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.
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will face the 10% early withdrawal penalty, plus ordinary income tax (Federal, State and City, if applicable) on the withdrawn amount.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.
I am sorry for your loss.
You will be required to take required minimum distributions if you choose to not take the money as a lump sum. The treatment of Inherited retirement accounts, 401(k) or IRA's, is outlined in the IRS guidelines and publications 559, 575, and 590(b) depending on the type of retirement plan.
Generally, inherited (non- spouse) retirement (401(k), IRA) money can be rolled over into the beneficiaries name or you can take a lump sum or some type of distribution. Usually, people will roll the 401(k) and/or traditional IRAs into an account that must be labeled as an inherited IRA that will include the name of the deceased. The inherited IRA funds must be kept separate from other retirement accounts and monies, since your wife must take annual required minimum distributions (RMD) based on her age, for as long as there is money in the account. There are pretty severe penalties for not taking the RMDs, so make sure your tax advisor knows the details of the Inherited account You can take more money out (pay off that loan), but any money taken as a distribution will be added to your income and taxed accordingly in the year of the distribution. If your father in Law had an annuity, retirement or non retirement, or a Roth IRA, they are treated a little differently and due to space and you not mentioning them will not go into them. Also, remember to make sure whoever does the tax returns (final individual and estate) for your father-in-law, make sure he took his RMD in the year of his death. If he was working, generally his work 401(k) is not included in his RMD calculation. I strongly suggest you get some guidance from your tax advisor before making any transfers or filing any tax returns. Inherited Retirement money is not difficult to understand but the rules are very inflexible so get the right help to set up and understand what you can or should not do and the taxable nature of the decisions.
Below is an excerpted paragraph about a non-spouse beneficiary from the IRS website.
This is regarding an inherited retirement plan, inherited from someone other than a spouse."If the inherited traditional IRA is from anyone other than a deceased spouse, the beneficiary cannot treat it as his or her own. This means that the beneficiary cannot make any contributions to the IRA or roll over any amounts into or out of the inherited IRA. However, the beneficiary can make a trustee-to-trustee transfer as long as the IRA into which amounts are being moved is set up and maintained in the name of the deceased IRA owner for the benefit of the beneficiary."
Like the original owner, the beneficiary generally will not owe tax on the assets in the IRA until he or she receives distributions from it.
Beneficiaries of Qualified Plans
Generally, a beneficiary reports pension or annuity income in the same way the plan participant would have reported it. However, some special rules apply.
A beneficiary of an employee who was covered by a retirement plan can exclude from income a portion of non-periodic distributions received that totally relieve the payer from the obligation to pay an annuity. The amount that the beneficiary can exclude is equal to the deceased employee's investment in the contract (cost).
If the beneficiary is entitled to receive a survivor annuity on the death of an employee, the beneficiary can exclude part of each annuity payment as a tax-free recovery of the employee's investment in the contract. The beneficiary must figure the tax-free part of each payment using the method that applies as if he or she were the employee.
Benefits paid to a survivor under a joint and survivor annuity must be included in the surviving spouse’s gross income in the same way the retiree would have included them in gross income.
Passive investments usually purchase and hold a basket of investments (stock, bonds, etc.) and adjust the portfolio periodically (annually or when something fundamentally changes with the invested company). The low expense ratio (cost to run the fund) is reflective of the passive investment style. Active investing is reflective of a management style that is more hands on and may be regularly looking for opportunities and trading when the need arises. Active funds tend to have higher behind the scene expense ratios due to trading costs and manpower (like analysts and advisors) expenses.
The debate of passive versus active management has raged on for years, but there is definite evidence fund expenses do impact returns.
A better question is, how does the fund you are considering perform against its benchmark (S&P 500, Russell 1000, Barclay's aggregate bond index, MSCI, etc.)? Although passive investments have tended to outperform most active managers (I have read as high as 80%) over the last number of years, the real challenge is to find a top ranked (quartile) fund (ETF, index, mutual fund) that has similar risk tolerances as well as other metrics to the benchmark. If you can find a fund that is in the top quartile over time, you can increase the odds that your investment will yield higher returns than the average benchmark return. Finding the details of the fund or ETF can be found in the prospectus, but I also use Morningstar and Lipper research, as well as other reputable sources to get a realistic comparison and comfort with an investment.
Finding investments suitable and in your best interest interest may not difficult, but it means doing your homework and research.