Hi lee, I am an advocate of rollovers from 401(K)'s. Especially if you are with a small company. Make sure you complete the rollover transaction properlly. I do like the many choices you have with an IRA, as well as not longer paying the fees that come with a 401(k). Best of luck
Good Morning Lee Leon - Hopefully you are working out of enjoyment and not neccessity. Typically one cannot roll their 401k into an IRA if you still work for the firm. If you can, you would have more control and you might be able to neutalize the increased RMD by making contributions to your 401k pretax.
Alright, before you all have to sign off, here's one more question from Beth.
Hi Beth - I know it might sound strange, but the rates you are paying are relatively low given historial rates. From your comments on the stock market you appear risk averse and more confident in "earning" 4+% by paying down your debt than taking risks in the stock market, so that might be a fine strategy for you. I'm glad to hear you have an emergency fund and wouldn't use that money to pay down debt. Do think about saving for retirement at the same time through tax-deferred or Roth plans, maybe through employer offered plans, especially if they will match a portion of your contributions. If you don't take advantage of that, you will be leaving money on the table.
Hi Beth, I like your thinking. I would try to pay off the high ineterest student loan first (al long as take advantage of an employee retirement program match) and then begin to save for the long term while also paying off your student debe and mortgage. Also watch the houseing market, hopefully at some point it may increase again that you can refianance at a lower rate before rates go back up. Barry
I'm signing off now. Hopefully I was able to help answer some of your questions.
I'm signing off now. All the best, Barry
Thank you, Tim and Barry. You've been a huge help
Hi. Lea Ann Knight with Garrison/Knight Financial Planning in Bedford, MA. Just finished the Retirement Chat Room and am now joining you here.
Hello, this is Bryan Totri with St. John & Associates in Atlanta.
Hi, Don is ready to take quesitons
Alright, Byran, Don, Lea Anne and Frank, let's get going again here.
Here's our first question from Kevin
Kevin, I'm not sure about paying off the mortgage without knowing more about you but a 5.625% rate is pretty high. You could refinance for less than 3% for fifteen years (assuming you qualify) and that would likely lower your payment and leave those Vanguard funds alone to grow.
Keep in mind Kevin you're swapping liquidity here.
HI Kevin, Have you tried to refinance your mortgage to a lower rate? If you can get that rate down, it might make more sense to keep the inheritance, which could be earning more than the interest you would be paying on your mortgage. If you can't refinance, paying off the mortgage does become more attractive. Make sure you don't need that inheritance money to help with retirement savings or unmet college costs first.
Kevin: Meaning, if you pay off the mortgage the funds are now tied up in bricks and mortar vs. the funds are available to you at anytime you need them should your situation change unknowingly.
Thanks, all. Some great advice for Kevin
When you're ready for the next one, here's one from Carol
HI Carol, it sounds like the full pension will help towards retirement, but only if you don't need more than the pension to supplement your lifestyle. Advisors used to always recommend buying a home and building equity in it over renting, but now I'm not so sure. Is there a place in which you want to settle down and live for the next 20 years? If so, buying a house, even if you are taking on a mortgage, might make sense. If you're not sure about settling in one place, keep renting and saving that money for other things. Don't forget that even if retirement is taken care of, you'll need to be saving for college as well.
Hi Carol, Buying a home has a lot of advantages but you have a lot ogf moving parts with your children's education and saving for retirement. Lot's of peole have mortgages into retirement and fifteen year rates are so low that you could get one of those and have it paid off by the time your husband is 65. I think the best thing for you to do is seek out a fee only financial planner who could run the numbers for you and help you decide. Go to NAPFA.org to find a planner in your area.
Carol: Thank you for your service. Buying a home with a young family can secure you in a location where you like the school district and want to build a life there. Renting can be fickle as you only have the period of your lease to plan for. Will you have VA favored financing availalbe? The critical question for those eligible for VA loans is whether, given their qualifications and financial status, the terms available on a VA will be better than those available on a conventional, FHA or USDA loan? The question is best answered in terms of the down payment the veteran is capable of making.
Thank you and your husband for your service to our country. I don't think it needs to be either or as you can probably do both. The key is if you decide to buy a house make sure the monthly payments do not crowd out funds needed to save for retirement.
Carol you might want to meet with a planner who bills hourly and work on a foward looking spending plan (budget). Go to NAPFA.org or try the Garrett Planning Network and see if an advisor is located near you.
Here's a question from Bob
Bob: regarding Dell stock. Its up 32% year-to-date. Depending how long you've owned it and what you paid for it...I'd be tempted to take some profits here. Sell a portion...stay invested with a portion.
Here are our next few questions from Jeff and Pilotician
HI Pilotician, I'd like to suggest that you spend a little time with an hourly planner to figure out the best use of the $200,000, the $100,000 401k and the amount you want to move away from the low interest rate accounts. The appropriate place will very much depend on how much of this you are going to need to live on and how aggressively it needs to grow to keep you comfortable in retirement. You can find an hourly planner at napfa.org.
Pilotician, This is a pretty general answer but I would start by figuring out how much of this money you need to spend over the next few years. Set that aside in a savings account. The rest can be invested in a balanced mutual fund like a target retirement fund or something like that. Vanguard has a bunch of low cost funds that might work for you. Each year, figure out another year's expenses and redeem enough in your mutual funds to cover them. If the market is down significantly, you can skip a year until the market recovers. Again this is very general but it's a place to start. You could benefit from meeting with a fee only advisor for more advice specific to your situation.
Pilotician: You will roll the 401(k) to an IRA account. You are likely moderately conservative investors as current retirees so you need to consider your investement attitude and risk (loss) aversion. I know it keeps coming up but working with a fee-only (extended relationship) or hourly (single issues) financial planner will serve you best. There is quite a bit to consider here.
Jeff: if you're there can you clarify your question a bit further. Are you saying you want to minimize risk (losses) and still accumulate some rate of return?
Jeff, as Bryan asked, tell us more. How old are you? How far from retirement? What are you trying to protect your retirement assets from? Taxes? Losses?
Here are our next few questions from Terry and Kern44
HI Terry, you can transfer those muni bonds to a discount broker and they won't be charging you 1.5% a year to hold them. If you have a local Fidelity or Scottrade office near you, stop by and they will handle the transfer paperwork for you. There may be a transfer fee from your current broker, especially if you are transferring an entire account, but discount brokers like Fidelity or Scottrade don't charge an account fee for brokerage accounts.
Terry, OUCH! 1.5%?. Open up an account with a discount broker like Schwab, or e-trade and have those muni's transferred to them. There might be an initial fee for doing this but it is a lot cheaper that 1.5%Holding them yourself can be a real pain. Let somebody else do it.