Chamberlain Financial Planning and Wealth Management
Michael Chamberlain has been helping people to make better financial decisions to improve their lives since the 1980’s. Chamberlain Financial Planning was established in 2007 to assist people on a fee-only basis, which means that we do not sell investments or insurance, unlike 95% of other firms.
Michael's education includes both Bachelors and Doctorate degrees from the University of California, Berkeley. Accredited Investment Fiduciary course work was from The Center for Fiduciary Studies at the University of Pittsburgh and CFP® course work was from Boston University.
Michael lives in Santa Cruz with his life partner, Patty, but most of his family is in Sacramento. His daughter Cathi, her husband and three kids, his two brothers and Mom and Dad are all living there. In 2009, Michael opened a branch office in Sacramento so that he could visit with his family more frequently. His son Mitch lives in Austin Texas with his wife and two little girls.
Sailing is one of Michael's life passions. It is a great way to get in touch with nature and he is fortunate enough to have a sailboat at the Santa Cruz harbor.
Doctorate, UC Berkeley
Assets Under Management:
Good question. It is one that should be asked more often.
The old saying is that Annuities are sold not bought. The reason that they are often sold is due to the commissions that the salesman generate, which can be over 6%.
Keep in mind, there are different types of annuities such as a fixed, variable, and indexed annuities. Each have different selling points. Since you mentioned the purpose would be to pay for medical premiums, I am guessing that you are thinking of a fixed annuity.
I would not recommend a fixed annuity, which has a fixed pay out each month, quarter, or year to pay for insurance that will have rising premiums. Lets say that your health premium is $800 a month the first year, but next year is $1,000, and the following year is $1,000. If you do not have access to additional dollars, you will not be able to afford to pay the rising premiums.
Without more info, I can not be more specific, but in general, NO I would not covert $70,000 to an annuity.
Granted, I do not know anything about you other than you are 27 years old, so anything that I state here will be a generality, but here goes. It is as simple as 1, 2, 3!
- If you are looking for investments, than buy an investment, not an insurance policy.
- If you are looking for a retirement account, get that, not an insurance policy.
- If you are looking for life insurance, then consider that.
Do not consider a life insurance policy (IUL or any other) as an investment or a retirement account!
The old adage "more is better”, does not really apply to retirement plans. We see folks in their 50's bringing in 5, 6, and more retirement account statements. This is more complex than it needs to be and often results in higher costs than need be. It is good that you are thinking about these things now.
You are on the right track thinking of low cost investment options, such as index funds, but do not count out the TSP offerings. They are very low cost too.
For now, maxing out the TSP is a great start. Wait to see what your next job offers as to a 401(k), 403(b), SEP IRA, etc., and make the choice at that time. Bigger firms tend to have better retirement offerings than small firms so it all depends where you land in the next job.
Depending on your situation, you may be able to fund a ROTH IRA, which would be a good option as well. Verify your eligibility before opening such an account.
There is much to consider when addressing when to take Social Security, but in general, if you are still working and making over the max allowed so as to not reduce your SS monthly benefit, you are negatively impacting your situation in the long term.
For those readers that do not know about the topic, please review what SS has to say on the subject:
"You can get Social Security retirement benefits and work at the same time. However, if you are younger than full retirement age and make more than the yearly earnings limit, we will reduce your benefit. Starting with the month you reach full retirement age, we will not reduce your benefits no matter how much you earn.
- We use the following earnings limits to reduce your benefits: If you are under full retirement age for the entire year, we deduct $1 from your benefit payments for every $2 you earn above the annual limit.
For 2017 that limit is $16,920.
- In the year you reach full retirement age, we deduct $1 in benefits for every $3 you earn above a different limit, but we only count earnings before the month you reach your full retirement age.
If you will reach full retirement age in 2017, the limit on your earnings for the months before full retirement age is $44,880."
Again, with out knowing your situation I would advice you not to take your Social Security benefit until after you stop working. For each year you wait, the monthly benefit will be permanently higher.
There are different levels of complexity in what seems like a rather straightforward question.
We know that for each year you wait to take your Social Security benefits, your monthly payment would be 8% higher when you do start taking it. This is the current rule and is seemingly guaranteed by the US government. But as you know, our government leaders could change the program in unknown ways in the future.
Even with this uncertainty, I routinely counsel clients to utilize their IRAs and 401(k), and delay taking Social Security. The reason is because you’re taking those funds off the gambling table. You state that investment funds might earn 5 to 6%. That is true some years, but in other years, the investments can actually lose money. The 8% of increased SS benefit looks pretty stable to this old guy!
The direct answer to your question is, yes, the general advice of delaying Social Security does take into account the loss of compounding growth in retirement savings.
You cannot use this general observation as specific investment advice to your situation. Consult your own advisor.