Rall Capital Management
Bob has more than 25 years of experience in the financial services industry. He began his financial career with Prudential Insurance, where he gained valuable knowledge and experience that allows him to help clients make sure that their various insurance policies are structured properly to protect their assets. After three years with Prudential, he joined the Dean Witter brokerage firm in Cocoa Beach. He spent the next 6 years in the brokerage world, helping clients develop and manage their investment portfolios. His desire to help clients beyond their investments led him to complete the educational and experience requirements to earn the Certified Financial Planner® designation in 1998. A desire to be even more independent when helping clients led him to start Rall Capital Management in September of 2004.
Bob is a member of the Financial Planning Association (FPA®) and the National Association of Personal Financial Advisors (NAPFA®). He is a contributing writer for the Journal of Financial Planning and has served on the publication’s Editorial Advisory Board for several years. He is a recognized leader in the retirement planning field, serving as host of the FPA’s Retirement Planning Knowledge Circle since its inception.
Bob and his wife, Gina, are both active members of the local running community. Bob, Gina, and Bob's adult children, Adam and Jenna, are deeply involved with Brevard County’s Special Olympics program. He graduated cum laude from Ohio University in Athens, Ohio with a Bachelor’s of Science degree in Communications. He also enjoys running, cycling, tennis and playing the piano.
BS, Communications, Ohio University
Certified Financial Planner(R) designation, College for Financial Planning
Assets Under Management:
The Trump Bump
I would not recommend withdrawing from your 401(k), even if you were not subject to the 10% penalty. Don't forget, that in addition to the 10% penalty that is incurred if you are under the age of 59-1/2, you will also pay tax on the amount withdrawn. $150,000 in additional income will most likely throw you into one of the highest tax brackets, so you would pay 28-33%, and possibly more, tax on your distribution. When you add the 10% penalty, you would be paying close to 40% in taxes. Another thing I would mention is that you have a 3.65% mortgage rate, which is extremely low historically. If your investments in your 401(k) can average more than 4% over the years, you are way ahead by staying invested.
Life insurance is intended to provide income replacement for those who are dependent on your income. If you are retiring, you will no longer have income from your salary, so you may not have a need for life insurance unless you have a life-only pension payment. Other reasons to maintain life insurance would be for final expenses, debt elimination, and education funding. If you have sufficient assets to cover your final expenses, you have no debt, and your kids/grandkids are not dependent on you for education expenses, then you may not need life insurance any longer.
While I certainly understand your thought process, I have to disagree with your plan. My rule is that if you are going to need the funds within a 3-4 year time period, they should not be invested. While we would hope that the returns on your investments are profitable and would result in capital gains tax when you withdraw for your down payment, markets and investments can also go down. I would hate to see your down payment fund suffer a loss just when you plan to withdraw it for your home purchase.
My first reaction to your question was to challenge your comment regarding the statement that "...there are no fees per se other than a $25/year fee." While it may be correct that you don't "see" any other fees besides the $25, annuities typically have mortality and expense charges amounting to 1% or more, fund expenses on the underlying investment funds of 0.50 to 1.5%, and sometimes more fees, depending upon the "options/riders" that are built into your contract. Unfortunately, you have to dig pretty deep to find these fees. But they are there.
As to what you should do upon retirement. A 1035 is on the right track, but not quite. You can process a rollover of the account into an IRA account and maintain the tax-deferred status. Since you are not taking a distribution, the funds will not be taxed until you do start taking distributions, which must start by April 1 of the year following the year you turn age 70-1/2.
I hope this helps.
There are differing opinions on how to diversify a portfolio. We believe that it is impossible to predict how the market, or a particular asset class, is going to perform over a period of time, so we don't try. We suggest a globally diversified portfolio using low-cost index funds. The asset classes we recommend are US Stocks, International Stocks, Emerging Markets, Real Estate, Short-term High-quality Fixed Income, and Intermediate-Term High Quality Fixed-Income (bonds). I hope this helps.