Ask a Certified Financial Planner

[Mark P. Cussen]

Yes, you will have to roll over your plans to an IRA if you want to invest in Vanguard funds. But I would recommend that you roll the funds over into a Roth IRA, and preferably pay the taxes on the conversion out of your pocket if possible. This will prevent you from having to take mandatory minimum distributions after age 70 1/2, and your heirs will also not be taxed when they take distributions. This is the only tax advantage you can gain; you will not gain a net benefit on items 1-3 by rolling over to a Traditional IRA.

Mark P. Cussen

[Mark P. Cussen]

Cmele, see my answer to your post on the next page.

Mark P. Cussen, CFP, CMFC

[72Tiger]

Can you explain how tax-free municipal bonds are set up, what typical rates of returns are associated with them, and if there are any hidden taxes associated with them? I have heard a few things here and there about them, but don't have a solid understanding of what they really are.

Thanks for this service you are providing!

[Gelsomina]

Any retirement planning advice? I'll be 50 soon, finances (including retirement fund) were wiped out from medical expenses, returning to work full time is questionable right now and my only income right now is SSD.

If you are able to answer this, be gentle, please - this such a sensitive topic for me I almost didn't post it.

Thanks so much for offering your professional advice here...

[Mark P. Cussen]

Municipal bonds are only appropriate for those in the higher tax brackets. They will always pay lower rates of interest than taxable instruments, because they are tax-free. You can purchase munis either directly from an initial public offering or else through a stockbroker. These bonds are relatively safe; while not as secure as government bonds, they are more stable than corporate notes and are backed by either the taxing power of the municipal authority or else its revenue generating ability. Let me know if you have any other questions.

Mark P. Cussen, CFP, CMFC

[Mark P. Cussen]

Gelsomina, I'll need to know more about your situation before I can advise you. Please email me at [email removed by moderator] and we can talk further.

Mark P. Cussen, CFP, CMFC

[Moderator's ntoe: I don't want Mark to get spammed at his email address. Please send your info to him via vbulletin's private messaging system.]

[72Tiger]

Originally Posted by Mark P. Cussen

Municipal bonds are only appropriate for those in the higher tax brackets. They will always pay lower rates of interest than taxable instruments, because they are tax-free. You can purchase munis either directly from an initial public offering or else through a stockbroker. These bonds are relatively safe; while not as secure as government bonds, they are more stable than corporate notes and are backed by either the taxing power of the municipal authority or else its revenue generating ability. Let me know if you have any other questions.

Mark P. Cussen, CFP, CMFC

Thanks for you input.

[lucille]

Hi Mark, I have a question about moving a 401k. Our now old 401k is with a corporation's 401k plan, much of our money is in some fairly volatile mutual funds. My husband recently got a job with the federal government so we will have access to their federal thrift plan (fed workers 401k). The elections for the thrift that will take effect soon are a mix of government securities for federal workers and international stocks.

With the current stock market our old 401k has taken a huge hit. So my question is should we move those funds that are now much smaller than they were to our new 401k (the fed thrift) now or should we leave them in the old 401k until they hopefully rebound before we move them? Is there a recover point or time frame that we should use as a benchmark for when to move them over to the new plan?

[Mark P. Cussen]

Lucille, there are a number of things that you can do at this point, but my first suggestion would be to simply roll the old 401(k) directly into a Roth IRA, and preferably pay the taxes on it out of pocket if possible. This will give the funds a chance to recover and then allow you to further diversify your overall holdings within your husband's government plan. But converting now will reduce your tax liability as the account balance is currently down. I would eschew rolling over his old plan into his new one, because your retirement portfolio needs more asset classes than govt bonds and international stocks. Let me know if you have any further questions.

Mark P. Cussen, CFP, CMFC

[rolltimer]

Originally Posted by Mark P. Cussen

Just go to an online broker like Scottrade and open an account. The website will lead you step-by-step through how to open an account and place trades. I do feel compelled to point out that it doesn't sound to me at this point like you've got enough assets yet to be trading individual stocks, but if you want to do that, Scottrade would be my first suggestion.
Mark P. Cussen, CFP, CMFC

I second the Scottrade recommendation. I have been using them for three years. Seven bucks a trade then and seven bucks today. I do most of my trading within my IRA so I don't worry about capital gains, how long to hold before I sell, and other tax implications.