Flaura, To answer your tax question, everything you take out of your retirement accounts will be taxed at ordinary interest rates unless they are coming from a Roth and I don't recall seeing that on your original thread.
Hi Lopez -- Sorry about that, it's a long queue. But you are coming up shortly!
Robert, If you can, it makes sense and I don't see a downside to that strategy. You child can claim up to 50% of your retirement social security.
@falsco - By limiting your investments to one style or another may prevent you from benefiting from other asset classes. I believe every investment portfolio should be well-diversified among many asset classes, including those you mention. I do like index funds because while we cannot control the markets, we can control the costs of investing. Low expenses add to your bottom line.
Lastly, speak with your accountant about how the dividends affect your tax bill
Hi Carla. Contributions to a 529 plan might cause a problem when applying for financial aid depending on how the plan was set up. If a grandparent makes a contribution to an account that is alrady in place, it could reduce the financial aid that a child could be eligible for. the best thing is to have the grandparent set up a seperate account with them as the owner and the child as the beneficiary.having said all of that, there is nothing wrong with a grandparen or anyone else helping out with college expenses.
Hi Caitlyn, great questions. And your focus on taxes is a good one because in my practice they are my retirees highest expenses unless we have a health issue. Let me repeat your scenario: Paid off home in 10, retire in 12. $4500 in SS, in 12 years at 7%, your $750k could be approx. $1.7 and a 4% withdrawal rate for example would mean $5600 so $10,100/month. Assuming you stay in your home, so does the equity for now and liquid is just that. If you continue saving, I think you'll reach your spending goal with ease. As for what accounts to hold and how much, you described the $750k as retirement assets so if I assume those are in tax-deferred accounts and you have the ability to save more, I'd add a taxable account and expect to distribute from that first. Does this help?
Just a reminder that we have a bit of a queue here. We will get to your questions as quickly as we can. Thank you for your patience!
Hi Lopez. Like so many of these questions, the answer is :it depends' A lot of people do what you are suggesting. it provides for tax diversification. without knowing more about yo, I would say it is a good idea.
@suzanne - A great question, and one we get often. To be honest, most of the analysis we have done on converting to Roths do not favor a conversion, especially if you do not have cash available to pay taxes (vs. paying with the 401k funds). The tax burden is simply too great, in most cases. Because of the USs progressive tax system, the more you convert, the more tax you pay. It is quite often difficult to make this up. There are many calculators available on line to help you make this decision. I believe Kiplinger's has a very good one.
Gary, are you asking if you should take the RMD and only that (vs. a higher amount) to reduce taxes? If that's your question, yes. If I have that question, wrong, please post again - thanks.
AL: This is a good question for a qualified estate planning attorney. However, I have seen IRA assets included in an estate plan. Oftentimes, it can be a bit cumbersome for your custodian to ADD the trust as a beneficiary to your IRA accounts, but it is possible. Why wouldn't your spouse be named as your POA? Again, I would work with an estate planning attorney on this issue. Good luck!
Hello Maurice, Good Question. Actually I use 50% in each for my portfolio. They each have their pros and cons. Bond funds can have a hard time with rising interest rates and Individual Bonds have market risk. I always advise Investment grade bonds if you buy them individually and for the funds with a rising interest rate risk stay short and intermediate time span right now. Good Luck.
PhilP, yes Social Security has a time limit for spousal benefits. You must be married for 10 years.
AL:: It all depends on the size of your investment portfolio, right? Sounds like you have a good grasp of some of the issues though.
Hi Stanley, you can estimate your benefits any time at www.ssa.gov
Mike T, I was just looking for your post, as I was incorrect. Your children under age of 18 can receive up to half of your social security income (there are family limits to be aware of) Sorry, I can't use the "haven't had coffee yet' excuse. Thank you for posting back.
Lopez. You can start the Roth now. once you have maxed that out, you can always go back and increase your 4019k0. By the way, you are a turbo saver! Good job.
@Al - As long as your returns exceed the amount of withdrawals (adjusting for inflation and taxes) you should be fine. One big hurdle you and others face is the potential for much lower returns going forward because of the interest rate environment we are in currently. You mention 54% in bonds. The potential for bond returns going forward is much less than in the past. Keep this in mind.