Prudent Wealthcare LLC
Gage DeYoung, CFP® is the Founder of Prudent Wealthcare LLC which utilizes a passive portfolio structure for low-cost and an asset allocation investment strategy to balance portfolio risk and return.
Gage has over 20 years of professional experience and collaborated with hundreds of affluent families in the South Denver area from 2001-2014. He has been quoted in U.S. News & World Report, The Fiscal Times, Investopedia, and Bankrate.
In his spare time, Gage enjoys helping his local community through Rotary club, playing golf, skiing and spending time with his twin sons participating in their local Boy Scout Troop.
BBA, University of North Texas
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You would need an average annual rate of return of over 12% on your portfolio to achieve your $1,000,000 goal in 40 years with an annual contribution of $1,200.
It is possible, but not likely if utilizing a broad stock market portfolio given the historic returns of the stock market.
Assuming a 10% return, you would have $531,111.
This is by no means a discouraging situation. You have the power of time and compounding on your side with a 40 year time horizon. You should attempt to save as much as you can comfortably every year. Regarding your long-term investments that are earmarked for retirement 40 years from now, using a low-cost broad stock market index fund would be a great way to start.
Always keep in mind, you save for 2 key reasons: To bridge work gaps and to eventually achieve financial independence.
Sorry to hear of the passing of your parent.
Assuming a time certain pension option was elected by your parents, and you and your siblings were named as beneficiaries of the pension, you and your siblings would be entitled to the continuing payments until the time certain period expires. As an example, if a parent elected a 20-year time certain pension option as their choice for payments at retirement, named 3 children as beneficiaries, and passed away after 10 years from the date the pension started making payments, the 3 children would be entitled to split the monthly payment for the next 10 years. In this case, the children would contact the pension administrator to notify them of the parent's passing. The pension administrator would then confirm beneficiary information on file and make arrangements to update the payees of the pension payments.
It will be important to find out what election was made by your parent prior to the pension payment start date. Many corporate pensions may only offer single life or joint life payment options. When this is the case, unfortunately the payments stop at the passing of the original payee or the passing or the original payee and their spouse respectively.
Thank you for this question.
Many people let their 401(k) and IRA assets accumulate until they are forced to withdrawal the Required Minimum Distribution (RMD) in the year they turn 70 1/2. Unfortunately, they then might find themselves being forced into a higher income tax bracket due to the taxable income generated by the RMD.
You do have some options to consider prior to reaching your RMD year. The options revolve around taking advantage of your current income tax bracket. Annually, you might find that you are a certain dollar amount away from crossing into the next income tax bracket. If that is the case, you might consider a withdrawal from your 401(k) (assuming your 401(k) allows for partial withdrawals) in the amount you are away from the top of your current income tax bracket. This will increase your taxable income and taxes for the year but you will be in control of how much. If you save the after tax proceeds, you will be building up you’re after tax portfolio for emergencies or greater fiscal flexibility in your retirement.
Another option would be to convert that amount to a ROTH IRA if you are eligible. Converting the money into a Roth IRA will result in a similar tax consequence but you will then have moved the proceeds into a vehicle that will grow tax-free going forward. Your Roth IRA will not be subject to an RMD. Clients I work with usually select this Roth conversion option when they already have an abundant after tax account and would like to earmark the assets for the long term ultimately for their estate to pass on to their heirs.
Everyone’s situation is unique. Before acting, you should consult a tax advisor, financial planner and your 401(k) plan administrator to fully understand your options and tax consequences.
This would be acceptable if you are over 59.5 years of age. There is not an IRA distribution penalty (10%) once you reach age 59.5. The distribution will still be counted as income in the year of the distribution for the purposes of determining your income taxes.
If you are under 59.5 years of age, I would not recommend rolling to an IRA and then withdrawing funds due to the 10% penalty.
Usually, when 401(k) assets are divided due to a divorce decree, a Qualified Domestic Relations Order (QDRO) is created. The QDRO provides instructions to the administrator of the 401(k) to open an account on behalf of the recipient and to move an appropriate percentage of funds to that new account. That new account may be able to provide you a distribution which is penalty free (not income tax free).
If the new 401(k) account allows for flexible withdrawals going forward, you might consider remaining in the plan in the event of future needs and avoidance of the 10% penalty. If the account does not allow for flexible withdrawals, you might consider splitting a full distribution into two parts, part one to be rolled to an IRA and part two to be distributed to you.
Every situation is unique and you should consult with your tax advisor, financial advisor and the 401(k) custodian to fully understand your options as well as the tax consequences prior to initiating any withdrawal.
Very sorry to hear of your husband's passing.
I usually would not recommend investing IRA assets into a variable annuity.
The main benefit of a variable annuity is its ability to grow in a tax-deferred manner for an expense. An IRA does this already at no expense.
1.65% is $3,828 a year assuming an investment of $232,000. Additionally, I am unaware of any mutual funds that do not have expenses.
Time should be taken to work with a financial professional that can help you assess your situation and determine an appropriate asset allocation or mix of stocks, bonds and cash based on your particular objectives and time horizon. Once an appropriate allocation is determined, an appropriate portfolio could be implemented. It is important to be wary of high cost investments.