Certified financial planners from the Financial Planning Association of Puget Sound answered retirement-savings questions for free. Here is the second set of those answers.

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Certified financial planners from the Financial Planning Association of Puget Sound answered retirement-savings questions for free. Here is the second set of those answers.


Advice given during the hotline is for educational purposes only and does not signify that those e-mailing engaged the services of a financial planner. It relies solely on the information provided by readers.



Health insurance coverage is a serious issue for those of us who might want to retire before age 65 and entitlement to Medicare. How much would it cost to fund health insurance coverage for someone who might want to retire at age 60, allowing for the real life annual increases of self purchased health insurance? How would you fund this? Any other options besides holding onto a job, full or part time, until age 65? Are there groups that one can join to purchase health insurance?Redmond

FP: This is a difficult area that there is not easy answer. Health care for someone your age is very expensive. A ballpark number would run probably $600+ per month, this is assuming you are in good health. For many people the high cost of medical care will cause them to continue to work so they can get coverage through their employer until they reach age 65 and become eligible for Medicare.

If you want individual coverage I think you will have to start calling individual insurance companies like Group Health or Blue Cross/Shield. You also might contact an insurance broker they can shop the coverage for you.


I am 30, buying a first home with my wife this month. I am getting an 80-20 loan, and the 20 is tied to prime. Should I try to pay that down as fast as possible, even if it means reducing the $500 / check I put into my 401k?Bellevue

FP: Congratulation on the purchase of your first home. You are getting in at the right time at the historical low interest rates. You need to ask yourself how long you plan on living in this house. If this is a starter house and you plan on moving at some point in the near future, say 5-7 years, then keeping the 20% tied to prime would probably work out fine. If you have a longer time horizons in this house then interest rate risk could be a major concern.


Contributing to your 401(k) plan is very important at your age because the more you put in early the greater the amount will be when you retire due to compound interest. I would try to keep from reducing your 401(k) contribution and continue to increase the contribution.

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A zillion articles and retirement planning models talk in vague terms of income but never say whether or not it is pre-tax or after tax; before savings (ie untaxed 401k comes out) or after. Have you ever heard that “you will need about 70% of your current income for retirement”, for example? People out there think in terms of “making xx thousand a year” (pre-tax) and are multiplying that number by 70%.

Question 1: Is that right? Or is is the norm after tax? No one ever mentions that SS payments are taxed but exclude SS/Medicare taxes. This is a pretty big percentage not taken from SS payments.

Question 2: Are they or not?

Question 3: Do company pension payments require SS/Medicare taxes be paid? People need to know about the early Social Security retirement before age 65 added income rules up to the 13,000 per year allowance, and then the “earn $2 and refund $1 of social security payments” if over 13k before 65.

Question 4a: Is this correct?

Question 4b: Does this rule still apply when filing taxes jointly with a working spouse or are the tax rules independant of the SS rule.

And Question 5: Is there unlimitted allowance for added income after age 65 with no loss of SS payment dollars? Guess how many people think that when a spouse dies, the surviving spouse get’s all (or half) of the dead spouse’s SS payment plus their own. Or is it that the surviving spouse recieves the larger of the two ( ie theirs plus any amount the dead spouse’s payment exceeds theirs).

Question 6: What are the basic rules for survivors assuming no other marriages are involved? The vague writers who tell us that we need a “Million Dollars to Retire” should have all their pens and keypads thrown away.

Question 7: Are there any books or Web Tables or web models that will show how many pre-tax dollars ( “pre-tax nest egg” ) are needed to produce a stream of X thousand pre-tax dollars a month for Y years with Z percenatge levels of confidence assuming P perentage inflation rate?Issaquah

FP: Question 1: The ideal way to pinpoint your retirement spending is to track or outline your expenses now. While they are well meaning, don’t rely on this overgeneralized figure of 70% of current spending or income. Examine your own spending and how it will change when you retire. Is there child-related spending now that won’t be there in retirement? Should you add more for medical premium, expenses, do you have an adequate allowance for home repair and car replacement? Now, once you have your desire spending, then figure what taxable income (generally I use fully taxable income at the various tax brackets to see what tax might be payable given today’s (taxable) rates. To be most accurate you might build in the non-taxable portion of social security you might receive. (Note that there is some risk these laws could change and that we might be taxed at 100% of social security received). Once you do all this projection/planning work, you can determine if owning tax-free bonds that produce non-taxable income is of any benefit.


Question 2: See above – don’t use gross income to figure your retirement spending needs. Examine spending now.


Question 3/4: Certainly one should be aware that if one works between age 62 and 65 and earns more than $13,000, some social security benefits may be lost. I would consult a CPA or tax preparer regarding how the rules apply to spouse of different ages and earnings.


Question 5. Yes, after age 65, one can earn any amount and not have social security earnings reduced.


Question 6: The surviving spouse can take 100% of the deceased spouse’s benefit I believe. Greater clarification can be obtained from the Social Security administration.


Regarding websites about projecting and showing what income can be drawn from an investment pool. Try financialengines.com to see if there are some links there, I also believe the National Association of Actuaries has one.


My husband and I are both 50 and work full time – he is self employed and I work for a bank. We make about $80,000 or so a year. We own our house and have about $180,000 in equity at this time. We have two kids – 12 and 15 and have invested some money in the GET program for tuition. We currently have about $275,000 in my 401 through work and about $25,000 in the pension portion. I contribute 9% of my salary monthly. About 75% of the funds are in stock mutual funds.

I’ve been wondering if we should also have a separate Roth IRA in addition to the 401 as I know the money is not taxed on withdrawals. I don’t think we could fund it in addition to what I put into my work plan though, so I would probably have to reduce the 401 contributions somewhat to fund the Roth IRA. My company matches up to the first 5T of my contributions.

Any suggestions for us? Should we do anything different?Shoreline

FP: There aren’t necessarily hard/fast rules to answer your questions but here’s an overview of some of the variables. The biggest issue is whether or not you benefit from the reduced taxable income by adding to your plan at work. Depending on deductions, etc.. how big an issue are taxes for you.

The benefit of the 401k is that you reduce your current taxable income by the amount you put in, plus in your case you get the company match (which you defnitely want to take advantage of), plus the tax deferred growth. The downside is that it is taxed as ordinary income when you take distributions and is generally not accessible without penalty before age 59 1/2 (there are some exceptions to this).

The Roth gives you no current tax benefit for contributing but is more easily accessible(after 5 years) and grows tax deferred and comes out tax free. The maximum Roth contribution for 2004 (which you can make up until April 15th) is $3000(plus $500 if you were over 50 in 2004). For 2005, it’s $4000, with $500 for being 50 or over.


This week I placed my 89 yr. old step father in a retirement home. His home, in No. Seattle, is free and clear and he owns it. My question is this. Is there some way I can shelter his home from cost of living payments were he to be placed in a nursing home. Can he qualify for Medicaid assistance without giving up his home? If so, how do I go about qualifying him for this.Renton

FP: The issues involving Medicaid and nursing home care are complex and require more in-depth discussion than can be covered in an email. I would suggest you contact a financial planner with specialized expertise in elder care issues. You can get information on resources in your area thru the Financial Planning Association local website www.fpapugetsound.org. You may also go to the Medicare website for a link to Medicaid information: www.medicare.gov.


I have CD and savings accounts totaling $285,000 drawing 3%+ interest now, have 401k worth $26,000 at 5% now, and IRA worth $68,000 at 3.2% now. I am 54.5, my wife is 53 and plan on retiring in 1.5yrs. What is the best. I plan on using the liquid savings until age 59.5. What should be my strategy as far as using funds from the IRA/401k part? We plan on using only the interest earned or should I actually make principal withdrawals and not take interest earned on them? Or doesn’t it matter as the withdrawals would be classified the same. I know you have to start taking monies out of IRA/401k by 70.5 correct? Advise on these and any other strategy you think smart.Mount Vernon

FP: You must have some other income sources somewhere other than what your listed or you are planning to work part-time. With these assets I’m not sure how you can sustain your standard of living in retirement. The rule of thumb is to withdraw tax deferred account first (IRA & 401(k)). I am not sure how you can sustain your income with only interest off of your investment because the rate of return you are receiving is pretty low.


I would suggest you contact a financial planner for additional help through the following sources – You can obtain a list of planners in your area by contacting the CFP Board at www.cfp.net or the Financial Planning Association at 800-322-4237 or www.fpanet.org.


I have 401K (company matches 4%), I contribute 5% of my income, my total amount is currently $10,400.00. My husband have something through his work, King County and his balance is somewhere around $6000. We are both 30. What else should we be doing in order to save for a comfortable retirement?Shoreline

FP: In order to answer your question in an meaningful way, there are a number of blanks that need to be filled in. You didn’t indicate what percentage your husband contributes to his plan? When do you want to retire? How do you define “comfortable”? What other assets to you have? What other financial resposibilities do you want to fund (college??) to name a few.


You may find the following websites helpful as they have retirement planning calculators (www.mymoney.gov, www.vanguard.com, www.tiaacref.com) The advantage you have is that, at 30, you have time on your side for compounding growth over decades; but in general I encourage clients to shoot for a 10% deferral rate (this obviously varies by individual circumstances). If 10% seems daunting, a good strategy is to increase you deferral 1% annually or to increase it whenever you get a raise (before you get used to the extra cash flow!) Hope this helps.


My portfolio is well balanced, but I want to put money into an IRA for both 2004 and 2005. Would a Vanguard Total Stock Market Index Fund be a good choice?Bellevue

FP: Thanks for emailing. There is no way to answer you question from the information given. Whether that fund is a good choice or not, depends an many other variables: what else to you own, what is your time horizon, what is your risk tolerance, what are you trying to accomplish with the funds, what is your asset allcoation? The answers to those questions will help you accurately evaluate the specific fund to determine if it enhances your portfolio.


What options are available for medical coverage during retirement and how much should be put aside for this expense. (Assuming no major health problems going into retirement).Sammamish

FP: At age 65 Medicare is available. In addition individuals also usually purchase some sort of medicare supplement plan. As to preparing for this expense, make sure when you are estimating your spending needs in retirement, that you give yourself liberal allowances for dental care,non-covered expenses, vision and any medical premium that you may be paying between retirement and age 65 if retiring early. As for dollar amounts, you might plan for $250 as an average (in today’s dollars) for a medical supplement plan, somewhere between $200 and $350 for miscellaneous non-covered medical/pharmacy – taking your individual health issues into account. If there is a span of a few years when you leave employment and have to carry an individual plan for a few years to age 65, we often use monthly premiums of $300 to $400 per person. -A daunting expense!


I am 59 years old- have approx $750,000 in 401- Iras- and Annuities. Have a rental that generates $1000 month. I expect approx $1000 month income from inheritance farm lease income. I have made max soc security deposits for some years.I should also get a cash buyout from sale of my half of a business in the neighborhood of $450,000 probably over 10year period.My question is if I retire at 62-63 should I live off my own income until 66.5 or start drawing it at 62.Poulsbo

FP: I assume your are talking about starting social security at age 62, was not sure? There is a cross over point if you live long enough that the income from starting social security early will exceed the greater monthly payment for those that retire later and start drawing social security. I think studys show that if your life expectancy is in your early 80s you would benefit by taking your social security payment earlier.


You also have to consider the tax consequences of starting social security early. If you have earned income above a certain level you will have to give back some of your social security payment until you reach your full retirement age which is 66. Once you reach full retirement age there is no earnings test.


I want to invest some money in Vanguard and am debating whether to choose a few varied index funds with that mutual fund company or just to choose a “one-stop” fund, such as one of its four LifeStrategy funds, which range from growth to income. I understand that the latter run at 0.28 percent a year. Which do you think would be preferable?Seattle

FP: I’m not certain what you are referencing when you talk about “run at .28 percent a year”. I’m assuming you mean expenses, which are only one piece of the puzzle. How much of a hands-on investor are you? The life strategy funds provide a built-in asset allocation targeted to specific risk tolerances. You may be able to build a more customized model on your own; but it will require more on-going management. In either case, you should put some work into which funds you are choosing.

“A few varied index funds” needs to be proactively selected for their contributions to your overall portfolio and asset allocation model. It shouldn’t be random. Vanguard has some useful resources on their website (www.vanguard.com).


I will reach age 55 in 14 months. i wish to avoid the 10 per cent penalty for withdrawing from my 401k. i want to use the exemption that i will be working until the year in which i turn 55. does this mean that i only have to work until jan 15 , or do i have to be employed by my current employer until after my birthtday?Lynnwood

FP: I assume this means that you are eligible to retire at age 55. You really need to contact your human resources department to answer this question. I would have to look at your plan document to understand what the language says.


We have a daughter with developmental delays and will probably qualify for SSI. She will turn 18 yrs old in December. When can we access funds? Does she have to pass some kind of test to qualify under the new rules? How much money can she earn without jeopardizing her monthly SSI income?Bellingham

FP: SSI issues are complex. The best resource is probably through the social security website (www.socialsecurity.gov).


I am still working at 57, my wife is retired and 55. We both have pensions available from a previous employer that we have not opted to start collecting on. Should we wait until my planned retirement at 60 to start drawing on this previous pensions or should we be drawing on them now?Sammamish

FP: This a question that requires more information. The couple of issues to consider are:


(1) What is your tax bracket now? Will starting up your pension now result in having it taxed at a higher bracket then if you wait? If so, this issue may suggest you wait and draw pensions when you retire.


(2) Are you aware of the reduction that would occur if you take a pension at 55 versus waiting to age 60? A financial planner or CPA can help you determine if it is wiser to wait and take the higher amount. (For example, I’ve found in my calculations that if a person can afford to wait until age 65 before drawing on social security versus age 62, they may end up collecting more money if they live past age 75). This is by no means the sole consideration.


(3) One question for your employer plans: Does the survivor benefit work differently if one of should die before taking the pension, versus taking it now and electing a survivor option?


Armed with this additional information, plus your desirde spending in retirement and other lifestyle choices might help you explore this in more depth with a Certifed Financial Planner. For additional information about CFPs and how to interview them to find someone with whom you will work well with contact: www.CFP.net, or www.pfanet.org, (1-800-322-4237).


I am currently making an extra payment of $200/month to the principal on our mortgage (we have a 15yr loan at 5.25%). My idea with the extra payment on principal was to have the mortgage paid off at about the same time the kids are entering college. Would it make more sense to forego this additional payment and instead add $200 monthly to my 401k contribution? (Note, my company does not make any kind of match to the 401k, but does have a pension. My wife and I are both in our early 40’s and have about $160K in retirement savings, but not much savings for our children’s college education).Seattle

FP: I commend you for wishing to pay off your mortgage early but you would probably be better off in the long run to take the $200 and add it to the 401(k) at work. Your interest rate is very low and the tax laws are written as such to carry a mortgage. The only caveat is if you feel comfortage carrying the debt. If you are then I would add the extra money for your retirement.


I’VE BEEN SEARCHING, WITH NO LUCK, FOR A DOCUMENT THAT SPELLS OUT WHAT KINDS OF INVESTMENTS ARE ALLOWED INSIDE A ROTH IRA. IS THERE ANY INFO WRITTEN IN LAY TERMS THAT I CAN PUT MY HANDS ON ?Mountlake Terrace

FP: The answer to your question may actually vary depending on who your custodian is. The best way to get a specific list is to go to your custodian and ask them to provide a list of acceptable assets. In general you can own most things in a Roth that you can own outside it. Standard exceptions include options (excluding covered calls), art, collectibles, etc. Stocks, bonds, mutual funds are all commonly held investments.


My husband retired recently from 35 years of Civil Service employment. He also fulfilled the quarter requirements for Social Security. He was told that since he is a Civil Service retiree he will only receive 40% of his montly Social Security benefit, not the full amount. His friend also retired from Civil Service (pension,) was an officer in the Navy (monthly retirement) BUT he is receiving FULL Social Security. What gives?Bainbridge Island

FP: You may want to start by verifying that your assumptions are all correct. Assuming that they are, it is a true statement that there are different retirement rules for different departments and also for different time frames (yes, it is confusing). The best place for definitive information is to contact Social Security directly (www.socialsecurity.gov).


I like to invest in mutual funds with low expense ratio for my retirement. So you can understand the majoritity of my money is in various Vanguard funds. But I know some funds with low expenses don’t give the best returns among their peers. My first question is what are the pros and cons with investing only in one fund family such as the Vanguand family funds? If not, what is your recommendation? I would like to retire in 12 yr. My second question is what a typical portfolio should be like now (% in domestic large, small cap stocks, forien stock and bond)?Bellevue

FP: Pro: Ease of administering accounts

Con: One fund family, one philosophy, is my opinion.

I like diversification for diversification’s sake.
Re your 2nd question, your risk tolerance will help determine your blend of fund allocations. Vanguard might have tools to help you determine this for you.


My wife and I are US citizens that would like to work overseas and travel in our retirement. How many months do we need to live in the US (minimum) and what is the current maximum amount of foreign income that would be non-taxable in the US?Bellingham

FP: The best resource for answering your question is the IRS website. If you go to www.irs.gov and type in “foreign income” for a search, it will give you a wealth of details that should answer these questions, as well as other related information that you may find helpful.


My wife and I are both retired (ages-63) We have 44000 in pension & ss income also 8400 per year for 5 years in unsecured loan income… ($ lent to kids). We have 490,000 in ira’s and 250,000 equity in a 450,000 house..we owe 23000 on a home equity loan, with no other consumer debt. We figure we will need 55000 to 60000 per year to live the way we are used to…Question is….are we on track.Seattle

FP: Let’s review how each piece of your financial resources will serve your income needs over time. Of Course, the social security and pension income is the one chair of the stool providing income for life. However, it is not quite high enough to meet your expenses along with federal income tax. The balance can be met by your IRAs of $490,000. Very generally speaking academicians in our profession suggest that to minimize the risk of outliving your investment assets you should draw no more than about 4% from your starting investment balance if you plan to draw on it for 30 years. This calculation assumes that you will need to increase this draw every year with inflation. $490,000 x 4% = $19,000 per year. $19,000 plus the $44,000 equals $63,000. Make sure you account for federal income tax in reducing the gross income that is available for spending. Maybe you should set aside the 5 years of unsecured loan income for car replacement and a home improvement fund? Finally, I look at home equity as an asset that could support your needs at age 90 – 95. Did you know that there is something like a 25% likelihood of living past age 88?


What about the risk of one spouse needing long term health care? If one spouse needed home health care of institutional care for say, seven years at $4,500 per month, would this deplete assets too much for the remaining spouse.


On balance it sounds like you are on track, but you should be aware of how long term care expenses (not much covered by medicare) might impact the resources. I would embark on a plan in which you keep your spending plus federal income tax within the $63,000 level. I would also try to account for car replacement in this monthly spending.


I will turn 65 next month and plan on working full time at least a few more years. I receive full medical insurance through my employer. There are over 20 people employed by my organization I cannot decide if it would be best for me to sign up for Medicare (Part A only) at this time or wait until I am ready to retire. Any recommendations?Bellevue

FP: Medicare Part “A” is automatic assuming you have worked at least 40 quarters. It does not cost anything since you have already paid for it through your Medicare taxes. You might be confusing this with Medicare part “B”. This does cost you a monthly amount (around $80 now) you would not want to do this until your actually retire. Just make sure you do it 3 months before retirement.


I withdrew money from a defined retirement plan when I left an employer – I had 11 years of service credit (I never thought I would return to that public sector employer – but circumstances changed!) I now work for the same employer, and it would cost $40,000 for me to buy back that service credit. I am 46, and a single mother. I have one year to decide whether to buy it back – I would have to borrow the money, probably as a second mortgage. Should I consider doing this?Redmond

FP: Unfortunately I don’t have enough information to adequately answer your question. I would gather some information together (1) how much credit (monthly income) would you buy buying with the $40,000? (2) Can you adequately pay back the 2nd mortgage?- (3) discuss the scenario of rising interest rates on this second mortgage. (4) Are there better alternatives than buying back the service credit. (5) what are your other important goals, children’s education, etc? This is a specific planning issue that may best be answered with a planner.


I am 31 years old and have $25,000 in my 401k. I am married, and our combined annual income is about $125,000. I also will be eligible for a pension when I retire. My question is, if I want to retire at 65 and live on about $70,000 a year, how much should I be setting aside each year? Also, my 401k is 100 percent stocks because I have time to weather the ups and downs of the stock market. Should I diversify a bit?Seattle

FP: To really answer the “how much” questions there are more input variables than can be covered in your email. You may want to check out the following websites for retirement planning calculators (www.mymoney.gov, www.tiaacref.com, www.vanguard.com). You did not specify what percentage of your current income you are currently saving. A good guideline is to defer 10% annually. 100% in stocks is an aggressive portfolio. It may or may not be the best for you. It depends a great deal on what else you own and on how realistic you are on your tolerance for risk. It’s harder to feel that you have time when the market cuts your account value in half or more. Even if you decide that the 100% equity allocation is appropriate, you should evaluate your options to diversify across different stock classes within your plan.


I will receive approx 500k from a Trust that will disolve next year when I turn 35. Am I better off purchasing a home outright & investing monthly what I would be paying for a mortgage, or keeping a mortgage and investing the funds?Seattle

FP: This is a nice decision to look forward to. It is difficult to answer this without knowing more about you. You need to ask yourself some question like; Are you bothered with going into debt, what is your risk tolerance and expertise when it comes to investing. I think in the long run, given the low interest rate environment, that carrying a mortgage and investing the difference might suit you better for the long run. The tax laws are written to help those that are homeowners that carry mortgages.


I am retired (no earned income) and would like to deposit extra cash from SSI and IRA (taxes paid) income into a Roth Acct. Can this be done? If not, why not?Kirkland

FP: You need to have earned income to be able to contribute to a Roth IRA.


The laws were set up to encourage savings during your working years.


My husband and I are in our early 60’s. We purchased long-term-care insurance five years ago. The premiums have gone up 50% since we purchased it, and I am concerned about being able to pay them when we are retired (which we plan to do in one year). The premiums are a total of $3,600 a year. We own our home free and clear (worth about $500,000). Would it be safe for us to drop the LTC insurance, with the idea of getting a reverse mortgage, if we should need extended care? We do not anticipant needing the assets from our home to provide income (we have approximately $800,000 in IRA and non-IRA accounts, from which we plan to withdraw 3% a year).Sammamish

FP: I would determine whether you have sufficient assets to pay for long term care as well as whether your goal is to leave assets for your heirs.


The first step would be to determine the estimated future cost of long term care for you and your husband. Then one would determine whether you have sufficient assets to provide for those costs, for the living costs of the surviving spouse as well as for your heirs.


I am a widower 61 years old and plan to retire at 62. My wife passed away 4 years ago at age 53. I qualify to collect on her social security of $1186 since I am over 60. If I collect on her social security for the next 5 years, can I leave my social security alone and collect at the age 66 rate without penalty or does the SSA penalize me because I collected on my late wife’s social security benefit?Olympia

FP: My understanding is that the survivor benefit will be separate from your individual benefit and there should be no penalty. Please contact the Social Security Administration at 800-772-1213 or www.socialsecurity.gov for a more definitive answer.


What is the current thought on paying off a mortgage? I’m a retired teacher, 64, divorced, and have a 403B fund that has enough money in it to pay off the house mortgage. (I’m presently helping my daughter with childcare, while she completes her Medical School training at UW. The house is in California and is presently being leased out for the cost of the mortgage payment plus $500 per month. I bought the house in 1970, so the house is under Prop 13, which froze the taxes at $600 per year. I would appreciate your thoughts on whether I should pay the house off, and keep it for investment purposes…or keep the mortgage. I have no other income other than my teacher’s retirement check per month. Long-term, keeping it would mean I would continue to rent it out and I would probably continue to rent an apartment here in Washington, to be near my grandchildren… so what would be the best decision?

A second part of this questions is this…I lived in my home for 30 years and then decided to help my daughter, which meant moving. I have now lost my $250,000 Capital Gains allowance, as I haven’t been in the house two of the last five years. If I were to decide to sell the house, would my ‘situation’ qualify for an exception or will I need to move back in the house for two of the next five years, should I decide to sell?Woodinville

FP: This question requires a bit of analysis. For instance, what rate of return are you receiving from renting vs. what rate of return are you receiving from your 403(b).


You’d also need to take your monthly income needs into account and see if you’d ever need your 403(b)for income in the future.


I’d suggest contacting fpapugetsound.org to ask for a referral to a financial planner that can help you analyze and assess the situation.


WE are a married couple, both working with good salaries. I make 80,000 and my husband owns a small business and makes about 150,000.00. we have two small children and i worry about their education. i recently started putting away money monthly towards some sort of education savings. I am interested in the GET program. Buying college credits at today’s prices for later on. My children are 8 and 3. Also I have a 401k that I contribute 400.00 month with no matching. I am in my late 40’s and I would like to retire comfortable (whatever that means) in my 60’s. My husband is in his early 60’s and show no signs of stopping. I feel we have money but we spend alot and I feel that now is the time to save when I am making the maximum amount of money. I know I am jumping all over but where do we start and how much should we be saving? My husband has a penison plan with his business and he has about 150,000. in it now. My 401 k has 45,000.oo thanks for you help.Seattle

FP: First off, you would be a candidate for help from a financial planner. Your situation is a little complicated to put together a well thought out answer in a few minutes I have here.


There are a number of options for saving for children’s educations including 529 plans that allow much more flexibility then buying credit where one can investment much more money tax deferred.


You can obtain a list of planners in your area by contacting the CFP Board or the Financial Planning Association.


I have CD and savings accounts totaling $285,000 drawing 3%+ interest now, have 401k worth $26,000 at 5% now, and IRA worth $68,000 at 3.2% now. I am 54.5, my wife is 53 and plan on retiring in 1.5yrs. What is the best. I plan on using the liquid savings until age 59.5. What should be my strategy as far as using funds from the IRA/401k part? We plan on using only the interest earned or should I actually make principal withdrawals and not take interest earned on them? Or doesn’t it matter as the withdrawals would be classified the same. I know you have to start taking monies out of IRA/401k by 70.5 correct? Advise on these and any other strategy you think smart.Mount Vernon

FP: You must have some other income sources somewhere other than what your listed or you are planning to work part-time. With these assets I’m not sure how you can sustain your standard of living in retirement. The rule of thumb is to withdraw tax deferred account first (IRA & 401(k)). I am not sure how you can sustain your income with only interest off of your investment because the rate of return you are receiving is pretty low.


I would suggest you contact a financial planner for additional help through the following sources – You can obtain a list of planners in your area by contacting the CFP Board at www.cfp.net or the Financial Planning Association at 800-322-4237 or www.fpanet.org.