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.
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.
GlennP - I'm saddened to hear about your brother's passing. Three of his assets would pass to whoever was named on the beneficiary designation form--the 401(k), IRA, and life insurance policies. Those assets pass outside the probate process. The house, on the other hand, would pass according to your brother's will or based on what a probate judge decided. Normally the retirement accounts and life insurance are paid directly to the beneficiaries, with possible withholding taxes on the retirement accounts. Life insurance proceeds are tax free. The home proceeds are also tax free. So as far as I can determine, the only income tax due would be on the 401(k) and the IRA. Hopefully the executor is working with an estate attorney to make sure that the process is going smoothly. There are things like "Notice to creditors" that must be posted as part of the estate settlement process. Good luck.
Delphiad6 -- Probably not. Usually one uses the beneficary designation to keep things from being part of your oubic probate estate.
Dave - I would not recommend your "hope to die soon" strategy. :) Paying capital gains over time makes good sense. If you have sufficient records, you are able to select the highest cost trade lots as you sell your funds. For example, with each trade you might sell the shares you bought in 2015 instead of the shares your bought in 1992.
Dave - depending on how much need for an income in retirement, you might consider keeping your taxable income in the 15% tax bracket. Future investing you might consider using a "last in first out, long term cost basis" reporting.
Wayne - Having assets titled in the name of your living trust provides a clear transition plan when you are "gone" or incompacitated. Avoiding probate and having a successor trustee are the main benefits.
Wayne, I agree with Mark and Jacob. Different states have different estate planning rules. A trust can avoid a lot of the troubles associated with probate at multiple locations. Plus there's the peace of mind knowing there shouldn't any fights over things.
Lester - Currently, $5.45 million (per person!) can be passed to your heirs without estate taxation. You and your wife will be able to pass almost $11 million using "estate portability" rules (an AB trust is not required today to ge the double exclusion). Although you are not currently in an estate tax situation, I'd still recommend working with an estate attorney to get something set up to make sure your assets transfer as you wish.
Lester - I'm not sure about Massachusetts, but the lifetime gift tax exemption is $5.43 million. There are other benefits to have trusts though. You should ask your attorney the benefits.
Dear OrenCPA, I'm not sure which ETFs you are talking about but the 3 minimum volatility etfs at ishares are all stocks. And they probably can invest in almost anything to achieve their low volatility/risk goal. But none of these include fixed income. I suggest that you could reduce your total portfolio volatility by using equities AND fixed income/cash. I've already mentioned Vanguard Wellsley Income Fund as a good alternative for a blended fund (both equities and fixed income) with relatively low volatility. Remember you can have inidividual holdings within the ETF that have high volatility BUT if they go in different directions at the same time, the overall volatility would be low. A financial planner can help you come up with a mix that specifically suits your situation and your goal of lowering risk.
Barry, social security rules just changed. How old are you? The key dates for grandfathered positions are 62 by 12-31-15 (there was one for another feature for those who were 66 by April 31 but it isn't effective anymore. If you WERE 62 before 12-31-15 you will be able to file a restricted application at your normal retirement age and draw off your spouse's benefit while letting yours grow until age 70. Maximizing social security is complex and alas, not everyone at the social security office can give you a good answer.
OrenCPA, unfortunately an ETF name doesn't always match up with what it invests in. As Bobbie mentioned, it could be invested in almost anything. One way to see how it is currently invested is by visiting the ETF company's website or a third-party research tool like Morningstar.com. These resources should provide information about how the ETF is currently invested and what the goal of the ETF is in terms of types of stocks, bonds, etc.
Stuart, when you decide to sell to fund your RMDs/Required Minimum Distributions, it is a great time to rebalance. Decide what to sell based on what allocation you want left after the RMD.
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.
My wife and I are 38 years old and do not have kids yet. We still rent an apt and will not buy for the next 2-3 years due to uncertainties in our jobs. We always maximize retirement contributions. Retirement: 630k; Student Loan: 115k (0.7%); No credit card debt; Cash: 512k (0.75%). To increase yield on cash: should we ladder CDs? Invest in municipal bonds? Keep it in a savings account? Something else? A combination?
Here's some info for anyone interested in laddering their money:
GlennP - I'm saddened to hear about your brother's passing. Three of his assets would pass to whoever was named on the beneficiary designation form--the 401(k), IRA, and life insurance policies. Those assets pass outside the probate process. The house, on the other hand, would pass according to your brother's will or based on what a probate judge decided. Normally the retirement accounts and life insurance are paid directly to the beneficiaries, with possible withholding taxes on the retirement accounts. Life insurance proceeds are tax free. The home proceeds are also tax free. So as far as I can determine, the only income tax due would be on the 401(k) and the IRA. Hopefully the executor is working with an estate attorney to make sure that the process is going smoothly. There are things like "Notice to creditors" that must be posted as part of the estate settlement process. Good luck.
GlennP - This will not answer your question directly, but there are a few things to note:- if there are beneficiaries named on both the IRA and the 401K, then taxes on distributions from these accounts may be "deferred" until the beneficiaries make withdrawals. - also, depending on how the house was titled, there may be a step-up in basis on the house, which can minimize taxes due on this- life insurance is income tax free.Also note, there are income taxes and etstate taxes, so settlement of estates is not cut and dry.
Dave,Couple options might include:
Dave - I would not recommend your "hope to die soon" strategy. :) Paying capital gains over time makes good sense. If you have sufficient records, you are able to select the highest cost trade lots as you sell your funds. For example, with each trade you might sell the shares you bought in 2015 instead of the shares your bought in 1992.
Dear OrenCPA, I'm not sure which ETFs you are talking about but the 3 minimum volatility etfs at ishares are all stocks. And they probably can invest in almost anything to achieve their low volatility/risk goal. But none of these include fixed income. I suggest that you could reduce your total portfolio volatility by using equities AND fixed income/cash. I've already mentioned Vanguard Wellsley Income Fund as a good alternative for a blended fund (both equities and fixed income) with relatively low volatility. Remember you can have inidividual holdings within the ETF that have high volatility BUT if they go in different directions at the same time, the overall volatility would be low. A financial planner can help you come up with a mix that specifically suits your situation and your goal of lowering risk.
OrenCPA, unfortunately an ETF name doesn't always match up with what it invests in. As Bobbie mentioned, it could be invested in almost anything. One way to see how it is currently invested is by visiting the ETF company's website or a third-party research tool like Morningstar.com. These resources should provide information about how the ETF is currently invested and what the goal of the ETF is in terms of types of stocks, bonds, etc.
