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My husband and are ready to retire. I have a 401K with my prior employer. I am about to roll this 401k over to an IRA. We own our home in full. We also just found a retirement home of our dreams and wish to find the most effective way to purchase?

This new home, then sell our current home and transfer my 401K in the most effective tax manner. I am 60 ( recently lost my job) and my husband just turned 65 and is on social security. I would plan to go back to work if I could find a job, but after 7 months Ii am not finding a job with the income that I previously received so I am seriously considering retiring at 60. Our current home is valued at $300,000 and is paid for. The new home is in a more tax advantage area and is valued at $350,000 We have $900,000 in our 401K

What suggestions do you have for us .

Oct 15, 2012 by Marie from Naperville, IL in  |  Flag
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6 votes

Hi Marie, you have a lot to consider as you make this potential transition. Rolling your 401k to an IRA makes sense, as it will give you maximum control of your retirement funds and will defer any taxation until you start withdrawing the funds.

If you can sell your current home before (or simultaneous to) buying your dream home, that would be ideal. You can then use the proceeds from your current home to put down at least 20% on your dream home. At that point, you've got options. You could certainly put all $300k into the dream home and have a small mortgage (of $50k). Or you could take out say a 15-year mortgage on about a $280k traditional mortgage. With interest rates being really low, you'd still have something of a home mortage interest deduction for tax purposes and a monthly mortgage payment in the $1,800 to $2,000 per month range.

The advantage to the mortgage is the interest tax deduction (assuming it helps you tax-wise) and keeping about $280k available for other purposes (including living expenses). The disadvantage is having debt over your head in retirement, an emotional consideration.

Even though you can't find work at a wage you'd like, 60 is still pretty young and I'd encourage you to keep working--even if it's part-time (maybe try to find something you really enjoy doing, even if it doesn't pay much). You'll stay busy and generate some income, which will help your other retirement funds to last longer.

You will need to figure out a plan to generate retirement income from your rollover 401k money, as well as when to start Social Security for you. Still lots of variables to consider and issues to work through--too many to handle here in a public forum. I think your money would be well spent to hire an advisor on an hourly basis to help you work through many of the specifics mentioned above. Best wishes, Mike

Comment   |  Flag   |  Oct 15, 2012 from Orland, IN

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Marie, I hear your concern. What you need is a detailed financial plan. Contact a planner to start the process of getting good quality advice. This is a critcal stage in your life. Do not settle for short answers on the internet. Good luck Dan

2 Comments   |  Flag   |  Oct 15, 2012 from Asbury Park, NJ
Daniel "Danny" Chen


Flag |  Oct 19, 2012 near Asbury Park, NJ
Daniel "Danny" Chen

Marie, as a followup, try contacting a few of the advisors on this site. Take some time to interview them and understand thier process for providing advice given yor particular situation. If you like thier approach then work with that advisor to produce a deliverable strategy/planning document that will specifically answer all your questions with the options available to you. There should be a fee for this service. You would have to ask each what thier fee structure is. This process does not talk about a particular product to use, it is a strategy session to address your allocation options while providing direction on the other issues.

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Flag |  Oct 19, 2012 near Asbury Park, NJ

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Marie, I echo the advice of both Danny and Mike. What you are posing is complex with many variables. You need an advisor who can help you make a plan that addresses all of these issues. You need to engage an adviser for some objective advice. The cost is insignificant compared to what's at stake. Remember the old Fram motor oil commercials: You can pay now or pay later. It will be a whole lot less expensive to hire an adviser or two than consider the potential costs of financial, investment or tax mistakes later.

Comment   |  Flag   |  Oct 15, 2012 from Amesbury, MA

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I want to second ( or fourth) the views on personalized advice. These internet platforms are a catch 22 because a little knowledge is dangerous and if you take bits and pieces of advice and try to go it alone it may not work as well as partnering with an adviser. I just furnished my house which came out great - but reading all the store catalogs and web-sites only got us so far. When we found someone to be our "guide" it all finally came together. I suspect that for most people financial planning requires the same sort of guide. ( P.S That " guide" was a lady who worked at Raymore & Flanagan.. great store)

Comment   |  Flag   |  Oct 19, 2012 from Port Washington, NY

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