Many people in their 50’s or 60’s warn us about catastrophic or ‘black swan’ events. But what’s the likelihood that this will actually happen?
How can you use the 4 percent withdrawal rule for early retirement planning, given that your portfolio will be split among accounts with different tax treatments? How do you adjust your retirement plan for future taxes?
Should a couple in their 30’s switch from term life to whole life insurance?
Should a couple in their 50’s with adult children bother buying life insurance in the first place?
Is it okay to keep all your assets at one investment brokerage, like Vanguard or Fidelity?
And can you deduct rental losses if your income is over $150,000?
Former financial planner Joe Saul-Sehy and I answer these questions in today’s episode.
Here are the details:
David asks:
I have a question about the four percent withdrawal rate. The example that’s often used is if you want to withdraw $40,000/year, you need to have a million dollars. Why don’t people talk about what that million dollars needs to be made up of?
For example, if it’s a million dollars of just Roth assets, when you withdraw it, there are no taxes taken out. However, if that one million dollars is primarily pre-tax money, it’s not really a million dollars. When you withdraw it, it’s at your nominal tax rate, so that one million may actually be $700,000 – $900,000. That’s a problem. How do people know what their true number is when they have a combination of assets?
Nate asks:
It struck me that a lot of ‘older’ people who have been interviewed on your show have emphasized the likelihood of catastrophic events happening. I think it’d be interesting to know – what is the actual likelihood of an event or series of related events resulting in a financial hit of $250,000 or more?
Marline asks:
I’m 56 years old, and I’m self-employed. I don’t know whom to trust or where to start when it comes to life insurance. I’m pretty sure I don’t want term. We have 2 adult kids, we own a home. I’m thinking I should go for the highest affordable plan? My husband has life insurance through his employer and it’s enough to cover funeral expenses for him (with maybe a bit left over), and I’m not sure if the insurance goes with him when he retires in 2020.
What life insurance is ideal for self-employed, retired, or an employee with no benefit, and how different should the individual plan be when married? Do kids need to be beneficiaries with a spouse in the plan, in case of losing both parents in an accident? Or does that need to be stipulated in a trust?
Diego asks:
I have a question about life insurance. I have a 20-year term policy, which is very affordable. My wife and I pay $35 each a month for $1M coverage for each of us. I have a financial advisor helping me out, and he is advising me to leave the term and get a whole life insurance policy.
Do you think whole life insurance is something you’d recommend in my situation? I’m debt free, earn $200,000/year, and I’m 32 years old. I have a 529 plan for my kid, I have a Simple IRA, I invest $500 to a brokerage account, and my wife has a pension plan from her job.
Anonymous asks:
I have an IRA and a 403(b) at Vanguard. I want to open a Roth IRA for my wife, and Vanguard is my first choice, but is it wise to have all our retirement savings with the same company? If I decide to open it somewhere else, which one would you and Joe recommend?
Steve asks:
I currently have a Roth IRA through Fidelity. Within that, I have mid-cap, small-cap, and international index funds. Is it considered diversification if all of these funds are through Fidelity?
Katie asks:
My husband and I were fortunate enough to make $150,000 in 2018. We have one rental property that produced $2,000 in rent money received. This is unusually low — we had to evict one tenant and perform a complete renovation on the house ($8,000 in expenses between repairs and upgrades). Our account said that since we made over $150,000, we weren’t able to deduct any of our losses, and that those losses would carry over to the next year.
The problem is if we continue to earn $150,000, then we won’t be able to deduct any expenses until we sell the home or make less money. I understand that our upgrades would be depreciated over time and that we can’t deduct more than $2,000 in expenses since that was the only money we received.
- Have you ever ran into this situation, where making over $150,000 doesn’t allow you to deduct any rental expenses? I’ve studied many blogs and I’ve yet to find this topic.
- If this is true, are rental properties a good strategy for people who make over $150,000?
- What are some good ways to get my taxable income down? Should I change my 401(k) contributions to Traditional instead of Roth?
Resources Mentioned:
Sources:
- Nolo: Can you deduct rental losses if you make more than $150k?
- Houselogic: Rental loss rules.
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