Jump-Start Your Retirement Plan, September 2015
Kiplinger is teaming up with the National Association of Personal Financial Advisors (NAPFA), whose planners will answer questions on retirement planning and other financial challenges. Submit your questions here and get free personalized financial advice on Thursday, September 17, from 9 a.m. to 5 p.m. ET.
3rd & 7 37yd
3rd & 7 37yd
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Sam.The answer to your question depends on a lot of things like where you live, your income, your assets and who actually owns them (you, your wife, or jointly) and who do you wish to benefit when you die? A lot of people bypass LTC insurance for a lt of good reasons but I think you would benefit from meeting with a fee only financial planner and having a financial analysis done to see just how much you can afford to self insure. Find an advisor at www.napfa.org.
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Hey Sam. Wow, that's a great question and probably difficult to answer here, but I'll give it a shot. Do some research on the cost of facilities in your area, or in-home care in your area, and adjust for ~5% increase per year (at least...this is above inflation, but health care costs increase at a higher rate). This amount should become part of your anticipated budget in retirement years. Then you have to determine if your projected retirement income (pension, SS benefits, distribution form your investments) can sustain this annual budget.
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Bojo, spend less than you make and begin a long term investment habit. Have an emergency fund and pay down debts. Track living expenses and see where you can reduce expenses. Think about your dreams and goals of what your retirement years will look like. If you don't see yourself working after a certain age then you must begin investing. There are a number of calculators to determine how much you need to save for financial independence. The first step is the investing habit. See if your current employer has a 401K plan where you can contribute to it automatically.
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The current median cost for long-term care is about $80k/year and 4 years is not an atypical long-term care stay so perhaps $320k, each and it would need to grow at about 5% per year. Possibly discounted some depending on your age but maybe not because increases in the costs of care may be the same or higher than the rate of return you might expect on your investments. I find that many clients who can afford to self-insure for LTC ultimately choose to transfer that risk to an insurance company so they don't have to set aside huge chunks of assets that they may or may not need.
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It's still a little early for this Bojo, but note that in the future you can start making catch up contributions:
Making Catch-Up Contributions for Retirement
www.kiplinger.comYou can stash extra money in your retirement accounts starting anytime during the year you turn 50. -
Turning 50? Catch Up on Retirement Savings
www.kiplinger.comYou can start contributing more cash to your IRA, 401(k) and other retirement accounts once you reach the milestone. -
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Bojo. Don't beat yourself up. You are not doing all that badly. Start contributing to your employer's 401(k) plan if you have one. If not contribute to an IRA. Invest in a balance of stock/bond mutual funds. Build up your contributions until you are "maxing out". Like others have said, get rid of your debt as quickly as you can and learn to live below your means.
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Hi Bojo76, You've had some good suggestions here. Besides maxing retirement, the key to retirement is cashflow. Focus on making it fluid. In other words, dont' let debt and ongoing monthly expenses burden you in retirement. If you can have mortgages, credit cards, and other debts paid off, and minimize your monthly bills in retirement, you can actually live on very little. Couple that with Davids strategy of living below your means now and saving as much as possible and you'll be headed in the right directions.
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My parents are now in retirement. My father is 75 and mother is 65. Father has been with the same finanicial advisor for many years. I haven't had a full view into my father's financial decisions in the past and don't have a great sense of whether the advisor has been doing right by him all along. I'd say 80% of parent's retirement is invested thorugh that adviser. My father has started to communicate with me more about this. I think he's nervous about retirement viability. He said he would welcome my helping him get a "second opinion." How do I do that? What type of professional would provide that type of service? How can I find them?
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Ed, if you are in the 15% tax bracket, I would consider a strategy where you convert traditional IRA assets to Roth IRA assets. You can do partial conversions up to the top of your bracket for the next 12 years before RMD's start. Make sure you talk to someone who understands what you are trying to accomplish, like a CPA and/or CFP
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Hi Ed, It depends entirely on your goals and if you have tax diversified assets in another account. If you're looking to minimize taxes from your IRAs you might consider converting some of the IRA up to a certain tax bracket until you reach 70 1/2 all the while living on taxable investments. This will require tax projections. If your goals are more joy orientated and you're just looking to enhance your quality of life, you might consider creating your bucket list and doing a plan to see the best strategy for a draw down. So... it depends.
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Ed remember that even if you take the distribution, you don't have to spend it. You could just put it in a taxable account. It is always nice to have several different "buckets" of money. If you have earned income you can still make annual contributions to a Roth IRA with some of the money.
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I'm currently retired and my financial planner currently my IRA enrolled In 1% cash, 6% stocks/options and EFTs, 78% in mutual funds, 13% in equity trusts, and 2% in annuities. Both my wife and I receive pensions. Current IRA seems to risky. What would you suggest as an proper IRA mix? Thanks.
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Hi Bob, that depends entirely on your risk tolerance. But you might ask your financial planner how much is in stocks or stock funds vs how much is in fixed income. That is what determines the risk level rather than whether it is in a mutual fund vs an etf vs stock.
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Hi Bob, It depends on your risk levels, or how comfortable you are with your investments, and with where the ETFs, mutual funds, and annuity are invested. If you're uncomfortable, or you have the feeling in your stomach, you might be too risky. But it might also be needed for your plan. So it is probably a good time to review these things. Or re-balance back to your original investment plan.
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My employer just announced a new 401k plan featuring a company match earlier this week with details set to be released later this month. My question is this... I plan on moving next year to continue my education on the opposite side of the country so I know it is unlikely I will be employed there long enough to receive the full match. Should I still go this route or put my money into a Roth IRA through my bank, USAA?
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Finally Bob, I suggest that you work with a planner on a goal funding plan. In my practice we use these to see how much risk a client needs to take maximize their probability of getting everything they want. Often they find that they can take much less risk that they are suited for emotionally and still reach all their goals. I explain it this way: You are the quarterback, you have the ball and a 2 point lead. There are 20 seconds on the game clock. Are you going to throw the ball or take a knee? Sometimes taking a knee is the best answer with finances too.
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