Retirement

What To Do With Retirement Funds After Retirement? (Your Advice)

June 1, 2007 By Jeffrey Strain 4 Comments

When it’s time to leave a job you have more than the loss of income to think about in regard to your personal finances. You also need decide what you will do with the accumulated money in retirement plans at the company. That is a question that this reader has:

My wife will be retiring from a large company in another 4 years or so where she has done well. Her 401k retirement fund at the company is about $600K with an additional $300K in the company “matching” stock plan for a total fund of $900k.
My question is what steps do we need to take so that we don’t have to pay a fortune in taxes when she retires? Is it possible to transfer the retirement money into a stock plan without having to pay a large amount in taxes?
I know we have to pay taxes if we withdraw from the retirement fund for our personal use, but will we have to pay if we want to keep the money invested? I’m sorry this is such a basic question, but we’re not at all financially literate and are not sure what to do.

What would your recommendation be on what this couple does with their retirement funds and in what type of investments would you place them?

On The Right Financial Road? (Your Advice)

May 11, 2007 By Jeffrey Strain 7 Comments

When you make financial decisions, there are times when you’d like to have others take a look at the decisions you have made and give their honest opinion on whether or not they think you’re on the right track. That is exactly what the writer of this email was looking for:

I earn approximately $77k and my wife is a stay-at-home mom. We carry no credit card debt. We have a 3 year old and a four month old. We have about $70,000 in 401(k) savings and between 3-6 months in liquid savings. We currently contribute about 4% of our income to retirement savings which maximizes my company match. We have about 5-10% equity in a $205,000 home and are aggressively overpaying both our 80% first mortgage (a 5.75 30-year) and our 20% HELOC (prime + .5) second mortgage. We have about $90,000 in federal student loans (85% is mine) debt at relatively low, fixed-rates (and consolidated). After the modest 401 contribution and the mortgage overpayment (about $8500 a year) we don’t really add anything to savings.
Conventional advice often seems to suggest we focus on retirement savings versus things like 529 plans or even aggressive mortgage overpayment. Since we originally put nothing down on our mortgage (and because I want to maximize our ownership stake for my wife’s benefit if I were to die suddenly; I have a $1m term life policy), we have been focused on building equity in our home but less on retirement savings (only that 4% or so). As far as those mortgage over payments, we have been overpaying both mortgages with the logic that the lower rate 30yr has a much higher balance, and the variable HELOC rate has a much lower balance, but we still expect to sell within 2-3 years. I am almost 34 and my wife is 35.
What do you think of the way we are tackling our finances, given goals of increasing net worth, potentially funding college education, retiring at some point, etc. My wife will likely return to work at least part time when our kids are in school in a few years.

Do you believe he on the right financial path given his goals or would you recommend that he make some changes in his financial plan?

Financial Laziness

March 27, 2007 By Jeffrey Strain 6 Comments

A lot of problems with finances are the direct result of being financially lazy. That is, you know what you should be doing, but you’re just too lazy (or have a convenient excuse) not to do it. And while life is certainly not about making sure every detail of your finances is perfect 24 / 7, most financial laziness comes in the form of financial leaks that could be solved with a small amount of time and effort. Here are 10 signs that you may be financially lazy:

1. You don’t pay off your credit card in full each month.
2. You pay banking fees.
3. You still have your savings in a brick-and-mortar bank.
4. You don’t compare your insurance rates once a year.
5. You have more than an occasional ATM fee.
6. Your phone service is over or under utilized.
7. You have subscriptions you don’t use.
8. You’re not contributing to an IRA.
9. You don’t contribute the full 401(k) match your company offers.
10. You haven’t done your taxes yet.

While this is certainly not an exhaustive list of where you can become financially lazy, it’s a good starting point to take a look at where you might be able to improve your finances. Financial laziness happens to the best of us and it’s good to get a reminder every once in awhile to get off your butt and do the things you know you should be doing.

Why Contribute To Retirement Savings (video)

February 3, 2007 By Jeffrey Strain Leave a Comment

Here’s an interesting interview that is well worth watching just in case you need any more incentive to contribute as much as possible to your retirement plans. The interview is with Andy Eschtruth from the Center for Retirement Research at Boston College.

See Video Here

One fact I found interesting was that most low and middle income earners rely on Social Security as their main source of income once they retire.