Maximize Your Money With Kiplinger and NAPFA, June 2016 - Live Chats, Q&As: Free Advice on Retirement, Investing, Personal Finance -- Kiplinger

Kiplinger Live Chat

Maximize Your Money With Kiplinger and NAPFA, June 2016

Kiplinger is teaming up with the National Association of Personal Financial Advisors (NAPFA), whose planners will answer questions about tax preparation, filing and more. Submit your questions here and get free personalized financial advice on Thursday, June 16, from 9 a.m. to 5 p.m. ET.

  • Angela, Congratulations on the birth of your granchildren!  If you are looking to save for college, I like 529 college savings plans.  They are set up in your name (so you maintain control) and you can name your child as succesor owner, with the granchild as the beneficiary.  529 plans vary by state, so check out who runs the one where you live.  (  If your respective State's plan is not good, I have has great success with Vanguard's 529 plan.
  • Here's some info on 529 plans:

    529 Plan FAQs

    www.kiplinger.comWe've got answers to your frequently asked questions about 529 college-savings plans.
  • Also, here are some ways to help the grandkids with college:

    6 Ways to Help the Grandkids Pay for College

    www.kiplinger.comCovering educational expenses is one of the best gifts you can give, if you go about it the right way. Here are six strategies.
  • Angela - Before 529 accounts which made saving for college on a tax-free basis a breeze, many people used UTMA accounts.  That stands for Uniform Transfer to Minors Act which were established in 1986.  You can Google 'UTMA' for more information but it allows your children to have access to the money before the account automatically becomes their child's property at 21 (normally).  It's an option still out there but not used much any more.
  • Angela - Oh my, I forgot about the tax free part of 529 plans.  (Thanks, Walt!)  As long as the money accumulated in the 529 plan is used for higher eduaction, the money is withdrawn tax-free!  This is a great feature, and I am sorry I forgot to point this out.
  • Angela, Social Security numbers are still given to babies, and parents can apply for one at the hospital after birth or later at a Social Security office (
    Social Security delivers a broad range of services online at We have a proud history of protecting the integrity of our programs and service to the public.
     I also like 529 plans for grandparents due to their tax-free growth if used for qualifying education expenses.  Having the account in your name and not a part of the parents' assets could be beneficial to the children down the road when they apply for financial aid as the value of assets owned by a grandparent is not reportable on the FAFSA.
  • My brother died and by law, his estate is being passed to his three siblings. It consists of 401K, IRA, life insurance, and a home (which has sold for 250K). The executor of the estate is saying that taxes are being paid out of the estate and when the monies are split among the siblings, we will owe no income taxes. The size of the estate is about 700K total. Does this sound correct to you? She has no idea what kind of taxes are being paid out of the estate.
  • 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.
  • Should one's Estate be the beneficiary of an annuity
  • Delph - It's possible.  Consider the blended family where two people who were married before have married and each have children of their own.  This is where estate documents can get complicated.  If the husband has an annuity and wants to make sure that most of the money goes to his kids from his first marriage, he might have all his wishes laid out in his will, such as "20% to my current wife, and the remaining 80% split among my living children."  He could theoretically do this directly through the annuity company, but maybe he just wants to redirect all assets back to his will for some measure of simplicity.  
    Having said all that, it seems to me that it's more efficient to name persons as direct beneficiaries of an annuity.  
  • Delphiad6 -- Probably not. Usually one uses the beneficary designation to keep things from being part of your oubic probate estate.
  • A financial planner is recommending I get life insurance of 335K. I already have term insurance of 500K but it ends when I am 80. I am 72 now. The premium is 15K. Upon my death my wife would get my social of 35K and my pension of about 8K. I am mainly concerned about my 44 year old daughter who still lives with us and whose income is low. Is this an advisable strategy?
  • I forgot to include that my current assets are 1,000,000.
  • Delphiad6, naming ones estate as a beneficiary on an annuity might make sense in some cases, but it will make the annuity go through probate.  Due to the account going through the probate process, having the estate listed as a benefuciary will likely make it take longer for the beneficiaries to become the new owners of the account, and it can increase court costs and attorney fees.
  • David - Sounds as though you need to do a cost/benefit analysis.  If the life insurance is cheap enough, and, this is important, it gives you peace of mind for your daughter, then it may be worth it.  However, if your assets are $1M (and there is no debt), then you need to ask is it truly needed?  BTW - how did the planner determine that amount ($335k)...was there a needs analysis done?
  • David, did the financial planner who recommended the $335k of life insurance do a comprehensive financial plan to come up with the amount that you supposedly need?  And does that planner have an incentive to recommend additional life insurance to you, i.e. does he/she get a commission on the policy?
  • David - It's difficult to say whether you need life insurance.  Is the insurance to provide a nest egg for your daughter?  Is it intended to supplement your wife's retirement lifestyle?  Without knowing the purpose of the insurance, I really can't make a determination.
  • I manage my mother's finances now that she is in an assisted living home. She needs all the income she can get from her social security and other investments to pay her bills. She comes up a little short every month, requiring her to draw down on the principle on some of her investments every so often - in addition to her RMD for her IRA. The only funds I can draw from are those in a mutual fund invested in bonds, which pays a decent monthly amount. I ran into a problem, however, about a year or so ago when the share price of the mutual funds took a nose dive. I hate to sell while the market for these bond funds is down, so I have been "loaning" my mother funds to make up the difference for her monthly expenses until the bond funds make a recovery in their share price. How long do you think this dip in the bond market will continue? It has made a turn around this year, about 50% so far, but I am a bit worried about if the share price will ever get back to where it was a few years ago.
  • Denny - Have you thought about taking more than the RMD from her IRA each month?  I'm assuming that the bond funds are in a personal investment account.
  • Denny - You are asking about timing the market, which is an almost impossible task.  It may be wise to do an overall review and possibly rebalance the account and addresss the bond fund this way.  There may be benfits by "banking" some losses on the bond fund (if there are losses) and using this to your (and your mother's advantage).  A bond ladder or some other strategy may work for you.
  • I understand that no matter your income, work history social security payments are maxed at $ 2,500.00 per month? And if you retire at 64 and not work till 70 do you still get the increased payments at 70?
  • I have to run.  Thank you very much to Kiplinger's for hosting this valuable session!  Have a good day everyone.
  • 10 Things You Must Know About Social Security

    www.kiplinger.comFor many Americans, Social Security benefits are the bedrock of retirement income. Maximizing that stream of income is critical to funding your retirement dreams.
  • KV,
    Yes.  Here are the details from Social Security (
    Social Security delivers a broad range of services online at We have a proud history of protecting the integrity of our programs and service to the public.

    Social Security retirement benefits are increased by a certain percentage (depending on date of birth) if you delay your retirement beyond full retirement age.

    The benefit increase no longer applies when you reach age 70, even if you continue to delay taking benefits. 

    Increase for Delayed Retirement
    Year of Birth* Yearly Rate of Increase Monthly Rate of Increase
    1933-1934 5.5% 11/24 of 1%
    1935-1936 6.0% 1/2 of 1%
    1937-1938 6.5% 13/24 of 1%
    1939-1940 7.0% 7/12 of 1%
    1941-1942 7.5% 5/8 of 1%
    1943 or later 8.0% 2/3 of 1%
  • Can you tell me the best way, for tax purposes, to transfer money from your 401K that is in company stock, when you retire? Can it be transferred in kind to a IRA so you don't have to pay taxes on it?
  • KV - There is no $2,500/month cap on Social Security benefits.  Someone retiring in 2016 at full retirement age (67) could receive over $2,600/month in Social Security benefits if they had maximum earnings over most of their working years.  (That number will continue to go up over time.)  Waiting to claim benefits will provide increased benefits as Jacob noted.
  • Hi Shirley, You can do what is called a custodian to custodian transfer and there are no taxes. They should be able to keep the investments in your company stock. The new custodian can help with the transfer.
  • Shirley,
    You can always roll your 401k into a Rollover IRA upon retirement.  If done correctly, this is a non-taxable event.  Later distributions would be subject to tax.  
    You might also be eligible for Net Unrealized Appreciation (NUA).  This means you may be able to distribute the company stock from the 401k.  The basis in the stock would be subject to ordinary income and the capital gains (difference between sales price and what you/employer paid for stock in 401k) would be subject to preferred capital gains rate.  This is very complicated, so make sure you fully understand the rules or work with a tax or financial advisor who understands the process and tax rules.
  • Hello Everyone, My name is Rich. I'm here to help! LOL. Seriously, this is my second go around with this version of the Kiplinger Chat and I'm looking forward to it.
  • Hi Rich, Jacob and Mark. Thanks for joining! 
  • And thanks to everyone who has submitted questions. We still have quite a queue but we're working to get to everyone!
  • Do you differentiate between cash holding (as a percent of your retirement fund) and a emergency fund. I know our current estimation of expenses for a year (minus savings, etc). Technically I have a 9 month emergency fund.
    Should I not count this toward our total retirement savings? I have had some advisors include this in our total, but to me the money should technically not count toward the total since it would be for an emergency. What are your thoughts on this?
  • Shirley - You have several options when dealing with company stock in your 401(k):  (1)  Your 401(k) plan will likely allow you to directly transfer ("direct rollover") the stock to your IRA - no taxes due on the rollover.  (2)  You can have your plan liquidate the stock and directly transfer the proceeds to your IRA - also with no taxes due.  (3) You might consider a NUA rollover - this is pretty complicated strategy that might make sense for you.  I'd recommend working with a fee-only planner that has experience with these types of transactions to see if this might work for you.
    One note: Be careful with comany stock.  Having concentrated stock positions is a tough way to protect wealth.
  • Barry - really the choice is yours. If you're conservative, don't count it. That means you'll have to save more. I have a tendancy to include it in the planning I do for clients unless they specifically say to exclude it.
  • Barry,
    When starting out, I will sometimes recommend keeping cash in a retirement account to act as a secondary emergency fund for true emergency (illness, job loss, etc).  Longer term, I would encourage you to build up a fund outside a retirement account so funds can be accessed with less restrictions or tax consequences.  
  • Barry - I'd consider assets you can access without costs, taxes or timing worries to be available for emergencies.  Cash in a retirement account is not accessible without taxes, so I would not count that as "available."
  • Hi. I've been a good saver for a few decades, but I never had the opportunity for a tax-advantaged 401K, so all of my investing was done in taxable accounts. Now it's retirement time, and I have the pleasure/pain of figuring out what to do about the mutual funds which I've dollar-cost averaged into over the last 35 years. I basically see two options: pay the capital gains taxes slowly as I move through retirement, or hope to die soon, and use step-up basis so my wife can avoid capital gains taxes. Any other thoughts on how to minimize the taxes on a successful career of mutual fund dollar cost averaging? Note: I have kept track of dividends and capital gain distributions, so at least I won't pay taxes twice......
  • @JacobKuebler I have the those funds in a checking account. I never considered an emergency fund as part of my retirement account. Though I am starting to look at building a cash holding account as part of our 401k, and use it to add to the other funds when the market takes a good pullback.
  • Dave,
    Couple options might include:
    • If you can mimize other taxable income, some tax planning may allow you to take advantage of 0% capital gains rate
    • If you are charitably inclined, you could consider a Donor Advised Fund (DAF) for charitable gifting using your highly appreciated investment securities.  
  • What are the benefits of putting a vacation home in a trust for estate planning. Located in PA.
  • 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.
  • Barry,
    In that case, if you plan to invest the 401k funds, I would not consider them emergency reserves.  Keep in mind, market timing is a guessing game and there is a cost to being out of the market in lost income/gains.  
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