question: My husband and I are both 46 and pensioners. My husband is on a pension plan and can retire at age 62 on $5,355 a month without the help of her spouse. She also has $100,000 in additional retirement funds and plans to continue investing her 5% of her salary until she retires. You cannot retire until age 65, at which point you will receive a monthly pension of $2,366 without survivor benefits. I was out of her job for 8 years before my return, so I have the option to buy back many years of service. She also has $128,000 in additional retirement benefits and plans to continue investing 15% of her salary until she retires.
We will pay off the mortgage at 65. Our house would be worth over $1 million if sold. We have her $37,000 car loan that we plan to pay off in 5 years. I have $24,000 in credit card debt because I paid the bare minimum and used the extra money to pay half of my two children’s college bills. That is why the children do not take out loans.
I have met several retirement advisors over the years as a free annual benefit provided by the Teachers Union, and they have assured me that we are on good terms. But there are still questions: 1) Should we both receive survivor benefits? Both of his grandfathers lived into their 90s, but my spouse is in perfect health. I don’t know my family history. 2) Should I buy back years of service, such as a more liquid 55 year old? How would I calculate the return on that investment? 3) How would I prioritize my debt? ) Do I need to start a Roth IRA as well? 6) Would it be profitable to hire one of her full-time financial advisors? (Looking for a new financial advisor? This tool will match you with an advisor that fits your needs.)
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answer: There’s a lot to uncover here, so let’s tackle these issues one by one. This includes whether your advisor was right to say you’re on the right track, whether you should receive survivor benefits, whether you should buy back years of service, and so on. more.
You say that you will pay off your mortgage, so you will probably have paid off your credit card debt by then, but since you have two pensions and are investing more in your retirement, it is possible that you will be financially stable in your retirement. seems to be of high quality.
That said, without knowing exactly how much your retirement expenses will be, it’s hard to give a definitive answer as to how much you’ll be able to spend. But considering you don’t have to pay the biggest payments you’re currently making (like a mortgage or perhaps a car payment), it sounds like you’re in a decent position, as long as your spending isn’t too out of the ordinary.
Keep in mind that your retirement calculations should also factor in medical and long-term care costs (if you haven’t already, plan for it). Also note that many parents want to help their children start their studies after college. If you’re planning on doing that, make sure you can afford it. (Looking for a new financial advisor? This tool will match you with an advisor that fits your needs.)
Should I choose Survivor Benefits?
Most teachers’ pensions offer the option to receive a survivor’s benefit. Once you have met your retirement requirements, it is important to inquire about the process for selecting plan beneficiaries or survivors. The difference between beneficiaries and survivors is that survivors often receive monthly payments for the rest of their life, while beneficiaries receive a lump sum. Naming a survivor reduces your monthly payments, but ensures that your surviving partner receives a monthly payment at the time of the retiree’s death. If there is a designated survivor and beneficiary of the retiree, the beneficiary may not receive the funds unless the survivor also dies.
Many experts say it’s usually better to have a joint income if possible. “Your husband may be fine, but accidents can happen. So we should always hope for the best, but plan for the worst.” Grace Yung, certified financial planner at Midtown Financial Partners, said. When one spouse dies, there are expenses that don’t cut in half, like a new air conditioner, a new roof, property taxes, and so on. “Additionally, life insurance and long-term care insurance may be considered,” Yung said.
When it comes to pension fund benefits, Joe Favorito, a certified financial planner at Landmark Wealth Management, says he basically supports survivor benefits. “Something like 100% Survivor with a pop-up option is often a good choice, because the discount between Singles and Survivors benefits is essentially a term policy with no maturity. It plays a similar role to insurance premiums,” says Fabolito.
“If you calculate your spouse’s monthly benefits at about $5,355, that’s more than $1 million in commuting. $1 million to justify that monthly payment If you died early and there was no survivor option, that reduced value would be redistributed to the pension fund. will be confiscated as such,” says Favorito.
Should you buy back years of service when liquidity increases? How do you calculate the return on investment?
A certified financial planner can help you work out the numbers, but generally there are times when it’s worth repurchasing the service without knowing the other circumstances. Because it’s all about cash flow. “Cash flow funds your lifestyle,” says Yung.
Pensions are effectively state-sponsored pensions. “Individual pensions share about 6%, but for single life it could be higher. , the insurer can be compared to paying a lifetime payment,” says Fabolito. If the annuity increase is less than what the insurance company pays, it’s not worth it. “The pension needs to be adjusted annually for nominal inflation linked to the consumer price index,” he said.
How to prioritize debt
There is a difference between good debt and bad debt. “An example of good debt is real estate. If it is your residence or something that generates income, it is good debt. In most cases, the interest on your mortgage can be written off, so pay off your bad debts first, like you would with the highest-interest credit card,” says Jung.
In fact, Favorito says credit card debt is the worst kind of debt imaginable. “Usually you want to prioritize debt based on interest cost and whether it’s variable. It’s also important to consider tax benefits. Mortgage payments are an itemized deduction, but many retirement People often do better with the standard deduction,” says Favorito.
Credit card interest rates can be much higher than the student loan debt you’re cooperating with, so you’ll have to think more about the debt payment process. It might be worth it to put more money into paying off your credit cards, at least until you pay off your credit card debt and have your kids take out loans in the meantime.
Do I need to start a Roth IRA even if I don’t have cash until my child graduates from college?
Fabolito says you don’t have to start, but it might be wise to do so. “Depending on your tax bracket each year, there may be some opportunities to fund Roth or convert some of your retirement savings into Roth,” says Favorito. Missing out on a few years of growth can have a big impact on your savings, as you won’t be able to harness the power of compound interest. The longer it takes to raise funding for the Roth IRA, the further it will fall behind.
Would you benefit from having one full-time financial advisor?
It can certainly benefit you — here are four signs you might benefit from a financial advisor — but of course advisors come at a cost. David Edmisten, Certified Financial Planner at Next Phase Financial Planning, ultimately determines whether a financial advisor is the right choice for you because you have a clear understanding of the areas you need help with and the services you need to provide. It is said that it will be matched with human resources who can do it.
A certified financial planner can help you develop a holistic financial plan and “try to effectively coordinate your strategies,” says Yung. However, it’s important to choose the right one and scrutinize each one using questions like these. (Looking for a new financial advisor? This tool will match you with an advisor that fits your needs.)
Having trouble with a financial advisor or looking for a new advisor? Email your questions or concerns to picks@marketwatch.com.
The question has been edited for brevity and clarity.
