Agree. It is not going to produce dizzying returns, but it does what it is supposed to do.
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Our FA has worked on the Roth Rollout strategy for us (we are 65, and will be dealing with RMD at age 72) - and it makes a pretty big difference in the overall size of the estate to the kids. We want to pass gift money to them as they can use it (to help when they are ready to purchase a house). So we are looking that over. We also have some home improvements to do.
We still have a good bit of our âestate planningâ to do. Baby steps and forward movement.
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Another thing to consider is the kidsâ future marginal tax rates vs yours. If the kids are doing well in high tax areas (hereâs looking at you NYC), their marginal rate could be approaching 50% when they hav to take the RMD from the IRA they inherit from you. So, a larger Roth conversion today at your lower marginal rate might make sense.
Not to mention that the former tax rates snap back in '26, absent future legislation.
edited to add: Roth conversions is a another good reason to delay claiming SS until 70.
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Yes, good point. Plus, our state has a substantial estate tax. Lucky for them we do have a reasonable amount in Rothâs, but thinking about them potentially paying 50-70% taxes (WA state estate tax and income tax on inherited 401Ks) makes me want to pass them money before death even more.
I just donât want to mess up their lives, I want to enhance it. The older one would say thanks, put it in an investment account, and likely never think about it. The younger kid (who could definitely use it and has the potential to really appreciate it) has the âI feel so guilty about my white male privilegeâ thing going, I donât want to add to that. I want them to fully understand that they would get this because their parents worked their butts off, lived below their means and invested, and their grandparents lived as if they were impoverished. Maybe weâll start with a little bit at a time and see how that goes.
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Thankfully, there is no state gift tax where we live @busdriver11!
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Oh jeez, some places have a state gift tax? I didnât even know that was a thing.
Been reading this thread for awhile now and very informative.
We recently met with a Financial Adviser as DH plans on retiring the end 2024. We donât have the funds many here seem to have, but we do have funds in far too many places.
After meeting with the gentleman, he recommended an Indexed Annuity. We have to go back as we surprised him with the retirement savings, but that is good as it gives us time to investigate this further.
Reading past threads, is seems an annuity is not recommended for investment.
Yet, we have friends also doing the same as we are with planning for retirement. They have also met with financial advisors, I know one was a Fiduciary.
All 3 couples were given the same advice, an Indexed Annuity was recommended at some financial level.
Were all 3 bad advisors? Or is this a good option for people who have funds that need to go somewhere?
These advisors do or donât stand to make commission off of the recommended annuity? You mentioned one being a fiduciary. I feel like weâve been âhadâ in the past so Iâm curious about annuities but donât want to hear it directly from financial advisors. Thanks!
Annuities have huge up-front commissions, so buyer beware. Search indexed annuities on the bogleheads forum and you can read up on teh downsides.
(not sure if Iâm allowed to post a link, sorry)
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IMHO you need to work with someone for a while. Some will offer a class â only cost is the purchase of the materials, which was bound information from professional organization. After we attended the class (early 2013 when we were 56/57), we met with FA and also attended one of the free dinner meetings with them. We scheduled another meeting with FA and went from there. Our class was with a two evening course with 2 books âRetirement Planning Todayâ published by Financial Educators Network (soft sided bound notebook page sized). We actually attended the same course again this past year to ârefreshâ ourselves and also see the current examples with Social Security and other tax updates. Over the years, DH has become more educated on how our investments are working, and each meeting with FA he comes away with having learned/understood more. With retirement, DH logs on each month and prints out a summary of our financial picture. I have two graduate business degrees but was not interested in studying and daily monitoring and doing what FA does (we have done everything with him outside of managing DHâs 401k which I continue to do and have done very well). FA just had a recent meeting for clients âHow Tax Planning Changes Through Four Stages of Retirementâ - it helps to have these classes so his time with individual clients is knowing they have this knowledge base. (Pre, Early, Middle, and Late Retirement are the 4 stages). It prompted us to learn more about RMDs and then ask FA to do an analysis for us with our monthly/yearly draws before RMDs kick in and keeping the best scenario for us. He uses a tool EMoney within the wealth management portfolio we have with him (his FA software tool). Over the years as their firm has grown and as software became a better tool, they have had less overall fee with their groups of funds (now with TD Ameritrade Institution) and a better tool for client information.
We have no private or government work pension. We both have social security - i drew right at 65 (last Oct), and DH is starting at 65 years and 8 months (should get first check in March). We just now set up our income flow/monthly from investments with FA.
You have time with retirement at end of 2024 but you need to have concentrated effort on learning and finding the right Fiduciary FA. FA should have a tool with Q/A from you to find out your risk level of comfort. Then looking at what you have now - how that risk number is.
I believe you are getting a quick and easy âsolutionâ w/o much work on FA but he/she will be getting his commission with annuity purchase and the investments you put under their umbrella, like 401k, Roth IRA, etc. IDK if you are meeting once or twice with the individual and they are giving a pitch that they give to many people or what your expectations are. Certainly if you have a pension and not that many assets to manage - the FA has to determine what kind of service he/she can give you.
Our FA constantly is âscoutingâ various financial instruments for his clients. So he is reviewing annuities that are out there and which are the ones to go into at that particular time.
So we had retirement money in various instruments - we started with looking at the various funds that needed consolidating â with SAR/SEP, 401kâs, IRAs and lots of loose ends. Not really monitoring anything before meeting with FA, except our largest which we have been active with all along. I knew we had to lower our risk and do better with having the investments all be correct for us.
We have 5 annuities now, I have 1 and DH has 4 - with 3 insurance companies, and purchased at various times from mid 2013 to mid 2021. FA has our Roth IRAs in his financial institutional umbrella but with our funds identified.
We purchased first annuity to lower our risk later in 2013, and also I had funds for annuity purchase, and then progressed over the years as DHâs 401k continued to become too sizable and needing to lower our risk along the way - the 401k was in various best performing 4 fund classes within our fund choices (and weighted differently for best overall performance and diversifying risk even more with keeping 4 funds instead of 2) - large and small cap growth and value funds.
We moved along with baby steps. First we got all the loose ends worked out over time - including a SAR/SEP. We attend the FA groupâs semi-annual presentations and met individually with our FA twice a year (typically weeks after the presentation). We have a sizable 401k that we manage ourselves (the company pays some overall âfeesâ) - of course each investment within the 401k has small fees - but we are in 4 very good stock âgroupâ funds at different percent amounts of overall account, that perform well based on how the stocks are doing of course, but who knows this year - I am waiting to âshelterâ the 401k into guaranteed return but then the question is when to jump back in - January was a downturn and markets are jittery at this pointâŠI track monthly and quarterly, but also go to weekly and daily with jittery markets.
Over time, we converted stuff into DHâs IRA and my IRA with our FA, then we moved it into Roth IRAs under our advisor. We spun off money from large 401k and purchased annuities that were good at each step of that - over various years. Also some of my other retirement funds (including a small 401k at most recent employer) went into my annuity, Roth IRA, or were cashed out as income after age 59 1/2.
The annuities we have are with very solid insurance companies that have different contract options and different length of time with contract. FA could make recommendations as we needed to have our overall risk be at our comfort level. We have a total of 5 annuities.
Now that DH and I are 65 and both retired, FA has developed the income stream for us based on replacing our income from our jobs and taking into account other income as from SS. He also is keeping in mind RMD (required minimum distributions) for us that go into effect at age 72 - so he has recommendations for us now that will help keep taxes to our kids down when they inherit from us while we have funds clearly until we are 100 years old.
We are looking to put some gift money into DDs accounts as we have money available to do so. It makes sense for us to do this in steps each year - to be used for home purchase when the time comes.
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Annuities are a lot to learn and a lengthy contract. You want to be sure the annuity truly works - it is the right product. You want to really understand your financial picture and have a Fiduciary FA that not only is very knowledgeable on having looked at lots of annuity products but also will present the best options. Do not sign anything you do not understand.
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Absolutely the FA makes a commission!
Our FA started his company some years prior to us joining, and his group has grown. I met one of his early clients through a church function at a church we donât attend - she has a disabled husband, limited means, and he has done very well for her over the years (he was in his first office when she became his client, and has added additional FAs and is now in office #4). At some of the group events, we see people we know through employment, church, community.
Tax question: I went with my 89yo mom to do hers last week at H&R Block. The woman said something about not having to files taxes next year. My mom said neither of her sisters files taxes, even though one of them works so has income beyond SS. Is this a thing? Is there an age or income threshold under which she wouldnât have to file? TIA
(States may have their own rules.)
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I know that many Area Agencies on Aging offer tax preparation for low income seniors.
no (to age) and yes to income
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Thanks, everyone! Iâll read up. I just got off the phone with her and she told me about her sisters so it was top of mind.
She did that a couple of times, but my sibs who are on-site never get her signed up until after all the slots are full.
Looks like she needs to file, according to the link supplied by @ucbalumnus . Thanks for the link!
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One may need to file for state income tax, and would look on the state web site for that situation.
FA has a Roth Conversion strategy to get our tax projections pretty close to the same as when we take RMDs. We are looking through to totally understand the logistics and then move forward on this. Conversion amounts for next 4 years, and then smaller amount in 2 years, and then we are at 72 and RMDs. It also makes a pretty big difference in the overall size of the estate to the kids.
One has to always consider the tax angle in these decisions.