60 Minute Finance
CPA and Financial Counselor
Born and raised in Virginia, John passed the CPA exam before graduating from Virginia Commonwealth University and beginning his career at a “Big-8” accounting firm in 1987.
After two years in public accounting, he accepted employment with a client and rose through the ranks in private industry. Desiring to work in a more diversified environment, John started his own accounting practice in 2000 and added personal financial coaching services in 2013.
John resides in Hanover County, Virginia with his wife and children. He is active in his church, enjoys finishing a good run or workout at the gym, and leads personal finance classes in the community.
In addition to 60 Minute Finance, John is also the owner and president of Riverpine Services, Inc. Riverpine Services, Inc., provides freelance accounting services to a select number of small businesses throughout the region. In 2016, John moved to a part-time roll with Riverpine to focus his attention and energy on his personal financial education efforts.
BS, Accounting, Virginia Commonwealth University
The recommendations provided are educational in nature and not intended to be specific recommendations for any particular individual. The goal is to educate and inform readers of available options, with the ultimate decision being theirs. Please consult the appropriate tax, investment, insurance or financial planning expert before making any final decisions.
Congratulations on being in such good financial shape!
Since you mention an RMD, I assume the annuities are inside of an IRA. I'm not sure why your advisor recommended an annuity in your situation since you already had tax deferral via the IRA structure. Further, I assume you mean that you can take up to 10% out of the annuities without a surrender charge.
I'm not sure what your estimated taxable income is currently, but if you're in a reasonably low tax bracket, I'd recommend that you begin to move money out of your pre-tax accounts. This can be done by transferring an amount to a taxable brokerage account (your RMD can be handled this way). If you have additional room in a lower tax bracket, you may want to convert some of the pre-tax (I assume) 401k to a Roth 401k/IRA. This will move the investments to a tax-FREE account that your son and/or grandchild can also benefit from after your passing.
Since you are investing with your son and granddaughter in mind, you may want to consider a heavier equity allocation than you would like for yourself. Your life expectancy is probably shorter than your son, and significantly shorter than your granddaughter! Invest with their time frame in mind, not your time frame, if you don't need the money for your expenses.
Best of luck and thanks for your question.
With such a short time frame (3-5 years), your options are limited. On-line, FDIC-insured money markets are now up to around 2% and there are some 1-year CD's paying 2.5%. I'd recommend sticking with those options. Yes, you won't earn much, but you also won't lose a chunk of your down payment when you need access to it.
Best of luck and thanks for the question.
I'd recommend only contributing enough to your 401k to get the company match. Any additional funds should be dedicated to debt elimination. Eliminating the student loans will increase your monthly net cash flow and allow you to save a serious amount of money each month!
Thanks for the question and best of luck!
If I understand your question correctly, I would recommend paying cash for the new home. Being debt free allows you to either cut your cash flow needs in retirement or, if you're still working, it allows you to save and invest a larger amount each month to take advantage of dollar-cost-averaging. Be sure to pay off any non-mortgage debt first (cars, credit cards, student loans, etc.), but it sounds like you don't have any of those to still deal with.
Enjoy debt-free life! Thanks for your question.
I like the idea of paying off the debt in full immediately upon receipt of the inheritance. It will eliminate the monthly payments from your cash flow as well as end any interest charges you are incurring.
If you're unsure, ask youself this question: If you had no debt and inherited "only" $120,000, would you then borrow another $50,000 to increase your cash balance to $170,000? Certainly most people wouldn't make such a move! If you wouldn't either, then you have your answer......pay off the debt in full.
Thanks for your question!