Q: Can my spouse start her full Social Security when she turns 66 and when I start my Social Security when I turn 67 can she shift hers to a Restricted Application for Spousal Benefit only? We are considering this as a strategy. After that, when she turns 70, can she go back to her own claim and, if so, will it have continued to grow at 8% per year or will it be only what she started claiming before she switched to the Spousal Benefit?

A: I recommend we discuss your question over the phone so I can have a better handle on your spouse’s Full Retirement Age Benefit at 66 and your Full Retirement Age Benefit at 66.

To answer your question, your wife cannot file for her lifetime benefit at 66 and then switch to her spousal benefit only when you turn 67, and then switch back to her lifetime benefit at age 70.

You have the following two options to consider:

Option 1:
You file for your lifetime benefit at 66
Your wife files for her spousal benefit at 66
Your wife switches to her lifetime benefit at age 70 (which has grown by 8% each year from 66 to 70)

Option 2:
Your wife files for her lifetime benefit at 66
You file for your spousal benefit at age 67
You file for your lifetime benefit at age 70 (which has grown by 8% each year from 67 to 70)

These two options are mutually exclusive. This means that you can only do one or the other, but you can’t do both. If you would like to schedule a phone call with me, I can run an optimization for you to help you make a decision on the best way to file.

Q: I have been watching a particular stock for years. I continued to watch it but I still haven't bought it. What are your thoughts? Do you think it's too late for me to buy it?

A:  I know it's tempting when you look at a stock like this. I typically feel the same way when looking at a stock that I feel like I missed. It's frustrating. But in my mind, unless I'm an early adopter, I feel like it's too late and I'm jumping on a crowded trade. Take comfort in the fact that you own other great franchises, and that investing is a long slow, boring game. Unless you're one of the founders of that stock, Facebook, or were buddies with Bill Gates in 1976… The only people that really get rich in investing are those that patiently adhere to the marathon.

Q: I have a question about asset location. I currently have 85% in equity and 15% in bond allocation. I understand that bonds are not tax-efficient and that it's best to keep them in tax-advantaged accounts. I have a much larger percentage of my portfolio that is taxable, so that means that my tax-deferred accounts are almost entirely in bonds. That means that my tax-deferred accounts will most likely grow at a much lower rate than my taxable which is all equities. This doesn't sit well with me. Is this the proper approach?

A: We build income-focused portfolios for our clients with a buy and hold, long term time horizon in mind. With this in mind, we allocate fixed income to Qualified Accounts (IRA and 401k) because this shields the client from paying ordinary income taxes on the income being generated on a monthly or quarterly basis. They only pay the ordinary taxes when taking withdrawals from the account, as needed, not when the income is actually received. We allocate our stocks and ETF’s in Taxable brokerage accounts because we are buying stocks and ETFs to be held for a very long time, which may reduce the overall tax liability because the capital gains tax will only be realized when a stock or ETF is sold. We recommend you sit down with a financial advisor to talk about this in more detail for specific recommendations catered to you.

Q: I have considered putting money into a Roth IRA recently. I was looking at Vanguard’s VTSMX Total Stock Market Index. I want to invest the $3,000 opening and then about $500 a month. But now our company 401(k) provider, Fidelity, is giving us a Roth option. I am 48 and contribute about $10,000 per year currently to my 401(k). I have changed my 401(k) so that I am now paying 60% Roth and 40% traditional 401(k). Currently, I have the funds listed below and contribute equally to them.
Do you think I should boost up my current 401(k) contributions to Fidelity or go with the Vanguard? If I go with Vanguard is VTSMX a good choice or would you suggest another fund? How does the 401k Roth work? Does your company offer retirement reviews?

A: We often recommend that our clients consider taking advantage of maximizing their contribution to a Roth IRA when they are eligible. The way you are currently splitting your contributions between the Roth and Traditional 401(k) makes sense in your situation. It's a great idea 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 what you’re looking for.