Revere Asset Management
President & CIO
Daniel Stewart is President & CIO of Revere Asset Management and has been providing financial services and portfolio management for over twenty years. Revere Asset is a Fee Based RIA which Always Acts as a Fiduciary in the Best Interest of its Clients. Prior to joining Revere Asset Management, Dan advised on investment portfolios exceeding $200M. He is also well versed in comprehensive planning including corporate, individual, and estate planning.
Dan joined the NorAm Capital team in 2010 to create and manage their Private Wealth Management firm. This eventually led Dan to buy the business and rename it Revere Asset Management. He graduated from The University of Texas with concentrations in Finance and Accounting. Dan has passed the CPA Examination on the first attempt and subsequently earned his CFA® Charter (Chartered Financial Analyst).
Dan, a native of San Antonio, Texas, is married with 3 children. Dan played NCAA tennis on a full scholarship at Vanderbilt University. He played professional tennis on the United States and European circuit and was then the Head Tennis Professional at both the Retama Polo & Tennis Club and Thousand Oaks Indoor/Outdoor Racquet Club, in San Antonio, Texas.
Chartered Financial Analyst (CFA®), BBA in Accounting
Assets Under Management:
Fee Based Only - Fiduciary with No Conflicts of Interest
#Yes Term-No Annuity
No information presented constitutes a recommendation by Revere Asset Management, to buy, sell or hold any security, financial product or instrument discussed therein or to engage in any specific investment strategy. The content neither is, nor should be construed as, an offer, or a solicitation of an offer, to buy, sell, or hold any securities by Revere Asset Management. Revere Asset Management does not offer or provide any opinion regarding the nature, potential, value, suitability or profitability of any particular investment or investment strategy, and you are fully responsible for any investment decisions you make. Such decisions should be based solely on your evaluation of your financial circumstances, investment objectives, risk tolerance and liquidity needs.
I am going to be very direct and to the point, and this will be against most of what you hear.
This would all depend upon your level of spending, level of market knowledge, and future desires in retirement, etc... But the good news is that you have saved and done well. With your duel pensions and social security, you will never go hungry.
I would say that at retirement, owning stocks and bonds via Exchange Traded Funds (ETFs) is much more efficient than mutual funds. They have lower fees, are more tax efficient, and are more flexible. But either way, with both the stock and bond markets at these levels, I do believe you need some type of sell discipline in place so you have brakes and steering in case of a market meltdown. I am not talking about day trading or swing trading or anything short term like that. I am talking about a few fairly simple midterm indicators to tell you hen the risks in the markets are heightened and it’s time to be defensive. If the indicators are triggered, you methodically take some cash off of the table. Will you get a few false signals? Sure. But when we do get a big correction, you can put the money you took off the table back to work at lower prices. At your stage in life, you don't need to match the S&P, you just need to get decent returns with some safety.
I do not believe in the indexed annuities. Or even fixed annuities at these low interest rates. But you will get all types of advisors telling you that you need “guaranteed income for life” to make sure you will be ok, especially after you noted you have $500K to invest. You already have income for life with your pensions and social security.
And with artificially low interest rates, nothing is truly "safe" or "guaranteed" that pays enough interest to be worth anything. You need to look at your investment dilemma in terms of purchasing power, not absolute dollars. If you have too much in fixed income, you are subject to inflation risk.
An annuity means that you give up a lump sum of money, say $300K, for a future income stream. Say you give away $300K, but now get maybe $1,500 (?) for life. And if we have higher inflation, this will seem like less and less over the years.
You have done well and saved, and therefore are not lazy. In my opinion, you will not just sit on the couch and eat Lays potato chips wasting the day. What you need is knowledge, not products. You can learn and educate yourself enough to select a few broad indexed ETFs or mutual funds, and then a few funds in the strong sectors, and even 6-8 of the best stocks on the planet with the best long term outlook, or hire someone to do it for you for a fee.
I have probably said enough and upset a few people, but those were my earnest thoughts. Best of luck.
You can take out the principal portion, or contributions, made to the Roth, but gains become tricky. If you take out gains under the age of 59 1/2, there will be a 10% penalty as well as tax. If over 59 1/2, you only avoid the 10% penalty, not the tax on the gains. There are very few limited exceptions or "qualified distributions" that avoid the 10% penalty under the age of 59 1/2, but you must have had the Roth IRA for at least 5 years.
The only other options is to do a "60 day rollover" where you take the money out with the intention of putting the money back in within 60 DAYS! This is a hard number deadline and is only to be used when you believe you can put the money back within 60 days. If you don't, the rules above apply.
Hope this helps. Dan Stewart CFA®
Assuming it is a Defined Benefit Plan (DBA or Pension Plan), you can certainly "roll" into an IRA. In fact, based upon the information you gave about needing some of the money, you will almost certainly want to do that. This is because with company retirement plans like DBAs, 401(k)s, etc.. there is a mandatory 20% withholding taken off the top and sent to the government, whether you owe 20% tax or not. It will simply be netted against your tax return and you may be giving the IRS an interest free loan. You see, they penalize you for not paying enough, but they don't pay you interest when you overpay.
With an IRA distribution, you set the percentage amount withheld, whether it be 5%, 10% or even 0%. So, you can match more closely to what you think your tax liability will be. Just generalizing and without knowing your personal situation, I would take 1/2 the IRA distribution before the end of this year and the other 1/2 on January 2nd next year. This way you spread the tax liability over 2 years and it may not push you up into a higher tax bracket. This is to stimulate your thinking about the planning process.
Lastly, you need to get moving quickly on the IRA rollover from the annuity. Insurance companies are notorious for holding the money and slowing down the process with detailed, minutiae paperwork that needs to be Notarized etc. You may need some help on this to get it done and transferred into the IRA before year end. Then process a distribution request so the new brokerage firm (hopefully discount brokerage) distributes the 1st half by year end because they get bottlenecked with distribution requests in mid December before Christmas. Best of luck!
Whenever there is a major change - company structure, merger, etc.. there is a "blackout period." Even simply switching a Third Party Administrator (TPA), which is the plan's "accountant," can trigger a blackout period. Under ERISA guidelines, this can take up to 90 days (max), but this should have been disclosed to you before the blackout period so you could make any necessary changes to your allocations of funds.
It is probably nothing to be alarmed about and is just the switching over to a new provider, TPA, or due to the merger itself. But it is definitely worth the phone call to HR. They should be able to give you answers, especially on your own withholdings which are always 100% vested and yours. Remember, this should have been disclosed before any Blackout Period.
I would say this though, you may have an opportunity to rollout your existing balances to an IRA Rollover where you have complete control and are not limited to their plan's investment choices, usually 12 or less mutual funds. Whenever there is a major change in the plan, which this sounds like this definitely qualifies, you must be given that option because it changes your original "deal" and you may not want to contribute your already accumulated assets going forward.
This doesn't preclude you from contributing and making new contributions to the plan, it just allows you to rollout your existing balances into an IRA Rollover. It will almost certainly provide you with more flexibility. In fact, as people change jobs, they should normally roll each old balance into their IRA Rollover and begin fresh with each new 401(k). This way, they will accumulate a nice rollover with unlimited options along with a 401(k). Hope this helps.
It's never to early to begin saving, whether it be for college, retirement, or otherwise. If you are talking about for your kids, though, I am not a big fan of 529 Plans. This is because they have limited investment choices and you can only make changes once per year. I would rather open an individual or joint (with spouse) taxable investment account, pay the tax, and have control of my destiny.
Educational IRAs are very limited in how much you can put in each year, but does leave you with more choices and flexibility. Uniform Trust to Minors Act (UTMAs) & Uniform Gift to Minors Act (UGMAs) are not as common anymore for some very good reason. You are gifting, or giving away control, of the assets. So while you control minors, once they reach the "age of majority," either 18 or more often 21, they can raid the account and buy a little Red Corvette (or worse) and there is nothing you can do to stop them. There are actually seniors in college teaching classmates how to raid their accounts.
For this reason, I usually prefer counseling my clients to have their own investment account that they can own and control. When the time comes, write a check. This is not what you will hear from the mainstream investment community. I want to think my child will be very responsible (and have been blessed as they are), but a lot of things can happen.
That said, these are tools which can be used for other planning. For instance, wealthy grandparents could use a 529 Plan to gift $50K into the plan and remove from the estate. So, the lack of investment direction and control is offset by a high estate tax (55%) once you are over approximately $11M joint & $5 1/2M individual. If you have complicated issues, seek advice. But for someone starting out early, I usually advise to save early in an account that you can keep and have control. Hope this helps.