I'm getting more worried that by the time I retire the rules will change greatly regarding retirement accounts. I've heard a few potential ways policy makers are considering changing things to help (partially) fund the social security crisis are:

limiting 401k contributions to a certain amount (say 2,500) leaving a Roth 401k as your only employer sponsored option. Then, at retirement, there will be some tax on Roth accounts? Are you hearing this and what changes if any would you suggest someone make now?

Tia

How would you structure a foreign country (Let's use Honduras as example) manager's pay, to best reduce tax consequences for the individual and for the U.S. based company?

Diversifying your "buckets" is one small way of hedging against the rules changing against one type of account. Be careful about doing this to such an extent that it harms the overall plan/goal since you're effectively hedging to fix a problem that doesn't yet exist.

There have been changes in tax policy for years now and when those changes happen, planners/advisors adapt, adjust, and help their clients move forward. When clients come to the table with that concern, I'm fond of telling them "Let's play as wisely and effectively as we can with the rules that are on the table now, and when those rules change we'll sit down and adjust accordingly."

What is your current perspective on equity/bond asset allocation for those in their early-mid 30's.

What is the value proposition in this market for holding fixed income securities.

Do I need a CFP?

• Got married and changed jobs last year.
• New company could potentially sell this year or next with a windfall of $250k-$1MM+ depending on how much it sells for.
• Currently have about $300k in liquid assets (cash + retirement + other investments).
• Also own a rent house that I am in the process of selling for a significant ($70k-$90k) gain.
• I'm an engineer, wife is a teacher.

I think we are saving enough but want to buy a house next year and probably start a family in the next 2 years and want to make sure we're on track for everything. I feel like I can handle this on my own, but you don't know what you don't know and the idea of being given $500k+ without a plan for it is kind of intimidating to me.

Age 49, been in public sector for the last 20 years and am eligible for retirement stipend, or I can delay receiving the stipend while the corpus grows tax deferred. I am moving on to a job in the private sector and intend to work another ~10 years.

Should I consider taking the retirement income, paying the income tax now, and then putting it into a Roth?

Mortgage of X at 3.125% with 13 years remaining on a 15yr loan (approximately 50% LTV)
2nd home mortgage of X at 5% with 9.5years remaining on a 10/30 arm (approximately 65% LTV)

Cash of X in the bank
2X active in the market in non-retirement accounts (individual equities, mutual funds, etc)
2X active in the market in retirement accounts

I have options to invest in commercial RE at any level from $10k- X, or invest in the market.

Would you:
A) payoff the second home
B) invest in CRE
C) invest in the market (dollar cost avg or lump sum)
D) combination of a,b, c and what % of each

cgh1999 said:

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Mortgage of X at 3.125% with 13 years remaining on a 15yr loan (approximately 50% LTV)
2nd home mortgage of X at 5% with 9.5years remaining on a 10/30 arm (approximately 65% LTV)

Cash of X in the bank
2X active in the market in non-retirement accounts (individual equities, mutual funds, etc)
2X active in the market in retirement accounts

I have options to invest in commercial RE at any level from $10k- X, or invest in the market.

Would you:
A) payoff the second home
B) invest in CRE
C) invest in the market (dollar cost avg or lump sum)
D) combination of a,b, c and what % of each

---

Here are my thoughts based on facts given:

Assumes cash in bank is materially above what is needed for cash reserves.

If you plan to sell the house before the ARM resets, no need to pay that down/off. Rate is a bit high, but still reasonable if you are earning income and in accumulation mode. If you plan to keep well beyond the ARM rest, it would be prudent to set a plan to retire that debt. If you don't want to deal with it at that time, I would explore amortizing the loan over the remaining 9.5 years.

If you are comfortable with risks of the commercial real estate opportunities, I would give serious consideration to those next. I prefer seeing lower investments in more opptys. If one comes along avoid the temptation to go big, maybe just up the investment a bit (I.e. twice what you normally do into those deals).

If you have money left over, keep investing in the market, preferably in a diversified manner.

Casey TableTennis said:

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cgh1999 said:

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IMortgage of X at 3.125% with 13 years remaining on a 15yr loan (approximately 50% LTV)
2nd home mortgage of X at 5% with 9.5years remaining on a 10/30 arm (approximately 65% LTV)

Cash of X in the bank
2X active in the market in non-retirement accounts (individual equities, mutual funds, etc)
2X active in the market in retirement accounts

I have options to invest in commercial RE at any level from $10k- X, or invest in the market.

Would you:
A) payoff the second home
B) invest in CRE
C) invest in the market (dollar cost avg or lump sum)
D) combination of a,b, c and what % of each

---

Here are my thoughts based on facts given:

Assumes cash in bank is materially above what is needed for cash reserves. correct. X cash does not count my "emergency fund".

If you plan to sell the house before the ARM resets, no need to pay that down/off. Rate is a bit high, but still reasonable if you are earning income and in accumulation mode. If you plan to keep well beyond the ARM rest, it would be prudent to set a plan to retire that debt. If you don't want to deal with it at that time, I would explore amortizing the loan over the remaining 9.5 years.
its a "ranch" that will hopefully be in the family for a while. I originally planned to pay it off with the cash, but feel like the long term investment opportunities are better use of cash. Was thinking of paying .25x today and then continue to make chunks that get it paid off over the next few years.

If you are comfortable with risks of the commercial real estate opportunities, I would give serious consideration to those next. I prefer seeing lower investments in more opptys. If one comes along avoid the temptation to go big, maybe just up the investment a bit (I.e. twice what you normally do into those deals).

Agreed. I'm in commercial banking and understand the risks. Hoping to invest 0.10x at a time. Up to 0.5x. As cash grows from earnings, I'll keep adding here.

If you have money left over, keep investing in the market, preferably in a diversified manner.

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Thanks. I've bounced this scenario off several people. Each person had a vested interest in one of the buckets. (Ranch, RE investment, or securities). I appreciate the unbiased opinion.

Stagecoach said:

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This seemed to be a hit last year. So, as a public service to anyone in need within the Aggie family, I will thoughtfully or sarcastically answer any remotely interesting questions posted before March 1st.

Rules:

• One question per post
• Be specific and concise
• Don't dominate the thread
• All CFPs encouraged to contribute
• No marketing or public solicitation of any kind
• Rules are subject to change
• Be patient - remember this is free

And go!

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What advice would you give to a freshman or sophomore in college who is interested in pursuing a career as a CFP?

Jac4 - my response would be to major in Finance, then as quickly as feasibly possible, complete your CFP. A finance degree from A&M will give you a lot of the knowledge you need for the CFP material, so you're left with the work requirements, which I can't remember off hand right now. I think its either 2 or 3 years in the industry or such. Also, the greener you are out of school, the more suited you'll be for the study regimen needed.

I majored in Finance, but waited until I was almost 30 with a kid before beginning my course. More ideal scenario than I'm sure several who have completed it, but if one could plan ahead...

Good luck and a very rewarding/fulfilling career awaits you. And you'll also learn there is more to investing than a couple index funds from Vanguard as TexAgs leads you to think

jac4 said:

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Stagecoach said:

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This seemed to be a hit last year. So, as a public service to anyone in need within the Aggie family, I will thoughtfully or sarcastically answer any remotely interesting questions posted before March 1st.

Rules:

• One question per post
• Be specific and concise
• Don't dominate the thread
• All CFPs encouraged to contribute
• No marketing or public solicitation of any kind
• Rules are subject to change
• Be patient - remember this is free

And go!

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What advice would you give to a freshman or sophomore in college who is interested in pursuing a career as a CFP?

---

Go talk to Dr Harness. Consider adding a minor through his program.

I've known you a long time and you could be giving advice. I mean that.

jja79 said:

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I've known you a long time and you could be giving advice. I mean that.

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Thanks! The secret to my success is its not mine. It's a collection of successes learned/borrowed/stolen from successful folks like you. Oh, and avoiding the general board

I'm getting married in early 2019 and will be looking to buy our first house sometime later this year with my fianc. Any general tips/tricks on loans or anything else to watch out for when buying a house? We won't have any shared financial accounts yet.

Wife is leaving TRS (Teacher Retirement System) after 7 years. We want to roll the funds over, she already has a Roth account but no IRA. Should we roll all that into a Roth and pay the tax hit? Or are we allowed to open an IRA to pay the taxes later in life? If we roll into Roth does it count against this years contributions?

herewegoagain said:

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Wife is leaving TRS (Teacher Retirement System) after 7 years. We want to roll the funds over, she already has a Roth account but no IRA. Should we roll all that into a Roth and pay the tax hit? Or are we allowed to open an IRA to pay the taxes later in life? If we roll into Roth does it count against this years contributions?

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If you are confident she will not return to TRS then you can roll over to traditional Ira and defer the taxes to as far out as age 70.5.

You could consider rolling to Roth as you mentioned if you feel that it would be better to pay the taxes now. The new tax law did lower tax rates so it's worth consideration i think

It would not count against this years contribution

You might want to avoid the recruiting write ups in addition to the GB!! I hope all my boys learn the lesson as early as you about learning from others and incorporating what works into your business life.

Thanks Nactown!

Been traveling this week. Will get this going over the weekend

If I have a Roth IRA with $40,000 in it, and the cost basis of my contributions over the last 10 years is $30,000, am I free to take a distribution of $30,000 without creating a taxable event? I have always understood that your *contributions* (not earnings on those contributions) into a Roth are ALWAYS eligible to withdraw without extra fee or tax since you have already paid taxes on them. Just looking for a solid confirmation of that fact.

I know by taking such a distribution, my brokerage would likely tell the iRS I took a distribution, even if it's below cost basis, which makes me uncertain.

(I am fully aware taking money OUT of retirements accounts is almost never a good idea - just trying to take advantage of your kind availability to make sure I do understand the rules of the game)

If my total W-2 salary is $123,200, does the standard deduction bring my AGI below the $118,000 threshold this making me eligible for a full Roth IRA contribution or would I need to contribute $5500 to a Traditional IRA to become eligible for a full Roth IRA contribution in 2017?

exp said:

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If my total W-2 salary is $123,200, does the standard deduction bring my AGI below the $118,000 threshold this making me eligible for a full Roth IRA contribution or would I need to contribute $5500 to a Traditional IRA to become eligible for a full Roth IRA contribution in 2017?

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The standard deduction won't reduce your AGI. Also you can't contribute more than 5500 total between Trad Ira and Roth.

So you would need to increase 401k pre tax contribution or HSA

Or you could just use backdoor Roth IRA method.

I think I just realized there are income limits for ira contributions if your work has a 401k program. Is this true? Is there no other option to defer taxes beyond the 401k in this scenario?

oldarmy76 said:

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I think I just realized there are income limits for ira contributions if your work has a 401k program. Is this true? Is there no other option to defer taxes beyond the 401k in this scenario?

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That's right

oldarmy76 said:

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I think I just realized there are income limits for ira contributions if your work has a 401k program. Is this true? Is there no other option to defer taxes beyond the 401k in this scenario?

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HA! Welcome to the world of "too much money"!!

Ain't the other side of the fence grand!?!?

nactownag said:

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oldarmy76 said:

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I think I just realized there are income limits for ira contributions if your work has a 401k program. Is this true? Is there no other option to defer taxes beyond the 401k in this scenario?

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That's right

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EE saver and I bonds are both tax deffered. $10k limit each per person.

oldarmy76 said:

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I think I just realized there are income limits for ira contributions if your work has a 401k program. Is this true? Is there no other option to defer taxes beyond the 401k in this scenario?

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I contributed $5500 into an IRA yesterday. TurboTax just told me I am not eligible for the deduction due to having been covered by a 401k for a few months this year. Is there any way to get that money back?

I was doing my taxes in parallel on HRBlock.com and TurboTax just to make sure I did everything correctly and that both services would calculate the same results. HRBlock said I WAS eligible for the deduction, thus I went ahead and made the contribution.

*EDIT - It looks like after some quick Googling that I could withdraw that $5500 without penalty...but my taxes probably just got more complicated for next year because I'm going to have to report the distribution and then somehow prove that it's exempt from penalty. What do y'all recommend?

**Double edit - After some more research, I determined that TurboTax incorrectly imported my W-2 data. Pretty hard to believe. Turns out I was not covered by any retirement plans and my W-2's reflect that correctly. HRBlock's import worked fine. After correcting this detail, the software agreed I was eligible for the deduction. *thumbs up*

Definitely learned something new about taxes this year.

You can withdraw what you contributed without penalty. You can also elect to make the contribution as as post-tax contribution (meaning you'd pay taxes on it) then roll the IRA into a Roth.

Remember the Roth limit is a MAGI limit. You won't know if you're over/under until you have all your deduction adjustments.

You are correct - no tax.

Your brokerage will send a 1099.

It will likely appear as a taxable distribution on the 1099 and in turbo tax unless you completed the 8606 each year (most don't).

TurboTax will ask what the cost basis is. You will have to tell it $30k. This answer should take care of the tax and form. If not, you will have to go to the form 8606 and type in your contributions from the previous years.

Casey TableTennis said:

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jac4 said:

---

Stagecoach said:

---

This seemed to be a hit last year. So, as a public service to anyone in need within the Aggie family, I will thoughtfully or sarcastically answer any remotely interesting questions posted before March 1st.

Rules:

• One question per post
• Be specific and concise
• Don't dominate the thread
• All CFPs encouraged to contribute
• No marketing or public solicitation of any kind
• Rules are subject to change
• Be patient - remember this is free

And go!

---

What advice would you give to a freshman or sophomore in college who is interested in pursuing a career as a CFP?

---

Go talk to Dr Harness. Consider adding a minor through his program.

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2nd the suggestion to speak with Dr. H. He is great and was in the business himself back in the day.