Good morning to you also from DC( ish) Northern VA
Happy (almost) summer everyone! Welcome to June's Jump-Start Your Retirement Plan chat. Let's give everyone a few more minutes to get logged in.
Joining us this morning to take your questions are Frank Boucher, Bonnie Sewell, Robert Schmansky, Mark Coffey and Walt Mozder. Thank you to the advisers for being with us today.
Oops, hit return too fast - maybe as far as it being a good option. Today we have great software that tells us the optimal strategy for your particular household after we gather some facts. Have you had a planner prepare this type of report for you?
The wife cannot claim her regular benefit at age 62 and then later switch to a spousal benefit under her husband's earning record. It's best to test for the optimal lifetime strategy by using one of the many Social Security software packages out there in use by financial planners today.
Hello Louise, I believe you are trying to switch back and forth on a spousal claim. Claiming a spousal benefit prior to your full retirement age will negate your ability to claim your own benefit, so, I think the last part of your strategy will not work. I agree with Bonnie, this involves running a calculation of both of your work history earnings, life expectancy, and needs within the overall financial plan.
Hi Louise! With a $500,000 IRA, I might be tempted into looking to see if it makes more sense to hold off until hubby is 66. Then he can file and suspend and you can both delay until age 70. Live off the IRA in the meantime (don't use all of it) and take withdrawals while you are in a relatively low tax bracket. Wouldn't hurt to have a financial planner run the numbers for you.
Louise, I agree with Bonnie that more facts would be needed and this forum is not the appropriate place to discuss those specifics. You are on the right in seeking out alternatives to claiming benefits at the earliest dates.
Richard, if it makes you feel any better, that's exactly what I have along with a Med D plan.
Additionally, Louise, your husband would get his benefit if he applied prior to full retirement age, not the spousal "half." I encourage you to sit down with someone to go over the spousal benefit options. There may be more depending on your situation.
Hi Richard - It would seem that you would be well covered for most medical expenses with Medicare Parts A & B, and a Medicare Supplemental policy. Watch out for long term care costs though. Those are typically NOT covered by Medicare, except in certain circumstances. You may want to check into a long term care policy or make other arrangements in the event of cognitive decline or other chronic health issues.
One significant healthcare expense I see with clients shortly after they retire is dental expenses in the range of $10-$20,000 at a time. In addition, nursing home expenses can be significant and few of those expenses are covered by these plans.
While there are some advantages to a corporate trustee, I would favor an individual but this is an emotional answer and you're asking that perhaps but also a legal question. Did the attorney you are paying for the estate plan offer any guidance?
Mike, you can always name an individual (a trusted family member, for example) as the initial trust, and then name a corporate trustee as the successor trustee if the individual is unable to serve in that capacity. An alternative is to name an individual as a co-trustee with a corporate trustee. An attorney could walk you through the pros and cons.
Mike, I believe that a corporate trustee is the best way to go but I would prefer a local bank that offers trust services. This is a very personal issue and you would probably feel better working with a local trust officer who understands your situation. Your attorney should be connected to such resources.
Mike, a corporate trustee can be a good alternative to an individual trustee. You may consider naming the individual as primary and corporate as secondary trustee since the individual is the same age as you. Naturally, you will want to meet with an attorney to confirm your alternatives.
You can own both a Roth IRA and a SEP IRA. If your income only permits you to contribute to a SEP IRA, then continue your savings there and let the Roth grow without ongoing contributions. You cannot move your Roth account into the SEP however. Two different money types. Hope this helps.
Chris, you can have both. You've asked if you can move savings into a SEP? SEPs are for self - employed folks adding a portion of their earnings (vs. savings)
which you did not indicate - are you self employed?
Chris, you can have a Roth and a SEP. You can contribute to both. A SEP can be a great tool to save to in addition to a Roth. Additionally, if you are maxing out that and self-employed you can start your own 401(k) which gives more room to save than a SEP. You can not move the Roth to a SEP. You can generally not move contributory IRAs to a workplace plan.
Chris, You are able to have both types of IRAs. However, there are different contribution limits and restrictions for each type of retirement plan. The answer will depend on your AGI and business income.
Chris, you can have both. A SEP is only available to self employed people or people who work for an employer that sponsors one. If you don't qualify for and you are not covered by an employer plan, you can make deductible contributions to a traditional IRA..
Joanne, sorry about the layoff. This is one of those "it depends" questions. I suggest you spend some time with a fee only financial planner to help you.
Good morning Joanne, lots of things to consider: 1) would you like to manage the lump sum payout of pay to have a professional manage it? 2) what are your fixed spending needs (sometimes people take the annuity option to make their mortgage payment) 3) do you understand the options in terms of the annuity and whether it has survivor options whereas a lump sum gets a beneficiary determined by you. There's more but I agree with Frank, context matters on a big decision like this and that would be inside a plan.
Joanne - that decision is not one to take lightly. I would suggest that you seek some advice because calculating the value of the pension in today's dollars depends on what interest rate you assume and your life expectancy. It also depends on whether you have a spouse that would depend on the income as well.
Good morning Joanne. It’s a very personal decision. In general, I find if you have a significant period of time prior to starting the income stream and you are comfortable with market risk, then it is possible to grow a lump sum over long periods that could be in your favor. Many have concerns about their pension as well to where this reduces the risk it may not pass as much. Again, in general though I advise this for those that have time and comfort with growing this. If you need money in the next 5-10 years, it may not be as beneficial (ignoring concerns about the pension funding). Like others, I recommend an overall plan.
Joanne, I agree with the others comments and suggest you read over the various implications to your financial planning when you are laid off from a job in this brochure that can be found on the Financial Planning Association website:
Hi Sharon, thanks for your question. A version of that question is pretty common - based on an article, someone considers a new investing scheme. We do a 3 prong risk profile on clients - risk tolerance (tummy test), risk capacity (how much could be lost before goals are impacted) and risk required (what risk must we assume to overcome taxes, inflation, and fees?) - then we put together an investment plan for the individual or family based on goals, resources, timeline, and risk profile.
Sharon, I don’t believe in rules of thumb when it comes to asset allocation. People have different income needs, thoughts on the future, comfort with growth, etc. Try to tie your asset allocation to your income needs. Money needed in the next 5 years should be available in conservative investments.
Sharon there has been some research recently giving that idea some merit, but it's a bold idea that is still being discussed in the financial press. Generally the investment allocation decision depends on other factors like other pension income, Social Security election strategies, risk tolerance, life expectancy, etc. Hard to answer that in a vacuum.