ideally, you’d want dividend/interest paying stuff in your tax-deferred account, not necessarily after-tax (Roth). Yes, you;d prefer the big growth items in the Roth. That includes your higher growth, non-dividend paying stocks.
It certainly works better if the HELOC is at a low rate, but that isn’t the reality of todays loans, that’s for sure. I think ours is at 7.5% interest. We use it casually as a slush fund, but it’s more for an “as needed for as short a time as possible”, and we try to not use it much. Sometimes I just don’t want to make the decision of do I pull from my Roth or from my 401k, particularly if the money will only be needed for a short time. It’s just a good backup to have that money (tax deductible since we’re itemizing) available if we need it for a little while. When we pay off all debt (mortgage and boat) in five months, we’ll have far more flexibility and not have to use the HELOC at all.
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HELOCs can be useful. Back when little kid was in college, I used our HELOC strategically to pay tuition in situations where a short term loan would make sense, like when it was clear a bonus could be coming but tuition was due just before that.
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Lol, my dad was a big believer in a graphics chip company because of its CEO and put a good chunk of his Roth pool in that stock early on. A lot of fun things you can do estate planning/gift wise with a huge non-taxable pool of money in a Roth.
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I’m on hold at the moment with TIAA. I built up a decent 403(b) from my first career as a professor. I’m trying to move it out to another entity, which will enable me to reduce my stock market exposure (looking for something with less correlation to the stock market). I can take out 90% roughly, but 10% is in an annuity and I can’t take that out easy. Like all of us, I will have to start taking RMDs at age 73. I thought I could do my withdrawals from one retirement fund, not all, but apparently, I have to do separate RMDs from the annuity, regardless of how much I withdraw from other retirement accounts. I also need a notarized signature from my wife transferring the money from my 403(b) to my 401(k).
Lots of admin work that seems pretty unnecessary.
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I moved a lot of my TIAA funds into “guaranteed” last summer; would that be another option for you?
can you take out enough from the annuity to equal your total RMD’s due for the year?
Big pension funds employ thousands of investment professionals and don’t want to make it easy for you to move out and self-direct.
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I believe that the RMDs from the annuity will be less than the amount available each year. So that will work.
The current value of the whole TIAA account (before I transfer 90% our) is maybe 7% of my current 401k value. So the annuity is less than 0.7% of my retirement funds. So it will require some admin in order to stay in compliance, but it won’t reduce the other admin I will have to do to take the RMDs from my 401k.
This is definitely a first world problem but it would be nice if they didn’t choose, as @bluebayou points out, to make it hard to move founds out.
@fretfulmother, is “guaranteed” the annuity?
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I am not sure; but I think so - I think it was called “guaranteed” but I am not looking at the account right now.
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Just checked - yes. Guaranteed annuity. The percent is based on the date of investment, so my big transfer in last summer worked out well.
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Thanks. I think of SS as an annuity and between ShawWife and me, we have a social security payment that, before taxes, does not quite cover our mortgage (2.625% so I won’t get rid of it, property tax, and home insurance). By not transferring out the full 90%, we could probably set the annuity to cover the total monthly payment (on an after-tax basis). This is sort of compartmentalized accounting. But, maybe it is good for psychological reason. I will have to think about that.
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It still burns me up that the university I worked at FT only had the TIAA benefit (and matching money) for faculty (and not all FT employees) - which was discriminatory, and I could have filed a class action lawsuit, but some years later they did add it for all employees. The other state universities under this board of trustees did offer TIAA benefits (and matching money) for all FT employees – I had a friend who worked at one of the other universities.
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I think some of us can wait until 75 to take RMDs, not 73?
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I wish I could wait until 75 as I am working and would expect to be working at 73 but I think I need to start taking it at 73 as I’m not as spry a youngster as you.
I have modified the way my company works a bit – I have shifted to having fewer employees and instead to using contractors and paying them a piece of the revenue from the engagements they work on. Since I have fewer mouths to feed and because ShawWife’s and my expenses should be lower than when we had kids around (although I’m not sure this is true), I have reduced monthly retainers and increased success fees. The success fees are part of how I have built wealth. I suppose I could shift our engagements to emphasize success fees even more when I am forced to take RMDs.
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I was just pointing it out because you said “like all of us.” It’s a little confusing, and didn’t want people to think everyone had to take RMDs at 73.
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Correct - to summarize,
the beginning age for RMDs is 73 for those born from 1951 through 1959 and is 75 for those born in 1960 or later.
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And a brief discussion of whether or not you can aggregate your RMD from one of multiple accounts. If I understand it correctly, you can do that with multiple IRA’s. But not with an IRA and a 401(K), and apparently a 403(b) is considered a different kind of defined contribution plan.
I have one traditional IRA, one old inherited IRA, and one 401(k). Each requires its own RMD.
RMD comparison chart (IRAs vs. defined contribution plans) | Internal Revenue Service.
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My RMD will need to start by age 75. But… the longer you wait to take the money, they higher the annual amount (slightly).
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more time for Roth conversions and, if so inclined, Qualified Charitable Deductions.
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Forgot about Qualified Charitable Distributions (they are not tax deductible but do come off the top of your RMD). Really good point.
I imagine I will use QCDs, perhaps to donate to our Donor Advised Fund and then distribute as ShawWife and I desire – we try to make a few larger contributions rather than lots of smaller ones. I should probably start that now as earlier QFDs will decrease what I have to take as an RMD.