Sullivan Financial Planning, LLC
Kristi Sullivan has been helping people achieve financial security since 1996.
After graduating with a B.S. in Business from Colorado State University, Kristi worked for Great-West Life in the employee benefits department for three years. This experience gave her a strong background in employer retirement plans, Flexible Benefit Accounts, and group medical plans.
Departing for Fidelity Investments in 1998 gave Kristi the chance to learn more about financial planning on a personal level. In her nine years at Fidelity, my duties included operations, compliance, financial planning, and teaching investment classes.
Sullivan Financial Planning, LLC was formed in 2007 with the goal of providing clients exactly the type of help they needed, without the pressure of corporate quotas or sales numbers directing the recommendations.
Kristi holds the Certified Financial Planner™ designation and the Series 65 and Colorado Life & Health Insurance Licenses. She is a member of the Financial Planning Association, The Alliance of Professional Women, The Women’s Estate Planning Council, and the Denver Alumnae of Chi Omega.
She is proud to have been a volunteer speaker for the non-profit Evelyn Brust Foundation. As a speaker for the Brust Foundation, she presented on achieving financial security at public libraries for the purpose of providing the general public an education without a sales pitch.
In Kristi's down time is spent with her husband and two sons. She is always up for a ski day, travel, seeing plays, and reading a good book.
BS, Business, Colorado State University
You are correct, the amount of your outstanding loan will be subject to income taxes at the time of your loan default (when you stop paying it back). The remaining balance is subject to income tax at your ordinary income tax rate. The 20% withholding comes into play if you take money directly out of the plan as a payment to you. If you roll the 401(k) to an IRA, there is no tax for that transaction. As you take money out of the IRA, you can tell your investment company the percentage you want withheld at each distribution.
Try to only take out money when you need it, not in one big lump sum. That will only increase your taxes in one year, when spreading out the distributions could keep you in a lower tax bracket.
Just because you are given the first right to buy doesn't mean you have to buy or are required to pay their asking price. I would definitely try to negotiate a fair price with the estate. If you can't come to an agreement that makes sense for all parties, walk away.
I'm a fan of a paid-off mortgage. Many people will tell you not to give up the tax write off from mortgage interest. However, if you look at it as a whole part of your finances, that makes no sense. Say you are paying $10,000/year in mortgage interest and are in the 25% tax bracket. Your IRS write off will amount to about $2,500 back to you at tax time, but that's still $7,500 that just goes to interest to the bank. In other words, the write off still leaves you $7,500 in the hole for cash flow.
If you don't think you will be in the house for very long, don't pay off the mortgage and tie up the money in an illiquid asset (the house). If you do plan on staying in your house for 5 years or more, pay that debt off and enjoy mortgage-free living.
Is it the investments themselves that you don't like, or the fees the bank is charging to manage those investments? I ask this because if you transfer the account to another investment company but keep the same shares of stocks/bonds/mutual funds/ETFs, there won't be a sell of the shares for gains. You'll just be trading one holding company for another.
Let's say you want to sell all of the investments and start fresh. On $29,000, the normal 15% long term capital gains rate (assuming you are not in the highest income tax brackets) will cost you $4,350. Assuming you save .4%/year on average (you won't be getting investments that charge nothing), that savings is $440/year. It will take you about 9.8 years to make up the capital gains cost with just the lower fees.
Consider ways to slowly move appreciated assets (combining with investment losses, charitable gifting with shares) so that you don't take a huge tax hit all at once. Also, look at the funds in context of more than just fees. A managed large cap stock fund expense ratio is around .6%. Index funds are less, but overall your bank may be in line with averages for the industry.
Great job saving extra cash! First, determine how much of the $100,000 should stay in cash for an emergency fund. The amount should be at least 3 months worth of essential expenses plus any upcoming spending in the short term (vacation, home repair, etc.). What's left can be invested for the longer term. How long is what determines what type of account to use. If you are thinking retirement and you feel your company 401(k)s are good quality and low expense, consider maxing out the 401(k) and using the savings to offset the drop in your paycheck. This gives you the best tax bang for your buck. However, if you want to use the money for longer term, but not retirement, use a joint brokerage account. I generally counsel on mutual funds and ETFs with low turnover and a combination of stocks and bonds that makes sense for the time horizon of the money. Don't leave 529s out of the equation if you live in a state with income tax.