My thanks to Kiplinger, their readers, and my fellow NAPFA advisors for a wonderful experience. What a great forum for general advice. I'll see you next time.
Thanks to the advisers who were with us for the past couple of hours!
With us for the home stretch are Therese Govern, Frank Boucher, Heidi Davis and Scott Draper.
@Almost - I'm comfortable with that equity exposure as long as you can sleep OK when the markets get unpleasant.
@Hassan Dannawi - can you clarify your question?
Thanks to everyone for their questions and for Kiplinger's/NAPFA for putting this together. Signing off.
Hi Bill. You've got it right that you have to wait until Soc Sec full retirement age to do this, but I don't know the timing of filing the actual paperwork. Anybody else?
Bill, no don't wait until your birthday. File several months before. For the file and suspend option you may need to go into your SS office since this is not standard.
Bill, consider filing 3 months in advance of when you'd like your first payment to arrive.
@Almost: You could look at reducing your expenses more radically. Brainstorm about what you might be willing to do to spend the time you want with those you love. Some have moved to other states or countries in retirement to reduce expenses. There has been an explosion of "Tiny Houses" (at least on the internet). Be radical, brainstorm how you could make $, spend less, how you could work less, what if you stopped working for a while & then went back later, etc. If it really matters, put every last possible idea on the table first. Then begin whittling down. Then have a planner help you spot potential pitfalls you may not see and help with the math.
Murph: An alternative to CDs would be short-term government or corporate bonds. I wouldn't tie up your money too far out with the low interest rate environment. The savings beyond the emergency fund should probably be invested for longer-term goals.
Murph, I feel your pain! There's very little return on funds that need to be very accessible. A CD ladder sounds like a fine plan; you may have regret should rates rise dramatically during the period, but who knows if they will or won't. A simpler solution is a widely diversified bond fund with a fairly short duration. You may see paper losses as rates rise, which could be tough for you. so proceed cautiously.
Tisha: Assuming that you are making the maximum contribution to your 401(k), I don't see a lot that you can do to lower your taxes. Are you itemizing your deductions? If so, you should be able to get some benefit from state taxes, charitable deductions, etc.
Hi Tisha. Deferring into the 401(k) is smart while you have access to it. When you don't, you may be eligible to make deductible IRA contributions (depends on your filing status).
'Hi Tisha, If you're concerned with losing your job, first focus on your emergency savings. You may want to build that up to a level where you feel more secure during this transition period.
Maxwell - there are a lot of variables but for most people in their 60's, the immediate deduction that comes with a traditional is more valuable than the tax free benefit of the roth.
Hi Maxwell. The math doesn't sound right here. Contributing to a Roth IRA shouldn't result in an increase in your taxes as compared to simply not contributing to a Roth IRA. Are you talking about a Roth conversion instead?
Maxwell: Opening a Roth IRA is a good idea because it allows future flexibility in where you draw your retirement income from. I don't understand how a Roth contribution would increase your taxes.
Hi Maxwell, a Roth is opened within a full tax strategy of balancing your tax exempt, tax deferred, and taxable savings. If your marginal tax rate's are the same post and pre retirement, then a Roth may make sense but you need to analyze how long your funds need to be in the Roth to cover the upfront tax cost.
Maxwell, the advantage of the Roth is that it helps to smooth out your income in retirement so you're able to better manage your marginal tax brackets.
Polaris23: It sounds like you are saving enough each year to make the maximum contribution to your Roth 401(k) and grow a sizable taxable investment account. I would do some longer-term planning in regards to how much you need for retirement vs. your child's education in order to determine the appropriate mix.
Polaris - you said you are saving $39,000. Could you put some of that into the 529 and increase it? I believe y should use your retirement accounts for retirement. You could use your after tax savings to supplement your college expenses when they occur. Not sure if I answered your question but I hope this helps.
Maxwell, the issue is that the future in your retirement is unpredictable. So diversifying your investments based on how they are taxed is a common strategy for seniors. But, of course, there is an analysis that needs to be done to look at the cost compared to the benefit.
Mia, - I have retired Navy Commander sitting next to me right now and she says, YES.
Polaris, most financial planners are going to tell you to prioritize retirement funding over college funding, assuming you can't fully fund both easily. By foregoing the Roth wrapper for all the retirement savings, and then planning to spend the int/div from the retirement nest egg during the college years, you're injuring the retirement nest egg's ability to do it's thing: compounding returns, tax-deferred.
Mia: It depends on how much your military pension is and your health and lifestyle.
Mia The rule of thumb on emergency funds is three to six months of living expenses but.... you really need to consider all of your sources of income. Do you have a job? If you lost it would that create a financial hardship. Most military retirees have another source of income. If that income was interrupted, would you still be able to pay all of yr bill and do the things you want to do? That's the case for emergency funds.
retiresoon: It looks like you do need to work with a CFP in order to put together a formal retirement plan and see what is possible. Decisions about investing would also be part of the planning process.
Mia, yes, there's no question that you need an emergency fund. The amount depends on your annual retirement expenses, uncertainty in your life and the variability of other income sources. Very roughly start by considering 3 to 6 months. Life is unpredictable. You may need additional funds beyond your retirement funds from time to time to cover unexpected costs.
Mia, fair question as the primary purpose of an emergency fund is to pay the bills should somebody lose their job. That being said, saving for a rainy day is important for everyone, even retirees. Surprises happen!