Allan, at your age I wouldn't worry about the current environment. The markets will go up and the markets will go down over your investment life. The simplest thing to do would be to use a target date fund (Vanguard has good ones). Then if you are worried about near term declines, invest a little of the money monthly over a period of up to a year.
Allan, I forgot to say "good job!" Be sure to keep some emergency cash out of the market. So boring...until you need it.
jc, the 529 plan might be a good option. Depending on how much is left on your mortgage, your tax bracket, how much you have currently saved for retirement, etc. it also might not be a bad idea to consider using some of that money to pay down your mortgage. Sometimes the peace of mind of being 100% debt free is hard to put a price on!
jc, remember that you can change the beneficiaries along the way at any time. I might split up the new money between the two younger kids...maybe 25 and 15. If you use the aged based option, the younger child's portfolio should have a higher overall return though the years. Then depending on the circumstances when you actually need the money, you can essentially move it from one child to another by changing the beneficiaries around.
Jc, In terms of college funding in a 529- the beneficiary on a 529 can be changed for siblings so if one child does not use an entire amount, the remaining can be passed to the next sibling's 529. We always recommend saving for retirement as the ultimate goal over saving for college. I would take a mid-point approach and put half of $20k into the mutual fund account and the other $20k into the 529 plan(s).
jc, be sure to use a direct sold 529 plan rather than a broker sold plan. the difference in expenses i very significant. I personally like the Utah 529 plan as it uses Vanguard funds. But your own state might offer tax credits to use their's. Some of my clients fund their state plans up to the maximum for the tax advantage and then use another 529 for the remainder of the money. www.savingforcollege.com is a good place to compare plans.
Max, typically assets receive a "step-up" or "step-down" in basis at the death of the original owner. This means that your cost-basis is likely the $10,000 or whatever the value was at the date of your father's death and you will likely owe taxes on the difference between that amount and the amount the shares were called for. You might talk with a CPA to be sure about your particular situation, but that's what seems to be happening here. In my opinion, it's one of many cases where the tax code just isn't fair.
Max, you may have also inherited some investments where you DID get a step up in basis. If so, the advantage that provides might overshawdow the unfortunate step down in basis on the preferred stock.
Seb. I did check and the IRS does not keep basis. So good luck on finding those form 8606s
Hi Seb, Unforuntately, there isn't a way (that I'm aware of) to formulate the deductible vs. nondeductible contributions in an IRA.
James, you can change 529 plans and you can change the beneficiary of any remainder to a grandchild or even to yourself if you want to go take some courses.
James, If you change the 529 Plan to another state, be careful with the recapture rules. If your state allowed tax deductions on contributions, but you move the plan to another state, there may be the tax recapture laws in place. If tax deductions weren't allowed, this won't be an issue.
CP, you might have your daughter ask someone in the HR department at her employer for a referral. Since it sounds like an international company, she's probably not the first person in her company to be in this type of situation.
Seb, I'm not sure about the Medicare but perhaps someone is. I will say that if she has IRAs outside of work, she might consider rolling them up into her current 401K as I don't think she would have to take RMDs. NAPFA friends, is this correct?
Robert, Can you please provide more background on yourself- age? working? will the funds be needed in the next few years? Are the funds ultimately for retirement?
Seb, I believe Bobbie is correct. If your wife's employer has good investment options, then it might make sense to rollover those funds to avoid the RMD for now.
Ann -- Do whatever you just did to post your question :)
Robert, people used to ask my contractor husband to give them an estimate over the phone re: painting their house. Of course he couldn't as he had no idea of what they were talking about. Well that is kind of like your question. We would need a lot of context for a good answer. Why not spend a little on an hourly fee only advisor so you can get a good answer? That said, be sure to have keep a good cash emergency fund. Then perhaps use a target date fund for the remainder. Vanguard has good ones.
Zane, if you're truly looking for low-risk, then you might try shopping around for a good savings account. Many online banks now offer rates in the 1.00% range. It's still not great, but it beats the 0.10% or some other ridiculously low rate many other banks are paying right now. With that said, keep in mind that even a savings account has risks over the long-term if you're talking about retirement investments. In this case, it's the risk that your savings won't keep up with inflation and possibly lower your future standard of living.
Zane the best rates I've found are at Ally Bank of Capital One 360 but we are still talking perhaps 1% (Ally offers a good rate on checking as well). Why not dollar cost average (invest an equal amount monthly...this can be set up to be automatic) into funds over the next year to ease the pain of a potential market decline? Be sure to keep enough cash for any purchases/needs in the next few years as well as an emergency fund.
Tyler thanks for pointing out that the biggest risk could be not taking enough risk. People often overlook this.
You're so right Bobbie! Most people don't realize how much more they would have to save if they don't invest at least some of their retirement savings in the proper investments.
Anita, it can be so hard to figure this out all by yourself. When there is a lot of money it is easy to say "go see a planner." But the truth is that with limited resource, getting the big picture plan would be more valuable to you as any move you make is crucial to your long term success. Look for an hourly planner and see if you could get some good answers in a couple of hours. This would be a very good investment for you at this juncture even though it could be painful for your cash flow.
That's about all we have time for in this edition of Maximize Your Money. Thank you to everyone who submitted a question, and we're so sorry we weren't able to get to everyone.
Anita, one caution. If you do meet someone who says they do know exactly what you should do without doing a plan, be very careful. Sometimes an "advisor" is selling a product that they think is the perfect solution for anybody or anything.
And, a big thank you to all of the NAPFA planners who were on hand to take questions today!
Please join us for our next chat on September 15. We're looking forward to answering more of your questions.
That you Kiplinger for making this possible!