Cheryl I am assuming that you will receive a 1099, You will need to pay some estimated taxes to avoid any penalty. A tax deferred account such as a SEP or a Simple should be on your radar. The federal landscape has changed for high income tax payers . You may very well end up in somewhere between the 35 and 39.6 % bracket. You may also have issues with capital gains on your investments. The best thing to do is to meet with your TAX ADVISER immediately. Project a list of your expenses (accelerate if possible) and have him/her run a projection. Don't go alone on this one Cheryl. If you have not taken SS benefits you may want to delay it a little speak to you advisor
Lloyd, under almost any assumptions. Even if tax rates increase, that only makes the Tax free status of Roth earnings more valuable over the long term.
MYD, while I suppose there are some instances where a variable annuity can make sense you are SO SMART to be concerned about the fees which often eat into the returns so substantially than any tax advantages are negated. With tax rates as low as the probably will be in your lifetime, I think paying the tax, putting the money in a taxable account, and choosing tax smart investments (concentrate on capital gains or qualified dividends...both receive tax favored rates) is the best idea.
We see you now, Patricia!
Hi Bob. Sounds like you are planning to delay drawing Soc Sec retirement benefits until age 70; smart move. The amount of your Soc Sec retirement benefit that is taxable depends on your other income (basically, your AGI, which includes the interest/dividends/capital gains from your stocks and bonds, plus tax-exempt interest plus 1/2 of your Soc Sec benefit, plus some more obscure things). If that calc is below $32,000 for a married filing joint couple, none of the Soc Sec benefit is taxed. Above that threshold, depending, some of it is taxed, but no more than 85% of your benefit will ever be subject to taxation.
Carla, you cannot rollover your 403b unless you have left your current JOB. What you should do if you are currently employed with the firm, is to look at the investments that they offered , and then exchange the funds base on your risk level needs age etc into the new funds. I am not sure what your objective is, but putting everything into yield funds may expose you to interest rate risk, credit risk etc. Most company has a soft ware tool on their website to help them with the allocation try that . If you have left the company then you can do the rollover
MYD, another strategy that might be helpful for you. Do you currently have an IRA? If not (or if you can roll all of those assets into a current employer plan), you could make an annual non-deductible contribution to a traditional IRA (no income limits on non-deductible contributions) and then convert that immediately to a ROTH (no income limits on conversions even if there are income limits on contributions). Since the amount originally contributed to the traditional IRA was non-deductible, there would be no tax on the conversion. CAUTION: This does not work like this IF there are already deductible contributions in any traditional IRA that you hold in any account. So even if you didn't get a current tax advantage, the money in the ROTH would grow tax free. Given your age, this would be a great idea for you.
Carol welcome before you decide what company to look for You need to do a ask yourself some questions. 1. What am I investing this money for, what is my level of risk (would I be able to sleep at night), Do I have an emergence set up. Once you have done that then you can start to look in to companies such as Vanguard , Trowe , Fidelty etc. I suggest you seek the advice of a FEE only planner to guide you . You will also need to look that your IRA investment to make sure that you don't have too much overlapping in the funds you select.
Dave, do these amounts inflate over time and if so, at what rate? If you did take a lump sum, how much would it be? If you know these things, any planner can help you determine what return you would have to earn if you rolled these amounts to an IRA lump sum rather than keeping the defined benefit streams of income. And thanks for the "thanks." NAPFA planners are very interested in what is best for YOU and we appreciate this opportunity provided by Kiplinger.
Hi Anne. Sounds like you do not want a comprehensive financial plan or ongoing advice, but are instead looking for a one-time retirement planning engagement. Here are two ideas: search for a planner on napfa.org who works on an hourly basis, or take a look at the Garrett Planning Network -- those are fee only advisors who will carve out a specific scope of work depending on what a client wants to work on (and pay for!).
MYD, a self-employed SEP...you are making the most out of your tax deferred opportunities. GOOD FOR YOU! So I suggest you continue to just use taxable accounts.
Bobintexas if you hit the enter key it submits the post! Do you have more?
Hi Maria -- Not seeing them in here. Would you mind submitting again?
BobinTexas, why do you want to retire so early? Indeed, I can only hope that most of my clients have jobs that they enjoy so much that early retirement is not their first priority. Also, unless you have something specific planned for your retirement, know that retirement is often overrated leaving people with a lot of time and not much to do that gives them purpose.
dshel: you can only borrow if you have access to borrowing. I suggest having one credit card. I also suggest having one person control the expenses (might be more of a burden on one person). Create a spreadsheet and allocate a certain amount toward each expense. Monitor the expenses and at the end of each month see where you are... did you go over on the expenses or did you not spend to much. Finally, when you create your budget, try to make the categories a broad at first... cable/t.v/phone if they are bundled, entertainment, household food etc. This way, once you start to feel comfortable with your budget and maintaining records, you can then get more granular
Wow! So many great questions. We still have a bunch in the queue, so you question may still be coming up. Thank you everyone for your patience.
Hi Carla, a 4 % contribution by your employer, goes straight to you bottom line. I am not sure you should miss this. Perhaps you may (depending on you goals) up a separate Roth IRA with a company such as Vanguard or Fidelity and then user their high yield fund. I don't think you should loose out on the Employer contribution . Good luck
Robert: do you mean for social security benefits
Bobintexas...have a blast and catch a fish for me. Strange, those I know who fish are some of my happiest clients in retirement. I just moved back to the farm so I can fish more:-)
Bobintexas sounds like you and your wife have been disciplined savers and workers -- congratulations! And both kids out of college and working -- even more congratulations! I think Bobbie's point is well taken; planning for retirement is more than making sure you
r
Whoops not done; hit enter button!
Lloyd I'm checking on something re RMDs and will be right with you.
Lloyd, when you transfer the 401K to an IRA and purchase a single premium immediate annuity, the annual distributions ARE the RMD for the annuity. I suggest you look at a low cost provider like Vanguard for the single premium annuity. Also, if you think interest rates may go up, you may want to wait for a bit. You will get a higher annual amount the older you are so I often have clients wait until age 70 to purchase such single premium immediate annuities. Do other advisors have comments?
Bryson: an immediate annuity could be a solution. Please determine total costs. Immediate annuities are not bad, if they are inexpensive, if you have a defined expense that you want to cover and don't want to be subject to the fluctuations in the market. Withdrawing from your bond fund each (do you have equities as well?) if you have equities as well... don't just withdraw from bonds because you will be increasing your risk as you get older. If you don't want to purchase an immedidate annuity then you should withdraw from your portfolio of both equities and bonds.
Robert: if you are referring to social security then your full retirement age is 66
Bobintexas,: to continue, planning for retirement is more than making sure you're financially prepared -- it's also planning for meaningful and productive work, paid or unpaid, for the next 30-40 years, IMHO. That being said, how do you figure out if you're financially prepared? It's all about the proportion between your assets (IRAs, investment accounts, pensions, etc) and your spending goals. Run a long term retirement projection for starters (Kiplinger's has one) to see how things look should you and your wife live well into your 90s. And I recommend you take the next step to hire a financial planner to help you with retirement projections. As an aside -- I think one of your greatest assets going into this is your ability to turn a hobby into part-time work; that's a huge help (financially and psychologically) if you get unlucky with timing and the market tanks just when you start taking distributions.
I am not sure if my questions was answered before: My income is ~200K I am 35 yo, I usually save over my retirement accounts 401k, etc and invest the rest in a taxable account with Vanguard. My financial planner suggests I instead invest in a variable life insurance policy as an investment vehicle so that I will not be taxed but I am concerned long term about the fees and want to know if this strategy is recommended for higher income people? thank you
Cheryl I am assuming that you will receive a 1099, You will need to pay some estimated taxes to avoid any penalty. A tax deferred account such as a SEP or a Simple should be on your radar. The federal landscape has changed for high income tax payers . You may very well end up in somewhere between the 35 and 39.6 % bracket. You may also have issues with capital gains on your investments. The best thing to do is to meet with your TAX ADVISER immediately. Project a list of your expenses (accelerate if possible) and have him/her run a projection. Don't go alone on this one Cheryl. If you have not taken SS benefits you may want to delay it a little speak to you advisor
Hi Bob. Sounds like you are planning to delay drawing Soc Sec retirement benefits until age 70; smart move. The amount of your Soc Sec retirement benefit that is taxable depends on your other income (basically, your AGI, which includes the interest/dividends/capital gains from your stocks and bonds, plus tax-exempt interest plus 1/2 of your Soc Sec benefit, plus some more obscure things). If that calc is below $32,000 for a married filing joint couple, none of the Soc Sec benefit is taxed. Above that threshold, depending, some of it is taxed, but no more than 85% of your benefit will ever be subject to taxation.
Hi Ken -- Try Kiplinger's Retirement Savings Calculator to help determine how much you'll need to retire.
