Golden Trail Advisers LLC
Mike Sedlak, founder and managing member of Golden Trial Advisers, LLC. advises executives, business owners and individuals on their financial planning and investments. Since 1998, Mike has worked on cases with people at all stages of their financial lives, from establishing savings targets and investment portfolios to developing business and estate transfer strategies. Mike is an investment analyst by training. He sets investment policy at Golden Trail Advisers, including holdings acceptable for model portfolios.
Mike has a high level of education and credentials in the financial services industry. He has broad designations such as his MBA from Northwestern's Kellogg Graduate School of Management. Mike has specific designations such as Certified Financial Planner (CFP), Chartered Financial Analyst (CFA), and Certified Exit Planning Advisor (CEPA). Mike also has securities licenses through the supervisory level. Mike is a recognized authority on estate planning from a financial planning perspective. He has taught an "Advanced Estate Planning Concepts" course for the Exit Planning Institute, a national organization for advisers.
Mike's depth of financial education and experience enable him to advise clients on a broad range of financial issues. One specialty is the transfer and use of wealth for the next generation. In addition, for clients who own a business, Mike is experienced and credentialed as a CEPA adviser to guide business owners through the transfer process (including estate tax minimization). For business owners, transferring or selling the business can be the most important financial decision in their lives.
Mike has held top leadership positions in volunteer organizations including the YMCA (head of Southwest Adventure Guides) and the Rotary Club of Hinsdale (President, Vice President and Board Member). Mike lives in suburban Chicago with his wife and two children.
MBA, Business, Northwestern University
BS, Business Administration, University of Illinois at Urbana- Champaign
#Life and Long Term C
To add to what has been said, you would set up an irrevocable trust if you want the money to be out of your name. With a revocable trust, the money still would be in your name. Two reasons for making a trust "irrevocable" woud be estate planning or asset protection.
Before you set up an irrevocable trust, be sure you won't need the money in your name later for another purpose. As my fellow professionals pointed out, you cannot change terms or get back the money you put into an irrevocable trust.
Another difference is that an irrevocable trust needs to do a tax return each year that it generates income. That can be costly, time consuming or both.
Hope this helps your understanding.
Congratulations on getting your son through college - a nice financial milestone.
To start saving for retirement, first, you should figure out how much you need to live on in retirement. Then, you can determine the amount you would need to save each year. Retirement calculators could help you with this. A financial planner probably could do a better job for you, taking into account taxes, Social Security, health care costs, etc.
Let's say you determine that you need to accumulate $500,000 by age 65. Assuming 5% returns, you would need to save about $25,512 per year. We will ignore taxes for now.
Knowing this amount (saving and investing $25,512 annually to get to $500,000 by age 65), you should look at the options available to you for investing. If you or your wife have a 401(k) plan at work, especially if there is a match from the employer, that is probably the best place to save money. The tax deferral at this stage of life might be valuable. But if not, many 401(k) plans offer Roth accounts, as well.
A separate question is what to do with three life insurance policies with a cash value of $60,000. We do not typically use cash value life insurance as part of our financial plans. We recommend term life insurance because the cost of term per $1,000 of death benefit is much less than the cost of cash value insurance. The commission paid to life insurance salespeople is much higher for cash value than term.
We believe a person should have sufficient term life insurance to cover an untimely death while he or she is building assets. Had you died before your son finished college, for example, your life insurance payout should have provided for his college. If people reach their savings goals, there is a point where they have sufficient assets and do not need life insurance. This should be part of the financial plan.
Life insurance policies. It is possible that the policies you have in place are OK and should be left alone. Another option available when people are insurable without being rated up for a health issue is to replace cash value insurance with term insurance. A 15 year term policy might be appropriate for someone who is 51. In that case, the cash value could be freed up for investment.
How to access the cash value? Tax rules allow the conversion of cash value into an annuity without paying taxes. This is called a 1035 tax free exchange. For life insurance, the principal can be withdrawn before the gains. So, some people take out the principal (tax free amount) from their cash value and then roll the taxable portion to an annuity. Up to $6,500 per spouse of tax free withdrawals could be put into a Roth IRA, assuming both are eligible for Roth. Then, only the taxable portion could be exchanged into one or more annuities. I would caution against the high-fee annuities, which have long periods of surrender charges.
After money from life insurance is exchanged into an annuity, the gains (taxable) must be withdrawn before the principal. That is the opposite of a cash value life insurance policy (tax free money comes out first), which is why you want to plan any disbursements/exchanges from life insurance carefully. Last point is that once you exchange money from life insurance to an annuity, you cannot exchange it back to life insurance without being taxed on any gains.
I hope this discussion is helpful. We would need to know more about your situation to give you recommendations.
All else equal, stock prices over the long run correlate with earnings. S&P 500 earnings have grown about 6% plus inflation annually. We would expect earnings to continue growing as companies add more products and more markets, reduce expenses, etc. That doesn't mean all companies will grow their earnings equally or the pattern of growth will be a straight line. However, since we would expect higher earnings over time, we would also expect stock prices to increase.
That said, markets respond to all kinds of news and information, especially in the short run. Why? Market participants want to get the edge on the competition and buy if they think prices will rise and sell if they think markets will fall. News and information that looks like it will hurt earnings would likely hurt stock prices.
Hope this helps.
Your question sounds easy, but there are a number of considerations.
The main priority is to determine the amount of after-tax (Roth) versus pre-tax (e.g. traditional IRA or 457) you want to invest. With the increase in standard deductions, the value of Roth / after-tax retirement accounts has increased. Money in a Roth IRA grows tax free and is withdrawn tax free. If you do not need the tax benefit of putting away money pre-tax, a Roth is a great place to have some money.
If a tax deduction is still important to you, you want to make sure you put money into a pre-tax retirement account. That can be either a traditional IRA or 457 plan. What some people do is add money to both pre-tax and after-tax retirement accounts. Note that there are income limits if you are eligible for participation in a 457 plan and want to make a deductible contribution to an IRA - so you might be better off putting all of your pre-tax money in your 457.
The next priority (if you want to invest after-tax money) is to find out if your 457 accepts after-tax (Roth) deposits? If so, you could put everything in your 457 and keep life simple. If the plan rules allow, some of your 457 money could be pre-tax and some could be after-tax. If you determine that you want to put some money into an after-tax retirement account and your 457 does not hold after-tax deposits, you would need to set up a Roth IRA. You could start a Roth IRA without doing a rollover or conversion. Just add money to it when you want to invest.
If you want to move your SIMPLE IRA to your 457, you would have to go through one extra step. Money in a SIMPLE IRA can only be rolled into another SIMPLE account. In any case, you should ask your financial planner to change your SIMPLE to a traditional IRA. That will get it positioned for the future and there is no downside or tax implication.
Your other question was whether to convert your SIMPLE IRA to a Roth IRA. Doing so would increase your income (and taxes) and might not be worth doing.
Good luck with your decisions.
1.55% compuunded would become about 1.562% for the year. If you leave the money in all year, you would have about $7.81 at the end of the year. But if you take out the money each month, the annual rate equivalent would be very close to 1.55%. So, the monthly income on an investment of $500, would be about $0.646 per month, or about $7.75 per year.