for the most part, questions will be answered in the order they were received. Each question will be held for moderation until an advisor is available to give you a detailed, personalized response. So, please do not be concerned if you do not see your question appear right away.
If you have a follow-up question, please submit it, and we will bring it to the advisors’ attention right away.
Rich, you can take this first one from Bill D
Hi Bill, your wife can claim SS benefits at her full retirement age, and you can receive 50% of her benefit. She can also register for SS, delay payments so her monthly payment increases (she can delay until 70) and you can receive spousal benefits. However, when you receive your benefit, it will be a combination of spousal and your own, I believe. SS is pretty tricky and I do not know if she can switch back to your benefit or not.
Bonnie, here is one for you from RHS202
Hi RHS202, thank you for your question. You can certainly consider an annuity. In doing so, ask these questions and please do not purchase unless and until they are answered to your satisfaction. 1) why do I want an annuity, is it to protect and pay for certain known payments like a mortgage? 2) what will the annuity be invested in, 3) what are my distribution options, 4) what are ALL (the investments, the commission, the mortality, surrender, management fees, 5) would a diversified low cost portfolio with scheduled distributions accomplish the same things much more efficiently and less expensively. Remember when purchasing an annuity - you live with the contract, not the sales conversation. The overwhelming number of my clients with annuities are not happy with their purchases (made through sales folks, not advisors).
Raymond, where do you live? I ask that because if it is in a big metro area, you may be very surprised at job opportunities you hadn't considered. Let me give what may seem like a silly example, but I assure you, the money isn't silly. Here in the metro DC area we pay full time dog walkers $45k/year. It is becoming more likely that it is possible to earn income almost anywhere. Yes, you can apply for SS benefits but you probably already know that by doing so before full retirement age 65-67 depending on your birthdate, you take a permanently lower payment.
And Allison, here is one from Rod
Rod, the answer is really that it depends. If you have a large taxable account that you can withdraw from then you may use this for a few years if you retire early and before you reach full retirement age for SS. This also presents opportunity to have a few low tax income years where you may be able to do a Roth conversion at a low tax rate to use later in retirement for tax free withdrawals. If you do not have much taxable savings and the majority of your funds are in tax-deferred accounts and you are relying heavily on SSI and pension then it is best to wait closer to full retirement age. You would just want to be careful not to deplete too much of your net worth before starting SS or pension income if you retire early
Rod, Sorry I didn't address the no debt question. The question of paying off debts really depends on the interest rate on the debt and your expected rate of return on your investments. If the interest rate is low and you expect to earn a higher rate of return on investments over the term of the loan, then it may be best to continue paying on the debt into retirement.
Rich, here's another question for you from Mere1948
Mere1948, see if there is an option available to roll it directly to an IRA Rollover. This is not a taxable event and then you can take money out at your leisure, while paying taxes on it of course, but you would not get hit with a large tax bill on the full amount.
Allsion, how about you take this one from Steward
Bonnie, here is a long one from Larry. Happy almost retirement, Larry!
And Rich, here's one from Sneaky Pete
JHwk - Thank you for the additional information. Your situation will allow you do some advanced tax and financial planning. For example, you may want to invest the 500K from the house for the long term, start spending down your Keogh now and delaying Social Security. This path may reduce your RMD's, maximize your Social Security benefits and reduce future taxes. I suggest you create a detailed plan with a professional who can work with you to meet your goals and customize an appoach for your situation. In the interim, I suggest putting the money in several money market accounts, being mindful of FDIC insurnace limits.
SJ - Also, access to an IRA may be easier if you need the income. There are some possible estate planning differences if you are considering funding a trust. A little too complicated for this post, but a NAPFA advisor in your area could be beneficial.
To SJ: I usually recommend moving 401k/403b accounts to IRA's for a couple of reasons: First, for control of the investments and accessibility; these Plans are usually limited in the amount and type of investment choices. Second, because many 403b's, in particular, are held by one insurance company risk becomes a factor in that case. Third, each 401k/403b Plan is written with different legal wrinkles, some of which your beneficiaries might encounter after your death.
Hi Berta - When you mention "paid out", does that mean you have taken money out of the IRA? Or just rolled it over to the IRA?
Eleanore and Randy, waiting for Berta's response. Several folks submitted questions early and are checking back later for the transcript, so they may not be here at the time.
Stacy and Jeff, here's our next question from Hillbilly
To Hillbilly: There are those who would recommend that you roll over your 401k account into an IRA annuity. However, I would recommend that you look at all your other IRA investment options before taking the plunge to an annuity product. Generally, annuities are the more costly way to invest. If you are not accustomed to investing on your own, and your 401k is somewhat large, you might consider engaging a fee-only planner to direct you to the right choice for you.
@Hillbilly, yes, you can rollover your 401(k) to an annuity if you choose to. I would not recommend it, however. I would recommend that you roll your 401(k) into an IRA and create your own income stream in a much more cost-effective manner. You could consider working with a fee-only planner to help you. Annuities have added costs for insurance and mortality charges which will eat into your nest egg. This is counter-productive to you and your savings.
Hillbilly - Yes, you can use the money from a 401(k) to purchase an annuity. I assume you are looking at immediate annuities that will start to pay you monthly, not deferred annuities that you use to accumulate money for the future. I suggest you read the NAIC (National Association of Insurance Commissioners) Guide to Annuities. Annuities are not right for everyone and can be very expensive. If you do decide to buy an annuity, many proffesionals recommend putting no more than 25% to 30% of your money in the annuity.