Strategic Wealth Partners, Ltd.
Bob Gavlak is a Certified Financial Planner professional and Wealth Advisor at Strategic Wealth Partners. Bob employs a holistic approach when working with his clients, ensuring that all aspects of an individual's financial needs are taken care of. He specializes in working with young professionals and pre-retirees through personal interaction, helping to build the ideal plan for navigating a broad range of financial situations.
Bob graduated from Case Western Reserve University with a BS in Business Management. An entrepreneur at heart, he started Fresh Fork Market, a company that connects local farms to consumers, while still in college. When farming lost its luster, he turned to helping young professionals and pre-retirees navigate their financial lives. Bob enjoys the challenge of navigating complex financial situations while simultaneously ensuring that the appropriate risk management strategies are in place.
A lifelong wrester and three-time Academic All-American in college, Bob still avidly follows the sport. He also enjoys golfing, running, discussing Cleveland sports, and spending time with his family. He lives in Delaware, Ohio with his wife, Heather, and their three children, Grace, Mitch and Andy.
BS, Business Management - Finance Concentration, Case Western Reserve University
Assets Under Management:
Retirement Education - INTRO - Episode #001
First of all - congratulations! You're doing great taking care of your money and saving for your future.
Since you've already taken care of the "big three" initial steps - matching contributions to 401(k), Roth IRA, and emergency funds - the next step is really up to you.
If you want to save extra money tax-deferred, work towards maxing out your 401(k) contributions. For 2018, that max will be $18,500/year.
If you want to save for "life events" - kids, house, vacations - consider opening up a non-qualified investment account. (If you're comfortable investing just use Vanguard or Fidelity. If you want a little help look into Personal Capital or Betterment. If you want more detailed help, consider looking up a financial advisor.)
If you want to invest in real estate, work towards understanding that market and build up your cash position to be ready to deploy.
If you want to invest in start-ups, consider looking into angel investor groups in your area.
At this point you have great flexibility and a wonderful opportunity to build your wealth for the future. It's a first world problem for sure - but one that is very important to come up with a solution that works for you!
This will be considered a gift. There are a few steps to this transaction and I'll walk through those with you.
First - the sale of the cabin itself. Your mother may owe taxes on the sale of the cabin depending on what her basis was (amount she paid for the cabin) and what she sold it for. (This is assuming that it is not her primary residence.)
So for that part, you have no responsibility for taxes but your mother may.
Second - the transfer of the cash to you. If she just writes you a check for $227,000 neither you nor your mother will owe any taxes. However, her estate tax exemption will be depleted. Here's how it works:
There is an exemption of $15,000 per year. The $227,000 will be lowered by that amount, so her impact will be $212,000.
She then takes that amount and reduces her lifetime exemption, but still owes no tax.
So the short answer is - your mother may owe some tax on the sale of the cabin, but you will not owe any taxes on the cash you receive.
**Please note - this is only a conversation on federal tax, as I do not know what state you reside in.**
In general, if your debts are at a lower rate than what you can get in the market, it's mathematically better to keep the debt and let your money keep working.
The unfortunate thing though is the returns you're mentioning are not guaranteed. If you truly believe the 15% will continue then the math is easy. However, how does your perception/strategy change if the market goes down 15% next year?
If you have a long-term plan for paying off the debt while continuing to invest then stick to that. But to look at is on a month-to-month or even year-to-year basis is a difficult proposition with the fundamental volatility in the market.
In order to make contributions to a Roth IRA you need to have earned income. If you do - you can put 100% of earnings up to $6,500 into a Roth (and if you have a spouse, same goes for him/her).
If you don't have earned income you can consider Roth conversions. You pay taxes on the converted amount, but from there on out the account grows tax-deferred and you can take distributions tax-free.
Roth conversions though do not count as part of your RMD (required minimum distribution). Any conversion would need to be in excess of your required amount from the government.
One more note: if you don't already have a Roth you need to wait five years before earnings can be distributed to you tax-free. So keep that in mind as well when it comes to tax/income planning.
The thing about general rules of thumb is that they are just that - general rules to follow. Retiring at 70 (or later) is something that many people may find to be a reality - either due to personal, financial, or lifestyle needs or simply because they love to work.
Often times individuals target the set government dates to retire (like 62, 65, 67, or 70) because they correspond with some benefit the government offers to retirees. At 62 you can start drawing Social Security. At 65 you become eligible for Medicare. At 67 you can get your full benefit from Social Security (perhaps sooner, depending on your age). At 70 you can get maximum deferral of your Social Security benefit and retire then.
But that doesn't mean that each individual situation needs to follow those dates. Depending on your goals, needs, lifestyle, other assets, etc. you may very well need to wait until 70 - or maybe you can retire tomorrow.
Putting together a plan can help you to understand what you need and want in retirement and develop strategies to help you accomplish that starting now. There are a number of free tools out there to help you develop a plan, or you can find a financial advisor who you feel aligns with your goals. Either way - the rule of thumb to wait until 70 to retire is simply a generalization of when SS benefits hit their peak.
Finding out what you need is the best way to know when you can retire.