I sold a property this year and I know I will have to pay capital gains on the profit this year. I want to invest some or all of the rest while paying as little taxes as possible when I withdraw the $. I am 67yrs old am on SS as is the wife and have a set Retirement for life and hopefully will not need to use this money anytime soon. Reading up on various methods of investment and tax laws has my brain swirling like a toad! Any help here from the Sig Forum Brain trust would be appreciated. I do have a small Regular IRA investment with Wells Fargo. I do have income from a rental so I could put at least 6,500 of the $ each year into it from what I read. Or would starting a Roth be better? The rest of the $ from the sale? I have no clue. Sitting $ in a checking account seems stupid but I am at a loss as which way to turn.

I am far from a financial guru, but know enough to say that you should avoid an annuity like the plague.

Large Cap Mutual Funds are doing the best right now.

If I were you, I'd find a fee only financial advisor. That means you pay them an hourly rate, not a commission on the investments they sell you.

IRA's (Roth's, Traditional, etc.) are the way your money is treated for tax purposes, not an investment itself.

Unless you have very special circumstances and know a lot about them, avoid annuities and the people that sell them like the plague.

Get your money out of Wells Fargo and into an IRA somewhere like vanguard or Fidelity. Do your research first because the money has to go directly from Wells to the other company (Trustee to Trustee) to avoid being taxed.

Both Vanguard and Fidelity have a lot of good information online you can read. Also start reading here at clarkhoward.com.

http://clark.com/personal-finance-
credit/investment-guide/

I'm sure JALLEN and others will chime in soon with some good advice too.

Find a piece of raw land with low taxes and roll the investment into that. Low carrying cost, no maintenance, defer your current gains and earn a solid return over time. Just a thought.

I asked the same questions in a thread from a few months ago leading up to my retirement. I learned quite a bit here. One of the main answers I got was to stay away from a annuity. Why lock a percentage of your money up that you cannot get to if needed? Some insurance company's may allow you to get to your money, but they will penalize you like crazy.

https://sigforum.com/eve/forums...110016134#1110016134

When you say Roth IRA Vs Annuities Vs Index funds, you are kinda talking apples and oranges:

A Roth IRA is a tax advantaged account where you invest after tax dollars, they grow tax free (the income isn’t taxed annually so your funds should grow faster than a regular account where you have to pay taxes on the gain every year), and under current law when you take the money out (provided you are old enough) there are no taxes.

[Many believe that at some point the government will tax withdrawals from Roth IRAs to try to make ends meet. That is not current law, they are not saying they are going to do that, but some have concerns.]

Annuities are a contract where you give a company a lump of money and they promise to make payments at a certain level from some point (reaching a certain age) until some other point (often death). There are tax free annuities. There may be taxable ones, I’m not sure I haven’t studied annuities much. The main thing I know about annuities is that putting tax free annuities in an IRA or other tax protected account isn’t advised. Kinda like buying tax free bonds instead of taxable bonds paying a higher rate in a tax free account.

An Index fund is a fund that buys the stocks making up the index. Typically low fee, it should closely mirror the performance of the index. You might choose an index fund as an investment in a taxable account or in an IRA.

With that rough (very rough?) sketch out of the way, here is how I would probably approach it if I were in your shoes:

1) Given the amount of money I am looking at investing, what options are available to me? (If I have $500 to invest I am not looking at buying a piece of property or investing in some exclusive hedge fund). If I have $50,000,000 I probably need to invest in some professional guidance so I dont shoot myself in the foot on taxes and I might also benefit from suggestions on diversification. Nota Bene: I am NOT asking how much you are investing, just suggesting that the amount is a factor in your planning.

2) What are my objectives for this investment(s)? From your description, I think I would be looking for relatively long term gain without planning to withdraw any of it for a while. That said, it may be worth having some portion relatively liquid, either to serve as a rainy day fund or to take advantage of opportunities that may arise.

3) What is my outlook for the intermediate term future? If I think that now that President DJT has been elected it is all sunshine and rainbows for at least the next three and probably the next seven years, I may be looking hard at equities, possibly via index funds if I don’t want to do more selective picking of industries, or companies. If if think the market is insane with folks taking on ludicrous risk for negligible reward and a blowup is on the horizon sooner or later despite President DJT’s best efforts, I might be a lot more conservative, and would be less likely to pile into an index fund and more likely to pick defensively.

4) (and maybe this should have been higher up for you, depends on your circumstances and priorities.) Do I want to make this a tax advantaged investment, or do I want to keep it taxable and have more flexibility? IRAs (Roth or old-school), SEPs, Keoghs, 401Ks, etc all provide tax advantages, but they all have limitations and restrictions, both by statute and by what the custodian makes available as investment choices. If the investments you are interested in are available in the tax advantaged accounts, that might be a great way to go.

I’m sorry, I feel like I’ve just given you more questions and no answers. Hopefully they will help anyway.

-Nick

quote:

Originally posted by CoolRich59:
I am far from a financial guru, but know enough to say that you should avoid an annuity like the plague.

I've got an MBA and well versed in financials and I say you should avoid an annuity like the plague.

Annuities are great only if you sell them.

Seriously, if you're set for life, what are you going to use the money for? That's the key point here. Your post is unclear, OP.

I get that you want to minimize taxes but that's not the end goal. While taxes maybe a consideration, you shouldn't let tax considerations be the determining factor in your financial decision.

At the very least, you have an enviable life in that you don't know what to do with this money.

I don't mind the financial advisor advice, that's actually good. But I want to bring up the non-financial aspect of your life. You've saved your money, you're set for life, are you now using your money so you can enjoy life to the fullest? And, if making your life count is a consideration for you, have you considered the role of your money in what kind of a legacy will you leave?

Me, I decided I have some people/causes I can leave my money but I also don't want to die very rich having lived poorly. I want to use that money for some enjoyment and some good while my wife and I are alive.

Bitcoin.

Do you understand the rules of a Roth? Why would that be advantageous?

A lot of money has been lost trying to make investments tax advantaged. Having some experience with all of them, except Roth, I wonder if I would not have been better off ignoring them for the most part. Now, I was not in a situation where some employer was giving me matching funds. The employer always was a corporation owned by me, taking it out of one pocket and putting it in another.

Avoid annuities.

You will pay taxes in securities when you sell a stock, typically, and when you receive a dividend. You pay taxes on gains, and deduct losses with some limitations. Losses will be inevitable when buying stocks.

I’ve been very happy with a significant investment over the years in Realty Income, (NYSE: O), Link, which is a Real Estate Investment Trust. It pays a dividend monthly, now running around 4-5% annual rate. It’s real estate, like being a landlord but without the plumbing emergencies, irresponsible tenants, bouncing rent checks, incompetent real estate agents, escrow officers and greedy lenders. There may be a REIT out there more attractive but I don’t know of it.

If you aren’t comfortable with these things, get some help, but watch out for local gurus who are too prosperous and who will end up featured on American Greed.

quote:

Originally posted by Rey HRH:
I also don't want to die very rich having lived poorly.

This is excellent advice.

quote:

Originally posted by 220-9er:
Get your money out of Wells Fargo and into...vanguard or Fidelity.

Definitely do this, Wells Fargo is not the place to deal with. Open an account at Fidelity (no charge) and ask them to get it transferred for you.

Our family dealt with several financial firms after the death of our father, and they all were a piece of cake except WF. It was a disaster and took months to handle what should have been simple and straight forward transactions.

quote:

Originally posted by JALLEN:

If you aren’t comfortable with these things, get some help, but watch out for local gurus who are too prosperous and who will end up featured on American Greed.

So true.

Here is a local-to-me example of this happening in the news currently:

http://www.newsobserver.com/ne...rticle191312944.html

As others have mentioned: go with Vanguard or Fidelity. They have world-class service with reputable investment offerings. Keep it simple.

Good luck-

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quote:

Originally posted by Sig209:

quote:

Originally posted by JALLEN:

If you aren’t comfortable with these things, get some help, but watch out for local gurus who are too prosperous and who will end up featured on American Greed.

So true.

Here is a local-to-me example of this happening in the news currently:

http://www.newsobserver.com/ne...rticle191312944.html

As others have mentioned: go with Vanguard or Fidelity. They have world-class service with reputable investment offerings. Keep it simple.

Good luck-

------------------------------

When someone is offering a fixed return, guaranteed, like that, you can be as certain as you need to be that it is a scam.

We had a guy in San Diego years ago, paying 6% a month! He raked in $150 million or more from lots of people who should have known better, paying 10% commissions to money brokers, living in an estate, buying race horses, sponsoring racing teams, underwriting the symphony and opera, and a couple of haute cuisine restaurants, before collapsing in scandal and grief. J. David Dominelli.

Link

I knew quite a few of the folks who got snared one way or another in that scam, including the lawyer who had been Dominelli’s main counsel, which got him a partnership in a really big law firm until the music stopped.

Lots of generalizations here and some are true. Most are not.

Find an advisor that you trust and have a conversation. You want my advice...don’t take marital advice, financial advice or romantic advise off the internet from people you don’t know and who don’t know you.

quote:

Originally posted by x0225095:
Lots of generalizations here and some are true. Most are not.

Find an advisor that you trust and have a conversation. You want my advice...don’t take marital advice, financial advice or romantic advise off the internet from people you don’t know and who don’t know you.

So if one was to go to Vanguard and read the differences between Roth or Traditional IRAs that could a wrong approach? I’d rather see one get schooled up than fleeced by an unscrupulous ‘financial advisor’(shark).

I’m a Vanguard & Bob Brinker protege.

quote:

Find an advisor that you trust and have a conversation. You want my advice...don’t take marital advice, financial advice or romantic advise off the internet from people you don’t know and who don’t know you.

Yep.
This is why I generally stay out of these threads. I'm a financial advisor. I'm an attorney. I largely work on a fee basis.

Much of the advice in this thread is very good. The best advice though, is to work with someone with whom you are comfortable asking questions, who takes the time to listen and understand your situation, and who does what you both understand to be in your best interest. It's not a cookie cutter approach and it takes time from both you and the advisor.

Mostly, though, I agree with Rey HRH:

quote:

Me, I decided I have some people/causes I can leave my money but I also don't want to die very rich having lived poorly. I want to use that money for some enjoyment and some good while my wife and I are alive.

You earned it. Find the right way (which is mostly up to you) to maximize your enjoyment of what you have.

A lot of hate for annuities, which I can understand. They are amongst the most abused investments. However, they certainly do have their place when used correctly, so let's not throw out the baby with the bathwater.

Focusing on your specific question...the basic strategy is to make the maximum allowable contributions to other tax-advantages plans (IRAs, 401ks, 403bs) before buying a tax-deferred annuity. Non-qualified annuities are tax-deferred, not tax-free, which is exactly why you should preferably fund a vechicle which is tax-free (like a Roth) or tax-deductible (like a regular IRA).

The problem is what do you do if you do have investable money after making that IRA contribution (looks like you have $6500 for your 2017 and 2018 tax years)? You're already looking at probably the best two options, a deferred annuity or a stock index fund. (By the way, deferred annuity basically means a variable annuity or a fixed annuity; do not confuse with the other main species, the immediate annuity which is designed to feed you lifetime payments starting, well, immediately.)

Variable Annuity: invests in mutual funds (they call them "subaccounts" when in a VA). Tax advantage: tax-deferred, meaning you avoid paying capital gains tax every year, and pay ordinary income tax on gains only when you begin receiving payments. Income tax is usually larger than capital gains tax, but you pay it only once on distribution, vs. every year you hold the investment. Most people fall into a lower tax bracket upon retirement, and that's another tax advantage. The other advantage is there is no contribution limit; I've set up rather large accounts, I think my biggest was $10 million.

When not to use a VA: as the investment vehicle inside another tax-advantaged account. If someone is trying to sell you an annuity for money inside an account that is already tax-advantaged, like an IRA, they are only trying to generate a commission.

Index Fund: investing in these is a good tax strategy that uses an instrument that is not specifically a tax-advantaged account. Even if the index fund is not inside an IRA, it is tax-efficient by its nature as index funds are not heavily internally-traded, so generate very little annual capital gains exposure. Once in though it is important not to create a taxable event by making sure to hold the shares until you actually want to spend the money in retirement.

If it were me, I would probably do both (a VA and an index fund like the S&P 500) for diversification sakes. I could talk much more especially on annuities, but this should help you in your general planning, I hope.

This message has been edited. Last edited by: kkina,

While Jallen and I don't always agree. I like his thoughts in this thread.

There is no magic wand to wave when it comes to investing nowadays.

a few things to consider are:

Term. How long till you will need.

Risk. Are you trying to make money or keep what you have.

What kind of roll do you wish to play.

To name just a handful.

Congrats on your property sale and wish you both a long and successful retirement.

Thanks all for the sage advice. I have waved off annuities. Index funds are definitely on the radar. I will be looking a bit more before I jump anywhere. The real estate angle will be looked into as I somewhat know that angle as most of my funds come from the sale of a apartment bld. I do intend to enjoy the rest of my life as I am doing currently. As there were a lot of lean years in my life story. I just don't want to piss it away foolishly. I have been blessed to have what I have and I respect that.