Daniel, I like to say that if we've discovered you've saved too much, we can always adjust down. Saving more earlier is a great strategy.
Advisors, don't you love it when client come in and they have saved so much you can tell them to feel at ease about spending more? It doesn't happen often but it is a joy when it does. It is often hard for such clients to spend. I had a client recently who was wealthy by any standard and she was fretting over buying new carpet.
Not a bad problem to have at all, Bobbie!
Yes, I had a client who had retired and had a bundle of money and wanted a new car. His was 15 years old with 200,000 or so miles on it. I told him he could actually afford to lease a new car every year for the rest of his life if he wanted to. He was very relieved!
Kittymomma, when you convert funds from a traditional IRA to a ROTH, a new 5 year clock starts on THOSE funds. You can keep them in the same account but you have take this into consideration if you take distributions. But if you don't plan on taking distributions within 5 years, no problem.
Hi Kitty: 1. No you do not have to keep separate Roth IRAs. It's is simpler to just have one Roth IRA account. 2. I suggest simplifying and moving the Roth into one account and at the same custodian.
Kitty, all great suggestions. There are two five year rules that apply: 5 years from your FIRST Roth IRA contribution, and also 5 years from your FIRST Roth IRA conversion. Does not matter how many accounts you have - I agree with my colleagues, however, that consolidating them with one custodian makes sense.
Kitty: 3. mutual funds, ETFs, or stocks can be kept in either a Roth or traditional IRA or taxable account. Sometimes it's recommended that bond funds be kept in the IRAs due to the income they generate. The stocks or stock mutual funds/ETFs can go into the taxable account. Of course if the taxable account holds tax exempt bond funds then this this is ok. Whether to use tax exempt bond funds depends on your income level.
Kitty, I usually put some of my client's most aggressive investments into the ROTH (emerging markets, small or mid cap funds). These are likely to have the most capital gain over a long holding period and if they are in a ROTH, all that gain will be tax free
Mary, good question. There are some 0% credit cards with no initial fee where that rate lasts for 15 months, so you could try that. In the meantime it sounds like you're putting too much into retirement accounts and need to have more going towards savings.
Mary, creating savings from current income is a better strategy than borrowing against future income. You would be safe reducing your contribution for a while (yes, your tax withholding will go up) in order to cover this expense and then to build your cushion back up. 3 to 6 months of expenses in boring old cash is a good strategy at all times. And, if it's needed for an emergency, use it, then commit to building it back up again.
Mary, whatever your plan, it needs to include paying off the unexpected expense AND then saving enough in an emergency fund to avoid this in the future. IF you think you can do that in a year with a VERY low interest or no interest card, that could be a good option. If you can't find such a card, you might consider borrowing from your 401K if the plan allows (usually you will be paying yourself about 4% in interest). CAUTION: If you leave your job before the loan is repaid, any remaining loan amount will be treated as a distribution and there will be a 10% early withdrawal penalty in addition to income taxes due if you are not 59.5.
Mary, so you may well need to cut back on your aggressive retirement savings until you can find the "sweet spot" of saving for emergencies + retirement.
BTW Mary, congratulations on paying off the credit card debt. Two thumbs up.
Mary: If you own a home, you could try opening a HELOC (home equity line of credit). Then pay off this expense. Just remember when you borrow your home isn't an ATM machine. Borrowing on it should be carefully considered and not become a habit. Kathy
Cecil, does your wife not work because you have children at home? I love having the house paid off by the time you retire, but I'm also wondering if you have sufficient insurance to protect your family.
Cecil, having a paid off home by the time you retire is a fantastic goal. I hate it when I see clients who at 65 just refinanced for another 30 years. That said, you have plenty of time until retirement. I suggest that you DO fund a spousal IRA if you could eliminate that additional house payment and still have the house paid off at retirement.
Also, Cecil, Delia makes a good point. You are doing a fantastic job on your finances but remember that good planning also includes risk management and estate planning.
Cecil, at age 48 with 10 years left on a 15 year mortgage, you will have that mortgage paid off well before retirement age (if you are taking the traditional route of stopping at age 65, which may or may not be true). If this is your forever home, there's no need to rush the payments. Then, you can fund other goals (including saving outside of retirement plans). A home is not really an asset, in the sense that you can use it to fund your needs. But, a free and clear home is a good thing to have once your income stops!
Cecil: Sounds as though your mortgage will be paid off by age 58, even if you don't pay extra on it. At your age you can put $5500 into a Roth IRA per year. If your spouse does not work you could open a Roth and contribute to that. If you can afford it try maxing out the 401k.
Cecil, when does the term policy end?
Cecil, it sounds like you are really good at looking ahead. I suggest that working through the numbers in a one time engagement with a planner would be very valuable for you.
Okay, that seems in line with your plan. Good job.
Jenny, so the HSA does not offer an investment option?
Yes, Jenny, most plans offer such investment options once the amount it in the HSA reaches a certain level.
Keep in mind that you can make withdrawals for authorized medical expenses only. So if you have those expenses it might certainly be worthwhile.
Jenny, you can transfer (one time) from a 401k to an HSA, but not the reverse. But remember that you don't have to spend the money in your HSA every year - it's sort of a retirement plan for your medical expenses in the future. Although it's not earning much, at least it's accumulating and may come in really handy some day.
Jenny, yes, I should have clarified that we're not talking about a direct transfer from your HSA to your 401k, but rather a tax-free withdrawal to free up cash to fund the 401k.
Clifton I love the fact that you started a 529 plan. Is is a directly sold plan or is a broker involved? There is a huge difference in ongoing fees.