Berta: If you want to check the financial strength of an insurance company, you may check Standard & Poors or AM Best. If you wish to evaluate specific annuity products for comparison, I would check with an independent insurance agent. The first question is whether you've properly evaluated and have a good understanding of annuities. They can be very complicated products...unless you're referring to an immediate annuity.
Here's our next one from lars
Lars - Putting your equities in Roth and the fixed income in the traditional IRA is a good plan. When it comes to taxes, asset location is just as important as asset allocation.
lars - Delaying your pension and SS to age 70 is also a good idea as your benefits will continue to grow. Don't forget to apply for Medicare when you turn 65, Medicare is automatic for people who are already collecting Social Security, but since you are delaying yours until age 70 you will need to apply for Medicare manually.
lars: In general, I think your strategy is wise. It partly depends upon when you may need distributions from each Roth and/or Traditional IRA. But it sounds like you'll be able to leave the Roth in place for a long time
Thanks, Kristine and Terry.
Here's another one for you from Dennis
Dennis: You can contribute to an IRA as long as you have earned income and are not age 70 1/2. Each $ converted to a Roth IRA, however, is taxed proportionally according to how much pretax $ and after-tax $ are in the IRA on 12/31 of the year of conversion. I'll provide an example in the next post.
Dennis: Example - After my contribution this year, I have $80,000 pretax IRA $ and $20,000 after-tax IRA $. Assume the same breakdown of balances at year-end at 80% pretax and 20% after-tax (as that's how the taxable amount is determined on form 8606 of tax return). If I convert $10,000 to a Roth, then $8,000 will be taxable. Then my balances will be as follows: $72,000 pretax and $18,000 after-tax still in IRAs.
Dennis: There is no limit to how many times you can convert to a Roth so as Terry said as long as you have earned income and can contribute to an IRA then you can do this strategy indefinitely.
When you're ready for the next one, here's one from Robert Flora
Robert: Assuming that you want to stay in the home, I would research all of your financing options before selling investments to pay off the line of credit. Call your mortgage company, shop other mortgage companies, check into peer to peer lending companies (Lending Club or Prosper) and see if you can refinance that line of credit before it becomes due. I'm not sure what the income/asset requirements are when you are retired, but it's definitely worth a few phone calls before you sell the house or sell your investments to pay the line of credit off.
Robert: As always, tough to answer given the limited amount of facts here. First, I would recommend interviewing a NAPFA advisor as he/she can provide a lot of value and "open your eyes" as to how many pieces of the financial puzzle fit together. Some thoughts - with mortgage rates at historic lows, it may be a wise time to refinance to a fixed rate. If you had to pay down some of the balance to do so, that may make sense...
Thanks, Terry and Kristine
When you're ready, here's our next one from CafLM2
CafLM2: I don't have advice as to specific investments/ETFs/mutual funds as my role is a financial planner and not investment manager. However, I would ask whether the kids have completely maximized their Roth IRA contributions (for 2012, the lesser of $5,000 or employment income)?
Alright, here's our next question from Sheila
Sheila: In my experience, I haven't seen many beneficial reasons to transfer IRA $ to an HSA. Note that this transfer can only occur once, I believe, during a lifetime. Why not simply make an HSA contribution which is tax deductible? Perhaps you still have the HSA but no longer have an HSA compatible health to allow for HSA contributions?
Sheila, contributions to an HSA are tax deductible, but they are not part of the medical expenses (subject to the floor). They are deducted on the front page of your tax return.
One last note on the HSA, the most you can transfer is the maximum amount that you could contribute to the HSA, so it doesn't make sense to fund the IRA only to turn around and transfer it to the HSA.
Thanks, Kristine and Terry
Ready for our next one from Lisa?
Lisa - Yes, you can make catch up contributions to the SERS plan. In 2013 the catch up amount is $5,500.
Here's our next round of questions from Anand. He has a few for you
Anand: Sounds like you've already made some smart decisions in planning. Good for you. These questions are very difficult to answer without developing cash flow, net worth and tax planning projections. For withdrawing $ in retirement, we look at one's specific situation including what current (retirement) tax rate is vs. what it is expected to be in future retirement years.
Anand: #1 for the most part, we try to generate as little capital gains as possible when creating cash for withdrawals.
Anand - thanks for the questions. Regarding question #2, investing a small amount each month (known as dollar cost averaging) takes the guesswork and stress out of investing, as you don't have to worry about investing at the wrong time, so I recommend that over investing a lump sum at one time. Also, the only time you want to avoid buying (for taxable accounts) is right before the year-end distributions. If you buy right before dividends and capital gains are distributed, you are essentially buying a tax liability.
Anand - Regarding question #3, I don't know if there is a best time to rebalance, with the exception of avoiding year end distributions for taxable accounts. Otherwise, many people will schedule their annual rebalancing at a time that works for them, such as at tax time, or when they do open enrollment at work.
We have a follow-up from Anand. Anand, we have a new round of advisors coming into the chat
Anand: If your company declares bankruptcy, your retirement plan assets are protected under federal law—the Employee Retirement Income Security Act of 1974 (ERISA). The law covers all “qualified retirement plans,” which includes 457 plans.
Since we have new advisors in the chat room, I'm signing off now. Thanks for the opportunity!