SJK Financial Planning, L.L.C.
Wes started his career as an insurance agent for his family’s independent insurance agency in Fort Worth, Texas, where he was born and raised. He owned several businesses over the years in the financial services and other industries.
After working decades in the insurance and financial services industry, Wes eventually left the insurance field to commit to financial planning and investment advising. Wes founded SJK Financial Planning, where SJK represents the initials of his children.
Wes graduated with a bachelor's degree in Business Administration from the University of North Texas majoring in Financial Planning. In addition to being a Certified Financial Planner™ Professional, Wes is a Life Underwriters Training Council Fellow (LUTCF). Wes is also an active member of the DFW chapter of the Financial Planning Association.
In his personal life, Wes has raised three children and seen them through college. He has been active in church, school, and professional organizations all his life. Wes enjoys the outdoors participating in backpacking, hunting, fishing, canoeing, and camping. He likes to cook, garden and read. He has a passion for old movies and is a Turner Classic Movie fan.
BA, Risk Management, Insurance, & Financial Services, The University of North Texas
Assets Under Management:
Wes Shannon, CFP
A great question, that leads to a very useful strategy I have used with my clients, but it is a complicated strategy. You can convert from a traditional IRA, Rollover IRA, any amount each year to a Roth but you will have to pay taxes as ordinary income on the amount converted. So your limit is based upon how much you want to pay in taxes. I find it is best to do a comprehensive review of the client's tax returns to properly identify what marginal tax bracket the client is currently in and how much more income can the client realize before moving into the next tax bracket. Remember, that for people over 65 on Medicare that their Medicare premiums are determined by their income so not only can the conversion increase income taxes but also possibly increase Medicare premium. The third concern is that the taxable amount of Social Security benefits is determined by income so the Roth conversion will also affect that calculation. So it is possible that a Roth conversion will increase three things: 1) Income taxes; 2) Medicare premiums; 3) Social Security amount taxed. So you can see that it is a calculation that will require some expert tax advice. The good news is the IRS allows you to change your mind about the conversion and "back-it-out" before you file the next year's tax return (including extensions). So if you do a conversion and find out that it is costing more than you considered you may undo part or all of the conversion.
With regards to the Required Minimum Distributions (RMD), the IRS does not allow the Roth conversion to satisfy the present year's RMD. So it is a two step process; first, withdraw the RMD and calculate the new marginal tax rate and determine the amount available to the next tax bracket; then do a Roth conversion. The Roth Conversion will reduce the amount of your traditional IRA therefore, future RMD's will be reduced because of the reduction in the IRA balance but the Roth conversion doesn't reduce the present RMD.
First, do you have a need for life insurance? If so, and you can afford it, a IUL can be a good choice. I personally have an IUL because I have a need to provide life insurance, and I like the cash value build up for retirement. With that said, it is not the only thing I have for retirement. The IUL is the fixed income portion of my portfolio and the equity and bond portions are in my 401(k) and Roth IRA. I'm sharing this with you to suggest that the IUL should be only a part of your retirement plan, not your only retirement plan. Also, shop the insurance companies. You want one with easy to understand index accounts, financially sound with "A" ratings or better from A.M. Bests, and with an experienced agent who has been in the insurance business for a while. Good Luck, at your age, if you stick with it, you will experience some substantial compounding and have a nice nest egg in your later years.
First, if your employer is matching your funds in the 401(k), you can afford to assume more risk. If you have 20+ years till retirement age, you can assume more risk.
I recently looked at the average annual return of the S&P 500 index for the last 30 years and it was 9.24%. For the same period, the Barclays US Aggregate Bond index was 6.66%. Assuming that these two indexes represent the stock and bond markets, you can use them for for a general rule of thumb estimate for your long-term expectations. Generally speaking, you can expect 9.24% returns for stocks and 6.66% for bonds. So, a moderately aggressive portfolio would be 75% stocks and 25% bonds, thus expecting an 8.6% return over 30 years. Moderate portfolios of 60% stocks and 40% bonds would be 8.2% and a 50/50 split would be 7.95%. The point being that over a long period of time, there is not that much difference in returns between a 50/50 and a 75/25 split. The difference is that the 50/50 split will not have as significant ups and downs as the 75/25 split.
So, if you are several years from retirement and your employer is matching, consider 75/25 or even an 80/20 split between stocks and bonds. You won't be disappointed over a long period (over 15 years). I would recommend an automatic rebalance of your investments in the plan annually.
If you file as a self-employed person, you may take a depreciation. but I suggest you consider taking the mileage deduction instead. Go talk to a Certified Public Account who does taxes to verify. The depreciation has limits on vehicle values and amounts each year. The mileage deduction is a simple $0.535 per mile for 2017. It was $0.545 for 2016.
At age 30, I would recommend 100% Roth.