Jump-Start Your Retirement Plan, December 2014 - Live Chats, Q&As: Free Advice on Retirement, Investing, Personal Finance -- Kiplinger

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Jump-Start Your Retirement Plan, December 2014

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, December 11, from 9 a.m. to 5 p.m. ET.

    Angieh, Roth contributions are phased out between $114k-$129k for those filing single; $181k-191k for married filing jointly
    Now lets look at the rest of your question. It seems like you are thinking about trying to live off the income. I suggest that you think in terms of a percentage draw every year based on the prior year end values (or an average of the 3 prior year ends to smooth out the bumps). You might consider 3.5 to 4% which would provide what you need. If your income (interest and dividends) doesn't equal that amount, make sales to come up with the difference. You will keep an overall allocation which considers your total investments and then you will divide them between the accounts for tax efficiency (Roth should have your most aggressive investments and be the last money you spend). Don't get too conservative in retirement. I usually suggest that retirees keep 3 years of cash needs ((total needed less social security or other income to be received) X 3) as part of their cash/fixed income allocation. That should make it where you don't have to liquidate in a down market which will make keeping a higher equity allocation palatable.
    I have seen longevity annuities (QLACs) with inflation adjustments, but the adjustments only apply after the annuity payments start. Inflation prior to the first annuity payment will reduce the real value of all of the payments. I'm 62, and would like annuity payments to start when I turn 80, so there is lots of time for black swans. I'd like to know if there are any strategies in purchasing a QLAC that preserve a real initial payment, instead of a nominal payment. My crystal ball could tell me what the inflation rate will be over the next 20 years, but it is cloudy today. I'm aware of an alternative that buys TIPS now and a SPIA later, but that forgoes the mortality credits and therefore costs significantly more. Are there any better strategies?
    Emmyp, I think that couples are well served by visiting with a financial planner before the wedding to discuss investments, wills, powers of attorney, and insurance. Why don't you see if there is an hourly, fee-only (not fee-based) advisor in your area. Start your marriage off by learning to have the money conversation. It will be money well spent.
    Angieh, if the wedding is soon I'd first save for it and not invest those funds. You want to be sure they're there for the big event!
    Bill, built into the QLAC payment is an inflation factor for what that initial payment should be at that future age, so it's not quite right to say it's not inflating now.
    Instead of withdrawing a fixed sum or a fixed %age, such as 4% of assets, I find withdrawals based on IRS life expectancies to be a good rate at which to withdraw,i.e. assets/(life expectancy). What do the experts think about this? I am using this also for someone in a disability trust although the person is less than 65
    Bill, there are 18 years between age 62 and 80 so I think you have plenty of time to make decisions and for any black swans to work themselves out (The S&P has tripled since 2009 so you would have made up your losses and then doubled your original money). Interest rates are so low now that I would at the least wait a couple of years before I pulled the trigger. Also, the older you are when you get the annuity, the higher the payout. I often have clients wait until their 70s and then buy a single premium annuity. Other than that, I am too unfamiliar to comment on the product you are talking about.
    Bill, I also like to consider investing for growth in some stocks for those older years. It may see seem initially risky, but as you point out, one of the biggest risks you're trying to offset is inflation risk.
    Bill, Bobbie makes an excellent point. Waiting until you're older shortens the amount of time the insurance company has to pay you for a lifetime benefit, which means they'll pay you more.
    Bill, my point on the current interest rates is that if you wait until they go up to purchase any one of this kind of products, the payout will be larger.
    Here's a question that's been on my mind... looking to open a Roth IRA for my wife. I personally already have a traditional IRA invested in a Vanguard Retirement Date fund. Does it make sense to invest her IRA also in a target date fund (possible the same Vanguard one?) or should I consider other funds so that our money isn't both in the same basket. For instance, I was looking at the Vanguard Dividend Growth fund. I'd probably also try to diversify with some other funds, too. What are your thoughts?
    Hello! I am 24. I have a good amount saved in my roth ira and companys 401k. I have an addition account with vanguard. I am playing with the idea of getting my masters within the next three years. I have 10+k sitting in a savings. Where should I allocate this?
    Hello, I am currently 30 years old and saving for retirement through a 401k and roth IRA. My company also offers a roth 401k, should i be using this instead of the regular 401k? If so, what would be the tax implications of converting the regular 401k to a roth 401k? I have some losses from a bad stock investment, would that be useful for offsetting potential taxes from a roth 401k conversion?
    If maxed out on 401K/IRA contributions, does it make sense to explore permanent insurance for added income?
    I'm 28 my job doesn't really offer a match on a 401k. Do you think it makes more since to put money into an all stock type account like share builder or to use like a roth IRA or something similar
    I recently acquired an extra $20,000. I have a personal loan at 9.99% for $14,500 outstanding (35 months remaining). Should I pay that off or refinance my house and put the money towards the down payment. If I refinance, that extra money will push me over 20% down and I will no longer have to pay mortgage insurance. With that and the low interest rates now I might save $200/month. If I end up refinancing, I think I can still pay down my personal loan aggressively over the next year 18 months so I won’t be paying it the full term. Thank you!!
    I'm currently 29, pay into a state pension, my student loans are nearly paid off and I have a small mortgage. No CC debt - I feel like I'm missing out on gains made by those in the private sector - is there anything I should be doing?
    I have 25k in a traditional IRA, and a similar amount in a roth IRA. I contributed to them before; but my income now over the IRS limits. Should I convert them into one account and combine with my current 457 and 403b accounts?
    My husband and I will be retiring in 11 years. Our 750K retirement savings is all tax-deferred which includes a 401K, cash balance plan and IRA's. SS will be 4K. Next year we plan on putting 7% in the 401K and 7,650 to an HSA of the 120K we earn. Company contributions bring our annual savings to 30K. We would like to generate 75K in retirement to live on but will also have some lump expenses like a new car occasionally. Are we saving enough money and is there a strategy to help keep us tax efficient and flexible besides doing a roth which currently hurts us at tax time? Your suggestions would be appreciated.
    My wife work for a non-profit with pretty sad pay ($9.25 an hr and 35 hr week) are there any tax deductions or benefit we can use to make this job a little more valuable?
    I'm 27 years old and purchased a home a few years ago with a 30-year, 4% fixed interest rate. I've heard a lot of advice to prepay my mortgage, but that's only the guaranteed equivalent of a 4% return and I bet that I can make more investing over the next 25 years. Is there any reason other than the "guaranteed" part to prepay the mortgage rather than long-term invest that money?
    Advisers: Should I increase my contributions to my 457(b) non-qualified deferred compensation plan (from 6% to 20%- the max for my plan)? Currently: I contribute a max of $51k to retirement (401k pre/post tax + 457b + employer matches) and a backdoor Roth $5500. I only contribute 6% to my 457(b) NQ deferred compensation plan (because company match = 6%)
    My Financial Background: Age 35. Income $250k. With Wife tax bracket = 35% Savings: $190k, Total Retirement (Roth, 401k, 457b): $316k, Total Debt: $107k (0.7% interest, zero point seven percent). I work for a large company which is in the top half of the fortune 500 list.
    Good morning. I am 66 and will be retiring in one month I have a Vanguard traditional IRA of about 240K and a smaller taxable account there of about 80K. I will probably need to start using that money in about 2 or 3 years. My question is this--is there a science to choosing which account to use first and which investments to use in the accounts? If so, is this something I can figure out on my own or do I need expert help?
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