David and Robert, it is interesting that I have retiring clients that want to stay aggressively invested. But when we do the planning work, we often see that is the only thing that could create a situation where they won't reach their goals. And reaching your goals (rather than building the biggest pile of money) is the point, isn't it? But it can be hard to back down especially when being an aggressive investor is what got you where you are. I tell people to think about it this way: you are playing in a football game and your team has the ball and the lead. There are 20 seconds left in the game. Will you pass or take a knee?
Marvin, now to part two of your question about gold bullion as an inflation hedge. Maybe another advisor can jump in here, as I haven't looked at gold specifically (other asset classes that can serve as inflation hedges: stocks in general, real estate, commodities, and TIPS). Can another advisor point Marvin to some resources here?
Marvin, I think gold is highly overrated as an inflation hedge. Perhaps you should consider a broad based commodities fund instead.
Harry: I would suggest visiting Vanguard.com and exploring "insights" tab. You can find helpful calculators and information about withdrawing money from a portfolio (withdrawal rate). However, if you take all of your sources of income and add up your expenses, you will get a net number. If you need $ from the portfolio to pay those expense.... what is that number? Take that number and divide by your investable asset balance. If you less than 4-5%, you should be ok.
CP, I think you should do both. The money you save when you are young will have so much time to grow. Continue to contribute the 4% to your employer plan (for other readers....at least enough to capture an employer match) and use any remaining money to retire your student loans. Set a goal for paying off the loan within 5-10 years even if this might mean delaying other things like a house purchase or increased standard of living. Indeed, keep living like a student for the next couple of years (which usually means "on the cheap") and get that thing paid off. It is so sad when I have a 50 something come into the office who still has student loan debt hanging over their heads.
KC Both IRA and annuities provide ways to defer taxes. I am not sure why anyone will however buy an annuity within an IRA as there is no double tax break. Depending on your particular contract and how long you had it for, you may have some surrender charges etc. You may however be able to exchange the funds for a money market fund and hold it until the back end charges have lapsed OR rollover the funds in an IRA without any back end charges depending on how long you had it. Check with the product carrier to see if this is possible . See what your options are
CP, I love Roths but right now, stay with the employer plan if you will get the match in a couple of months and concentrate on paying down the debt.
David, I definitely think a planning session with a fee only advisor would help make this decision. And you certainly did the right thing by hanging tight when the market dropped. But the market has been up for years so transitioning to a more conservative portfolio might be just the thing to start right now under the "don't get greedy" theory of life.
Nate: longevity is the issue, by waiting from FRA until 70, you increase your benefit by 32%. The crossover of taking at 62 vs. 70 is about 15-17 years. So, if you feel that you will live into your 90s then research suggests that waiting will provide a higher total payment than receiving early. However, you must factor in your health, your cash flow needs. For example, do you have other sources of income where you will not sell assets in your IRA and incur taxes.. Finally,i
s your family health history strong where you feel 85 and older is a real possibility
Hi AR. You need to run tax projections with tax software to answer this question. Roth conversions don't incur tax penalties (if you're thinking of the pre-59 1/2 penalty on IRA distributions), but they can certainly add to taxable income. However, given your low earned income, it is possible you'll be able to convert some IRA dollars in a zero tax bracket (or low tax bracket), but you have to run the numbers to figure that out. The good news is that if you overshoot the conversion, you have a chance to undo all or part of it via a recharacterization.
Ronald, thank you , Generally you can go back three years to amend your taxes for a refund, However A wash sale losses are disallowed for the year you had that transaction. The wash sale rule generally limits losses incurred within 30 days of an acquisition of the same or substantially identical stocks or securities. However, there is an exception for the acquisition of a stock or security by a tax-free exchange, by way of inheritance, or through a gift as this does not invoke the
Robin -- It actually looks like Deb answered that not long ago, let us know if you have a follow up: I am a nervous Nellie when it comes to investing for retirees. Having said that, it is my opinion that 80% equities and 20% fixed income is too aggressive for my tastes. There a a million ways to design a portfolio, but at age 74, that much in the market would really hurt if we have another significant drop. There is no harm in revisiting this with her adviser.
Hi Bob. Well none of us are lawyers here, but both of those numbers seem way off the mark: one too high, one too low! If you want a living trust, go to a reputable estate planning attorney in your community -- get referrals from your CPA, any other attorneys you know, any other professionals you know. Look at their education, experience, credentials, community involvement, involvement with their professional organizations. A good estate attorney can talk to you about your estate goals, and whether a living trust best serves them.
kgm, I often talk to clients about the "right" answer vs. the "good" answer. Many times keeping a mortgage can be the technically right answer as you do get a tax deduction for the interest. But that tax advantage will diminish over time as most of the payment becomes principle instead of interest. Indeed, depending on what your state taxes are and how many other deductions you have, you might get to the point that you do not itemize well before the mortgage is finally paid off. So the tax advantage disappears. Now let's talk about the good answer. It sounds to me like you would sleep much better at night if the mortgage was paid off. And, in my experience, clients with a paid off mortgage are much more likely to weather market downturns with less anxiety. Again, this is a situation where a brief meeting with a fee only planner could help you come to the right answer for you. At the very least, I would strongly consider paying off the mortgage with current money in taxable accounts when the tax advantage is no longer an issue. Things to consider: would you have to pay much tax to raise the cash (re gains on investments?), is the taxable account currently in cash and making almost no money (which would make paying the mortgage off more attractive); could you pay off the mortgage and still have cash reserves for emergencies (knowing you still have retirement accounts you could tap if needed)?
Bob, can you clarify your question about a service for "managing cash"?
Lloyd, even with no children, saving that ROTH until the end still means more net money over the long term. I promise:-)
Go Lloyd! The proof is in the math.
Hi BC. I don't have any experience with private equity: any advisors on the call who can address his question?
BC, I think private equity is highly overrated and would keep it simple. If you are someone with an enormous amount of money you may consider it but then you should really have a personal relationship with a planner.