Jump-Start Your Retirement Plan, February 2015
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, February, 19, from 9 a.m. to 5 p.m. ET.
3rd & 7 37yd
3rd & 7 37yd
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@ kakarn - You're right that dividends are not everything. But one argument for them is that the company may not make the best choices with that cash, as we've seen - they could use to buy businesses they know nothing about, buy back their stock at all time highs, or may just build up a huge cash position that's not earning anything. Sometimes returning it to shareholders is the best option.
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Hi ginnyj: First of all, you'll need to set aside money to pay your income taxes on that $35K. CD ladders have fallen out of favor because they just don't pay. Your Dodge & Cox fund may be higher than your current risk tolerance. I would suggest you work with a fee-only financial planner because you have several options here. Short-term bond funds can provide you with income if you need it and a safer place to keep your two-years worth of income needs.
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Thanks for the advise everybody. Had not thought about the TAX!! Smh 600k is sum of both our 401ks . Have been thinking one of us taking SS now also. Have procrastinated finding a fee only planner part of it is probably wondering what the cost would be and finding someone that’s not just interested in investing but working with low income budget.
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Ginny J, it does seem like you have a lot in equities. I often discover when I run the numbers that clients have a BETTER chance of funding all their goals if they use more conservative investments (unless one of the goals I leaving a big sum to heirs). You could work it through with a planner to see just what kind of risk you need to take and what the subsequent target return would be. Laddered CDs are an option and would help hedge against rising interest rates. But so would laddered bonds which might return more but have individual bond risk. I suggest you diversify any fixed income allocation between all types of investments to include CDs, short-term bond funds, mid-term funds, inflation protected, GNMA funds (Vanguard has a great one), high yield bonds or bank notes, and even foreign bonds.
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Not Enough Cash Flow - XY Planning Network advisors don't have income or asset minimums and many are also either current NAPFA members or applying to become members. SO that might be a place to look too. (Disclosure:
I'm a member of both NAPFA and XY Planning Network) -
nzweimer, I'm not sure if I understand your question but a deferred annuity in an IRA just doesn't make much sense in most cases. Why pay the usually high costs of annuities to get tax deferral when you are already in a vehicle (IRA) that gives you tax deferral? Why not use a low cost, discount brokerage and invest in low cost index funds or ETFs? Most active managers do not beat the indexes over time and the index investment expenses are much lower.
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Thanks to all of the NAPFA advisers who fielded questions for the past two hours. You can find a fee-only personal finance adviser near you at .
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@wreckon95 - After having a properly drafted special needs trust, the next thing I'd be thinking about is your own estate plans. Having your assets properly titled and having correct beneficiary designations goes a long way when (30 years from now) you are not in the picture.
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@wreckon95: Great job getting the special needs trust in place! Some thoughts that come to my mind although I am not a specialist at special needs planning are: Do you have appropriate legal docs in place regarding who will be her back-up guardian(s) if you (and your spouse, if applicable) become incapacitated or pass away? Is the trust funded? Do you have adequate provisions for back-up trustees? Is the whole family aware and onboard with whatever is in the will (thereby, hopefully, avoiding any challenges to the will)?
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Not enough cash...how much you pay will depend on several things: what market you are in (an advisor typically has lower costs in a smaller community), what the advisor's experience is, what their overhead is (many advisors work virtually now so they don't have to have a fancy office with leather chairs). I would like the other advisors to comment but I would say typical costs would be $150-350/hour with some fringe on either end. Some advisors offer something like a quick start plan for a fixed fee....maybe 600-900. You would be surprised at how much you can get done in a short period of time, especially if you do a good job of providing information to the advisor in an organized way.
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@NOT ENOUGH CASH FLOW - I'll jump in here - costs will vary greatly by advisor and geography. I'd recommend checking out some of the networks mentioned, find a couple of names in your area and send some emails or make some calls. Finding someone that is a good match for your personality is very important.
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@not enough cash: XYPN lists fee ranges on their advisor search results. You can also look up the form ADV for any planner who is a Registered Investment Advisor. It's a long disclosure document but Item 5 should disclose their fee ranges.
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Question: Is there any way to determine the hit to my SS by retiring before I have 35 years of earnings? The SS statement I get assumes I will keep making the max end of SS taxable earnings and projects my monthly on that and says, at age 70 I will get $3,381 per month. In reality, we currently plan to retire in 5 years when I am 55 so I will miss out on 11 years of paying in that their calculation is assuming will occur. We will save $124K per year between now and then and will end up with roughly 2 mil at 55 if we continue to make at least 7% return. We also have hubby's military pension and are insured by Tricare Prime. While I doubt we will run out of money, I'm concerned if hubby dies first (we elected no survivor benefits), I want to ensure I can get the most out of SS as I assume I will outlive him (he is only 3 years older but my family has some long lifers!). Any help is greatly appreciated.
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Public Pensions and SS article states: The windfall provision does not apply to public pensioners who have 30 years or more of substantial earnings under Social Security. And Social Security benefits are not reduced for those with military pensions. Thank goodnesss. The earlier comment scared me because we definitely count on hubby's roughly $3.5k gross monthly military pension.
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The cost of fee-only advisors.....many people might balk at paying several hundred dollars an hour. But remember, for that you will get unbiased advice based on what is best for you. For instance, you might be able to go to an advisor to get investment recommendations and the cost might be well below $2000 with low ongoing fees on the recommended investments. Compare that with someone who sells a commissioned product. They may either have high front end loads/sale's charges (for instance 5.75% on A shares which would cost you $5750 on $100000 right off the bat) AND/OR high ongoing fees (higher for B or C shares) and possibly a deferred sales charge if you sell before a certain time limit (B Shares). You are looking for value and transparency.
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Calculators
Social Security delivers a broad range of services online at socialsecurity.gov. We have a proud history of protecting the integrity of our programs and service to the public. -
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Hi, all! I'm Stacy with Kiplinger.com. @AlexaH, you might also want to check out these strategies married couples can use to maximize Social Security benefits.
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Dave B, I think your wife has to be full retirement age before she can collect a spousal benefit (I am looking but cannot find a definitive answer) Also, as her benefit is going to be higher, you might consider using other assets to fund your needs until she is age 70 when her benefit will be much larger.
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@alexa I would call SSA (be prepared to hold for 20-30 minutes. They can let you know which calculator to use. I know that there is one and I think that there's a Primary Insurance Amount (PIA) worksheet that would do it too but I'm not finding it based on a quick web search. Here is a link to their detailed calculator and the estimator
Social Security Detailed Calculator
Social Security delivers a broad range of services online at socialsecurity.gov. We have a proud history of protecting the integrity of our programs and service to the public. -
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@DaveB: If your wife goes in and claims Social Security Benefits before her Full Retirement Age (FRA) (probably age 66+/-), SSA will look at the spousal vs her own benefit and give the higher one and that will be that. She cannot change later.
If she waits until she reaches FRA, she can tell SSA that she voluntarily wants to claim ONLY her lower spousal benefit for now. She could then bump up to her own maximum benefit at age 70 -
Thank you Maryan, Michael, and Bobbie. I am aware that one must be extremely careful regarding using trusts to protect inherited IRAs. My problem is it has been very hard for me to find an Estate Attorney who really knows this field. Also the language used in the trust must adhere to very strict guidelines of the IRS. I have found several banks and brokerage firms that have these relatively new "Trusteed IRAs" that have shown me approval letters from the IRS. They have also been recently discussed in the Wall Street Journal Weekend Investor section. Its my understanding that not only do these provide similar features as normal revocable trusts for beneficiaries, they also protect against the IRA funds being taken in case of beneficiary bankruptcy, rules for which were recently changed for ordinary inherited IRAs by the Supreme Court.
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I would like you take on moving all my retirement assets to one company. I currently have assets split between Fidelity and Vanguard and, for simplicity, would like to consolidate in one company. I understand market risks, but am concerned about company risks...all eggs in one basket. Your input will be appreciated.
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@DaveB, you can read more about the spousal Social Security benefits in this story. Hope it helps!
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Hi, @SMD. Kiplinger actually just discussed this topic in the March issue of the magazine:
Consolidate Individual Retirement Accounts-Kiplinger
www.kiplinger.comKeeping your retirement savings with just one brokerage can cost you less now and simplify cashing out later. -
@SMD - I'm a big fan of consolidating whenever possible/practical. Most custodians (Fidelity and Vanguard included) are covered by SIPC insurance. You can read about Vanguard's coverage at:
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@Bobbie- Yes, there are several layers of weird technical details behind how SS actually thinks about what they are doing but the end result is that if she does it before FRA, she gets whichever the $ amount of whichever benefit is higher that time and is considered to have claimed/be claiming both benefits.
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Julie, you will be taxed on a conversion per a pro rata portion of your account value vs. your non-deductible contributions. For instance, let's say you put $50K in deductible contributions in an IRA. Then you put $10K in non-deductible contributions in an IRA (does NOT matter if it is a separate IRA as you have to consider all IRAs when making this calculation). The IRA is now worth 75K. You want to convert $5K. Of that 10/75 X 5K or 666 will not be taxed but the rest will.
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@ Julie C - Only the taxable amount (amount above your non-deductible contributions) will be subject to tax. Be aware that Roth conversions look at ALL IRAs as one when determining taxable/non-taxable amounts. Converting one IRA and only considering that IRA's "basis" is incorrect and might lead to a tax surprise.
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