Crystal Brook Advisors
Peter is the founder of Crystal Brook Advisors. With over 18 years of professional experience in the financial planning and investing industry, Peter has successfully educated young professionals, entrepreneurs and advanced investors reach their financial planning and investing goals. As an educator, Peter encourages clients to ask questions. He will provide an understandable answer for each client's specific financial planning and investing needs.
Crystal Brook Advisors are committed to designing, developing, and implementing a broad range of investment advisory solutions which include comprehensive financial plans and investing programs with an established practice of high ethical and fiduciary standard, transparency, and expertise. Whether you’re a short or long-term horizon investor, we can help you or your business with the products and services that meet your specific financial planning and investing need.
Peter’s team provides expert advice by combining research with effective technology tools, bridging tradition and contemporary financial planning and investment management solutions.
Peter is a licensed Certified Financial Planner™ (CFP), Chartered Financial Consultant (ChFC), and Chartered Life Underwriter (CLU).
Peter holds two Bachelors of Science and a Master’s Degree. Prior to Crystal Brook Advisors, Peter was a Branch Manager and Financial Advisor at American Express Advisors.
Peter teaches Financial Planning and Business planning at the American College.
Peter has been published in various media channels: CNBC, Fortune Magazine, Investopedia, to name a few.
BS, Business Administration, Alfred University
BS, Health Care Administration, Alfred University
MPS, Health Care Administration, Long Island University
Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.
I think the issue is due to confusing gross income and taxable income. When you contribute to a 401(k) retirement account you are making a pre-tax contribution, thereby not paying tax on the money today. Under the retirement rules the money grows tax deferred until the day you make withdrawals, then you are taxed on the amounts you withdraw during that year. Your gross income does not change, just taxable income. As an example if you earn $100,000 (gross Income) and you contribute $15,000 to your 401(K), your taxable income will be $85,000, but your gross income is still (remains) $100,000. If you check your year end W-2 or 1099 statements you will see how the taxable income and gross income are entered.
Another term you may encounter for benefits is Adjusted Gross Income which is your gross income minus adjustments to income, which is located on the bottom of the first page of you tax return.
The answer can be yes, but there are a few considerations to make sure of. One being your eligibility. If eligible, the total maximum you can contribute is $5,500, if under 50 years of age or a maximum of $6,500 (aggregate) if over 50. So if you are under 50, you can contribute $3,000 to a Traditional IRA and $2,500 to a Roth IRA for a total of $5,500. Any combination, if eligible, to the maximum of $5,500.
Some of the eligibility for contributions depends on: if a person has or contributes to a retirement plan at work (401(k), 403(b), etc.), income levels, a non working spouse, and if they are have access through an employer plan, to name a few. It is suggested to discuss the eligibility, phase-out limits and deductibility in greater detail with your tax advisor, since the rules and exceptions will take up more space than allotted here.
Since you are over 59 1/2 there should not be any penalty to withdraw funds your IRA, but as you indicated the amount you withdraw will be included in your gross income and taxed accordingly. If you touch your wife's IRA you most likely will face the 10% early withdrawal penalty, plus ordinary income tax (Federal, State and City, if applicable) on the withdrawn amount.
Another thought is use the equity in house #2 or #3 and look into a home equitly line, since you are/ will be owner occupied. A home equity line is easier to get and can be much faster to obtain (weeks) at least compared to a mortgage. Be careful of the different costs and consider the possible interest rate increases (as Fed and their effect/ cost of borrowing over time. You may also want to watch the tax overhaul debate since realestate and other deductions are under review and may be eliminated. One last thought is if you touch the IRA funds now, how will it impact your retirement scenario?
Consider reviewing the tax implications of the debt alternatives, IRA distributions, home equity line of credit (HELOC) or other credit line versus credit card debt with your tax advisor. to minimize tax unwanted or unintended surprises.
Consider a fee only financial planner to assist with the decision and alternatives.
If you are earning a high six figures income, the odds are you can not fund a Roth IRA, outright.
The limits the IRS allows, which are all based on your Modified Adjusted Gross Income (MODI), is your Adjusted Gross Income with a few additional adjustments as outlined in IRS brochure 590-A. A single person limits are $118,000 and phases out by $133,000. For a married person, the income limits are $186,000 and phases out at $196,000.
Some alternatives are, if your employer adopts/ puts into place a Roth 401(k). Roth 401(k)s are becoming a more popular benefit with employers and allow you to contribute without the income restrictions and can be in addition to having a regular 401(k). There are some subtle differences between a traditional Roth IRA and the Roth 401(k), but that is for another time. You could also do a back door Roth, but I would look at the breakeven process of paying current taxes and the time it would take to get your money back and eventually be tax-free. You could fund a tax deferred account or some high level tax alternatives with insurance or real estate, but check with your tax advisor before implementing any strategies and make sure you understand the risk involved.
As a point of clarification, earnings are not tax-free, but grow tax deferred. Withdrawals of principle (money you contributed) and earnings are tax-free after age 59 1/2. Principle can be withdrawn after 5 years of account opening, tax free, but earnings, unless you meet certain exceptions listed in IRS brochure 590-A, will most likely be subject to the early withdrawal penalty of 10% and may be taxable. Speak to your tax advisor if you are seriously considering this strategy.
Selecting an insurance policy that fits your needs is a very personal decision and you need to consider many factors such as health, budget, age, family medical history, temporary need (think college or pay off the mortgage) or long term need, etc. Temporary needs can be satisfied with a term policy or coverage for a certain time frame, 1, 5,10, 20, 30 years. Term policies are usually very inexpensive when you are younger and get progressively more expensive over time. Generally, the term policies are not available for people over 70 or maybe up to 80 years of age. A policy for your entire life can be covered by a permanent policy such as, Whole life, Universal life, Variable universal life to name a few. Permanent insurance, once you have a permanent policy and pay your premiums, the company cannot cancel it or change your premium, unless they change the premiums for all the people that hold that type of policy. A thought to remember is that underlying insurance for all policies gets more expensive as you get older. So in a very basic way, a 10 year level term policy adds up your 10 annual premiums and divides by 10 years to get the average cost that is charged each year for a level term policy. A permanent policy acts the same way, but over the expected lifetime of the insured. The cash build up in the earlier policy years in a permanent policy is used to offset the higher costs much later.
The traditional Long Term Care policies coverage became effective if you needed assistance in your home or other type of facility when you could not perform at least 2 activities of daily living. The policies were just to cover these chronic types of situations and most would not cover you for death. They are/were expensive for the chance of probability you needed the coverage. If you did not use the benefits, you did not get a return on your investment. Similar to car insurance, if you never had an accident or crashed your vehicle, you just paid your premiums on the chance that you might need collision coverage.
For several years, there has been a hybrid or newer generation of policies that cover not only cover death, but LTC, with the thought that one way or another you get a benefit. The differences are the benefits paid are capped so the insurance company can put a limit to their liability.
Which one is better for you really depends on what you want to achieve over the short and long-term. If you want coverage in case of death to cover your family and if you have a long life and are worried about the possibility of needing some assistance with the ADL's at home or at a facility, a hybrid policy may be more appropriate. I suggest you research and look at the hybrid policies. Contact a few different life insurance companies and get a few quotes. Research the policies and prioritize what you want, why, and match it to the policies and compare the features, benefits, and costs.
Costs can vary, so shop many companies. When dealing with insurance, matching a person to a company or product is an important factor that can be reflected in cost. One company may be willing to take more of a chance for less cost.