Author Topic: Hi, I am new here & want to talk about IRAs  (Read 4322 times)

Chesleygirl

  • Pencil Stache
  • ****
  • Posts: 639
Hi, I am new here & want to talk about IRAs
« on: July 10, 2017, 08:04:50 AM »
Hi. I am new here. I plan to contribute as well as learn. Thanks for letting me join.

I am 50 yrs old, haven't worked full time in several years and have only 55K in my IRAs. I have 3 kids and funding their college savings plans. I get an inheritance from sale of a house next year and would like to know, what's the maximum I can put in a 529 plan during one year? and what is the max I can put in an IRA in one year, after age 50?

Gin1984

  • Magnum Stache
  • ******
  • Posts: 4873
Re: Hi, I am new here & want to talk about IRAs
« Reply #1 on: July 10, 2017, 08:14:33 AM »
Are you working?  An IRA is limited not only by the max ($5500 under 50, $6500 over 50) but also by your earned income.  If you only have $55,000 for retirement, you really need to not be funding your children's college. 

Lady SA

  • Bristles
  • ***
  • Posts: 497
  • Age: 29
  • Location: Midwest
Re: Hi, I am new here & want to talk about IRAs
« Reply #2 on: July 10, 2017, 09:13:02 AM »
Funding your children's college is a noble goal, but you need to put your own gas mask on before you can help others. Having only $55k at 50 years old is not enough to fund you into retirement. If you haven't worked in a few years, how are you currently paying for your expenses? Are you married and your spouse works?

From the IRS website on 529s:
Q. Are there contribution limits?
A. Yes. Contributions can not exceed the amount necessary to provide for the qualified education expenses of the beneficiary. If you contribute to a 529 plan, however, be aware that there may be gift tax consequences if your contributions, plus any other gifts, to a particular beneficiary exceed $14,000 during the year. For information on a special rule that applies to contributions to 529 plans, see the instructions for Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return.

It also sounds like there may be annual 529 pan limits based on which plan/state you choose.

For IRAs:
https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits
looks like $6500 for those over 50.

Chesleygirl

  • Pencil Stache
  • ****
  • Posts: 639
Re: Hi, I am new here & want to talk about IRAs
« Reply #3 on: July 10, 2017, 10:25:27 AM »
I'm married and my spouse works.

I need to put more than $5500 in my IRA next year. If I can't put more than that in, where else could I put the money to invest it?

apricity22

  • 5 O'Clock Shadow
  • *
  • Posts: 71
  • Age: 43
Re: Hi, I am new here & want to talk about IRAs
« Reply #4 on: July 10, 2017, 10:47:38 AM »
I'm married and my spouse works.

I need to put more than $5500 in my IRA next year. If I can't put more than that in, where else could I put the money to invest it?

A taxable brokerage account.

or

If your spouse isn't already maximizing their contributions to a retirement plan at work and you are comfortable using your money for expenses so they could do that, that could be another option.

Lady SA

  • Bristles
  • ***
  • Posts: 497
  • Age: 29
  • Location: Midwest
Re: Hi, I am new here & want to talk about IRAs
« Reply #5 on: July 10, 2017, 10:51:29 AM »
See investment order:

0. Establish an emergency fund to your satisfaction           
1. Contribute to your 401k up to any company match           
2. Pay off any debts with interest rates ~5% or more above the 10-year Treasury note yield.           
3. Max HSA             
4. Max Traditional IRA or Roth (or backdoor Roth) based on income level           
5. Max 401k (if 401k fees are lower than available in an IRA, or if you need the 401k deduction to be eligible for a tIRA, swap #4 and #5)           
6. Fund mega backdoor Roth if applicable           
7. Pay off any debts with interest rates ~3% or more above the 10-year Treasury note yield.           
8. Invest in a taxable account with any extra. 

Bracken_Joy

  • Walrus Stache
  • *******
  • Posts: 8943
  • Location: Oregon
Re: Hi, I am new here & want to talk about IRAs
« Reply #6 on: July 10, 2017, 10:52:46 AM »
I'm married and my spouse works.

I need to put more than $5500 in my IRA next year. If I can't put more than that in, where else could I put the money to invest it?

Can you work part time somewhere that would give you access to a 401(k)? Be sure your spouse is maximizing their 401k or 403b or SEP IRA or whatever employer-sponsored plan they have access to. However, if you're looking at your retirement as separate from your spouse, and not working yourself, then yes, after tax brokerage account is your only option.

Chesleygirl

  • Pencil Stache
  • ****
  • Posts: 639
Re: Hi, I am new here & want to talk about IRAs
« Reply #7 on: July 10, 2017, 10:54:41 AM »

What kind of taxable brokerage account, like mutual funds? I'd want it in conservative investments, so I was thinking maybe muni bonds, or bond funds of some sort.

My spouse has had 401K for years, I've never had it where I worked and in recent years when I wasn't working. I do transcription work at home, but it's contract work only. So no 401K with that.

Lady SA

  • Bristles
  • ***
  • Posts: 497
  • Age: 29
  • Location: Midwest
Re: Hi, I am new here & want to talk about IRAs
« Reply #8 on: July 10, 2017, 11:18:35 AM »
I do transcription work at home, but it's contract work only. So no 401K with that.

Wouldn't this count as earned income? If so, then you would be able to contribute to an IRA.

A taxable account is just the "box" where you store your investments, so stocks, bonds, whatever. It would be a normal, individual or joint, brokerage account and once you set it up, you put money in and purchase stocks or bonds or mutual funds, allocate it however you want.

GizmoTX

  • Handlebar Stache
  • *****
  • Posts: 1450
Re: Hi, I am new here & want to talk about IRAs
« Reply #9 on: July 10, 2017, 11:24:35 AM »
OP, since you are 50, you can put $6,500 into an IRA annually.

Are you an independent contractor? If so, look into these instead, as they have higher limits: https://www.irs.gov/retirement-plans/retirement-plans-for-self-employed-people

I agree that you should not be funding your children's accounts until you & your DH have adequate retirement funds. If absolutely necessary, they have access to student loans but you do not.

Lady SA

  • Bristles
  • ***
  • Posts: 497
  • Age: 29
  • Location: Midwest
Re: Hi, I am new here & want to talk about IRAs
« Reply #10 on: July 10, 2017, 11:51:42 AM »
I agree that you should not be funding your children's accounts until you & your DH have adequate retirement funds. If absolutely necessary, they have access to student loans but you do not have access to loans to live on.

Agreed.

radram

  • Pencil Stache
  • ****
  • Posts: 955
Re: Hi, I am new here & want to talk about IRAs
« Reply #11 on: July 10, 2017, 01:28:47 PM »
Does your wife's employer offer a 401k?

If so, max that out this year ($18,000, add $6,000 if she is over 50) and again next year. Max out a roth for you and your spouse ($5,500, add $1000 if 50 or older).

If you do not have the money this year, but the sale of the house next year would cover it, you might just take out a short term loan in December of this year, fund 2017, and then pay off the loan when the sale of the house clears.

Your transcription work should qualify you for a SEP IRA. 25% of your earned income can go into one.

Chesleygirl

  • Pencil Stache
  • ****
  • Posts: 639
Re: Hi, I am new here & want to talk about IRAs
« Reply #12 on: July 10, 2017, 02:00:55 PM »
OP, since you are 50, you can put $6,500 into an IRA annually.

Are you an independent contractor? If so, look into these instead, as they have higher limits: https://www.irs.gov/retirement-plans/retirement-plans-for-self-employed-people

Thanks for that link. I'll check it out.

wenchsenior

  • Magnum Stache
  • ******
  • Posts: 2998
Re: Hi, I am new here & want to talk about IRAs
« Reply #13 on: July 10, 2017, 03:01:57 PM »
I agree that you should not be funding your children's accounts until you & your DH have adequate retirement funds. If absolutely necessary, they have access to student loans but you do not have access to loans to live on.

Agreed.

+1000.  There are no loans for retirement.  Do your stuff first, always, or you potentially will end up a burden to your kids later.

kendallf

  • Handlebar Stache
  • *****
  • Posts: 1065
  • Age: 54
  • Location: Jacksonville, FL
Re: Hi, I am new here & want to talk about IRAs
« Reply #14 on: July 10, 2017, 03:53:15 PM »
If you are looking for a bit more understanding of basic investment terms, the "buckets" mentioned above where you can invest your money (IRAs, 401ks, taxable brokerage accounts, etc.) then I recommend you read JL Collins' stock series:

http://jlcollinsnh.com/stock-series/

It's not rocket science, and Collins keeps it simple. 

One aspect I haven't seen anyone address in their replies to you is whether you're trying to shelter this inheritance money from taxes.  That was kind of the feeling I got from your initial post.  The short answer is that your inheritance isn't earned income and you won't pay federal tax on it.  A few states (six) impose inheritance taxes. 

So, if the money is a sizeable amount and you want to invest for your future, after deciding what your risk tolerance is and choosing a suitable investment mix, just open a taxable brokerage account and put it to work. 

Chesleygirl

  • Pencil Stache
  • ****
  • Posts: 639
Re: Hi, I am new here & want to talk about IRAs
« Reply #15 on: July 12, 2017, 09:15:09 AM »

One aspect I haven't seen anyone address in their replies to you is whether you're trying to shelter this inheritance money from taxes.  That was kind of the feeling I got from your initial post.  The short answer is that your inheritance isn't earned income and you won't pay federal tax on it.  A few states (six) impose inheritance taxes. 


I'd like to shelter as much from taxes as possible. So I wanted to know what's the max I can put into IRA and 529 plans. I believe with 529 plans, you are limited to putting in $14,000 in one year?  My state does not impose inheritance tax.

frugaliknowit

  • Handlebar Stache
  • *****
  • Posts: 1687
Re: Hi, I am new here & want to talk about IRAs
« Reply #16 on: July 12, 2017, 09:36:43 AM »

What kind of taxable brokerage account, like mutual funds? I'd want it in conservative investments, so I was thinking maybe muni bonds, or bond funds of some sort.

My spouse has had 401K for years, I've never had it where I worked and in recent years when I wasn't working. I do transcription work at home, but it's contract work only. So no 401K with that.

For my "car replacement fund" and for (conservative because I am older) non-IRA/401K retirement investing, I use VTMFX which is a blend of high grade stocks and Munis (tax managed, which means little/no churn).

Chesleygirl

  • Pencil Stache
  • ****
  • Posts: 639
Re: Hi, I am new here & want to talk about IRAs
« Reply #17 on: July 12, 2017, 04:06:21 PM »
Can I ask what VTMFX is, or I will google it to find out more. Thanks.

MDM

  • Senior Mustachian
  • ********
  • Posts: 10666
Re: Hi, I am new here & want to talk about IRAs
« Reply #18 on: July 12, 2017, 05:07:51 PM »