Another good morning from DC
Good morning and welcome to June's Maximize Your Money chat. Let's give everyone a few more minutes to get logged in.
Good morning, and welcome! For the next 8 hours, NAPFA planners will be on hand to answer your questions. You can find a Fee-Only financial planner in your area at www.NAPFA.org.
With is this morning are NAPFA advisers Bonnie Sewell, Rodney James, Frank Boucher and Mark Coffey. Thank you all for being here!
Here's our first question:
Good morning C - A great estate planning attorney can lay out all your options including having your husband enjoy income from your assets while he is alive and the assets then going to your children when he passes. He can do something similar. The main point is that estate planning is a legal process that should 'marry' your financial planning and there are many good options out there today.
Good morning, C. I totally concur with Bonnie. If you are already working with a Financial Planner, perhaps that is a great place to start. He/she can assist you to find the Estate Planning attorney to suit your unique circumstances.
jump4, maybe - there's more to know and isolated investment allocation actions can be a disconnect from overall planning. Let me re-state what I think you're saying to see if I can be helpful - you manage your own investments, you've determined a 60% stock/40% bond allocation is appropriate for you and you're asking if the 40% bonds should be exclusively in the IRAs for the next 10 years? If that's correct, I'd like to know more about your tax situation.
Jump4, You may consider how much you are taking from your IRAs vs your taxable accounts each year to minimize your tax bill. I generally think asset location (which account holds which assets) is less important than managing your overall asset allocation. If you spend from one account exclusively, it can be difficult to keep an appropriate overall asset allocation.
Jump4: You want to have a diversified mix of assets within each of your accounts. Depending on your tax bracket, you could consider holding tax-free municipal bonds in your taxable account. Holding some bonds in your taxable account would give you flexibility to take distributions from the account and avoid selling equities in a down market.
R.A. thank you for your QLAC question. Like the other planners on this forum, we do not sell these or other products, however, the answer should be in your contract. And you paid a commission to the person or firm that sold you this product - they owe you a complete and correct answer so you can use this product within your financial plan. If you brought this to me, I'd have to charge you for the time to read the contract and ask the seller (agent) questions (often they struggle to understand what they've sold as well so we have to go up the chain). I would start with the firm that sold you the QLAC and insist on correct and complete answers to your perfectly reasonable questions.
KMM, Why are you keeping the apartment vs selling - Capital appreciation, future use, other reason?
KMM, you probably reviewed the rules for deducting rental losses before you rented it, but for others who may wonder, they are explained in Pub 925 from the IRS and here's a handy decision tree for looking at the same information: http://taxmap.ntis.gov/taxmap/pub17/p17-049.htm
Mary, No, There is no age limit to convert traditional IRA to ROTH. However, you should be aware that you pay taxes on the amounts you convert ( in the year of conversion) and this is irrespective of your age.
Hi Larry, You sure can. It sounds like what you want to do is change custofians and you are allowed to do that as often as you wish with no tax or penalties. People do it every day. Set up your new IRA with your new custodian and tell your current custodian to transfer your account to it.
Michael J - congratulations on your savings and investing in retirement accounts! And no debt except student loan at a reasonable rate. You indicate that you may purchase a home in 2-3 years and with that short a time frame, risk is truly magnified. So first, really attempt to know your risk tolerance and whether putting it at risk in munis and doing so impacted your ability to buy a home in that time frame would be too disappointing. In general, a mix sounds best to me, keeping what you think you'd use for a down payment in boring old CDs that ladder to your time frame and the balance in munis. But for specific guidance, check in with your planner.
Larry, Following up on summit's response to your Q - If you intend to rollover to a new employer's 401K, the first thing to check is if your new employer's plan allows rollovers from IRAs. Not all plans allow that. If they do, then follow the procedure per your new employer's plan
SaintsFan, your approach seems reasonable - have you done planning for the health care coverage (potential gap) for you from 2018 until age 65?
Saints Fan---What you say sounds reasonable but do not believe that retirement planning should be a do it yourself project unless you are a professional. Why not have an hourly planner run some numbers for you? Will a 2-4% drawdown meet your needs? What is your definition od "Moderate" or "Moderate Aggressive? Most of us make financial mistakes ( I have) and we recover but when you make a retirement financial mistake, we may not be able to recover. It's worth your peace of mind to have another pair of eyes look at your situation. Go NAPFA.org to find a fee only planner near you.
Michael, uncertainities in your jobs is the key takeaway for me from what you said. Given this, I would start saving for an emergency fund first from your cash position - In fact, if you are eligible, saving in a ROTH IRA is a great way to save for emergency funds. I will then set aside money in safer Investments towards down payment for your "to be bought" home. Whether it is CDs, municpal bonds or savings account is tough to say without knowing the risk tolerance / investing profile / tax situation of both of you. In fact, I would think a comprehensive review of your financial situation is a great place to start for you ( in my view).
Joan, my retired clients often face two large expenses - taxes and medical care or coverage. REITs pay out income by design - that income comes as dividends and they are generally not qualified dividends for taxes which means in a taxable account, you may pay more. They can be effective in an overall plan, however so based on the very limited information we have here, you may wish to review it with your planner. As for a small conversion to a Roth, a planner can do that math for you including the 'time value of taxes paid now or later' and of course, you'll need the cash for any taxes to be paid in a conversion.
Joan: Investing in the REIT using a Roth is preferable to investing using the taxable account. The tax consequences of the Roth conversion would depend on the ratio of nondeductible dollars to deductible dollars in your IRA. You should consult with your planner or tax advisor on the optimal amount to convert.