Anthony Capital, LLC
Whether your question is about social security draw age, balancing risk and return in an investment, tax planning, or which strategy you should use to cover long term care needs, your chance for success improves dramatically with accurate information. Matthew believes his role is to guide clients through these trade offs using various tools, experience, and his training as a certified Retirement Management Analyst which centers every decision on improving retirement outcomes using math and science.
Matthew has become an expert in optimizing the financial lives of public and private sector employees. Several years ago, recognizing a huge need for benefits education and basic financial planning, he teamed up with The Society for Financial Awareness to offer workshops, seminars, and private consultations with a goal toward education. This collaboration has given thousands of public and private sector employees access to fiduciary advice while requiring no minimum investment amount. This educational approach that focuses on the best interest of the person has created millions in dollars of value for the attendees and their families.
He is a well know presenter in San Antonio and surrounding areas having taught hundreds of seminars touching on subjects ranging from debt solutions, investing, Social Security, pensions, insurance, and other financial topics.
Being the 8th of 11 children- Matthew has real life experience in financial planning as he put himself through college, graduating from Brigham Young University with no debt and money in the bank. He speaks fluent Thai and enjoys traveling whenever occasion permits. His personal life centers around being a father to 3 boys and husband to a beautiful and creative wife.
Brigham Young University
Assets Under Management:
There are 2 big considerations in answering your question: How much risk do you feel comfortable taking with your retirement funds and how comfortable are you with debt?
Let's look at why these questions are key to giving you the best answer. If you are comfortable enough to weather down markets and probable losses, then you would be able to invest in something with a better return than the 3% you're paying the bank. This means for example, that if on the $260,000 you are getting 7% from a balanced mutual fund on average ($18,200 year) and only paying the bank 3% ($7,800 year in interest), the remaining 4% ($10,400 a year) goes into your pocket. Pretty good idea to not pay it off it seems... but this is where question #2 comes in.
For the more conservative, or those looking for simplicity, it still might make sense to pay it off as it is one less thing to worry about. In your case, because you plan to travel it might make sense because you will not be around to fix payment issues, etc. Given that you don't plan to retire fully until age 62 however, it might be better from a tax standpoint to pay off the remaining $260,000 over a period of several years rather than all in one as anything drawn will be added to your usual income tax for the year.
One example of how this could look would be to take your maximum allowable interest each year in a Substantially Equal Periodic Payment plan which is about $39,000 a year in your case and you use that to pay off the house at an expedited rate. This gets your house paid off by 62 but doesn't jump your income tax to astronomical rates. This is just an educational example- please consider chatting individually with a licensed professional before committing to any moves with your money.
Please let me know if you would like to discuss this in further detail.
This is a great question because it shows how confusing the different retirement accounts can be. I mean there are so many letters and numbers out there it is really hard to keep them all straight! Here are just a few that are all slightly different and yet, very similar: IRA, Roth IRA, SEP IRA, Simple IRA, 401k, 403b, 457, deferred compensation plan, 401a, and so many more!!
So let's try to sort out your question by breaking all of these down into two account types: IRA and 401k
An IRA is an individual retirement arrangement- which means it is "owned", "operated", and funded by you. The limit on these is $6,500 as you correctly stated.
A 401(k) on the other hand, is "operated" by the company but "owned" by you, BUT both you and the company can make contributions.
I'm assuming that this account your referencing is actually a 401(k) (or something like it 403b, SEP IRA, etc) rather than a normal IRA. If it is in fact a 401k then you can put up to $18,500 into the account this year and the employer can still put up to $36,500 into the account for you without breaking any IRS rules.
If however, it is indeed a normal IRA- then you will be taxed on all the money over $6,500 put into the account and that extra money should come back to you from the investment company. If this is the case, you should encourage your employer to set up a 401k or similar plan- it will save both them and you more on taxes and increase the amounts you can save for retirement!
I'm not sure I understand completely- Are they owners who own the 33.5%? Or did you take a loan from them at 12% interest?
It sounds like both- if that is the case, it is well outside the normal route of raising money. Generally, there are two ways to raise money: sell ownership (stock) or get a loan (a bond or note). If they are owners, they have an appreciating assets. That plus dividends and profits, is their pay. But they also take 33.5% of the risk which includes lawsuits, workers compensation, and even going broke.
If they gave you a loan, then they are entitled to interest at a guaranteed rate and because they don't own it, if you go broke or don't make payments they can foreclose on your assets to collect the debt owed them just like a bank.
One last question: as you pay off the "debt' you owe them, does their ownership decrease? Said another way: If you paid them $50,000 tomorrow, would they then only own 16.75% of your company? Then it would be convertible debt... but it doesn't usually go that direction so while possible it would be unusual.
If they somehow got you to give them ownership AND you're paying them interest, unless it is a very risky business propostion, it sounds like they might be taking advantage because they are accepting all the benefits of ownership with very limited liability.
Yes, in fact you both can contribute to a traditional IRA.
Your limited to $5,500 a year per person, with that number jumping to $6,500 for people turning 50 this year or older.
The only limit to be aware of (and it's probably not a concern for you) is rule 415(c) which says that between you and your employer, total contributions for 2018 cannot exceed $55,000 total.
So if you contributed $18,500 into 401(k) ($24,500 if over 50) and $11,000 for you and your wife's IRA ($13,000 if over 50), that would leave your employer contributing $25,500 this year ($17,500 if you're over 50).
Given your salary of $115,000, your employed would have to be paying you a 15% -22% match! Again, probably not a problem- but for your sake I truly hope you have lots of those kind of "problems" with employers paying you more money!
This is a great question and actually you're not alone in asking it. This idea has been getting more press recently with the surge in baby boomers beginning to retire in earnest. I really like the way that you're seeing this as a comprehensive problem involving taxes and account types, rather than just the "where should I invest my money in retirement?" line of thinking that so many people fall into while planning for retirement.
Beyond the obvious need to secure fiduciary advice, you'll be well served to consult an advisor with the Retirement Management Analyst designation (RMA) offered by the Investments and Wealth Institute (you can find more info here: investmentsandwealth.org). An RMA is concerned with first securing a level of income necessary to maintain your current standard of living, and from there build out other investments based on timeline and risk that you are comfortable with taking.
In your particular case, you would harvest some significant benefits by working with someone versed in pension plans and taxability.
For example: Assuming yours is the FERS pension which is fully eligible for Social Security, you will still not only need to examine your best option for survivor benefits but if your wife was a teacher as I infer from her 403(b), there could be an accompanying pension plan which minimizes or entirely eliminates her ability to draw Social Security even from your benefits. If you are covered under the CSRS federal pension that could also be a significant difference that would be missed by planners without the pension expertise.
As full disclosure, I chose to answer your question because it fits my expertise very well. That said, I'm happy to provide you with an initial consult at no cost- and if it seems we're not a good fit or if you're outside our geographic range- I'd not hesitate to assist you in either vetting potential candidates or referring you to competent professionals I've vetted that will be able to fully and completely assist you.