Leamnson Capital Advisory, LLC
Founder & President
Founding Leamnson Capital Advisory, LLC in 2011 represented the realization of an increasingly compelling vision Fred Leamnson formed while serving in the retail brokerage industry for more than 20 years. He has seen much during those years and determined there was much room for improvement. His vision drove him to implement what he knew to be true: that there was a better way to help investors think about and make smart, confident decisions about their money. To elaborate, he learned many valuable lessons during his time in the brokerage industry.
Fred's desire to move away from these types of industry conflicts was why he intentionally founded Leamnson Capital according to a different, better, way of championing his clients’ highest financial interests. By operating as a fee-only, Registered Investment Advisor firm, his sole sources of compensation and business are the fees his clients pay him in exchange for the best interest advice he provides. This enables and requires him to serve in a fiduciary relationship with his clients, so he can best focus on always doing what’s right for them.
Fred lives in Reston, VA with Cathy, his wife of 32 years and their two Akita's, Titus and Kaylee. On weekends, they enjoy spending time with their pups, taking them for walks on the Reston trails. They both enjoy bicycling, yoga, and regular workouts at the gym. They also enjoy visiting the many beautiful Virginia wineries — doing their small part to support the growing Virginia wine industry.
Assets Under Management:
I'm sorry about the job loss and the difficulty of your situation.
If you withdrew your 401(k) money when you left your job, you would owe tax and a 10% penalty since you are under age 59 1/2. The IRS requires plan administrators to withhold 20% of any distributions from 401 (k) plans. It seems that is what happened here.
As to the loan, if you withdrew the 401 (k) funds, there would be no money left from which to borrow. If you had a loan before taking out your money, that would have been a taxable event as well. I'm guessing that's the situation. If not, please clarify so we can better answer.
In general, keep in mind that any money not rolled over to another company plan or IRA will get taxed. If you are under age 59 1/2, you will pay an additional 10% penalty. As previously mentioned, the IRS requires plan administrators to withhold 20% of funds sent directly to employees for taxes.
If you can wait until age 70, you will earn an additional 8% per year over your age 66 amount, or $1,848.00. There are several other things to consider when making the decision.
1. Income needs - If you're taking early because you need the income to live comfortably, then that's what you should do. If you can wait, you will draw a larger benefit.
2. Benefit reduction - If you work and draw Social Security early, benefits are reduced $1 for every $2 earned over $16,920 and $1 for every $3 over $44,880 in 2017. Granted, an adjustment is made once you reach full retirement age. However, you may not earn what you thought when filing early.
3.Taxes - If you have earned income, you could pay taxes on up to 85% of your Social Security benefit. Here's a link to the SSA site to help you understand how benefits are taxed - https://www.ssa.gov/planners/taxes.html.
4. Life expectancy - The longer you live, the more valuable waiting becomes. The breakeven points for taking benefits early are generally around age 78 and 79. If you wait until age 70, that moves to 84 or 85. I always recommend planning for a life expectancy to age 90 or higher. It's much easier to increase your income because you've planned conservatively than to cut back because you're running out of money.
Your idea of investing the $1,000 now sounds good but rarely works. Often, the money never gets invested. Rather it gets spent. If you do invest, it should be as part of an overall retirement strategy that takes into consideration income needs, expenses, liabilities, life expectancy and many other factors. All stocks have a risk to them. In the financial crisis in 2008, the S & P 500 index (large caps) dropped by over 38%. That sounds risky to me.
A good Social Security calculator can "do the math" to help you decide when to claim. Good software will calculate your breakeven points for various ages, consider spousal benefits, taxes, and many other factors. Look at Maximize My Social Security - https://maximizemysocialsecurity.com/.
Don’t make the claiming decision in a vacuum. For the reasons mentioned, it should be a part of an overall retirement plan.
It's hard to answer your question with the information you provide. There are several things to consider.
- What are your ages?
- When do you plan on retiring?
- What's the mix between assets in retirement accounts vs. taxable investment accounts?
- Do you have money in Roth IRAs?
- Do you have a pension or other sources of guaranteed income?
- Is either of you taking Social Security?
Much of the industry advice says to draw on taxable accounts first, then IRAs, then tax-free accounts, like Roth IRAs. Yet every person's situation is different, based in part on some of the questions raised above.
As to Social Security, if you plan for the life expectancies above, it would make sense to delay claiming as long as possible. Between full retirement age and age 70, you accrue delayed retirement credits of 8% per year. This is income you can't outlive and one that is inflation protected.
How much income you earn also has an impact on how much of your Social Security is taxed. That factors into the decision on how to withdraw your funds.
If you are not working with a financial advisor, I would encourage you to find a fiduciary advisor who can take a look at your assets, liabilities, and other factors to help determine the best way to withdraw your assets.
You may also want to resubmit your question with answers providing more information about your situation. It would be easier to give you a more definitive answer to your question.
Many "experts" will tell you it's almost always better to own than rent. They point out the tax deductions available for mortgage interest, the wealth effect gained from price appreciation, and the security of owning a large asset. All of those a valid reasons to own.
However, the most important thing is cash flow. Can you afford to own? There is the monthly payment of principal and interest, property insurance, and, as you point out, property taxes. Though the mortgage may be fixed, property taxes can and often do go up. In addition, you need a down payment, typically of 20% of the purchase price. Though they can be negotiated, closing costs, including title insurance, are also added.
Start with a budget. Look at your current monthly expenses and income. If there is a considerable surplus after paying bills and contributing to savings, use that as a guide for how much extra you can afford. Caution, don't do this at the expense of your savings. That's a recipe for trouble.
Since you're looking for more space for your family, compare larger rental houses in your preferred neighborhood to the costs of owning a house in that same area. Real estate agents and mortgage companies can help you calculate the costs of ownership. You will, of course, likely pay more for a larger rental house. Compare the two costs in relation to the budget you created. Let the budget determine your choice. DO NOT stretch yourself to get into either property.
It's better to be conservative and have peace of mind than to be stressed because you're overspending. Good luck!
Asking where investors put their money in a bull or bear market indicates a desire to time the market. Though advisors and fund companies will tell you otherwise, timing the market is rarely successful. Timing a bull or bear market requires you to be right twice. Once when you sell. Once when you buy. No one has the ability to do that.
A better question is how should your money be invested to accomplish the goals you have set for yourself and what you want your money to do for you over the long term. What other investors do has little to do with what's important to you and yours. Part of that exercise should be to understand how much risk you're willing and need to take to accomplish those goals.
There are tools available to help you stress test your portfolio to see how it might perform in a worst case (bear) and best case (bull) market. If this test shows you're not willing to take the kind of risk measured, dial down the percentage in stocks. If you feel like you can take more and need that to accomplish your goals, increase the amount invested in stocks.
Once your portfolio is selected, implement a rebalancing strategy to take advantage of those extreme conditions that happen in the markets, both bull and bear. In those extreme conditions, some parts of your portfolio will have gone up substantially and be sold and used to purchase other areas of your portfolio that have dropped substantially and be bought. It's a simple way to implement the age old investment adage to buy low and sell high.
This may sound boring and unexciting to you. However, in my experience, a well-diversified global portfolio tied to your personal goals and risk tolerance with a built in rebalancing strategy offers the best chance for long term investment success.