Ask an author: David Loeper here to answer your retirement planning questions!

[jmarti22]

Hi, I just recently graduated college and was thinking about opening a ROTH IRA with around $4000 but with the economy going downhill I was wondering whether now is a good time to open one or invest my money elsewhere. Any advise would be greatly appreciated.

[David Loeper]

Originally Posted by jmarti22

Hi, I just recently graduated college and was thinking about opening a ROTH IRA with around $4000 but with the economy going downhill I was wondering whether now is a good time to open one or invest my money elsewhere. Any advise would be greatly appreciated.

Anyone that tells you they "know" whether it is the "right" time to invest is either selling something or is lying. Markets are ALWAYS uncertain. Presuming you have a liquid and safe cash reserve, starting to accumulate money toward retirement early is generally better than later, but it depends on your unique goals and priorities.

[bdeal]

Laura Rowley's article, "Get Ready for the 401(K) Wars" and her reference to your "Stop The 401(K) Rip-Off!" instilled me to write a letter to our company prior 401K providers upper management people regarding a recent personal experience I've experienced on these matters. My letter reads in part (omissions made for privacy purposes)...

"My employer, XXXXXXXXXXXX recently made a decision to change the administration and investment service provider of our company 401K program from XXXXXXXXXXXXXX to XXXXXXXXXXXXX. We employees were informed there would be a “blackout period” beginning on July 14, 2008 and ending on August 13, 2008 during which we would not be able to direct or diversify the assets held in our plan accounts nor could we monitor our individual plans online in the usual manner.

As a layperson on such matters but knowing the volatility of the market we have been in, I made some conservative changes in my account before the blackout period began by putting 75% of my funds in your Stable Value Guaranteed Account. I did so to allow myself to sleep better during the blackout period not knowing such a move may subject me to what, in my opinion, are excessive hidden fees hurting me financially.

When I reviewed my account after the blackout ended I compared the movement of the DOW, NASDAQ and S&P 500 to my 401K for the period. I was surprised to find my 401K went down significantly more than these major market indexes by comparison. Inquires with both our new plans financial advisor and our old plans advisor, Mr. XXXXXXXXXXXX, resulted in both telling me I was charged a fee by your company for not keeping the Guaranteed Account for the minimum required period. However my response is “I” did not move the funds out but rather the provider changeover process did. By my calculations I was charged approximately 3.5% for changes made during the blackout period. From my viewpoint this is an excessive and hidden fee and over-reaching action.

I was aware the Guaranteed Account is one of, I believe four or five of our plan choices that has a restriction on the frequency of making direct movements, a 30 day minimum I believe it is. However I had no knowledge that movements made from one provider to another during a blackout period would subject me to any rule violation fees. I have been unable to find any clear explanation on this specific situation in the Summary Plan Description. To the best of my knowledge I have not received any specific written or verbal notice or warnings of such possibilities during so-called blackout periods and this is not something I (or most prudent individuals) might think of on my own. Clearly I would not have placed my funds in guaranteed savings had I have had any knowledge, that would allow me to make a more informed decision, that such actions might activate such unnecessary fees.

As a sixty-six year old with a wife who is currently fighting advanced stage 3 ovarian cancer, I am counting on every dollar I can find for our present and future well-being. In that light and for the reasons stated above I ask for your consideration in immediately granting me a credit for the above referenced fees".

MY QUESTION IS: It has been over two weeks and I have not received a response to my above letter (sent certified mail). What might you suggest I do to get some attention failing a favorable or any response?

[libralady55]

I have a traditional IRA and am in a 25% tax bracket. I am currently receiving my husbands pension fund and a percentage of his 401k. I expect my income to be the same and was wondering if it would benefit me to change my IRA to a Roth over the next few years so as not to increase my tax bracket. Would this make sense?

[David Loeper]

From what you tell me here, it appears that you have a case that the trustees breached their fiduciary duty. Stable value accounts from insurance companies often have surrender penalties, and that is rarely highlighted to participants. In plans we have taken over that had similar issues, the communication about the blackout period to participants warned them not to use the stable value account because of the penalty and in fact warned them to use a money market fund, or short term government bond fund if they wanted to have access to the new investment assets at transfer.

Many participants still did nothing and kept holding the stable value account. Instead of subjecting them to the penalty though, the trustees waited until the surrender charge time period past before transferring the stable value funds to a more liquid and penalty free money market. This is often only 90 days and I do not know why the trustees would have subjected you to the surrender charge unless the time period with the product vendor was a year or more (that is unlikely).

The product vendor is not going to rebate their charge. They were contractually entitled to it. The trustees may, if there are not a lot of participants that were charged this surrender penalty be willing to make up the difference instead of facing a lawsuit for fiduciary breach.

I wouldn't start with the threat of a lawsuit, but simply follow up with another written letter to the trustees asking how long the money needed to stay in the stable value account to avoid the surrender charge and why they transfer participants money prior to that time.

Originally Posted by bdeal

Laura Rowley's article, "Get Ready for the 401(K) Wars" and her reference to your "Stop The 401(K) Rip-Off!" instilled me to write a letter to our company prior 401K providers upper management people regarding a recent personal experience I've experienced on these matters. My letter reads in part (omissions made for privacy purposes)...

"My employer, XXXXXXXXXXXX recently made a decision to change the administration and investment service provider of our company 401K program from XXXXXXXXXXXXXX to XXXXXXXXXXXXX. We employees were informed there would be a “blackout period” beginning on July 14, 2008 and ending on August 13, 2008 during which we would not be able to direct or diversify the assets held in our plan accounts nor could we monitor our individual plans online in the usual manner.

As a layperson on such matters but knowing the volatility of the market we have been in, I made some conservative changes in my account before the blackout period began by putting 75% of my funds in your Stable Value Guaranteed Account. I did so to allow myself to sleep better during the blackout period not knowing such a move may subject me to what, in my opinion, are excessive hidden fees hurting me financially.

When I reviewed my account after the blackout ended I compared the movement of the DOW, NASDAQ and S&P 500 to my 401K for the period. I was surprised to find my 401K went down significantly more than these major market indexes by comparison. Inquires with both our new plans financial advisor and our old plans advisor, Mr. XXXXXXXXXXXX, resulted in both telling me I was charged a fee by your company for not keeping the Guaranteed Account for the minimum required period. However my response is “I” did not move the funds out but rather the provider changeover process did. By my calculations I was charged approximately 3.5% for changes made during the blackout period. From my viewpoint this is an excessive and hidden fee and over-reaching action.

I was aware the Guaranteed Account is one of, I believe four or five of our plan choices that has a restriction on the frequency of making direct movements, a 30 day minimum I believe it is. However I had no knowledge that movements made from one provider to another during a blackout period would subject me to any rule violation fees. I have been unable to find any clear explanation on this specific situation in the Summary Plan Description. To the best of my knowledge I have not received any specific written or verbal notice or warnings of such possibilities during so-called blackout periods and this is not something I (or most prudent individuals) might think of on my own. Clearly I would not have placed my funds in guaranteed savings had I have had any knowledge, that would allow me to make a more informed decision, that such actions might activate such unnecessary fees.

As a sixty-six year old with a wife who is currently fighting advanced stage 3 ovarian cancer, I am counting on every dollar I can find for our present and future well-being. In that light and for the reasons stated above I ask for your consideration in immediately granting me a credit for the above referenced fees".

MY QUESTION IS: It has been over two weeks and I have not received a response to my above letter (sent certified mail). What might you suggest I do to get some attention failing a favorable or any response?

[David Loeper]

Originally Posted by libralady55

I have a traditional IRA and am in a 25% tax bracket. I am currently receiving my husbands pension fund and a percentage of his 401k. I expect my income to be the same and was wondering if it would benefit me to change my IRA to a Roth over the next few years so as not to increase my tax bracket. Would this make sense?

I don't really have enough to go in here to give you a definitive answer. Are you in a 25% bracket with earned income, or is all of your income unearned from the pension and 401k? If you are still working, how old are you and how much time do you have until you plan on retiring and when do you think you would need to make withdrawals from the IRA? How much of your assets are in the 401k and IRA?

There are a lot of variables that go into the analysis of whether this make sense. Were any of the IRA contributions after tax? Will the required minimum distributions that go into effect at age 70 1/2 be in excess of your spending need?

Your tax bracket would not necessarily go up at 70 1/2 if you wouldn't be forced into larger distributions than you need for living expenses by Required Minimum Distribution (RMD) rules. The pension and 401k distributions are fully taxable already and so long as your disbtributions for spending needs from the 401k and IRA combined meet the RMD requirements you can continue to defer taxes on the amounts above that.

The conversion will cost you taxes with certainty now that you might have the option of deferring into future. It would take a lot of time to make that certain tax up.

[emackn]

My wife and I are feeling the crunch. For now, My 401k through work is our only retirement plan, and has been for years. My wife wants to reduce my contributions to retirement so we have more money now, but I'm resisting. When she asks for reasons for why I'm resisting, I can't think of anything. Can you offer any advice?

[David Loeper]

Originally Posted by emackn

My wife and I are feeling the crunch. For now, My 401k through work is our only retirement plan, and has been for years. My wife wants to reduce my contributions to retirement so we have more money now, but I'm resisting. When she asks for reasons for why I'm resisting, I can't think of anything. Can you offer any advice?

Well, there are a lot of good reasons to reduce/eliminate savings to your 401k such as:

- You already have more money accumulated than you know what do to with
- You are close to retirement and already have accumulated sufficient resources to fund your life long goals so another year or two of savings is immaterial relative to the size of your portfolio
- There are no other goals that you would add in the future that would need additional funding that you would prioritize over the immediate lifestyle improvement of reducing savings
-You are close to bankruptcy, foreclosure, etc. and need the extra money now to fend off these actions.

These are just examples of good reasons to reduce/delay contributions to your retirement plan. Obviously the opposite of all these...i.e. if you don't already have sufficient resources saved for the future, are not on the brink of foreclosure, bankruptcy, etc. are all reasons to continue making the savings.

I have no idea how far away you are from retirement, how meaningful the reduction of your contributions to your 401k would be after tax in terms of improving your current lifestyle, how long you would consider doing it, etc.

There is always a price to pay of not saving now (just as there is a price to pay of saving now), and you pay for it in the future, compounded. Whether that makes sense or not depends on your personal goals and priorities. There is no pat correct answer.

[tobybeavers]

We loaned our $30,000 IRA funds to a real estate investment coach named, Dan Buxton from Ohio. We met him at a Chuck Smith real estate seminar. Dan was the teacher. He told us he would pay us 15% a year on our money.

We have not heard from him in 23 months.

We have sent Certified mail and emails and calls but to no avail.

What else can we do to prove to the IRS that we have been robbed?

Thanks Toby

PS We would love a copy of your book!!!

[David Loeper]

Originally Posted by tobybeavers

We loaned our $30,000 IRA funds to a real estate investment coach named, Dan Buxton from Ohio. We met him at a Chuck Smith real estate seminar. Dan was the teacher. He told us he would pay us 15% a year on our money.

We have not heard from him in 23 months.

We have sent Certified mail and emails and calls but to no avail.

What else can we do to prove to the IRS that we have been robbed?

Thanks Toby

PS We would love a copy of your book!!!

Toby:
It looks like you were a victim of a scam. I searched for Chuck Smith on the Internet and tried calling their toll free number, which of course has been disconnected.

It really ticks me off when people are scammed liked this. I cannot understand how crooks can sleep at night doing this sort of thing to people. "Buyer beware" and "if it sounds too good to be true, then it probably is" are rules to live by.

I would certainly file a complaint with your state corporation commission, real estate division or investment oversight area (whatever is applicable in your state.) If you are also in Ohio like Mr. Buxton, these are some of the contacts you should make:
Office of the Attorney General

Consumer Protection Section
Consumer Complaint Form
http://www2.ag.state.oh.us/sections/...us/welcome.asp
State Office Tower
30 E. Broad Street, 17th Floor
Columbus, OH 43215-3428
Phone: (614) 466-4320

Ohio Department of Commerce, Division of Real Estate and Professional Licensing Division

http://www.com.state.oh.us/real/
77 South High Street, 20th Floor
Columbus, OH 43215-6133
Phone: (614) 466-4100

FBI Field Offices, Mortgage Fraud

White Collar Crime Supervisor
http://cincinnati.fbi.gov/
550 Main Street, Room 9000
Cincinnati, OH 45202-8501
Phone: (513) 421-4310

White Collar Crime Supervisor
http://cleveland.fbi.gov/
1501 Lakeside Avenue
Cleveland, OH 44114
Phone: (216) 522-1400

Now, as for your question about proving to the IRS you were robbed, I'm assuming you mean as of means of claiming a theft loss on your tax return. That isn't as easy to do as one would think. Often, they would require at least a police report or court action.

The IRS might argue that this was just a bad investment, instead of theft. Complicating matters even more, it was in an IRA and not being a CPA, I'm unsure of whether theft losses in a tax qualified account are deductible against ordinary income.

You need to contact a qualified CPA individual tax specialist to find out whether the IRS would allow a theft deduction on your return from an IRA, and they can also assist you in finding out what you need to do to provide proof of loss.

Regardless of whether you can deduct it or not, I would certainly report it to the authorities.

In the future, before you make ANY investments, you should look up both the firm and the person on www.sec.gov where you can look up both securities brokers and investment advisers, look into past complaints, etc.