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    April 2, 2013
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AskKen's Answers
1 2 3 4 5 ... 31 next>>
 

How do we invest in freedom funds with my husband's Roth IRA?

Hi,
Freedom Funds® - Fidelity’s brand of target date asset allocation mutual funds - are designed to help build and maintain an age-based retirement portfolio. For instance, an individual who is 40 years old and wants to retire at age 67 might consider Freedom 2040 (27 years from now).

I think you will find the information and tools in our Mutual Fund Center very helpful. In fact, we provide a number of easy-to-use resources that will help your husband decide if a Freedom Fund is suitable for his Roth IRA.

Once he has read the prospectus and determined if a Freedom Fund is appropriate, he can access his account on Fidelity.com or call a Fidelity representative.

Everything you are likely to need is at your fingertips on Fidelity.com. Here is a link to learn more about our Freedom Funds: https://www.fidelity.com/mutual-fun...

Thanks for your question.

Ken

Important Additional Information:
Fidelity Freedom Funds are designed for investors expecting to retire around the year indicated in each fund's name. Except for the Freedom Income Fund the funds' asset allocation strategy becomes increasingly conservative as it approaches the target date and beyond. Ultimately, they are expected to merge with the Freedom Income Fund. The investment risks of each Fidelity Freedom Fund change over time as the funds’ asset allocations change. The funds are subject to the volatility of the financial markets, including equity and fixed income investments in the U.S. and abroad and may be subject to risks associated with investing in high yield, small cap, commodity-linked and foreign securities. Principal invested is not guaranteed at any time, including at or after the target dates.
6 days ago
by
AskKen
 

If I apply for spousal benefits after FRA, can I switch to my own benefits at age 70?

Thank you for your question on how Social Security benefits are taxed. A quick way to find out if any of your benefits may be taxable is to add one-half of your Social Security benefits to all your other income, including any tax-exempt interest.

If you file an “individual” return and your combined income from the sources mentioned above is below $25,000, none of your Social Security is taxed. If it is between $25,000 and $34,000, you may have to pay income tax on up to 50% of your benefits, and if it’s over $34,000, then up to 85% of your benefits may be taxable.

If you file a “joint” return and your combined income is below $32,000, none of your Social Security is taxed. If it is between $32,000 and $44,000 then up to 50% may be taxed, and if it’s over $44,000, then up to 85% of your benefits may be taxable.

The maximum Federal income tax on Social Security benefits is 85%, no matter how much other income you have. If you have substantial income from other sources, it might make sense to delay taking Social Security benefits until age 70. The delayed credits, which would result in a higher benefit, would help offset the taxes you might need to pay. As always, we recommend consulting with your tax advisor on your specific situation.

Ken

Important Additional Information:
Fidelity does not provide legal or tax advice. The information herein is general and educational in nature and should not be considered legal or tax advice. Tax laws and regulations are complex and subject to change, which can materially impact investment results. Fidelity cannot guarantee that the information herein is accurate, complete, or timely. Fidelity makes no warranties with regard to such information or results obtained by its use, and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information. Consult an attorney or tax professional regarding your specific situation.
6 days ago
by
AskKen
 

Can I withdraw the money without penalty if I am 61

I want to withdraw some money to pay for the college fee for my kids. Please advise how to withdraw the money.
Thanks
Thank you for your question. Yes, since you are older than 59½, you are no longer subject to a 10% early withdrawal penalty on withdrawals from your Traditional IRA. You may, however, be subject to income taxes on those withdrawals. You should talk to your tax advisor about your specific situation.
To withdraw from your Traditional IRA online, log in to NetBenefits® and under the IRA you want to withdraw from, select the option to Withdraw from IRA and follow the steps.

If you prefer, you can submit a paper form. Go to Customer Service (the link is right next to the Fidelity logo in the upper left). Choose FORMS under More Resources, and then choose Most Popular Forms, Withdrawals. You will see the option to download a PDF. Here is a link directly to the PDF: https://www.fidelity.com/bin-public...

Before you withdraw money from your IRA to pay for college expenses, consider the fact that your children have more years to pay off college loans than you do to save for retirement. There are a number of low-interest Federal loan options available for students. Once you have withdrawn money from your IRA, you can only replace it through normal contributions that are subject to annual limits. It may take you a long time to rebuild those savings. Again, you may want to discuss this with an advisor before making a final decision.

I hope this is helpful.

Ken
1 week, 6 days ago
by
AskKen
 

What is the best age for my husband and me to begin taking social security

I am 61, husband is 64, both retired.

We used the online retirement calculation tool, our combined assets will take us comfortably through the "plan to the ages" of 94 and 92 respectively.

When is the best time to begin taking social security;
* as soon as possible for both husband/wife
* husband at 66 FRA, wife 62 before FRA
* husband 66 FRA, wife 66 FRA
* husband 70, spousal benefit wife at 66, then wife take at 70
* other

Waiting has a breakeven point of "lost" income.

Thank you for your assistance.
Thank you for your question about when to begin taking Social Security benefits. For most people, Social Security is an important part of their retirement portfolio. When to take Social Security is a big decision and we’re glad to discuss what one should consider when making that election. We also have consultants who can review your plan with you, and information from Social Security to provide a more detailed strategy.

There are some general factors to consider when making the choice, such as one’s age, savings, Primary Insurance Amount (PIA) at Full Retirement Age (FRA) for both spouses, and health or life expectancy for each person. If one can wait on taking their benefit till they reach Full Retirement Age then more strategies will be available such as Claim Now, Claim More Later, and File and Suspend, which will allow one or both of your benefits to earn Delayed Retirement Credits. These credits will increase your benefit by a certain percentage from the time you reach FRA until you start receiving your benefits, or at age 70.

If longevity is in your family history, generally speaking, it is better to delay taking Social Security as long as possible since the benefit payment will increase by an average of 8% a year up to age 70. It’s true that there is a breakeven point, as you mentioned, and if one should pass away prior to that age, then they would have received more had they started their benefits early. But we don’t necessarily know what the future holds, and each client’s situation is unique.

I would suggest the two Fidelity Viewpoints® articles below as a starting point. These articles both provide pros and cons of taking benefits early or later, as well as some strategies for couples to get the most from their Social Security benefits. I also suggest working with one of our consultants who can run an analysis with you and discuss a strategy that is specific to your PIA, age, and longevity assumptions. This will then provide a more detailed plan along with a breakeven point and estimated cumulative lifetime income one could expect from that strategy.

https://www.fidelity.com/viewpoints...

https://www.fidelity.com/viewpoints...

Ken
1 week, 6 days ago
by
AskKen
 

Suspending social security so younger spouse can collect in the interim

I am 63 and my spouse is 65. Can he suspend collecting his social security payments now so I can collect 50% of what his benefit would be now until he decides to collect social security?
Thank you for your question about the Claim and Suspend strategy for couples eligible for Social Security benefits.

Ideally, your spouse should have claimed benefits and then immediately suspended them before receiving any payments. If your spouse has already started his benefit then he’ll have to wait until he reaches his full retirement age (FRA) for the ability to suspend his retirement benefit payments. There is another option if your spouse is under FRA, and wants to stop his benefit. If it’s been less than 12 months since he filed, then he can withdraw his Social Security claim and re-apply at a future date. But keep in mind that all the benefits received to date must be repaid.

Regarding your question about the spousal benefit, which can be as high as 50% of your spouse’s benefit, you’ll want to wait until you’ve reached your FRA. If you start your benefits early, they will be reduced based on the number of months before your FRA. I’ve provided a link to SSA.gov that provides the percent reduction for claiming spousal benefits early if you were born between 1943 and 1954: http://www.socialsecurity.gov/plann...

I hope this is helpful.

Ken
1 week, 6 days ago
by
AskKen
 

When do I have to take a minimum required distribution?

Specifically, my birthday is September 1, 1945. When I turn 70 1/2 will be March 1, 2016. My confusion is that I have and understanding that I have seen somewhere that I have until the following year, which will be March 1, 2017 to begin having to start taking the MRD. The information on this site says that I have to start taking the MRD at 70 1/2, which is March 1, 2016. Also, a friend of mine questioned why I do not convert it to a Roth IRA so I do not have to take MRDs. If I convert it to a Roth, do I not have to pay the deferred taxes? If so, there is no advantage to the conversion as I suspect and hope my income will be decreasing in the ensuing years.
Thank you for your question. It’s important to have a clear understanding of minimum required distributions (MRDs), because there can be significant penalties if you do not take them on time. With your birthday being September 1, 1945, you will need to begin minimum required distributions for the year 2016. Per IRS rules, for your first MRD only, the deadline is April 1 of the following year (2017 in your case). However, if you take your 2016 MRD in 2017, then your 2017 MRD will be calculated with a higher year-end account value since your 2016 MRD amount would still be in your account by year-end. You would also need to take two MRDs in 2017, since your 2017 MRD is due before December 31. So consider taking the 2016 MRD before December 31, 2016, to avoid these two issues. Each year after your first MRD, the deadline will be December 31.

Regarding your question about the Roth conversion, you generally have to pay income taxes on any amounts converted other than post-tax contributions. This could turn out to be a major tax hit for you in the year you convert, and may even bump you up to a higher tax bracket. We suggest that you speak to your tax advisor about your specific situation.

We have an article about such conversions that may be helpful to review: https://www.fidelity.com/taxes/tax-...

There is also a Roth Conversion tool to model what the impact would be for you:
https://calcsuite.fidelity.com/roth...

Keep in mind that generally, converted assets in the Roth IRA must remain there for at least five years to avoid penalties and taxes.

I hope this is helpful.

Ken
2 weeks, 3 days ago
by
AskKen
 

Where to invest my present IRA

I have a bank IRA that matures on 04-16-13. I'm getting .450%. What are some recommendations for me to increase my interest rates. I do have a Fidelity account.
Many people I speak with are surprised to learn that Fidelity offers a broad range of fixed income investing options. Since you mention a bank IRA, I am going to focus on certificates of deposit (CDs).

Fidelity offers brokered CDs, which are CDs issued by banks for the customers of brokerage firms. These CDs are usually issued in large denominations and the brokerage firm divides them into smaller denominations for resale to its customers. Because the deposits are obligations of the issuing bank and not the brokerage firm, FDIC insurance applies.

Fidelity offers brokered CDs through two main venues: new issue offerings and secondary market offerings. There are typically 50–100 new issue offerings and as many as 2,000 secondary offerings available at any point in time. New issue offerings are typically sold at par value and investors do not pay a trading fee to purchase them.

You can shop our new issue inventory by visiting our Fixed Income Research center on Fidelity.com. You can sort the offerings by maturity date, expected yield, and a number of other features. https://fixedincome.fidelity.com/ftgw/fi/FILanding#tbcds|treasury|cd-new-issue|cd-tab-content

There are also a number of alternatives to CDs, such as U.S. Treasury securities, bond funds, and fixed income exchange traded funds (ETFs). You may want to start by reviewing our CD offering to get a sense of the yields that may be available to replace the bank IRA you have coming due in the next few days.

If you want to transfer the bank IRA you currently hold to Fidelity, a Fidelity Investment Professional would be happy to help. The process, in most cases, is pretty easy.
I hope you find this information useful. Thanks for asking Fidelity!

Ken

Important Additional Information:
Any fixed income security sold or redeemed prior to maturity may be subject to a substantial gain or loss. Your ability to sell a CD on the secondary market is subject to market conditions. If your CD has a step rate, the interest rate of your CD may be higher or lower than prevailing market rates. The initial rate on a step rate CD is not the yield to maturity. If your CD has a call provision, which many step rate CDs do, please be aware the decision to call the CD is at the issuer's sole discretion. Also, if the issuer calls the CD, you may be confronted with a less favorable interest rate at which to reinvest your funds. Fidelity makes no judgment as to the credit worthiness of the issuing institution.
2 weeks, 3 days ago
by
AskKen
 

How do I complete a Transfer On Death to my heirs for my trad. IRA, should I outlive my spouse?

Thanks for your question. After the death of the original owner, IRAs are transferred based on the beneficiaries listed on the account—which is why it’s very important to name beneficiaries and keep them updated if the circumstances of your life change. If your beneficiary is your spouse and the sole beneficiary of the IRA, then your spouse has several options, including treating the Inherited IRA as her own IRA. If the beneficiaries do not include your spouse, then they will have to transfer the inherited assets into an Inherited IRA.

To make sure that your IRA beneficiaries are up-to-date on your account, visit Fidelity.com and choose the Customer Service link right next to the Fidelity logo in the upper left. Updating Beneficiaries is under the Account Maintenance tab in common account maintenance tasks.

Here is a link directly to the correct page: https://www.fidelity.com/customer-s...

I hope this is helpful.

Ken
2 weeks, 3 days ago
by
AskKen
 

Social Security maximum benefit at 70

Does the maximum benefit at 70 ASSUME you continue to work full time/full salary from FRA to 70 or is it based on retiring at FRA (for me 66) and waiting to 70 to apply?.
Thank you for the question. For most people, Social Security benefits will be an integral part of a retirement income plan, and the decision about when to begin collecting benefits is a crucial one.

The amounts provided on your Social Security statement assume that you’ll continue working. The statement provides you with three benefit estimates based on working until age 62, full retirement age (FRA), which is 66 for those born between 1943 and 1954, or age 70. The benefit estimate at age 70 also includes delayed retirement credits. These credits will increase your benefit by a certain percentage from the time you reach full retirement age until you start receiving your benefits, or at age 70. The percentage varies depending on your year of birth; those born in 1943 or later will receive an 8% a year increase to their benefit. At age 70, benefits no longer increase.

The Social Security website offers a lot of additional information on how to estimate your benefits, and the effect of early or delayed retirement. Go to www.socialsecurity.gov and select Retirement Estimator.
I hope this is helpful!

Ken
2 weeks, 6 days ago
by
AskKen
 

Are SS benefit payments taxable if they are delayed until after FRA?

I plan to get my SS benefits when I reach my full retirement age of 66 because I believe the SS payments to me will not be taxable even though I continue to work full-time earning about $60,000 per year for a few years. Is this belief correct?
Thank you for your question on how Social Security benefits are taxed. A quick way to find out if any of your benefits may be taxable is to add one-half of your Social Security benefits to all your other income, including any tax-exempt interest.

If you file an “individual” return and your combined income from the sources mentioned above is below $25,000, none of your Social Security is taxed. If it is between $25,000 and $34,000, you may have to pay income tax on up to 50% of your benefits, and if it’s over $34,000, then up to 85% of your benefits may be taxable.

If you file a “joint” return and your combined income is below $32,000, none of your Social Security is taxed. If it is between $32,000 and $44,000 then up to 50% may be taxed, and if it’s over $44,000, then up to 85% of your benefits may be taxable.

The maximum Federal income tax on Social Security benefits is 85%, no matter how much other income you have. If you have substantial income from other sources, it might make sense to delay taking Social Security benefits until age 70. The delayed credits, which would result in a higher benefit, would help offset the taxes you might need to pay. As always, we recommend consulting with your tax advisor on your specific situation.

Ken

Important Additional Information:

Fidelity does not provide legal or tax advice. The information herein is general and educational in nature and should not be considered legal or tax advice. Tax laws and regulations are complex and subject to change, which can materially impact investment results. Fidelity cannot guarantee that the information herein is accurate, complete, or timely. Fidelity makes no warranties with regard to such information or results obtained by its use, and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information. Consult an attorney or tax professional regarding your specific situation.
2 weeks, 6 days ago
by
AskKen