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Message
So the wife quit her teaching gig, and...
Posted on 7/8/12 at 8:30 pm
Posted on 7/8/12 at 8:30 pm
She has about $22k in retirement to play with..suggestions please....some options are:
1. Leave in the retirement system that is in flux for an approx payout of $650/mo till 85 assuming it starts paying out at 60.
2. Pull out and take the 28% hit with taxes and penalty and pay off my student loan.
3. Roll into a Roth IRA or traditional. If I do so I'm assuming I would need a financial guy to help start one or go it alone with one of the online investment groups....
I'm new to this and am reading voraciously. Any suggestions would be very much appreciated. I've never started a retirement on my.own as my company has mine with me able to move it around about 10 different options as I see fit.
Thanks
Eta: willing to read any recommended books.
1. Leave in the retirement system that is in flux for an approx payout of $650/mo till 85 assuming it starts paying out at 60.
2. Pull out and take the 28% hit with taxes and penalty and pay off my student loan.
3. Roll into a Roth IRA or traditional. If I do so I'm assuming I would need a financial guy to help start one or go it alone with one of the online investment groups....
I'm new to this and am reading voraciously. Any suggestions would be very much appreciated. I've never started a retirement on my.own as my company has mine with me able to move it around about 10 different options as I see fit.
Thanks
Eta: willing to read any recommended books.
This post was edited on 7/8/12 at 8:31 pm
10
Posted on 7/8/12 at 8:39 pm to thejudge
3 and it's not even a question.
You have good taste in guns. What model XD is that? My CC is an XDm 40sc.
You have good taste in guns. What model XD is that? My CC is an XDm 40sc.
Posted on 7/8/12 at 9:12 pm to BallyHOO
Pizza..XD 45.
Bally. I am heavy towards no. 3....reading on learning to set one up, or is it better to see someone to set it up for you?
Bally. I am heavy towards no. 3....reading on learning to set one up, or is it better to see someone to set it up for you?
Posted on 7/8/12 at 9:18 pm to thejudge
hopefully one of the cpa/tax types will answer, but I think rolling into a ROTH will still cost you some tax money. Do the analysis, but paying off the student loans may provide a better return on the long haul, based on your age.
And in the fine tradition of td.com...pics of wife or gtfo
And in the fine tradition of td.com...pics of wife or gtfo
Posted on 7/8/12 at 9:45 pm to Cold Pizza
quote:
3 and it's not even a question.
This.
And you don't need an adviser or anything. Go with vanguard or another low cost option and set up the IRA (either Roth or Traditional). Then have your wife contact her former plan administrator and tell them she wants to roll her funds over. She'll probably just need to fill out a form or two.
Posted on 7/8/12 at 11:03 pm to thejudge
quote:
1. Leave in the retirement system that is in flux for an approx payout of $650/mo till 85 assuming it starts paying out at 60.
Is she sure that she will never, ever, ever, ever return to that retirement system in any way?
Some of the saddest people I've encountered are teachers who left the profession briefly, withdrew their retirement, then returned later and couldn't retire.
Posted on 7/9/12 at 5:59 am to shutterspeed
This is true. My wife is taking a break from public schools, teaching at a small private school now. I would make sure she is never going back to it first.
Posted on 7/9/12 at 10:10 am to thejudge
I think if you do #2, the penalty is 35%. They'll withhold 25% for taxes and make you pay a 10% penalty. Of course if you're in lower tax bracket than 25%, you'd have to wait until you file your taxes to get the refund. If you're in a higher bracket, you'd have to pay more when you file your taxes to make up the difference.
I just looked it up in my Becker CPA review book, and you avoid the 10% penalty if you're a first time homebuyer (limited to $10K), medical insurance if you're unemployed or self-employed, medical expenses in excess of 7.5% of AGI, diability, education for college tuition books & fees, or death. So I think you'd pay the 10% penalty if you used the money to pay down student loans. Now if you're going back for a degree, there'd be no penalty. Our government make a lot of sense.
I just looked it up in my Becker CPA review book, and you avoid the 10% penalty if you're a first time homebuyer (limited to $10K), medical insurance if you're unemployed or self-employed, medical expenses in excess of 7.5% of AGI, diability, education for college tuition books & fees, or death. So I think you'd pay the 10% penalty if you used the money to pay down student loans. Now if you're going back for a degree, there'd be no penalty. Our government make a lot of sense.
Posted on 7/9/12 at 10:20 am to thejudge
Also not sure where you're at in student loan repayments, but on certain loans, they reduce the interest rate after all payments are made on time for the first three years. I got it on my loans and my brother just got it on his, so if you're not to the 3 year point yet and you have that deal, the return won't be as great on paying down the student loan debt if you're interest rate will drop from 4% to 3.5% or something.
Helpful note too, if you don't start withdrawing money by the age of 70 & 1/2 the feds penalize you for that too.
Helpful note too, if you don't start withdrawing money by the age of 70 & 1/2 the feds penalize you for that too.
Posted on 7/9/12 at 10:27 am to thejudge
I think #1 is the best option as the government/public entities usually have really good benefit plans and generous payouts. And you want it to be there if she goes has back to teaching.
#3 is the 2nd best option. It is really easy to roll over. Vanguard and Fidelity I think charge no fees if you opt to receive all email notifications. My vanguard IRA charges no fees since it is managed only online and they don't smail mail me statements. My brother has the same deal with Fidelity I think.
ETA: in my opinion. I'd feel better if more posters chimed in.
#3 is the 2nd best option. It is really easy to roll over. Vanguard and Fidelity I think charge no fees if you opt to receive all email notifications. My vanguard IRA charges no fees since it is managed only online and they don't smail mail me statements. My brother has the same deal with Fidelity I think.
ETA: in my opinion. I'd feel better if more posters chimed in.
This post was edited on 7/9/12 at 10:47 am
Posted on 7/9/12 at 10:57 am to meldawg399
Information is awesome here. We plan on her going to teach at a private school and enroll the kids in it once they are of age. It is not paying her to work and have the kids in daycare all day right now. We decided to have her quit until they are at least school age but I hope to never have her in the public sector again. Its a political mess. Best scores in the school but she was moved to a new subject and stripped of her planning hours because her scores we low.....the new person hired took her job and then demeqnded her teaching materials. Wife said she burn them all before they got em...haha...
Thanks again
Thanks again
Posted on 7/9/12 at 11:14 am to thejudge
Also look into a tax deduction for qualified educators if she pays for any of her own materials (not reimbursed by the school). If she's paying for her supplies/aides, I think some of that can be written off for tax purposes. If she teaches 900 hours per year at the K-12th grade level and the max is $250 on it. It is on line 23 of the form 1040.
It includes any "ordinary and necessary expenses paid in connection with books, supplies, equipment (including computer equipment, software, & services), and other materials used in the classroom."
"ordinary expesne is one that is common and accepted in the educational field...necessary is helpfuland apropriate for your profession as an educator....and expense does not have to be required to be considered necessary."
I'd keep receipts just in case the feds want audit.....they like auditing the self-employed.
It includes any "ordinary and necessary expenses paid in connection with books, supplies, equipment (including computer equipment, software, & services), and other materials used in the classroom."
"ordinary expesne is one that is common and accepted in the educational field...necessary is helpfuland apropriate for your profession as an educator....and expense does not have to be required to be considered necessary."
I'd keep receipts just in case the feds want audit.....they like auditing the self-employed.
Posted on 7/9/12 at 11:27 am to thejudge
She can't roll it into a Roth....it would have to be rolled into a Traditional IRA. If you converted the traditional to Roth, you will still owe taxes on the full amount converted.
Just roll it into a Traditional IRA with Vanguard, pick the Target Retirement Fund for the year she anticipates retiring...easy peasy, done deal.
Just roll it into a Traditional IRA with Vanguard, pick the Target Retirement Fund for the year she anticipates retiring...easy peasy, done deal.
This post was edited on 7/9/12 at 11:33 am
Posted on 7/9/12 at 11:29 am to meldawg399
A public school teacher isn't self-employed, man.
If a person is an educator, it is typically an automatic $250 deduction in arriving at AGI.
If a person is an educator, it is typically an automatic $250 deduction in arriving at AGI.
Posted on 7/9/12 at 11:43 am to krehn11
quote:
A public school teacher isn't self-employed, man.
His wife is a teacher and I interpreted
quote:
I've never started a retirement on my.own as my company has mine with me able to move it around about 10 different options as I see fit.
as he owns the company and thus self employed. I misunderstood his original post.
quote:
If a person is an educator, it is typically an automatic $250 deduction in arriving at AGI.
My Becker CPA review book says "If you are an eligible educator, you can deduct up to $250 of qualified expenses you paid."
Sounds to me like it isn't automatic based on the 2011 Becker book but limited to what the educator paid. However Becker isn't an authority on the tax code; the IRS & its publications are. The law could've chaged to be automatic; I don't know. I'm not a tax guy but just trying to help someone find a tax break while I'm studying to pass the CPA.
Posted on 7/9/12 at 11:59 am to meldawg399
I was saying that typically educators spend > $250 out of pocket so more often than not they are going to be taking the $250 deduction.
Posted on 7/9/12 at 12:57 pm to meldawg399
quote:
Sounds to me like it isn't automatic based on the 2011 Becker book but limited to what the educator paid.
It's pretty well automatic. You could find just two or three things around the house that you've paid for to equal out $250.
Who's going to argue about a measly $250 anyway.
Posted on 7/9/12 at 12:58 pm to thejudge
quote:
We plan on her going to teach at a private school and enroll the kids in it once they are of age.
What are her long-term goals, though? Is she planning to retire at age 62-67 as a private school teacher? Does she have administrative plans? What concerns me about your situation is that she's planning on staying in education. Teachers move back and forth between public and private all the time. Would suck to lose all those years in the system.
Posted on 7/9/12 at 1:52 pm to shutterspeed
quote:
Just roll it into a Traditional IRA with Vanguard, pick the Target Retirement Fund for the year she anticipates retiring...easy peasy, done deal.
Sounds great
quote:
What are her long-term goals, though? Is she planning to retire at age 62-67 as a private school teacher? Does she have administrative plans? What concerns me about your situation is that she's planning on staying in education. Teachers move back and forth between public and private all the time. Would suck to lose all those years in the system.
The forecast is for her to never go back to public education. She loved it and the money wasn't great but she loved the kids and did it until politics killed her want to. I would love to give my.kids a good start in smaller classes at a private school, be easier to afford if she works there with the tuition break. After hopefully they are through the 5th grade they will probably have to migrate towards the public sector as past elementary school Tue cost go up significantly. Then substitute teaching appeals as some income and time off can be taken at leisure. The hours I work are insane and not good for the kids if we are both gone.
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