I have two inter-related questions.
I am a recently retired (3 Jan 06) federal agent who is now drawing a
federal pension that is partially tax free (federal and MI). This
amounts to approximately $4300.00 per month. I also have a 401K that
is now frozen from future contributions with about $110,000 in that.
It is invested in Government securities (20%), Bond fund (10%), Midcap
fund (50%), and small cap (20%). This will continue to accrue, tax
deferred until I am 70.5. The current rate is about 8% in total. I
am 60 years old. I have about $25,000.00 in CDs, savings and
Emigrant Direct. I can roll the 401K into anything I wish, leave it
for now with the same distribution or change that distrbution, or take
an annuity for whatever period I chose. My condo has about $60,000
worth of equity and I have a $155,000 mortgage with a 4% rate. I am
wondering what I should do, if anything, with the monies I can access.
Some have suggested that I roll the 401K into a directed IRA. Some
say leave it alone. Some say take the annuity. I should mention that
I will be doing some consulting work soon to supplant my pension and
to qualify for SS as federal employees don't qualify for SS if they
did not contribute.
Secondly, last year, my significant other (not wife), recieved a
large, lump sum, distribution from her former husband's pension plan
per their divorce decree and she will continue to recieve monthly
checks as well. Problem is the company did NOT take out any taxes for
that lump sum which significanly increased her income for last year.
The tax software says that she now owes about $6000.00 in taxes. Is
there any way she can mitigate this tax burden?This question is outside my areas of expertise, but I feel reasonably
certain that you will be more likely to get a good response if you
increase your price considerably. At your current price, the
Researcher who answers your question will earn $1.50, which might be
appropriate for a question that required five or ten minutes of work.
I doubt that the kind of question you're asking can be well answered
in so short a time.First of all let me say that I agree with the fee remark. Not to
sound harsh, but if the information is important (and it appears to
be) you should be willing to pay a reasonable fee for a viable list of
solutions. When I was on Wall Street many people often weanted my
expertise but did not want to pay--that is not right. Would you ask
your doctor to not charge you or pay him $2.00 for surgery?
Most likely, any financial professional who entertains your questions
for free will do so with the hope that he can have your
business--trust me that is the way it works. However, I would caution
you against this approach. Obtaining static advise that can be eaily
answered by any knowledgable financial professional is VERY DIFFERENT
than letting him manage your assets. If you want a financial planner,
never let them manage your assets or direct you into money managers.
Lately they have been trying to advertise that they can do both and
they cannot.
The answers to your questions would require examination of many
documents and other information. My best advise to you is to find a
person who ONLY does fee-based planning (you pay a fee for service)
rather than management of assets. I would say that $200 is a fair
price for the answers to your questions.
I will tell you that in 99% of instances, annuities are a rip-off and
I feel they should be dramatically restructured or banned completely.
It is an insurance product--need I say more? They have the highest
fees of any financial products and they hide them well. The only
benefit of certain annuities is to protect assets in the event of a
divorce. Also they are good for undisciplined individuals who want a
stable income. However, the fees can be anywhere from 4 to 7%
annually DESPITE what salesman tell you. Stay away!
Bond fund are a HUGE ripoff that most people do not realize.
Basically all mutual fundsa are a ripoff with huge fees. All they are
is marketing machines. Consider the fact that Bill Gross of PIMCO,
who manages the largest bond mutual fund in the world (over $75
billion) has returned an average of 6% annual over the past 10 years
(havent checked lately but that is close i am sure). Meanwhile the
total fees are over 2%, and mutual funds still do a good job of hiding
certain fees. Nevertheless the fees that are listed are around 2%. I
dont know aboutyou but I prefer the money market over that.
If you want some good bond funds that charge smaller fees and can be
bought and sold like stocks, check teh closed-end funds. My favorites
are ACG and HTR--bery diverse, monthly portfolio transparency and
monthly dividends (about 8% dividen yield). The prices can be
volatile but they are pretty solid. Learn about closed end funds on
closed-endfunds.com
Financial pros dont push them because they cant make any money from them.
ROlling the 401k into aan IRA is what I WOULD DO. However, the
problem with access to the markets is that everyone soon thinks they
are stock gurus, when in fact they are clueless. If you are committed
to managing you own assets, I could teach you how to easily outperform
mutual funds (easy), indices (easy), money managers (easy) using a
conservative approach. Bottomline is this--only buy big name
companies when the street dumps them. Stay out of airlines, grocery
chains, freight, publishing, transportation--all terrible businesses.
Im talking about the big name companies but stay away from
financials--i am expecting a crisis with loans and derivatives.
I would keep a large cash position over the next few years as I expect
major problems in the market--buy on sell offs and sell on
rallies--the big names. Right now, DELL is startig to look very
attractive, as is AMGN and INTC. Still some downside most likely,
but they are undervalued currently.
If there was a way to exchanging emails, I would help you for free. I
am no longer working on Wall Street so I have no hidden agendas. Good
luck
To the "S&P 500", if i were you I would not be in the S&P 500 going
forward. Over the next decade, I cannot see it returning more than 4%
if that (unadjusted for inflation) for a variety of reasons.
Amyway this is getting long..I'm done. Good luck.I am a financial advisor that specializes in the TSP, email me and I
could offer my advise for free.
Cheers,
PJDI am in a similar situation. Here is something to think about.
Keeping in your current 401K allows you transaction fee free
transfers. If you move money in a IRA you will have to pay for
trades. Also, do you really want the flexiblity to put your
retirement in one stock if you choose. That is when you get in
trouble. Keep it there.
Is that 4% rate on your condo fixed or floating? Sounds low to be
fixed. That is a issue too if floating.
Overall I like your current position. I like the 25K sitting is
Emigrant Direct/cds. Emergency money. Personally, I feel 20% in
Government securites is too high, I am a SP 500 kind of guy.
If your other does not work she could put some money in a ira to
lessen the tax burden. I can't remember the limit on the top of my
head.
Good Luck,
Paul#If you have any other info about this subject , Please add it free.# |
|
Filed under: xn--qi1a.com — jane @ January 5, 2009 edit