Maximize Your Money With Kiplinger and NAPFA, December 2015
Kiplinger is teaming up with the National Association of Personal Financial Advisors (NAPFA), whose planners will answer questions on holiday money concerns, year-end tax planning and more. Submit your questions here and get free personalized financial advice on Thursday, December 10, from 9 a.m. to 5 p.m. ET.
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Another big thank you to the advisers who have been fielding questions for the past couple of hours! Remember, you can find a fee-only adviser near you at -
Joining us now are Delia Fernandez, Allison Berger, Bobbie Munroe and Peter Ashby. Welcome!
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Hi, my parents have a large amount of farm real estate and machinery. My dad is in his early 60s and still farms it. What can I look into to see what is the tax efficient way for me and my 3 other siblings to inherit the land and machinery? I fear that the value will be higher than the 5 million deduction at his or my moms death. -
Mark -- that amount is $5,430,000 per person, so this year that would be $10,860,000 for both your parents. Do you believe the farm is worth more than that? -
Good morning. Live n Ny, Both not working retired 64 , have 90k in IRA, 380k in 401k, spouse recently rolled 300k into IRA.
pensions not enough to cover expenses. Waiting till 66 for SS
Need help figuring out best way to makeup shortfall till 66 or 2 years -
Some advice for anyone thinking about delaying Social Security:
Mind the Gap If You Delay Social Security
www.kiplinger.comBuild an income stream if you plan to retire before you claim Social Security. -
Jane, to clarify, retirement assets are roughly $770k? -
I was a stay at home mom for most of the 25 years of my marriage which ended in 2010. Therefore my benefits are very low. My ex has remarried ,I have not. I am 55 now with a portfolio of 1.4 M. My ex is a practicing cardiologist and would receive the max in benefits, his wife also has,a high paying job
I am in relationship where we've discussed marriage. He is concerned I would lose any benefit of my ex ssi, my partner has an excellent state pension and approximately 750,000.00. -
Mark -- the most important step you can take is to have your parents consult a good estate planning attorney right away. A lot of successful business owners feel invincible due to their success, and don't feel comfortable discussing the logical necessity of planning for a time when they won't be in full control of their fate. A good attorney will walk them through their options so they can see the impact of not planning for a cost-effective transfer of their estate.
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Dorothy, that is correct. If you were to remarry you would no longer be able to claim SSI on your ex-husband's earnings history.
Retirement Planner: If You Are Divorced
Social Security delivers a broad range of services online at socialsecurity.gov. We have a proud history of protecting the integrity of our programs and service to the public. -
Jane, you don't mention how much of a shortfall you have to make up until age 66. You should consider sitting down with a planner to run some projections. Usually people tap their investments to make up the shortfall until Social Security kicks in, but this sounds like you're concerned you can't afford to do that, so I recommend you talk to a planner.
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Jane - Sounds like all your assets are in tax-deferred accounts so you will just need to figure out how much the shortfall is after taxes and then withdraw from the account(s) that make the most sense. If you need help doing this, you should hire a planner to help you. -
I'm 66 and starting to receive my S/S benefits as of 1/1/16. My wife turns 65 on 4/30/16. Is she still able to collect Spousal benefits via a restricted application and let her benefit grow until age 70? Should we wait until her full retirement age to file a restricted application or can we do it when she turns 65? -
Mark - There are a lot of different ways to accomplish this. You will definitely need to talk to a tax professional and estate planning attorney to help you figure out the best way to transfer your property. They will not only help you figure out how to structure the farm (LLC, LLP, FLP) but also how to pass it tax efficiently (possibly a trust).
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Harry, Your wife will still be eligible to collect spousal benefits and allow her benefit to grow under the new rules: www.financialsymmetry.com I recommend seeking out a planner to discuss your best options. You can also run your scenario through maximizemysocialsecurity.com
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I would like to draw down the my $M traditional deductible IRA before 70 to reduce large RMDs six years from now and convert the withdrawals to a Roth. Is there a benefit to doing a very large conversion in one (or two) tax years and biting the bullet on taxes and continue to withdraw and convert to Roth at levels that don’t trigger the higher tax rate? Also, do I have to pay the taxes separate from the withdrawal amount or can the conversion be less taxes (e.g. withdrawal $100,000 minus $20,000 taxes and convert $80,000 to Roth)?
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Ideally you would want to look at a multi-year tax projection to answer your first question. You don't mention your age, so I don't know how many years you have until 70. To answer your second question, yes, you can convert less and pull out additional funds to pay the taxes
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Hi Seriously. Apologies, we have a very long queue! What handle were you asking the questions from?
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Harry - You need to wait until her full retirement age if you only want restrict. Here's an article to review.
Big Changes Ahead for Claiming Social Security
www.kiplinger.comThe budget law is phasing out two popular claiming strategies, but some lucky baby boomers will squeak in under the wire to take advantage of them. -
Should I take monthly or year end federal tax on my pension check in 2016?
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Charles, I would recommend regular monthly tax withholding on your pension checks. If you don't pay enough throughout the year you run the risk of owing a penalty at tax time.
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Barbara - You should definitely run an analysis both ways to project taxes due using both strategies. There are also strategies you can use if you decide to "convert in 1 or 2 large amounts such as charitable donations or using Donor Advised Funds. A CPA or Financial Planner can help you with this as well.
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I plan to sell several stocks next year that have a basis established many years ago. For example, 34 shares BLS acquired 6/23/1978. I believe BLS was acquired by AT&T in 2007. Other of these stocks have split, spun off shares of other companies, divested, merged, etc. For example I have a few shares of LU, that were not part of the original portfolio. How do I determine the basis of the shares I hold today in order to establish the long-term capital gain? Are there tools available to follow the basis of these shares given the original basis and splits/spinoffs/etc/ that have occurred over the years?
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Kent -- often companies will have calculators for this purpose on their website, or their Investor Relations department can help you.
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Am retired, over 70 and have 50K in a MSA Account. What is the most efficient way to withdraw that money and does it go tax free to my heirs?
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Bob, I think of an MSA account as a great resource for unexpected medical costs later in life. If you're married, your spouse can inherit the funds tax-free; the account balance is taxable to a non-spouse beneficiary. The trick here will be to use those funds for yourself during your lifetime or leave them to a spouse. If you have no spouse, and are really concerned about leaving the funds tax-free to an heir, you may want to be sure to withdraw them for approved, tax-free purposes now and consider gifting the funds to your heirs. This is one of those tricky questions only solved if we knew the exact date of your death .
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I was laid off from a large company last year and started my own business at the beginning of this year. My retirement funds are still with that company, in funds that are not rated highly or doing well (avg. 3-4% return and have higher fees than most). What's the best option to move it into, and will I be charged any penalties since I didn't move it within a certain amount of time after leaving? Money is tight since the business is just getting off the ground, so I can't expend a lot initially.
Thanks! -
Hello: Looking at using an NAPFA advisor for regular strategy sessions along with a robo advisor service. Which robo company would best fit this model? -
Jake, find out if a robo adviser is right for you:
Is a Robo Adviser Right for You?
www.kiplinger.comIf you're a novice, computerized advice may make sense. For others, it's a tougher call. -
Also, here is some comparison on robo advisers:
Comparing Robo-Advisers for Retirees
www.kiplinger.comAutomated services are gaining popularity, but can they handle the complex needs of investors in or near retirement? -
Mkerain, You can roll your prior employer 401k into an IRA with lower cost fund choices. As long as the rollover is processed as a "direct rollover" there are no taxes due. Vanguard is always a good choice for low cost funds and they have great target date options that offer instant diversification and an appropriate mix of investments based on your desired retirement date.
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we will have income of 20,000 in 2015, can we convert 70,000 from a Trad IRA to a roth IRA and stay under the 15% tax rate and will the 130,000 in capital gains be tax free?
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Trevor, Long term capital gains will be tax free as long as your taxable income (line 43 on the 1040) is below $74,900 for Married Filing Joint or $37,450 for Single. Any gains that bring your taxable income above that level will be taxed at the 15% rate.
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Just found out I am getting a bonus this month. Plan on using the majority of it to make a large payment on student loans. Is there a benefit (tax or otherwise?) to making sure I make that extra loan payment before the end of 2015?
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Good afternoon. I'm Bobbie Munroe CFP a fee only Napfa registered financial planner. I thank Kiplinger for giving us this opportunity to share our knowledge with their readers. -
In 2016 I have to start taking RMD's. I will not be working. Can I rollover the
RMD money from my 401k to a Roth if I have no income other than SS? -
Kay, first let me congratulate you for paying down those loans. I know people who are nearing retirement who still have the student loan monkey on their back. It isn't pretty. As for as paying before year it, I'm not sure but I can't think of any benefit except going into the new year with less debt. Even if you can deduct student loan interest on your tax return, a small timing difference in the payment shouldn't affect the interest paid in 2015 significantly.
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Anne, unfortunately you cannot roll over RMDs into a retirement account. You could consider investing the funds into a tax-efficient index fund at a company like Vanguard, which has very low fees.
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I will turn 70 1/2 Dec 10, 1918. What will be my RMD requirement.
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Here are some RMD basics, Steve. (With a calculator tool at the bottom.)
The Basic Rules of Calculating, Withdrawing RMDs From Retirement Plans
www.kiplinger.comThe rules for required minimum distributions can vary for different types of accounts -
Anne, you could do a Roth conversion, but this would have to be in addition to your RMD. Since you won't have earned income you are not eligible to make Roth contributions.
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Anne, Delia is spot on. You can't make retirement contributions unless you have earned income. You CAN convert an IRA to a ROTH without any earned income but you would have to pay tax on the amount converted.
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Tax efficient investing....I read an interesting article on this just the other day. Many people look at a fund's average turnover as an indicator of tax efficiency. But some funds with a low historical average turnover might have high distributions currently and vice versa. Using index funds is generally a great way to get tax efficiency.
