Q: I have considering putting money into a Roth IRA recently. I was looking at Vanguard’s VTSMX Total Stock Market Index. Basically I want to invest the $3,000 initially, and then about $500 per month. But now, our company's 401(k) is giving us a Roth option. I am 48 and contribute about $10,000 per year to my current 401(k). I have changed my 401k so that I am now paying 60% Roth and 40% traditional 401k. Does this approach make sense? How does the 401(k) Roth work? Does your company offer retirement reviews?
A: We generally recommend that our clients take advantage of maximizing their contribution to a Roth IRA when they are eligible. It's great that you are currently splitting your contributions between the Roth and Traditional 401(k). In your position, it makes sense for you to continue to hedge the “tax bet” since you are 48 and are likely at or nearing the highest tax bracket that you will be in during your lifetime. To get it close to a 50/50 split between your Roth and Traditional contributions you could contribute 70% of your 401(k) contribution to the Traditional and the other 30% to the Roth. Then you could max out your Roth IRA ($5,500) with your remaining savings. Regarding the Vanguard fund, unfortunately we are not able to give specific investment advice, however Vanguard funds are typically a good option for investors due to their broad exposure and low costs.Our fee is based on a percentage of the assets that we manage; however, we do offer complimentary consultations where we break down your entire financial picture. We’re also happy to point you in the right direction if our service isn’t necessarily the right fit.
Q: I'm not eligible for my company's 401(k) yet, so I'm contributing to my own IRA. I'm married and we file jointly. We are both over age 50. Does the $6,500 limit apply to both of us together or just me? I can't tell the answer from the IRS website and I don't want to get hit with excess contribution penalties
A: The IRA contribution limit applies to the individual, therefore both you and your wife are eligible to contribute $6,500 each to your own IRAs.
Q: Should I get a reverse mortgage?
A: Generally, we do not recommend reverse mortgages for our clients as it is a method that is often used as a last resort for income. As with any financial decision it is important to do your research to fully weigh the pros and cons. Check out this article to understand a little bit more about how reverse mortgages work. http://www.bankrate.com/finance/retirement/basics-of-reverse-mortgages-1.aspx
Q: My husband will retire in August 2016 at age 70 and begin collecting on Social Security. I am 61, turning 62 in July of 2016. Are there any benefits to my husband filing for Social Security before the deadline for these changes?
A: There are no real planning options left for your husband since he is turning 70 in a few months and will take social security at that time. Also, since you were not 62 by January 1, 2016, then the new law that goes into effect on May 1 did void your ability to file a restricted application.