Your retirement questions answered

Adam Taggart
By Adam Taggart on Thu, Sep 6, 2012 - 12:55am

Following on the success of our recent podcast with an endorsed financial adviser, we will soon record another - this time, focused on retirement planning.

This is a topic we routinely get a LOT of questions about.

So, if you have burning questions about 401ks, IRAs, Social Security, annuities, life insurance, etc - let's hear them in the Comments section below.

As before, we'll collate all the submissions we receive and try to address as many as possible on the podcast.

Expected airing date of the podcast: the weekend of Sept 22nd

28 Comments

deana.sec's picture
deana.sec
Status: Member (Offline)
Joined: Feb 8 2012
Posts: 1
Unlocking the potential of retirement funds now for survival

It's almost a given that the money system as we know it today may not be around in the next 20 - 30 years when most people my age will hit retirement to withdraw their funds. Therefore, these funds are at risk.

Many people (including myself) are looking to uncap the potential for these funds for use now to build a resilient lifestyle in preparation for an upcoming collapse, so my question is, is there a way to use our retirement funds (here in Australia we call it a self managed superannuation fund) within the confines of the law to invest in our own resilience now?

FYI

In Australia, a self managed superannuation fund allows for anyone to obtain their retirement funds in a bank account in the form of cash to invest in whatever he/she see's fit providing they do not derive a direct benefit from it. There are of course, a number of ways to bend this rule (investing in rare artwork, classic cars etc). I'm interested in ways of bending the rules enough to satisfy the government but still derive a direct benefit to build resilience (purchasing land for example).

Deana

Doug's picture
Doug
Status: Diamond Member (Online)
Joined: Oct 1 2008
Posts: 2763
retirement

If (like me) you are rapidly approaching retirement, where can we park our nest egg so that it is relatively safe (besides PMs that is)?

Doug

JF's picture
JF
Status: Member (Offline)
Joined: Aug 8 2009
Posts: 2
Direct Registration for IRAs?

Given the recent problems with firms such as MF Global where clients have lost funds in supposedly segregated accounts, is there a way to have any IRA assets (e.g., stocks, bonds) held in some other form than the broker or custodian's "street name" so that title to the assets would be clear in the event of a bankruptcy?

Grover's picture
Grover
Status: Platinum Member (Offline)
Joined: Feb 16 2011
Posts: 507
Self directed IRAs

Like Doug, I'm rapidly approaching retirement and have a substantial nest egg in a 401(k) vehicle that will be unlocked when I retire. If I cash it out, the taxes will be quite large. Needless to say, I'd like to avoid any situation that triggers the taxes. I don't want to do anything illegal and would prefer to keep the morality above board. I don't see anything immoral about growing the base, delaying current taxes, and paying more taxes later ... later may never come (while I'm alive.)

I'd like to know how to go about converting my 401(k) into a self directed IRA that I can use to purchase farm ground that I would operate as a profit seeking venture. The farm ground would be adjacent to a separate lot that contains my dwelling (and additional farm ground.) What legal manipulations would be necessary? Would a partnership or an LLC with a trusted non-related friend as executor provide sufficient insulation to achieve my goals? Can you provide a list of financial firms that specialize in these services? What percentage range of fees can be expected? Given the current laws, at what age would distributions become mandatory? What am I overlooking? What advice would you give to a person in my situation?

Grover

macro2682's picture
macro2682
Status: Gold Member (Offline)
Joined: Sep 3 2009
Posts: 423
Healthcare...

I have an engineering degree, and I've been working in financial services for 8 years... Yet I still don't have an answer for this one:

My parents are 60-year-old single-income self-employed empty-nesters.  They pay $18,000 (that's eighteen thousand) per year for health insurance.  In addition to that, they always blow through their $2,000 deductibles, and often wind up paying for various other services out of pocket.  At the end of the day, they spend about $25,000 per year on healthcare.

Because of healthcare costs, my parents cannot retire.

What should they do?

Net worth is about $900,000.  All in real estate (They didn't listen to me).  Dad is in good health.  Mom has diabetes. 

I keep telling them they should just pay for catastrophic, and find a cash doctor for the rest.  But their generation is paranoid about being uninsured, and catastrophic is expensive too.

Nate's picture
Nate
Status: Gold Member (Offline)
Joined: May 6 2009
Posts: 461
self directed IRA

Grover wrote:

I'd like to know how to go about converting my 401(k) into a self directed IRA that I can use to purchase farm ground that I would operate as a profit seeking venture. The farm ground would be adjacent to a separate lot that contains my dwelling (and additional farm ground.) What legal manipulations would be necessary? Would a partnership or an LLC with a trusted non-related friend as executor provide sufficient insulation to achieve my goals?

Grover

Hi Grover,

A coworker googled self-directed IRA/LLC with checkbook control and came up with a list of companies that handle this.  The funds have been transferred to the custodian handling this but he has yet to purchase farmland or an apartment.  I will keep you updated on any future developments.

Nate

JRB's picture
JRB
Status: Silver Member (Offline)
Joined: May 17 2009
Posts: 149
PMs in IRA

If PMs are parked in an IRA, what is the taxation on withdrawal from the IRA, compared to the 28% gain tax on selling PMs out of hand.  It would seem that the PMs would be sold from the IRA and then cash withdrawn would be taxed based on the individual's bracket for that year.  Correct?

- Jim

svgreengoddess's picture
svgreengoddess
Status: Bronze Member (Offline)
Joined: Apr 23 2011
Posts: 41
gold IRA

I would like to know more about gold based IRA's.  I would also like to know about cashing out early as someone else mentioned, while avoiding huge tax penalties.  i have a local gov't pension that i might want out of, not knowing if it'll still be solid in the future.

Doug's picture
Doug
Status: Diamond Member (Online)
Joined: Oct 1 2008
Posts: 2763
yes, taxed as income

I just had this conversation with my accountant.  He said that anything coming out of an traditional IRA is taxed as income in whatever bracket you happen to be in (when distribution of IRA is added to other income).  That would presumably be whatever PMs are valued at in dollars when you take the distribution.

Doug

hucklejohn's picture
hucklejohn
Status: Gold Member (Offline)
Joined: Dec 13 2008
Posts: 281
Questions

Is it wise to have gold in a Roth IRA?

To what extent are Roth IRAs at risk for a change in their tax protected status?

What's the risk of government confiscation in some form of gold?

priceaction's picture
priceaction
Status: Member (Offline)
Joined: Sep 8 2012
Posts: 1
Self Directed IRA

Like several others, I am researching the use of self directed IRA(s) and I would love to see / hear / read any specific details along the lines of:

- criteria for selecting a custodian in general and any particular criteria that would relate to specific objectives (like holding hard assests, funding a business, international / sovereign diversification)

- how to hold PM's in an IRA such that I would be able to audit the segregated holdings personally (ie visit the depository unannounced and examine a specific lock-box with MY metal in it)

- funding an LLC that I would managed that could also accept deposits (sell shares) from / to others (family, friends ...) somehwat like an investment company or investing club

- holding assets internationally in a self directed IRA

- holding securities by direct registration or certification

My overall objective is to achieve as much direct control over the assets, be they physical assets or documents evidencing ownership interests or deposits in financial institutions, without violating US laws. I am no longer comfortable with promises from governments or fancy looking brokerage statements coming from allegedly trustworthly fiduciaries. (Can you spell MF Global?) To the extent that I could offer to manage such benefits for friends and family that would be a bonus.

I'm brand new here and still poking around.  My apologies if these issues have been addressed already. It's great to find others who are capable of thinking outside the box.

ronpoitras's picture
ronpoitras
Status: Member (Offline)
Joined: Feb 21 2010
Posts: 16
mutual funds

There are screens available for funds that are environmentally & socially conscious. Needed now are similar ways of screening for resilency, for safety in a transformative economy and for protecting capital in these uncertain times. While investing locally & in one's skills & resources makes sense not all of us can withdraw all of our funds completely from the mainstream of IRA's and 401k's. Are there mutual funds that are particularly well positioned to survive economic difficulties rapidly approaching?

Being connected with an academic most of our funds are tied up with the large insurance company TIAA-CREF. Any way of assessing the health and ability of an organization of this scope & size to survive difficult times? Word has it that they made it through the great depression relatively unscathed. Any help appreciated....Thanks 

gribs57's picture
gribs57
Status: Member (Offline)
Joined: Mar 6 2011
Posts: 2
Early retirements impact on Social Security payout

My plan is to leave a private sector job at 59 1/2, use my pension and 401k withdrawals to bridge until 66 1/2 and then begin collecting my fuil social security amount. What is the impact on my social security payout if I do leave my job at 59 1/2 versus continuing to work? Thx!

Doug's picture
Doug
Status: Diamond Member (Online)
Joined: Oct 1 2008
Posts: 2763
gribs57

I can't give you specific numbers, but assuming these are your peak earning years, the impact on SS payments could be pretty large.  If you meet the criteria, you can get estimates here:

http://www.ssa.gov/estimator/

Doug

jimsandi's picture
jimsandi
Status: Member (Offline)
Joined: Jun 4 2012
Posts: 3
Whole life with cash Value

I have a whole life policy with a cash value over $64,000.  How can i get access to this cash value because it might not be so much in a short while.  Should i try to borrow against it.  Sell the policy?  I should say i have 1 son in college,  1 son soon to be a senior in high school and a daughter in 7th grade... the whole life policy is for 200k, and I have 300k of term insurance as well. 

jimsandi's picture
jimsandi
Status: Member (Offline)
Joined: Jun 4 2012
Posts: 3
403b(7)

my wife and i have  a little over 200k in a 403b(7) pension and profitsharing plan at work.   what can we do to protect the money and get access to it in case of a financial breakdown.  I can transfer everything into cash instead of mutual funds.  but that's about it.  *make too much money for IRA's and am at least 15 years from retirement.  Is there anything i could recomend to the non profit corporation that i work for? 

Quercus bicolor's picture
Quercus bicolor
Status: Silver Member (Offline)
Joined: Mar 19 2008
Posts: 244
401K options

My employer has been slowly putting money in my 401k over the past 5 years so that even though I have added nothing of my own (prefering to invest in my own resilience and suspecting higher tax rates in the future), there is now a good bit of money in there.  The plan is offered through T. Rowe Price.  Most of their mutual funds with the usual stock and bond funds are available as an option.  I have it all in the short term treasury money market.

There is also a self directed account available through State Street.  The list of fees suggests that various mutual funds and other funds (ETFs?) as well as stocks and bonds are available with this option.  Perhaps precious metals are available as well, although I haven't yet made the inquiry to find out.

I know I have a number of investment options for this 401k including taking the money out and paying a penalty.  What do you suggest  with an eye towards preserving this wealth for the future?

Arthur Robey's picture
Arthur Robey
Status: Diamond Member (Offline)
Joined: Feb 4 2010
Posts: 2502
Dr Smith tells it like it is.

This video on Capital Account will explain why your parents' bills are so high Macro. (And it is not what you think)

GiraffeOK's picture
GiraffeOK
Status: Bronze Member (Offline)
Joined: Apr 14 2009
Posts: 25
Social Security

Do you anticipate near-term changes in Social Security benefits? Ignoring other considerations, would you advise someone who is eligible, but still employed, to begin taking benefits now to ensure starting under the current rule structure?

Doug's picture
Doug
Status: Diamond Member (Online)
Joined: Oct 1 2008
Posts: 2763
David Stockman

Stockman sounds off.  If it were up to him, SS and Medicare would be means tested now and those who are wealthy enough would pay more.  Putting it off is foolhardy to him.  I think he has a point.  Oh, did I mention cutting a third of the military budget now?  Of course, he doesn't mention that he was instrumental in dribble down economics and seriously inflating the debt bubble when he worked for Reagan.  I think he has seen the light since then.

http://video.cnbc.com/gallery/?video=3000109364&play=1

Of course, the CNBS talking heads keep interrupting with their inanities.

Doug

gcruwitme's picture
gcruwitme
Status: Member (Offline)
Joined: Jun 9 2011
Posts: 13
City and State Pensions

Since many city/state pensions could be in jeopardy in the years to come (pension shortfalls, city and states going bankrupt etc...) my question is, would you take a $60,000 a year pension or a lump sum of $400,000?  My fear is, if I choose to take the pension on a yearly basis, that $60,000 could be reduced (by government, city bankruptcy or inflation) or gone all together. If I take the lump sum, I can at least try to protect the $400,000 with PM's and other investments. I'm looking to retire in 2 years, but can retire earlier to get at the lump sum.

phecksel's picture
phecksel
Status: Silver Member (Offline)
Joined: May 24 2010
Posts: 157
I have a modest IRA that

I have a modest IRA that would be good for a few years, but nothing long term.  Been using a professional management firm, but that is going to come to an end soon... really long story, but I've lost faith in their abilities.

Used to manage my own investments, and did quite well.  Some tough personal times and made too many emotional decisions.  Cost me a bunch of money.  Pro's have actually done an adequate job, but like many here, nervous about the future monetary position.

MasterOfMyDomain's picture
MasterOfMyDomain
Status: Member (Offline)
Joined: Apr 20 2011
Posts: 14
Repatriation Question + SEPP IRA info

Chris has made several references to possible repatriation of assets stored outside of the US. This seems to me to warn against using GoldMoney as it only has vaults in UK, Switzerland and Hong Kong. I'm also wondering if this would have any relevance to holding CEF as its vault is in Canada, although I realize this is a (closed-end) mutual fund and shares are held in a brokerage most likely in the US.  Perhaps I'm misunderstanding something regarding this.

I raise this as an issue because most of my assets are (unfortunately) in IRAs in one form or another.

Attention Hard Assets Alliance: Please come up with an IRA option!

Information note for folks wanting to get to their IRA money now without penalty. One option without penalty (still have to declare withdrawals as income) is the SEPP approach: "Substantially Equal Periodic Payments" (not to be confused with SEP-IRA). You have to do a somewhat complicated calculation based on your age and amount of money in your IRA plus get an allowable interest rate from IRS websites to generate an amount of money you can take each year without a penalty being applied. It's somewhat complicated and you really need to make sure you do your homework. Bear in mind, once you start doing it you CANNOT change your mind without getting nailed on penalties. Unfortunately, with interest rates being as absurdly low as they are it dramatically reduces the amount of money you can take out because you get almost no benefit from compounding.

DavidintheDogPatchDesert's picture
DavidintheDogPa...
Status: Member (Offline)
Joined: Oct 16 2012
Posts: 2
What to do with the ROTH IRA

Ok, so I've been investing in the stock/bond market for years via low cost active managed mutual funds (no Index funds because I figured maybe the managers could sell when there are good gains) all within my IRA.   The quesiton I have is if one day I decide that I need to get out, what's the better option for my ROTH IRA funds whereas I don't lose the tax advantaged space (provided there still is such a thing).    If I believe that one day the market can not go any higher and has reached a "limit" due to my own evaluation that precludes the stock market from continued exponential returns, am I a fool to continue to contribute to that ROTH IRA now - expecting that in the future there will be someone to sell to?

k.n's picture
k.n
Status: Member (Offline)
Joined: Feb 23 2013
Posts: 2
help

I can help you with her issues with diabeties, but not financially.  If you will go to google or what ever serach engine you use and type in holistic healing of diabeties it is curable and they will stop spending so much on health care. Actually you need to advise them on holistic health because they will spend not even half of what they do now. Cancer is curable aids, herpies every thing is. Go to g.edward.griffin a world with out cancer I beleive that is a great video to start your journey. I will make it simple. Holisitc means to cure a problem. You are going to the core and fixing it there so you releive all other sysptoms.  Your body will not and can not get sick if you give it what it needs. You will not get arthritus and other (age) related illnesses. Have a beautiful life, if you have questions email me at nelson.kala@yahoo.com

k.n's picture
k.n
Status: Member (Offline)
Joined: Feb 23 2013
Posts: 2
help

I can help you with her issues with diabeties, but not financially.  If you will go to google or what ever serach engine you use and type in holistic healing of diabeties it is curable and they will stop spending so much on health care. Actually you need to advise them on holistic health because they will spend not even half of what they do now. Cancer is curable aids, herpies every thing is. Go to g.edward.griffin a world with out cancer I beleive that is a great video to start your journey. I will make it simple. Holisitc means to cure a problem. You are going to the core and fixing it there so you releive all other sysptoms.  Your body will not and can not get sick if you give it what it needs. You will not get arthritus and other (age) related illnesses. Have a beautiful life, if you have questions email me at nelson.kala@yahoo.com

AndyG's picture
AndyG
Status: Bronze Member (Offline)
Joined: Feb 29 2012
Posts: 33
k.n wrote: I can help you

k.n wrote:

I can help you with her issues with diabeties, but not financially.  If you will go to google or what ever serach engine you use and type in holistic healing of diabeties it is curable and they will stop spending so much on health care. Actually you need to advise them on holistic health because they will spend not even half of what they do now. Cancer is curable aids, herpies every thing is.

Sorry, I have to comment here, K.N.

When you say 'holistic' = 'to cure a problem', I think I have a different dictionary to you. Holistic means 'all aspects of a person's needs including: - psychological - physical - social - spiritual.'

I am a GP [Family Doctor] in the UK for 20 years.  Firstly, diabetes comes in 2 types: 1 + 2. Type 1 required insulin or you will die. Type 2's [formerly called Maturity onset] is treated with diet, exercise, wt loss, and failing that tablets, and failing that insulin. So when you say 'diabetes' is curable, what do you mean? For a Type 1 without insulin you will die of ketoacidosis. So as 'we' have become heavier as a population our rates of diabetes have markedly increased. You can 'cure' Type 2 [ie have normal glycaemia - sugar control] with diet, wt loss and exercise, with no medications. Interestingly in Cuba when they had their Peak Oil moment they on average lost about 20lbs in weight, and rates of diabetes dropped in step.

'Cancer is curable'? Question for you - which type? There are many curable cancers. If you are suggesting homeopathy or some other 'alternative' method to treat agressive cancers or Aids, then I would call you a Quack and Charlatan.

I  don't believe modern medicine has all the answers to health care. I also know modern medicine isn't always as holistic [in the true sense of the word] as it should be. That doesn't mean its a great advance over leeches, homeopathy, and other treatments with no evidence [is in the random, double blind, controlled trial] other than personal testimonials, 'it worked for me, so it will work for you'.

I'm not wanting to appear paternalistic or condescending, but please do not give medical advice to people unless you know what you are talking about.

backhousepirate's picture
backhousepirate
Status: Member (Offline)
Joined: Jul 12 2009
Posts: 2
I would never provide SSN to a website.

It looks official, but so what.

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