Chadstroma
Footballguy
Yea, but most lenders will not have them on the loan to co-sign at that age though you might find one.
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Personal Finance Advice and Education! (2 Viewers)
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Long Ball Larry
Footballguy
Well, what I am really trying to figure out is where my expected breakeven point would be at 7 years in the future, based on the amount of equity accrued between the down payment and the mortgage payments, such that I wouldn't have to take a loss if I wanted to sell at that point. Obviously nothing is set in stone and I would have to account for a variety of scenarios, but are you saying that for this purpose you would assume that the house would sell for the amount for the same as the purchase price?
Not speaking for Wilked, but i don't think you can assume anything with respect to residential real estate...especially in a relatively short time frame. There are so many peaks and valleys and there are different local factors involved everywhere. If you want to be conservative, plan for the worst.
Plus, for the first 7 years, you're going to be paying majority interest anyway (assuming regular down payment and 30 year mtg)
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wilked
Footballguy
What you are doing, then, is to evaluate rent vs buy for a period of 7 years.
This is widely agreed to be the best calculator for this exercise
http://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html?_r=0
Long Ball Larry
Footballguy
Exactly. In the worst case scenario, we could just stay, it would be fine, or maybe consider renting it out. It's not like we have any firm plan, but I like the idea of the flexibility for when my daughter is done high school. (but trying to balance against the possibility that we wouldn't move anyway and the tangible/intangible value of home ownership over the next 7 years. (We have both owned, rented, and rented out properties in the past, so we know a lot about the costs/benefits.)
thank you, I will play around with that.
Chadstroma
Footballguy
A couple of things on that. 1) Most lenders have moved away from just adding people to an existing card as a signer though you can as an authorized user (difference in ownership and in this discussion in regards to credit). 2) Most lenders (and I believe the credit bureaus as well- not sure on that but I know there was a lot of discussion a while back on it) don't grandfather in the credit history once added as a signer on a card. Meaning- if the card was opened in 2010 you use to be able to add someone as signer on that card and they magically had credit since 2010. I don't think that that happens anymore.
phatdawg
Footballguy
Related to the 529 discussion:
Dentist mentioned (and others reinforced) that funding 529s should be way down the list of things to take care of, so I wanted to get feedback on my approach.
We have a 529 account for each kid because we get a 20% state tax credit up to $5,000 in contributions to a 529, so we thought it was throwing away free money not to contribute up to that amount. The contributions are split evenly between the two.
Other details:
My wife and I are 45 & 42. No debt other than our house. We have an emergency fund of more than 12 months of expenses right now. We are paying extra on our mortgage and should have the house paid off in less than 5 years.
My wife contributes 3% to her 401K to get the 3% company match. My company puts in 10% to my 403b regardless of my contribution (I currently don't contribute anything additionally). We max out our Roth IRAs. I contribute the family max to my HSA at work.
Any thoughts or feedback?
Dentist mentioned (and others reinforced) that funding 529s should be way down the list of things to take care of, so I wanted to get feedback on my approach.
We have a 529 account for each kid because we get a 20% state tax credit up to $5,000 in contributions to a 529, so we thought it was throwing away free money not to contribute up to that amount. The contributions are split evenly between the two.
Other details:
My wife and I are 45 & 42. No debt other than our house. We have an emergency fund of more than 12 months of expenses right now. We are paying extra on our mortgage and should have the house paid off in less than 5 years.
My wife contributes 3% to her 401K to get the 3% company match. My company puts in 10% to my 403b regardless of my contribution (I currently don't contribute anything additionally). We max out our Roth IRAs. I contribute the family max to my HSA at work.
Any thoughts or feedback?
Steve Tasker
Footballguy
Personal opinion, I don't know how much you each make or your pensions/other retirement assets, but I would recommend maxing your 401k/403b or getting very close to it before doing 529s. You may be missing out on a 20% state tax credit for 529s but you're missing out on hidden deductions on reducing your taxable wages with 401k/403b contributions.
Making numbers up, but if you're in a 25% federal bracket and a 5% state bracket, contributing that extra $5,500 to your 401k/403b would save you $1,650 (30% marginal total rate). Contributing that money to a 529 would save you $1,100 ($5,500 x 20% state credit).
ghostguy123
Footballguy
I have this potential situation at the moment. I could sell my house to my sister and then buy a house in the development we originally wanted from my friend's dad.FUBAR said:We are absolutely thrilled to be buying without a realtor. Unique circumstances but saving ~$20k is a huge win.
I am pretty sure as time goes on here people will be listing houses more and more without the use of a realtor. As long as your house can be located online somewhere, people will find it.
A while back I asked my realtor how much she would charge me to do the paperwork and complete the sale if I ever found a buyer for my house on my own and she said 2%. I was like waaaaaaaaat????? Seemed rather pricey for her to do just do a few hours of paperwork.
ghostguy123
Footballguy
Ditto.phatdawg said:
This thread also is leading me towards putting money in a roth IRA so that I can have some options at retirement based on the tax brackets at that time.
Chadstroma
Footballguy
I introduced a mix of Roth for my 401(k) a bit ago. When my cash flow and debt get into a better light- my plan is to increase the Roth contributions by a lot more. Having a healthy mix basically just gives you more flexibility- I am not worried about balancing them out now as I have a couple of decades before retirement but I do need to increase the Roth side for sure.
Long Ball Larry
Footballguy
Steve Tasker
Footballguy
FUBAR
Footballguy
yes. That's what we're doing. Title search/exam, insurance, recording, contract, deed, basically everything except appraisal and inspection for under $3k. You might be able to find cheaper.
I assume her quote was an attempt to get GG to not go that way or discourage others from doing the same.
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Chadstroma
Footballguy
True but more and more do these days. It is becoming pretty common from before where it was fairly rare.
ghostguy123
Footballguy
Huh, I never even looked to see if there was a Roth option connected to my fidelity 403b. I shall do that now 
Turn out, sort of. I track my 403b online and can just start a roth IRA on fidelity, so it's all in one place.
Turn out, sort of. I track my 403b online and can just start a roth IRA on fidelity, so it's all in one place.
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Chadstroma
Footballguy
If Fidelity is administering it- I would be shocked if it does not have the option.Huh, I never even looked to see if there was a Roth option connected to my fidelity 403b. I shall do that now
ghostguy123
Footballguy
Steve Tasker
Footballguy
Your plan is governed by someone at your company; they have the ultimate say in what is or is not available in your plan. Fidelity offers the Roth option but your plan admin have to choose to offer it. If you know who that person is, you can go talk to them and see what they say about having it added in the future.
Chadstroma
Footballguy
Odd. My old employer 401k through them offered it and I have all my retirement rollover IRA's with them including the Roth. Surprising.
Chadstroma
Footballguy
Makes sense. I wonder if there is an extra cost to it or who ever made the decision just doesn't care.... most likely a small extra cost and someone just doesn't care.
ghostguy123
Footballguy
There was no Roth in my investment elections, but like I said, I can just open one up through Fidelity, probably through the same log in I use now. I will have to check that out. Will probably just call and see if there is something they do offer but I am just missing it.
Odd. My old employer 401k through them offered it and I have all my retirement rollover IRA's with them including the Roth. Surprising.
Chadstroma
Footballguy
Yea, that is what I did. It still shows my old employers 401k stuff and employee stock purchase program part even though the company has been gone for almost 10 years now. The IRA opens in a new account. I don't remember the original process as I did it a long time ago but I did have to stop by an office to get a few things done which was easy peasy.
wilked
Footballguy
New law in effect today, bad news for mutual fund salesman, I mean financial advisers (commission based)
http://mobile.nytimes.com/2016/04/07/your-money/new-rules-for-retirement-accounts-financial-advisers.html?referer=https://www.google.com/
http://mobile.nytimes.com/2016/04/07/your-money/new-rules-for-retirement-accounts-financial-advisers.html?referer=https://www.google.com/
FUBAR
Footballguy
question for the group.
If I wanted to become a certified financial planner / advisor in 1-3 years (upon first retirement), what steps should I start taking? I have almost no formal training but a decent understanding of planning and personal finances. The main part I don't think I'd like in the profession is any push to sell things to people that might not be in their best interest (so the new law is a very good thing IMO). I'd want to be fee-based, not commission.
If I wanted to become a certified financial planner / advisor in 1-3 years (upon first retirement), what steps should I start taking? I have almost no formal training but a decent understanding of planning and personal finances. The main part I don't think I'd like in the profession is any push to sell things to people that might not be in their best interest (so the new law is a very good thing IMO). I'd want to be fee-based, not commission.
RUSF18
Footballguy
In order to sit for the actual CFP exam you'll need to meet certain qualifications from a coursework standpoint. I'd start with that to see if your education background satisfies it or if you'll need to take courses first.
Binky The Doormat
Footballguy
RUSF18
Footballguy
CFA is Chartered Financial Analyst, a whole world different than the CFP certification. I'm not sure if there's a different certification than the CFP if you're trying to be an advisor or if it's just used interchangeably.
Steve Tasker
Footballguy
I can't really speak to the steps required for a license, but it seems like a tough retirement gig. Are you looking for full-time work with this? Part time? Doing things yourself? Probably depends on what you're looking to do with it, but it's a pretty tough field to really get into, I think.FUBAR said:
FUBAR
Footballguy
Full time. I'll retire from the army in the next 3 years but only be 40-42. So not ready to stop working but I'll have the flexibility to do what I want, not just find something to pay the bills.
Difference b/w the advisor and planner here:
http://www.businessinsider.com/difference-between-financial-advisor-and-certified-financial-planner-2014-7
http://www.businessinsider.com/difference-between-financial-advisor-and-certified-financial-planner-2014-7
matttyl
Footballguy
Yeah, back in the day I called myself an "advisor" because I had a series 6 and 63. Allowed me to do mutual fund type stuff, and variable annuities and variable life insurance (which I never sold any of). That can take just a few months. The "certified" stuff requires quite a bit more. The answer will depend on what you'd like to focus your practice on. Do you want to specialize in helping folks take the steps to start saving for retirement? Do you want to only work with people who have 6 figures of invest-able asset? Do you want to have any insurance related sales (lots of guys in insurance agencies only do retirement based planning ).
Chadstroma
Footballguy
You will want to get licensed as pretty much the first steps towards all of this. To be CFP I believe there is a time requirement of time working- so it is not something you can just do. However, to start the road is fairly easy. You can look to jump on with a financial brokerage like Ameriprise, Morgan Stanley, Edward Jones. Usually these will be pure commission type of positions that you can get hired on directly and get fully licensed. The positions that aren't are usually looking for already licensed individuals with established books of business.
Other routes to head down the road would be through a bank and becoming a licensed banker. Or you could do insurance. Both of these are partial licenses but helps you transition somewhere else to get fully licensed.
Once you have all your licenses and time doing it- you jump through whatever hoops they have for the CFP (I assume class and tests kind of things) then you have your CFP and can pretty much do what you want. You can easily do it. A lot of these firms love vets but I think it will take longer than 3 years to get where you want to be.
Random
Footballguy
Binky The Doormat
Footballguy
You should be sent an annual prospectus. If not, call your pension fund and have them email you one. That status is typically stated very clearly in there.
Random
Footballguy
ex-ghost
Footballguy
metoo
Footballguy
Unless you already have an account with Vanguard, I would go with something like Fidelity just to make sure the account is funded by 4/18. Vanguard is slow.
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Random
Footballguy
Also related to this. Any insight as to where to start looking for health insurance in retirement? They are very concerned with this and asked if I knew anything about it (which I do not).
matttyl
Footballguy
They've got a few options (I say "they", I assume your mother and father both on the plan?). They should be allowed to remain the plan for up to 18 months via COBRA (may be the best choice). Alternatively, if your dad has an option for coverage with his job - both can go there.
They can also go to the individual exchanges set up by the ACA/Obamacare. Given that on 9/16/15 you said "she will be 65", she may have already turned. If so, and she has 40 quarters of work and tax filings - the answer is Medicare (part A and B, hospitals and doctors, respectively) with a part D (drug plan) with a supplement plan of some sort (called Medsupp or Medicare advantage).
matttyl
Footballguy
Also, did you get an adequate answer to your pension question of theirs. It's a good chunk of what I do and would be happy to discuss options (unless they've already decided).
Random
Footballguy
Very undecided. They somewhat need the money on a monthly basis to cover living expenses (which is probably the biggest part that needs addressed - but my father is very private with finances, so its tough to discuss this part with them). Would love to hear your thoughts.
As I just told them over the weekend (they had gone to a few banks/retirement planners - all told them the cash option was better) I just dont see how the cash option wins here (unless they dont need the money). It looks to me like it will only produce 10-15k/yr (at 4% withdraw rate) vs 20K/yr for the pension.
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Dentist
***Official FBG Dentist***
because you already have an account set up, if you're a new account holder they almost certainly won't get it done as quickly.
I hate vanguard's account minimums as well.
If i didn't get such an amazing deal with BAnk of America through merrill edge, I'd be a TD Ameritrade user, their commission free ETF schedule is the best and their customer service is going to be much better than Vanguard's
Chadstroma
Footballguy
I believe pensions are required to provide information on their funding annually. Shouldn't be too hard to get a copy of the report by asking whomever administers the pension.Random said:
matttyl
Footballguy
Well, if she's in good health and there is a history of longevity in the family (there seems to be), then more often then not the monthly pension will ultimately win out over the lump sum. Companies actually like the lump sum as it's gets a "promise" off their books. They've "promised her" 1,784 a month (likely index at least a bit for inflation, most are) for her lifetime. That could be a very, very long time. Say it's just a 3% inflationary kicker - it's only a $21,408/yr promise now, but at her age 85 it's a $37,539/yr promise and growing. She makes it to age 90, and they've paid out over $825k. You don't give up a "promise" of a lifetime income unless you're coming out way ahead.
Now, she could "lose" that bet. How? If she were to pass away early on in her retirement (within the first 12-15 years by my calculations). If that happened, they would have been better off had she opted for the lump sum. This is the case of my FIL. Retired (for the second time) at 67, dead within a year from esophageal cancer. That's the exception, not the rule. How you offset that is one of two ways - either take the survivorship benefit you mentioned (typically a ~20% reduction for her LIFETIME to promise to give your father some income for his remaining lifetime - with quite a few drawbacks), or permanent (whole) life insurance (but folks around here hate that term).
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matttyl
Footballguy
Depends on quite a few factors. I just ran a very, very basic and fast quote. At best health, 65 year old woman could get 200k for 4,577 a year. That could be more than they need/want; or not enough.
The idea is that she could take the full 1,784 a month (21,408/yr) and pay 4,577 a year in her life policy. She'd then net 16,831 a year (again, likely growing with inflation, but the 3% kicker would be based on the full 1,784 a month starting value, not some already reduced amount). Then if anything happened to her, your father would get a tax free (the lump sum option they have now wouldn't be tax free, but life insurance is) lump sum of $200k to do with as he pleases. I choose that amount, as it's roughly the equivalent of 7 or 8 years taxable survivorship had they picked a full survivorship benefit from her pension (with a few assumptions I'm making).
The other benefit that's typically overlooked - lets say your mom takes the survivorship benefit from the pension and has a 20% reduction of her pension to guarantee a promise to your dad if anything happened to her. Lets they say she lives 20 years - that's over $115k of reduction in her pension at that point. Lets say that year your father (the survivor in her survivorship benefit) passes away. She will very likely never get back that $115k of lost pension she's had over the prior 20 years. That's simply money lost. If the same thing happened with the life insurance, she could just change the beneficiary to you and your siblings (if you had any) or anyone else she likes. Or she could just cash the policy in (there would be about $93k of cash value in the policy at that point). Lots of options with the life policy, not so much with the survivorship benefit.
ETA - The whole life would have worked best had she bought it instead of term 10-20 years ago or so. It may still very much work well for her here, but the best way to use permanent life to maximize a pension would be to have the life premiums either end, or greatly reduce when you hit retirement - not start when you hit retirement. With my very rudimentary quote above, she'd be spending ~21% of her pre-tax pension (possibly a quarter of her net pension) on life coverage. That could be a very tough pill to swallow.
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