Mink Wealth Management
Managing Director/Wealth Manager
With over 23 years' experience in the industry, Brandon has seen his clients through both bull and bear markets. With an expertise in retirement planning, he draws on this industry experience to develop and manage financial strategies for high net worth individuals.
Brandon grew up in Northern Virginia where he is currently raising his three very active children. He graduated from James Madison University with degrees in Finance & Marketing. He enjoys staying fit, outdoor activities, watching movies and charitable endeavors related to underprivileged children.
As a CASA (Court Appointed Special Advocate), Brandon has been appointed by the court system to advocate for the best interests of abused and neglected children. www.casaforchildren.org
Assets Under Management:
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Mink Wealth Management Introduction
First, you need to have a reasonable estimate of your monthly expenses in Peru. Second you need to subtract your fixed income sources, and lastly figure out how to receive a reasonable income stream from the money you invest.
So, for example, if your monthly expenses in Peru will be $2000*, and your income (presumably from Social Security) is $1200/ month, then you will need $800/ month from your $130,000 portfolio (if you need $100k in one or two years, that money should remain in a CD or money market).
If you need $800/ month from your $130,000 investment portfolio, that represents a 7.4% distribution rate. If your portfolio is invested in mostly bonds and some stocks, you might return 5%/ year. Assuming a 5% growth rate, you would then run out of money after 22 years. If you don't have any beneficiaries, and expect to be 'too old to enjoy your money' by the time you turn 87, that might be completely acceptable to you. Of course I simply gave you an example with broad assumptions (and not factoring inflation).
You can use the calculator attached to this link to help you hone in on the right answer.
To answer your question about investing more directly, I would urge you to look at a balanced mutual fund from Vanguard or Fidelity. The costs are low, and unlike a stock or ETF (Exchange Traded Fund), you can set up a systematic distribution plan without incurring transaction costs (in this example $800/ month that would be direct deposited into your bank account).
*I did a quick google search for cost of living, and on average, if your expenses in the United States were $5000/ month, then you can expect the same lifestyle will cost about $2000/ month in Peru.
Good Luck and remember the famous Peruvian Proverb: Fortune and Olives are alike: sometimes a man has an abundance and other times not any.
Pay off the car loan. 4.75% represents a current opportunity cost since you are getting less in the money market. The Feds should be raising rates 1 or 2 more times this year, so you will continue to see the interest you get increase at the bank. Make sure you are getting close to 2% on your money market at the bank. If not, take a look at CIT bank or another high yielding money market. Their money market is currently yielding 1.85%. Assuming you feel confident that you will have enough in the bank to make a 20% downpayment it's very important that you and your wife continue to max your Roth IRA contributions each year.
Good Luck and happy house hunting! Brandon
Given your low income, it probably makes sense for you to convert at least some of your IRA into a Roth each year; especially if you won't need to rely on these funds for living expenses.
This comes down to "tax bracket management". Assuming you are a single tax filer, your federal tax bracket is a modest 22% for income between $38,701-$82,500. If your taxable income is $20,000/ year, then you can convert right around the $100,000/ year that you mention, mostly within this 22% bracket (the next step up starting at $82,501 is 24%). I would urge you to do so if there is a strong liklihood that you will leave the majority of this account to grow for a minimum of 15 years.
If you want to keep the taxes even lower, you will only pay a 12% federal tax rate up to $38,700, which means you can convert around $18-$19,000.
The more time you can go without reliance on these funds, the more sense the Roth conversion makes!
I've attached a tax "cheat sheet" to help you with the tax bracket management.
Good Luck! Brandon
The tax code "is what it is", so you are basically looking at 23.8% in Federal capital gain taxes. I'm assuming that these were ISO's (Incentive Stock Options), that your income will remain over $250k for the foreseeable future and that you are married. If you are single, then your cap gains rate will be lower (I've attached a tax reference guide that will provide you with the details).
There is also a type of fund, where you can co-mingle your stock with other stocks to essentially establish a 'diversified mutual fund'. This will allow you to diversify your holdings and avoid paying capital gains immediately. Of course, when you eventually sell this fund to take cash for any reason, you will then be responsible for the capital gains taxes at that time.
Hope that helps! My Best- Brandon
That is great that you have a charitable inclination!! It would be easiest to simply call your IRA administrator and provide them with the charity name and address for where they will send the amount you specify from your RMD. Yes, that is correct that as a charitable contribution you most likely not have to pay any taxes on this withdrawal.