Scott all of the advisors are probably debt averse:-) But where is the cash going to come from? Do you have it on hand? Are you going to have to take a withdrawal lump sum from a retirement plan which could result in a big tax bill? I tell clients there is a often a difference between the right answer and the good answer. The right answer in this case is that technically, most diversified allocations should return more over the next 20 years than any mortgage interest rate you would pay. The good answer may be that you would sleep much better if the house was paid off.
You are limited by the gift tax exclusion of $14,000 but if they are married, you could, if everyone gets along well, give $14K to their spouses and/or children as well.
Hacksaw, that site also has good information on how to find an advisor. At a minimal I would look for a CFP, fiduciary (puts your best interest first), and full disclosure of any fees or commissions (fee based is perceived as having less of a conflict of interest and IMHO is true most of the time).
Maryann, yes if you have a married daughter with 2 children you can give the annual gift amount to all 4 of them. So can your spouse even if all of the funding comes from one of you (in which case I would file a gift tax return clarifying how the gift was made so it doesn't count against your lifetime exclusion). When gifting to children remember that in a Uniform Gift to Minors account they will have control at some point, usually age 18. You could use the gifts to fund a 529 college savings plan for the children...them as beneficiaries with their parents as owners.....and not chance that the money gets spent on a new car:-)
Oh Kathy, I see this often. The parent wants to make sure the responsible child gets the proceeds (so they pay tax on a large lump sum) and then distribute it to the others. If the money was divided before the distribution, the resulting taxes overall would probably have been less (unless the siblings are high income earners). Now can you give it to them? If you think your estate at death will be less than 5 miliion plus dollars, the you can give them any amount you want and use current part of your lifetime gift exclusion (but you would need to file a gift tax return...check with your tax preparer). If you DO think you will need that entire 5 million plus exclusion at death, then you are limited to 14K/year to preserve it. If you are married, you and your husband can give anyone 28K/year even if you pay all the money (but you would need to file a gift tax return).
Agree with you Bobbie -- wasn't sure how far down the family chain he wanted to go. Kathy, you can give these gifts each year until you've reached your gift exclusion, currently over $5 million. Since you've already paid the taxes, it's too late to undo and disclaim. Please make sure your CPA knows what you are doing so the correct forms can be filed if/when appropriate.
Terry, if you've been married 10 years or longer, she can receive spousal benefits. She must be 62 or older. But if social security is going to be a big part of your retirement income, I'd really recommend waiting as long as possible to collect.
Yes Terry, she will qualify when she turns 62 but she will take a big hit on the benefit, which is half of your Personal Insurance Amount (PIA). She would get the full benefit when she turns Full Retirement Age (FRA), which is probably 66. If she files at 62, she could get up to 30% less.
Terry, you have to work 40 quarters to be eligible for your own benefit. She will be able to receive a spousal benefit but I think you have to be taking your own benefit for this. Know that taking benefits early means taking a big haircut on the amount.
Kyle, I'd probably look for a CD that expires around the time you'll need it. I wouldn't invest it. The money market works if you like the rates. But keep an eye on it.
Kyle, if there's any chance you'll use the money in the next few years (which it sounds like there is), then I'd stick with cash like instruments (i.e. savings accounts, CDs, etc.). I'd echo Richard's comments on rates. Several online banks are offering 1%+ right now so shop around!
Gam, I'm sorry for your poor fortune. I'd recommend getting a second opinion on an hourly basis from a fee-only financial advisor. They can take a look at exactly what you have and whether or not it makes sense to sell them given your overall investment strategy and financial planning objectives.
JP, you questions are relatively complicated for a chat and could require more analysis, especially regarding the exempt status. However, it seems that your cash flow is decent and you have time on your side, In your cause, it might be one of the few times I'd say let market compounding work for you and invest and pay down the house simultaneously. If you're saving 15% in the 401k already, just focus on the house. But for the most efficient answer, it'd require more analysis.
James, the FDIC covers banks but not money market funds. To get around the FDIC limits on coverage, you can open account with different titles (one for you, one joint, one for your spouse) and fund each to the max....most likely using CDs. Or there is a group www.cdars.com. You can use just them and they distribute the money among different banks to make certain nothing is above FDIC limits. Now SPIC applies to investment accounts and only covers in the event the brokerage fails. The limit is 500K per customer including up to $100K in cash.
Joe, this depends a great deal on your investment philosophy and strategy. For example, a total stock market index approach will certainly help minimize the transaction costs from rebalancing compared to the large-cap vs. mid-cap vs. small cap approach. Research shows that asset allocation is the primary driver of a portfolio's return so the stock/bond decision is vastly more important than the large cap/small cap decision, all else being equal (i.e. adequate diversification, goals, risk tolerance, etc.).
Kyle, such a boring answer but I would not invest money I was going to need within the next 2 years, especially with the market at highs. Just make sure you get the best rate possible. Capital One 360 program or Ally Bank (paying 1.3% for 18 months with 25K minimum) are good options.
Kyle, I'd probably use a combination of money markets and CDs depending on when the money is needed. I wouldn't invest it in any equities.
Kyle, you're right to not want to take much risk with your down payment funds. You could build a CD ladder or invest in a short-term bond index fund. Also, there are online banks such as Ally (formerly GMAC) whose interest rates are sometimes higher than your local or national banks.
Joe, you don't have to take the RMD until next year. Unlike a Traditional IRA, if you still have earned income, and meet income eligibility requirements, you can still contribute to a Roth IRA after 70 1/2, up to $6500/year.
Ken, you can fund an IRA with the distributions, regular or ROTH, as long as you are working. The after tax part works ONLY if you don't have another IRA as if you do, the taxation at the Roth conversion is prorated re after tax amount vs total amount for ALL accounts. By the way, if your income is going to be lower in the next couple of years, you may consider taking some of the money out of your retirement accounts now while income is low. I know, people say that you should wait as long as possible but I often see many opportunities for lower taxation if earlier withdrawals are made.
Curt, it sounds like you may be invested a little too aggressively for your risk tolerance given your aversion to the ups and downs of the market. A portfolio's expected return is directly correlated to the amount of your investments you allocate to riskier assets (i.e. stocks). In other words, if you want less risk, you'll probably have to accept a lower long-term return and that's completely OK. As they say, "there's no such thing as a free lunch" especially when it comes to investing.
Ken, I should clarify as this is a bit confusing. If you aren't working, you simply cannot fund an IRA. So the RMDs cannot fund this. If you CAN rollover just the after tax portion of the TIAA account into an IRA then you can start converting that to a ROTH with little or no tax.. If all the money in the TIAA account is before tax, there is no advantage in this. And if distributions must be prorated between before tax and after tax savings, then the ability to rollover and then convert with no or little tax is significantly diminished. Talk to your tax consultant.
John, If you have earned income you can contribute to a Traditional or Roth IRA prior to the year you turn 70 1/2. So if you're 70 1/2 next year, you can contribute this year to either a Roth or Traditional IRA. Next year when you turn 70 1/2 you need to take a RMD before year end. You can continue to contribute to a Roth beyond age 70 1/2 if you have earned income.
George hourly rates can vary between $150 and $300 and often depends on what part of the country. That said, it is amazing how much you can get done in a few hours.