Thank you, Garrett! We appreciate your help
David L: If you're just starting out, build your rainy day fund first. I would save at least 3 months of your living expenses. Then consider saving for your retirement via a 401k, regular IRA, or Roth IRA. I like to have clients save at least 10% of their gross income towards retirement, but you may have to work up to it over a period of months/years depending on your circumstances.
Hi, this is Pat Jennerjohn with Focused Finances LLC, in Oakland, California, checking in.
Good afternoon. Brent Perry, CFP from Piedmont Financial Advisors in Indianapolis, IN checking in and ready to take your questions.
Pat, you can take this one from Aaron
Aaron, you are correct that you must exclude income from foreign sources from your income in figuring out your Roth IRA contribution. If, after backing out income from foreign sources, you have zero earned income, then you cannot contribute to any sort of IRA. So it's difficult for you to find a tax deferred savings vehicle specifically set up for retirement savings. Yet, since your savings would be from after tax income in any case, consider simply establishing regular savings into a good mutual fund - check out some of the "fund of funds" offerings at Vanguard or T. Rowe Price. If you come back to the U.S. and again have earned income (based on the rules for IRA contributions) you can then switch that savings target to a Roth IRA. The important thing is to establish the habit of saving - from the top - even if the perfect vehicle is not available.
Brent, you can take this one from Clordatil
clordati: If you the conversion from your 401k to your Roth took place in 2013, then you will pay the taxes when you file your 2013 tax return. You will use IRS Form 8606 to report the conversion. This conversion money does not count against the $5,500 annual cap.
Delia, here is one for you from cdubs
Hi cdubs, Delia Fernandez, CFP here to answer your question. You can't literally place those savings bonds inside of an IRA; you'd have to cash them in and pay the taxes on them, so I recommend you do some investigating first.
cdubs: Go to savingsbonds.gov and check out their savings bonds calculator to figure out what they're worth and whether they are still paying a good interest rate. If so, hold onto them. Bonds may not technically continue their growth mode, but the savings bonds are growing tax deferred at a guaranteed rate, so depending on what they're paying they may well be worth holding onto.
And Travis, here is one from Robin
Robin: You're welcome and we are glad to help. The amount of bonds vs stocks really depends on your risk tolerance. There are many factors that affect when you can retire, spending is just as imporant as the amoung of money you have. Without knowing the other factors I would think 65/35 stocks to bonds, is on the safe side. A way to help protect the bond investments is to select shorter duration bond mutual funds. Remember the stock market can be volitile as well.
I hope this helps.
Delia, here is another question from Cristobal.
Cristobal: I recommend you first consider life insurance for insurance sake (do you need life insurance at all?) before you consider using it as an investment vehicle. This really involves more detailed analysis than can be done in a chat room. You have to consider your whole investment picture and financial plan, where you are taking advantage of other tax-deferred retirement savings vehicles, the strength of the insurance company, etc. I recommend you sit down with a CFP to review your entire picture and not just focus on one type of investment.
Thanks, Delia. Here is a followup for you from Cristobal
Cristobal: You make some good points. But NEVER cancel a life insurance policy until you first determine whether you need life insurance, and if so, you obtain a replacement policy. If you have a cash build up in the policy you can also use that to buy up additional paid life insurance or other options, so please consider seeing a CFP first to review your options.
Pat and Travis, perhaps you can both help answer this multifaceted question from C. Rodgers
C Rodgers, we are looking at your question and will team up to get it answered. An important factor to consider is the degree(s) that you are pursuing, the cost of that education, and the future income that you can anticipate after acquiring that education. And, are you going to pay for this out of pocket or use student loans and grants? You don't want to spend the rest of your working life digging out of student loan debt, which will slow down your ability to save for other goals. More to follow...
C. Rodgers: Another factor to consider is some employers will pay for a percentage of your schooling if you plan to stay with the company long term. This may be another option as you look for ways to fund Grad School. Does your current employer have any program to assist with schooling?
Delia. Here's another question from Mike M.
Hi Mike. The TSP plan has very low fees and a good selection of index-type investment options developed especially for the program, so I really do like it. But often people roll such accounts over to an IRA to obtain a wider range of investment options, so it's up to you. In any case, keep in mind that keeping your costs low puts more money in your pocket over the long run
Delia, a followup for you from Mike M
Mike M: Contributions are important, but so is long-term growth with low costs. The TSP is not the only low-cost option available to you, but it is attractive. Others include low-cost index (and actively managed) funds from Vanguard; exchange-traded funds from a wide range of providers; and even individual stocks and bonds. The possibilities go on and on.
The reason many people transfer an account to a rollover IRA is usually because they want to have it available to them with other investments they may have at a mutual fund or brokerage firm they like, or because they want different investment options. And yes, you could roll this into an IRA at one of those mutual fund or brokerage firms and then have the satisfaction of also contributing to it if you qualify. It's really a matter of personal preference.
Brent. You can take this next question from Tom