Portnoff Financial LLC
Certified Financial Planner
With over 15 years of experience, Jeremy Portnoff is committed to offering comprehensive financial planning and investment management services to individuals and families across nationwide. In founding Portnoff Financial LLC, an Independent Fee-for-Service Registered Investment Advisor, Jeremy has championed what it means to be an individual advisor without a large firm: maximizing the firm's resources without losing the personalized and flexible benefits of working with an individual advisor.
Jeremy specializes in retirement plan distribution rules to help clients minimize taxation of retirement savings and pass them on to future generations in tact. Investment management is also something that Jeremy has much knowledge of and experience in. He approaches this area by utilizing various institutional portfolio strategies to customize an investment program for each individual based upon their unique needs and financial situation. The strategies he employs are based upon an understanding of how demographic trends, predictable consumer spending habits, and technological innovation drive the economy and financial markets.
Jeremy has been quoted in several print and online publications including: The Wall Street Journal, Investor's Business Daily, Business Week Online, The Star-Ledger, Financial Planning Magazine, InvestmentNews, National Underwriter Life & Health, Bankrate.com, Boomer Market Advisor, AdvisorMax.com, and Morningstar.com.
CSUF, BA Business Administration (Finance)
Institute of Business & Finance, MS Financial Services
Assets Under Management:
Given the historically high valuations on the stock market in general and with bond market yields so low (risk of price decline when yields rise) it would seem reasonable to invest a lump sum with caution.
You have your typical dollar cost averaging which basically means to invest smaller increments over a period of time. For example, if you wanted to invest over a 12 month period, divide your $500,000 by 12 and invest about $42,000 per month. If you wanted to spread it over 18 months, then divide by 18 and invest about $28,000 per month. If the market does start to go down, your contributions would lose value however you'd be investing and accumulating more and more shares of the target investments at lower and lower prices which mean the breakeven gets lower and lower so that when the markets turn around, as they historically have, then the time it takes to recover is less than if you had invested a single sum near a market high.
Consider your potential risk. Be sure to have a reasonable expectation on the level of loss that you could experience depending on how you invest and over what period of time. Most advisors will have software that can show a historical hypothetical of what would have happened over periods such as the financial crisis which can help to set that expectation of a worst-case scenario. Be sure to not invest any riskier than you are willing to see your portfolio decline.
There are other, non-traditional ways to invest using strategies that have a market neutral or some kind of loss reduction approach but if you do something like this, you should work with a professional who understands how to build a defensive portfolio.
That doesn't sound right at all unless it is not a 401k plan, but is some other type of retirement plan such as a type of pension plan. Another possibility is that if the funds were all employer contributions and are not vested, then you basically forfeit the funds. If it is a plain ol' regular 401k to which you made contributions and are thus vested in those contributions, upon termination of employment you should be able to access those funds, change investments, rollover to an IRA, etc. The only other reason I can think of is if there is some kind of litigation going on related to the plan which has cause plan assets to be frozen.
You should call them and ask why you are not able to access the funds and get a copy of the plan document which spells out the rules of the plan so you can confirm what you are being told. If there is no reason why to prevent you from requesting your funds, you might have to go to the Department of Labor, but that is a last step.
Generally, if you miss your RMD and correct it as soon as you realized, which it sounds like you did, you should be able to avoid the 50% penalty by filing the 5329. Don't expect to hear back from IRS that the penalty has been waived though. You'd likely only hear from them if they were asking for interest or penalty of some kind. IRS has a 3-year statute of limitations on audit so if you don't hear from them within 3 years on it, then you can conclude you have effectively received a waiver of that penalty.
The income will be included in your 2018 return. Going forward you should set up some kind of procedure/reminder system (calendar alert?) to make sure it never happens again. Some people like to wait until the end of the year to take an RMD but I'm a fan of doing it early in the year just to know it got done. Another option is to do it every year on your birthday. Many custodians will provide the calculation and an automatic distribution of your RMD at a pre-set date and this is a great option however you should always independently verify the RMD has been calculated properly, especially if you have retirement accounts of different types that require RMDs since the RMD aggregation rules can be somewhat complex.
The best budgeting program I've seen is YNAB or YouNeedABudget.com. They have many resources to help you learn the program and the philosophy behind the budgeting process which if followed correctly will help you pay off debt, save money, and improve your credit.
Generally speaking, a 401k is an employer-based retirement plan (can also be used for self-employed persons) which employees can defer some of their income. An IRA is an “Individual” retirement account that anyone can have that is not related to their employment.
Both 401ks and IRA have “Roth” options. In a traditional 401k or IRA contributions typically go in pre-tax, earnings are tax-deferred while in the account, and all distributions are taxable when distributed. For Roth accounts, the contributions go in after-tax, grow tax-free, and the distributions are tax-free as long as you are over age 59 ½ and have had the account more than 5 years.
The only exception to this is when non-Roth after-tax contributions are made to IRAs, but this is beyond the scope of your question.
Anyone can defer income into a 401k or Roth 401k, however, the ability to contribute to a Roth IRA is limited when your (modified) Adjusted Gross Income reaches $184,000 and is eliminated when it reaches $194,000 (for a joint filer). Anyone can convert to an IRA regardless of income. At $48K of income you are well within the limits unless you have a high income earning spouse.
The decision to save pre-tax versus after-tax is largely a function of whether you think your tax bracket will be higher or lower than they are now when you take distributions. If you think your taxes will be lower then it makes sense to get the tax break now and pay less tax later via pre-tax 401k contributions. If however you think your tax rate will be higher (because of income sources and/or tax increases in general) then it makes sense to pay tax now to get tax-free distributions later via Roth IRA. One need not do one or the other, rather tax planning in this sense can involve “tax diversification” whereby you make contributions to both types of plans (if allowable) to have flexibility in your tax footprint in the future.
Another consideration is whether your employer has matching contributions in the 401k in which case you would want to contribute at least the amount to maximize the matching contribution.
As far as ideal contribution to a retirement plan in general is a function of what your goal is. Working with a qualified financial advisor can help you articulate what your retirement goals are and come up with a plan to get you there which would include advice on how much you should be contributing to different types of retirement and investment accounts.