Lauren: Absolutely get rid of the credit card debt. Depending on the loan interest rates, I would look at also thinking about a Roth IRA. Roth IRAs are nice because they can be used as a secondary savings vehicle that you can withdraw your contributions if necessary (contributions, not growth) without penalty or tax. If it turns out you didn't need it, then you have a tax-free retirement savings vehicle. If the loan rates are low, consider that there are many ways to pay them back and over the next 30-40 years you will gain more by investing than paying back the loans too quickly. If you have any private, variable, or high rate loans however, I would certainly try to have a game plan for paying those down and back first. The reality is though that you're likely to be in a spot over the next several years to need liquidity to take advantage of opportunities for your career. Better to have cash to take advantage of those than trying to maximize your debt pay-off.
MP Filing and suspending is a strategy that married couples use to maximize their combined Social Security benefits. You said you were single. Unless I am missing something (entirely possible) I don't see a reason why you would want to do this. File when you are ready and collect your benefits. I see where KIP just posted an article. Give it a read.
Mattie: Your plan may allow you to convert money from the pre-tax 401(k) to the Roth 401(k). It's relatively new, and plans don't have to allow it. You would pay income tax on the amount converted if your plan does let you.
MP: Here's a strategy to file and suspend. http://www.kiplinger.com/article/retirement/T051-C000-S004-social-security-offers-lump-sum-payouts.html
A big thank you to the NAPFA planners who joined us this morning!
Joining us for these next two hours are Kelly McCauley, Michael Gibney, Deborah Frazier, Phil Hogg and Katherine Holden. Welcome!
Breaking the IRA into two parts and taking 72t withdrawals from one while leaving the other alone is smart. Getting below the SIPC limit is a non issue as far as I am concerned.
As always, you can find a fee-only personal finance adviser near you on www.NAPFA.org.
Samy, not seeing it in here. Can you repost?
Hello Sandy, I'm not sure what your specific question is, but I have a few comments. When you mention that you will take your Social Security at 66 and your husband will then get spousal benefits, have you thought about possibly "filing and suspending" at that age, which will still allow your husband to take the spousal benefit, but will let your benefit grow at 8% for each year you wait to start -- up to age 70. The reason that this is so attractive is that the annuity payment we can get from Soc. Sec. is the most generous annuity available, and it has inflation-protection, which can be really important if we live a long life. If your pension will not be indexed, this could be especially useful to provide you with some inflation protection. Having some of your savings invested in equities should also give you some asset growth, and therefore some help with inflation. You need to take a look at what you expect your living expenses to be in retirement, and how much coverage you have for potential health and long-term care expenses and then look at how to allocate your assets with that info in front of you.
Just a reminder that we have a number of questions in the queue, and we are taking them as they are received. If you don't see yours pop up immediately, don't worry!
Unicorn: It doesn't eliminate it. If you rollover 401k assets to IRA, and they are pre-tax, your Roth Conversion will no longer be completely tax free. Your tax liability will be calculated using the pro-rata rule. there are no other conversion vehicles.
Hi Mattie: Yes- An individual 401(k) plan can be created in a pre-tax of Roth format. You can contribute for the employee portion up to $17,500 total (between pre-tax and Roth). If you contact custodians, they can point you in the direction for the correct paperwork to set-up a Roth I401(k)
Yup, we have you in there Samy!
Sandy. Keep in mind that pension income is taxed at ordinary income tax rates, so if there is an opportunity to get money form other sources, you may consider this. By rolling all to an IRA, you can take distributions on your own terms. However, if the steady income for life is appealing/comforting to you, then by all means, go with the annuity
Marc, I must admit that I do not know the answer to this, but have reached out to the other advisors for their help: Stay tuned!
Nick, your credit score will have all to do with favorable rates for a loan. Regarding the credit card, I imagine how long you have had a balance, your payment history and any missed payments would impact this more than making a payment before applying for a loan. The best way is to check with whatever lender you are working with and ask. Good luck
Samy, a deferred comp plan is just that, deferred comp. You are pushing your tax liability down the road. Keep in mind that most 457b cannot be rolled over to an IRA. It may be wise to contribute up to the match, and then run an analysis on what future tax liabilities may be for higher contributions