Answers and Guides from Top Financial Advisors

Hi Jenna from Boston, You have some great answers here. Sometimes I'm torn to answer questions because it truly is what I refer to as sound bite financial planning. If you have the opportunity to sit down with an advisor who can look over your current situation, income, spending, savings - then outline the goals you have for yourself both in the short and long term, I would highly suggest you do so. Every situation is different - financial products are just that, products. You need to have a strategy that will keep you moving in a positive direction with an eye on how you can access the money between now and the time you reach your pinnacle of retirement where you want your money to produce an income for you. In order to do so, there is alot more to the answer based on what you want to have happen. Learning the strategy of using financial products and maintaining the ability to change with economic conditions is a must. I would suggest you find a financial advocate to work with who listens to you and helps you achieve what it is you are wanting to accomplish.

Jenna, the most you can put in an individual Roth is $5500 per year. On an individual Roth, there is an income limit of $112,000 for individuals and $178,000 for couples filing jointly. You could have greater investment options with lower, or at least more controllable fees. Direct contributions into a Roth can be withdrawn tax-free at any time, though rollover contributions need a 5 yr wait.

On a Roth 401(k), the limit on contributions is $17,500. Though there is no income limitation, if your plan does not have 'safe harbor' you could be subject to what is called a corrective distribution. Check with your plan administrator, not HR to be sure you don't get caught up in that. HR may tell you that you can contribute up to $17,500, but the plan administrator will test the plan and send you a check if it fails the test. Distribution is subject to traditional 401(k) rules, meaning there is a penalty for withdrawal before age 59 1/2, 55 if you separate from your employer. Your plan may permit loans, which would not be an option on an individual plan.

Hope this helps.

The main difference between the two is how much can be contributed to each. That maximum you can contribute to a Roth 401K is $17,500 the maximum you can contribute to a Roth IRA is $5500. The other advantage to a Roth 401k is that your employer can match if that is that is the company's policy.

John, advisors that can offer advice and charge a fee are called RIA's, so any RIA , or IAR can give advice for a small fee. The only reason your current broker cannot advise you is because he can't charge a fee. And frankly, for compliance reasons, he should not be giving you free advice. In this highly regulated and litigious industry, if he gives you bad advice, both he and his firm could be liable.

If your 401(k) is with your current employer, it is not likely you can move it anyway. If you are no longer employed there, you should really probably transfer it to an IRA where you could have greater investment options at lower fees.

There are a number of firms that will charge $300-$500 and send you advisories by email as to how to allocate. It is usually up to you to act on the advisories, and so the advice is worthless if you do not stay on top of it. If your 401(k) provides a brokerage account, there are firms that will do that as well. Just google '401k advice for individuals' and you will find a variety of services. I think you would be better off to consider finding someone local that can meet all your needs. Seek referrals from trusted friends, neighbors, and associates.

An important question is how large is your account? If you have a $10,000 account, it really might not make sense to pay someone to manage it, unless you have a financial advisor that will accept it as part on your total financial management plan. If your account is relatively small and you really do not feel comfortable making investment choices and watching it, you may just want to select an asset allocation model that is offered to you by AON. For example, if you can tolerate 'moderate' risk, simply select the 'Moderate Asset Allocation Fund' It is typically a 'fund of funds' to meet your level of risk.

If you have a larger account and you feel you need help, I would consider finding a new advisor. I am not knocking your current advisor, he may be very good. but you should consider your needs.

Jenna, The differences can be summed up as 1) Access and 2) Dollars. To access a Roth 401k your employer has to have that option in your retirement plan. You can elect that option and your salary deferrals will be taken after taxes and posted to that type of account. You can split your 401k contributions between Roth and pre-tax if you want but in total you are restricted to the maximum amount you would have been subject to anyway. To access a Roth IRA you have to have AGI below a certain level. The amount you can contribute is 5 or 6 thousand dollars depending on your age and earned income. Choosing between the two types of accounts depends on which one you have access to and how much money you want to put away. Best of luck.

Roth 401k is at work and a Roth IRA is an individual plan. Both plans have maximum annual contributions so the real question is how much investable assets are you looking to invest for retirement. Both will provide tax free growth and withdrawal in retirement. If you are in good health and want to put larger sums away, then a properly structured life insurance plan would create lifetime tax free income as well.

Specific counsel would require more information and is beyond the scope of this platform. However - In the end- I would say that the Roth / Traditional Split does not matter all that much; What's most important is the % of your income that you invest - and your asset allocation decision.

Just to add a little more information... The plan may not allow an outside advisor to manage the account for you. This is called taking discretionary management authority and the plan sponsor accepts some liability by allowing that to happen. For this to have any value to you within the plan, there should be a brokerage window that would allow your outside advisor to have a broader selection of investments. There are a lot of "ifs" here so if I may offer a suggestion, ask your outside advisor to look at your in-plan investment choices and design a portfolio for you. Our company does that at no charge for clients. Best of Luck!

There are two ways that this could be done, assuming as John Benedict says that the investment adviser is permitted by his or her own firm to do it. The first way is if the Aon Plan has a feature called a "brokerage window" that takes you to a brokerage account permitted by the Plan. You could select the brokerage window as your Plan investment and the investment adviser could then manage the assets in the brokerage account, without being limited to the investment funds offered by the Plan. The second way, if the Aon Plan does not have a brokerage window, is for the investment adviser to access your 401(k) account using one of the confidential data services that are available to advisers for this purpose. The adviser then could manage your 401(k) account for you but would be limited to the use of the investment funds offered by the Plan.

John, If you are no longer working for the company that sponsors your AON 401K plan, there could be advantages to rolling over the assets to an IRA or alternative 401K plan that has more or better investments options. If you are still working for the plan sponsor, you might also check to see if they would allow you to hold your account at a brokerage firm such as TD Ameritrade or Charles Schwab, which could be beneficial. Whether you keep your 401K account where it is or roll it elsewhere, as John stated above, a firm like mine (as Registered Investment Advisor) can manage the investments in your plan and/or advise you in accordance with your goals and objectives. I manage the assets in a number of 401K plans for clients throughout the country, and just took on new one held at Schwab yesterday. Feel free to check out our website at www.winerwealth.com and contact me if you have questions or are interested in my assistance.

John,

I am not familiar with Ameriprise's compliance rules, but this could be their policy. They may not allow their advisers to manage anything for clients without it being in an Ameriprise account or in a product that they sell to clients.

If you are still employed and you want to leave the funds in the existing 401(k), you should seek out a Fee Only Independent Registered Investment Adviser. They should be able to help you manage the 401(k). There are typically two ways that my firm will mange someone's 401(k) and I would assume other advisers could do this for you too. One way is by managing it on a non discretionary basis. By doing this the adviser would give you recommendations of which fund options to use and how to allocate the funds. It would be your responsibility to actually make the recommended changes. The second approach is for the adviser to have discretionary control. With this approach the adviser accepts the responsibility to not only make the recommendations, but also to make sure the changes are done for you. Either way works. It just depends how much control you want to maintain. Also, if you choose this way don't be surprised if the fees charged by the adviser are a little higher for the discretionary management versus non discretionary. This is due to the fact that taking discretionary control the adviser is responsible for the implementation and not only providing you the recommendations.

If you no longer are working for th ecopany another option is to roll the funds to your own IRA and have and adviser manage the funds for you. By doing this the investment options will be greater since you won't have to rely only on a relatively small selection of option inside your 401(k). The investment cost of the investment options could also be lower depending on the type of options you would choose.

I hope this is helpful

Hi John! Here is my question for your advisor: how do you get paid? If he is paid based on the dollar amount of assets he manages, then, yes, you will need to transfer the account in order for him to manage your 401(k) funds. Otherwise, he is not getting paid for the education, advice, and money management he is supplying. Contrary to popular belief, financial advisors don't work for free.

Here is my question for you: what is your reasoning for leaving your 401(k) at AON? If you still work there, that makes sense. If you have left the company, you may want to consider taking the funds with you - kind of a control issue. Also, if you are questioning your advisor's advice, get a second opinion. You want someone you can trust to help manage your retirement funds. Good luck!

Another consideration is does your 401k have brokeragelink access? If it does, you are able to open investment options of a full blown brokerage account. You and your advisor would be able to invest in a wide range of investments such as stocks, bonds, etf's. The Ameriprise rep is only held to suitabilty standard. The RIA model provides you with a fiduciary relationship which simply means that the advisor must always act in your best interest. Hope this helps. Good Luck!

These stock options may be inside a qualified plan or outside a qualified plan. As you can see from the responses, this could be a hand grenade or a cornucopia. We would all need a discussion and have a plethora of questions for you before really know which path to recommend. It is very important that you find someone who is competent to help you sort it all out. Most of the choices that you could make have irreversible consequences and could be very costly to you. Go forth and conquer.

It is difficult to say whether life insurance or a long-term care insurance policy would be a better investment against risk. They are both addressing different types of risk. Are you more interested in possibly protecting the depletion of your assets if you were unable to care for yourself or provide money when you pass away for household costs, end of life expenses, transition money for your significant other, etc.? Before making any decision or diving further into specifics, I suggest you make a list of your goals and wishes in order to see what strategy would accomplish them the best.

Like others have mentioned, I would work with an advisor to determine if you have a need for life insurance before surrendering your current policy. Sometimes there are goals or factors you have not considered.

Since there have been other responses about possibly obtaining life insurance with a long-term care rider, you should first figure out if you need the life insurance. Do you really want to pay for life insurance if you do not have a need for it? If you decide to purchase a long-term care insurance policy by itself, think carefully about whether you could afford the policy in the future. Premiums could increase in the future.

We often address questions like this on our blog, so if you you want to learn more about other topics, check out http://www.empirical.net/empirical-wealth-management/empirical-blog/.

Hi C, I agree with the group and strongly urge you to look at the asset based type solutions. Translation - Life or annuity chassis products that give you a death benefit in case you never need to pay out of pocket for care, a long term care benefit in case you do need to pay for care, and a cash value in case you win the lottery and want your money back. One America, Genworth and Lincoln Financial all have solid products for this purpose. One America has one attribute that the others do not. They offer a Lifetime Continuation of the benefit for a small annual premium. It's guaranteed to never go up and if you do a joint policy with you and your husband, there would be benefit dollars available as long as either is alive.

Mark and Michael have made some very good points on this issue. These areas of financial planning can get complicated. Consider the purchase of a LTC policy that would offset the risk if needed, and if you never need it, the premium can be paid back to you in the form of a death benefit or return of premium. You should seek professional advice on this decision so that your personal situation is fully understood. Hope this helps.

C, there are a lot of moving parts to your UL policy, and they are important because, other than need, it will determine if you have value that you are giving up.

How long have you been paying premiums, what are the premiums going forward, how much cash is built up, have you paid all the admin expenses on the policy?

Sometimes there is an admin expense that is loaded onto the first 7 or 10 or 14 years. FYI, that is a key reason why some UL policies can build cash value much quicker than others. So you may have a policy where the admin fees has been recently paid; now you policy's cash value will start to grow rapidly. I don't recommend life insurance as an investment vehicle, but it's possible that you are in a position where you've just gotten over the hump. In regard to making a decision, this is the toughest position to be in.

If you have been building cash value over years and surrender it, you will have to pay tax on the gain over cost basis. It might be wiser to get a 'Reduced Paid-Up' policy. That is where the insurance company will give you a paid in full policy for whatever your current cash value will buy.

If you have reasonably low cash value and you don't see the value in paying continued premiums, and your husband really doesn't care, and there are no children or grandchildren that you want to name as beneficiary, then you truly might not need it. But be sure, because 'you don't know what you've got til it's gone'. Keep in mind that you are 55 now; if you breathe your last breath at age 95, in 40 years, with inflation, it might cost half of that just to put you in the ground

My current preferred method to provide long term care is with, coincidentally, life insurance, or alternatively an annuity, with a long term care rider. The rider will pay 2-3 times the face amount if you cannot perform 2 of the 6 activities of daily living. Hopefully, you still are in a Preferred health classification;, you can use this strategy of transferring your cash value through a tax free 1035 exchange to a new policy, either as all of your long term protection, or in conjunction with a stand-alone LTC policy.

This should be part of your family's overall financial plan. Seek professional advice. Consider the alternatives.

Mark gave some great advice there. One more thought is that a lot of insurance companies now offer life policies and annuities that have Long Term Care benefit riders. In essence, they can do "double duty" to help out with Long Term Care costs into the future. I'd really recommend you finding an objective financial advisor in your area who can help you make the best decision for you. It might be possible to "trade" your existing policy for one with LTC benefits included.

Scott provided a great summary of these Alternative Asset Managers business model and sources of revenue, but did not give a specific valuation metric. Coming up with a So I am going to give my 2 cents.

Any business is valued based on its present and future cash flows discounted at a certain rate of interest. So the question is, are these Alternative Asset Managers going to grow at a rate faster than the Traditional Asset Managers and do they deserve a higher multiple or lower discount rate, etc.

The first Alternative Asset Manager that went public a couple of years ago was Fortress Investment Group (FIG). Per Yahoo Finance it is currently valued as follows (caveat: these have not been independently verified):

Forward PE=10.5 PEG Ratio=0.77 Price/Sales=2.0 Price/Book=2.59 EV/EBITDA=9.80 ROE=26% Forward Dividend Yield=3.2%

One can compare FIG to Traditional Asset Managers like Legg Mason (LM) and/or Blackrock (BLK). What I found in a quick and dirty back of the envelope comparison was that there was not a clear cut valuation parameter that stood out for one group (Traditional) vs. the other (Alternative). For example, on a PEG basis FIG at 0.77 was lower than 1.33 for BLK. The market obviously feels that BLK deserves a premium based on its size, longevity, etc.

Ultimately, the valuation will depend on the following parameters:

1) Your forecast of the future growth of the business cash flows 2) Confidence in your forecast 3) Management's ability to execute and deliver on those forecasts 4) Whether the management is shareholder friendly 5) Demand for the shares etc. etc.

I have copied links of various articles and reports that will shed more light on various valuation related issued when looking at Private Equity Managers.:

http://finance.fortune.cnn.com/2012/05/03/private-equity-firms-valuations/

http://dealbook.nytimes.com/2007/03/16/valuing-a-public-blackstone/

http://www.bloomberg.com/news/2011-08-17/carlyle-pitches-wall-street-on-ipo-valuation-to-rival-blackstone.html

http://www.washburn.edu/sobu/apm/Reports/BX.pdf

Hope this helps.

First of all, you need to give serious thought to surrendering an existing life insurance policy. There are a myriad of issues around this. If you were gone, your income, your retirement savings contributions, contributions to the household, the cost of funerals, wakes, etc. are just a start. We always recommend conducting a probability analysis around this topic. I know - not a very simple answer, but eliminating a life insurance policy is serious - the odds insurability can go down every year and the cost of insurance generally goes up every year. In other words, if you lose a policy, it may be impractical or impossible to get another. It's a big decision.

With that being said, I like your consideration of a long term care policy. If the life insurance is not needed than any available net cash value (above taxable gains, surrender charges, etc.) could be available to help finance the long term care policy. Also, if you are eliminating the UL premium that now available cash can go to the LTC policy. The LTC policy is another big topic. Consider shared LTC policies for both you and your husband. If you only get a policy for you and your husband ends in situation where you and family members can not care for him, his extended care could end up using all your assets. The same thing could happen to you in relation to your husband's future. Long term care policies have lots of variables - inflation protection (very important), elimination periods, maximum daily benefits, etc. Consider shared policies with decent benefits that fit into your budget. Work with an advisor that will help in the process.

This is a lot of info, but I hope it helps. Mark

When you exerices your options you are taxed on the difference between your exercise price and the market price. Therefore you have money at risk. If you hold for long term capital gains there is a risk that the stock will go down--why take the risk? You are better off exercising and selling to avoid that risk. The only advantage of stock options is their leverage and after you exercise there is no leverage.

Without getting too specific on any of the individual names that are public today (e.g. Oaktree, Blackstone), here are some of my general thoughts on the business model:

1) The main thing to remember is that these are asset management companies at their core. The primary difference between a private equity company and a more plain vanilla asset manager (think Blackrock or PIMCO) is the fee structure, which is much more favorable to the private equity model.

2) The difference in the fee structure is that when a private equity company raises a fund, they raise committed capital, which means that they are literally raising the right to receive capital at a future date from a client (for example a pension fund). The PE company begins taking fees on this pool of committed capital before it is even deployed. The PE company then typically has a certain amount of time to invest the committed capital, and if it doesn't deploy all the capital it loses the right to invest those commitments. On top of the fees on committed capital, there are then a series of other fees that the PE company takes. The main ones are the management fee, which the company charges to oversee owned assets once the capital is deployed and then of course the incentive fee, which is the ~20% fee that the company can earn on a profitable investment.

3) So to answer the question more directly, the value of a PE company is tied to its AUM like any other asset manager, and for a PE company you would have to include committed capital in that calculation. I haven't run a specific comp table comparing the value of the PE companies to other public asset managers (Blacrock, Legg Mason, etc.) but I would assume that the PE companies trade at premiums to the vanilla asset managers, although I'm not sure that's justified (I'm not sure it isn't justified either though). As to whether or not they should trade at a premium, I can see the argument going either way based on my level of understanding. On the one hand, PE companies have the potential to earn much, much higher fees than traditional managers. On the other hand I would argue that there are disadvantages to the PE model in that you are only as valuable as your last fund because the funds have defined lifespans. By contrast PIMCO can and probably will be managing its mutual funds for the foreseeable future.

4) Two other items to note:

a) Remember that if the market has enough confidence in a company, it will not be valued based on its present operating fundamentals but on its prospects for future growth. Asset managers are operating in extremely deep capital markets, and so the potential for growth can be astronomical even if the growth wont necessarily materialize.

b) Growing an asset management business isn't about who is the best manager, it's about who has the best sales and marketing. A good sales force will beat a good investor every day of the week in building a successful business.

5) Remember who you're partnering with. As a shareholder in any company it is imperative that you evaluate the trustworthiness of management. This means not just going with the smartest team, because if the smartest team happens to be a greedy one, they will spend their day thinking about how they can enrich themselves at the expense of the shareholder. For PE companies you should take extra care for the following reasons:

a) Asset management businesses are people businesses. They are not capital intensive and so arguably there is very little reason why they should be public companies. The primary operating reason that most asset managers come public is for succession and retention purposes, meaning that it gives them a tool to give equity to their employees. PE companies are generally not coming public to enrich their public shareholders and in fact it is likely that behind closed doors they view retail investors as "dumb money."

b) Wall Street is teeming with smart, selfish and short term thinkers. That's one of the most dangerous combinations I can think of. In my mind the excessive fee structure that PE companies charge should be an instant red flag highlighting management's propensity for greed. PE firms are hired by their clients to advise on investment opportunities. Part of being a good advisor is protecting your client from excessive fees even if that comes at your own expense. IMPORTANT: That is not to say that everyone who works in PE or manages a PE firm is greedy and lacks integrity, but it is a warning to potential shareholders to tread with extra caution.

There are endless Rule of Thumbs, calculations, and strategies for determining how much life insurance you need. The difference between an Insurance Salesperson and an Insurance Advisor is that the Advisor will help you determine your actual need while the Salesperson will tell you what they think you need. I know we are suppose to rely on our hired professionals for sound advice, but the amount of life insurance you need is a decision that needs to be your call.

A simple and accurate way to determine the amount of life insurance you need (insert opinion here) is to walk through the scenarios with your spouse. I know it can be a bit morbid, but it's also efficient and effective. Sit down with them and answer these questions: 1. If I died today, what would you need or want? 2. If you died today, what would I need or want? 3. If I died 10 years from now, what would you need or want? 4. If you died 10 years from now, what would I need or want? 5. If I died 20 years from now,... etc.

Some people will answer those questions and find don't need any life insurance. Some will require life insurance only to cover their needs (debt, income,...etc). Some would like enough life insurance to cover their needs AND put their loved ones in a better plan financially (ie "wants"). Once you both answer those questions, then you can take those answers to an Insurance Advisor who can explain how different life insurance policies work and shop for the best rates. Hope that helps!

Invest With Purpose. www.appliedcapital.com

Saleh - You're asking the right questions and these answers are all excellent. Just keep in mind that while the principles of investing will always hold true, the rules and limitations unfortunately have a way of changing. The one factor that could make or break your retirement years is how your savings or nest egg is taxed when you begin to withdraw it.

The best defense to saving in a constantly changing tax environment is to perpetually hedge your bets. Instead of focusing on which type of accounts are best under the current tax code, you will allow yourself more future flexibility by concurrently funding all 3 of the tax buckets. Tax-Deferred, Tax-Free, Taxable. So a good mix of your pre-tax (Tax-Deferred) 401k and a (Tax-Free) Roth IRA for you and your spouse as Andy mentioned is a great start. If you have additional funds to save you can continue building your Taxable bucket by saving in a joint or trust account, pay down your mortgage, or diversify into other real estate. And yes, Rod is exactly correct in that your employer match is your first and best options since "free money" beats anything an advisor could ever do for you.

To determine the exact allocations you'll want to find a good Financial Advisor who will not only work well with your personality, but is also willing to communicate with your other advisors like your CPA or Estate Planning Attorney. When you have this allocation discussion with your CPA, keep in mind his motivation and understanding of your objectives. Unless you specify otherwise most CPA's have one goal... lower your tax bill as much as possible in the current year. If you make it clear you would like pay the least amount of taxes over the next 20 years AND in retirement with the maximum flexibility, then a good CPA will now see that you want him to be your Tax Planner/Advisor and working with your Financial Advisor is a part of that. Feel free to contact me to discuss any other questions or ideas.

Invest With Purpose. www.appliedcapital.com

So far... all good answers...
Just to keep it simple... take the match... if nothing else, take the match... and, did I say, "take the match"?
Okay, it's only for one year at a time, but, a match is equivalent to a 100% guaranteed return for every dollar you contribute. Where else are you going to find that kind of deal? Best Regards... Rod

Good for you, Selah! You are not too old to get started. I agree with the comments above, so I won't rehash those. Here's what jumps out at me about your situation. You stated that you have not developed good savings habits. That may mean that, at your salary level, you may have a spending issue. I'll take my lumps from other advisors on this one, but I recommend you start with a budgeting class. Take a Dave Ramsey course with your wife to get your spending and savings habits in order. Then you will really be able to save the 20% you want without sacrificing your other needs. Good luck!

J, there are a gazillion answers to that. My colleagues have touched on some. Mostly, it depends on your goals or purpose for the money. If you don't have a specific purpose for the stock, you may want to leave it alone. If you are leaving the company, you will want to be sure to take your equity with you, though. However, if you are concerned about tax consequences, maybe your 'exercise and hold' plan will work. There are too many variables to consider here, so you best bet is to find a financial planner (not a salesperson) and spend some time discussing your situation. Good luck!

Whoa . .. Has your advisor talked to you about NUA? If not, fire them. Net unrealized appreciation is a tax strategy. In English, you may be able to take your company stock out of a 401k (or move your allocation to company stock from a deferred compensation account and repurchase in your 401k), pay tax on your basis, then qualify for capital gains on the appreciation. Many CPAs don't understand this, but hey - most advisors are salespeople that wouldn't know livestock from preferred stock. You know your company, and with a strong financial plan you can make a business decision on how much risk you want to take. We are working with a client near retirement now. We found how he could decrease his potential tax liability by using a NUA strategy. What is the catch? The stock has to go up, not down. That's the trick, isn't it? It is also inside a 401k - and you may not. The main thing an advisor that knows what they are doing will want to know is - do you pay the tax on the options or does your company? Good luck! Drop us a line if you want to talk.

STOP!!! Break it down in three steps: 1. Do the pre-tax! You are starting late and probably not going to have a ton of income when you retire (whatever that means - let's say doing what you love full time versus your job). 2. Work on doing 20% first and see if you can do it. Why? Roth IRAs on top of your 401k is a great idea, but there are MAGI phaseouts that can hit you. Plus, let's just say I want to see you do 20% first, and work out the tax details later. Don't take the wrong way - take is as 'do what is in front of you first'. 3. Allocate properly! No, your 401k provider is probably useless - that is okay! Find a great advisor who will do a financial plan that includes telling you how to allocate you 401k money.

So - do the hard part first - 20% of your income. Worry about extra savings later, but before April 15th of next year. Then find someone who will do a financial plan that includes how to invest your 401k. Okay, okay - our firm does that and we have lots of clients in Texas. I said it. There are also a few other qualified CFPs and CFAs that can do it too. You found the right place to find decent people, no matter who you go with.

You can do this.

First of all, congrats on your commitment. Unfortunately, many will never commit and will have to live a poor retirement. Your income is strong, is it fixed or growing? Once you get started seeing your wealth grow it gets easier and easier commit to more and more. I've got quite a few millionaire plus clients who started right where you are.

Do you have a mortgage and/or children to deduct? Your income is at the point where taxes start being a real burden and all deductions will help. For this reason I would suggest pre-tax for your retirement plan. If you want to contribute to a tax-free retirement plan, a less known strategy would be life insurance. One plan came out recently that even includes an income rider. Life insurance costs can be somewhat expensive but so are taxes. The other benefit of adding this kind of strategy is the self completion feature if you fail to make it to retirement.

The only other way to defer more pre-tax dollars would be to start a side consulting business and open a defined benefit plan for both you and your wife. This would work even better if your income continues to rise.

These are some suggestions only. If you would like to discuss, contact me or another competent financial professional that has broad based knowledge.

Congratulations on getting committed to saving for your retirement.

Assuming you have a number of high quality, low fee funds to choose from in the 401k, and the administration fees are low, then max out the 401k. Selecting the pre-tax version of the 401k will reduce your overall tax bill, which will give you some additional funds back in your pocket to invest elsewhere.

You are on the cusp of having too much income to be able to invest directly in a Roth IRA (Phase out starts at $178k and completes at $188K) However, you can do a 'back door' Roth. That is, you open a traditional IRA and make your investments. Then, very shortly thereafter (like the next day), you convert it to a Roth IRA. Because you only pay tax on the gains in a conversion, it is likely it will be very small, if any. (Note, if you already have a traditional IRA, the taxes are determined on the entire balance. There are ways around this too, but that is for another question).

Make sure you open the IRA for your wife too. Max them all out. And if you still have money left to invest, then look at a regular taxable investment account. Just make sure you have tax efficient funds in this account.

Marvin,

Since you have not provided any information on the type of account you are trying to find the balance of, it is very difficult to answer your question. If it is a 401(k) account you are inquiring about you should be receiving a quarterly statement or at the very least an annual statement that reflects your account balance. If it is another type of company sponsored retirement plan, you should contact your HR department at your current or past employer and they can provide you with the appropriate information. You will need to provide us with more information about the type of account you have in order to point you in the right direction.

Disclosure: The posted information is for informational purposes only. This message does not constitute an offer to sell or a solicitation of an offer to buy any security. All opinions and estimates constitute Karp Capital's judgment as of the date of the report and are subject to change without notice. Accordingly, no representation or warranty, expressed or otherwise, is made to, and no reliance should be placed on, the fairness, accuracy, completeness or timeliness of the information contained herein. Securities offered through Financial Telesis Inc., member SIPC/FINRA. Financial Telesis Inc. and Karp Capital Management are not affiliated companies.

Marvin, depending on the size of your employer, you will need to contact either Human Resources or the plan administrator. You can have them update your address so you can get current statements, and they can give you instructions on how to log on to your account through the online portal

Every plan has a third party administrator. If your company is large enough, they may have the capabilities to help you. Regardless, call HR and if they are not equipped to help you, just ask for the number of the plan administrator, who, as the name implies actually administers the plan.

Dan,

You should be able to payoff your outstanding loan in your 401(k) account with your current employer by writing a check for the outstanding balance and interest. You will need to check with your HR department to find out what specific forms you will need and also to determine the payoff amount. As long as you are still employed with that company you will not be able to transfer your account to an IRA rollover. Once you terminate employment you can either transfer your 401(k) assets to an IRA rollover or to your new employer’s 401(k) plan without tax liabilities or penalties. However, if you subsequently withdraw the funds from the IRA rollover account you could face a potential penalty of 10% if you are younger than 59 1?2 , and the withdrawal will be treated as a taxable event. It would be wise to work with your accountant to determine the best options for your specific situation.

Disclosure: The posted information is for informational purposes only. This message does not constitute an offer to sell or a solicitation of an offer to buy any security. All opinions and estimates constitute Karp Capital's judgment as of the date of the report and are subject to change without notice. Accordingly, no representation or warranty, expressed or otherwise, is made to, and no reliance should be placed on, the fairness, accuracy, completeness or timeliness of the information contained herein. Securities offered through Financial Telesis Inc., member SIPC/FINRA. Financial Telesis Inc. and Karp Capital Management are not affiliated companies.

Hi Melodie! I'm not quite sure what you are asking, so I'm guessing here. Did you want to know how to view your 401(k) account information and balance? If so, check with your Human Resources department. They will have information on how to access your plan information online. I like Gina's answer as it relates to viewing the plan in context of how it works. You may also want to see how it is incorporated into your overall retirement planning.

Marvin,

I'd love to help you out on that question, but... you've not provided much information here, aside from your name and your question.

A couple of things that would help, is, who your employer (or previous employer) is.

Which Company handled the plan you were involved with, etc...

If you can give us some more information here, maybe we can help. My crystal ball just isn't working well with all the tornadoes here in the Midwest.

Best Regards...

Rod

There are two ways to look at your account balance:

1) The old fashioned way, which is from a paper statement from your custodian, which is usually sent on a monthly or quarterly basis. 2) The newer way, which is online, real-time, all the time.

It will depend what you signed up for and what the capabilities of your Custodian and Third Party Administrator are.

If you do not have access to any of the above, then a call to your company's HR supervisor would be the best course of action.

Hope this helps.

Rita, I probably cannot tell you specifically what to invest in, based on a few short paragraphs about you.

I recommend you seek out a good financial advisor in your area. Find someone who is not trying to sell you the moon and the stars; someone you feel comfortable with, that is looking out for your best interests.

And this is why. You really should have a financial plan. You need to address income, safety and longevity, as well as possible liquidity concerns. You need to take a risk tolerance questionnaire so you more accurately know what level of risk you can tolerate. You need to know what it takes for you to be able to sleep at night.

I would expect you need some growth, but not above your personal comfort level. I would not recommend VTINX as your only holding, It is fairly conservative with relatively low risk. I would agrue that in a well managed and diversified portfolio as part of an overall financial plan, you can get greater diversification and performance without much difference in risk. And VTINX or something similar, could be a part of that plan

I know of $80,000 Non qualified and 23,000 Qualified. I don't know what is in your cash emergency savings. Though you would not actually co-mingle the monies, you can strategize the 2 accounts to come up with a plan. I am not so comfortable with you putting all your savings in an annuity. You would get a guaranteed income, but your money becomes illiquid. If you can work out a cash flow plan that works for you with a portion in an annuity, that makes more sense to me.

Without knowing details, I have concerns about you not expecting to live more than 12 years. Though it may be true, the possibility exists that you plan for 12 years, and then outlive all your money. Irony.

Again, without knowing all the details, I would try to set up with a financial advisor a low fee, well diversified, risk managed portfolio. I would try to be on a budget where you live as frugally as you comfortably can. Try to stretch those retirement dollars. Retirement planning and wealth management are important on any level. If you look, you can, and will, find an advisor that makes sense to you and will help you.

Hi Rita, Congratuations on your retirement. To preserve your $60,000, and if this is the only money you have to work with, consider an immediate annuity where your beneficiaries receive whatever you have not received from the $60,000 - if you outlive the annuity, it will pay the monthly income benefit for your life. At your age, you should be able to find a company who will give you at least $400 of income per month for life, I'll be happy to help, give me a call.

Hi Toni, All good answers above. Remember, every dollar you place somewhere has a cost associated with it, nothing is free. You used the word "sell," everything is for sale, the real question is what is it you want to buy and for what reason are you making the commitment. Your personal commitment to your future is what you need to think about. Once you have that outlined, then plan with the appropriate financial products that will get you there, with an advisor who is on YOUR team to guide you toward your accomplishments.

Hello Melodie, The first step is to understand your personal planning. What are your goals, your cash flow. If the company offers a match, when will their contributions on your behalf be vested (meaning if you work for them for the time envelop allowed in the plan, for example seven years, then you receive a percentage of their contribution each year until you have successfully completed working for the company for the full vesting period where their contributions are 100% in your account. Each contribution you make however cannot be lost back to the plan. If you happen to stop working for the company during that vesting period, you can roll your contributions and any vested contributions to your personal IRA. Please give me a call for more specifics on your personal planning situation.

Take your time! Before you can properly invest your $60,000 of savings you need to fully understand your monthly expenses. Compare your monthly expenses to your monthly income which seems to be just social security. Now if your expenses exceeds your income, the difference is your monthly short-fall amount. I would take this amount and multiply it by 24 months and determine the amount of un-investable funds that should be maintained in a cash account. review annually and increase from the investment account.

Now deduct your amount of un-investable funds from the $60k to determine your available funds to become investable funds. Now you have to determine your risk appetite or risk tolerance before you can invest. I would expect it to be maybe a 50% stock and 50% income mix. This is critical to determine before you invest any dollars in any investment(s).

Also before you invest any money in any funds review the operating expenses or costs of what you invest in. You may not control the market results but you do control where you invest and the related costs of investing!! Low cost ETF's may be your best option.

No professional can make an investment recommendation for you based on the limited information you have already provided. But please be careful before you invest your life savings because the risks and costs vary widely.

Do you know what is in the Vanguard Target Retirement Income Fund? There is a high probability that fund will experience a significant downturn at some point. Either the stock market portion will get it or rising interest rates will. That doesn't mean it is a bad fund, you just need to understand the potential for volatility. You might be better off purchasing the individual funds that make up your fund and drawing down from the specific assets over time. This is the beauty of dealing with no load mutual funds, you can get the economies of scale with a relatively small amount of money. Good luck to you and be flexible with your distributions.

Rita, The answer to your question depends on your financial situation (i.e. sources of income and assets other than the $60K you mentioned), lifestyle and expenses, health and family health history, investment knowledge and experience, risk tolerance and time horizon for various financial objectives. I would suggest you hire a financial advisor who will ask for this information and then be able to provide you appropriate and effective advice. As others have stated, at 71, you can't afford to make mistakes with your retirement savings. Working with a financial advisor should increase the likelihood that you will make the right decisions and be able to maintain your lifestyle, comfort and financial security throughout retirement.