Investing advice for couple (late start to investing)

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SpartanBull
Posts: 131
Joined: Fri Jun 06, 2014 12:31 am

Investing advice for couple (late start to investing)

Post by SpartanBull »

Hello,
I'm looking for some advice for a couple of aged 60 (Husband/200k income roughly) and 58(Wife, part time work, low income probably around 15-20k or something). Long story short I really don't think these too have any type of retirement portfolio going unfortunately. There are a variety of reasons for this, but at this time all of there kids are out of college, they're expenses are beginning to moderately reduce, and I think its time for them to make up for lost time as best they can.
First things first, I'm assuming they might not be Roth Eligible due to too much income, but could they max out traditional IRA's on Vanguard for 11k--$5,500 each?? Secondly, the Husband seems to believe his employer offers some time of 401k/matching option, etc...I'm sure that would be wise to max out as much as possible.
So...
-Max out personal IRA's for each person
-Max out Employer matching as much as possible (I'll get the info from him on this)
-Taxable account contributions
Are they eligible for some type of "catch up" contributions given their age? Any advice would be appreciated. Thanks!
Grt2bOutdoors
Posts: 25617
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Investing advice for couple (late start to investing)

Post by Grt2bOutdoors »

https://www.irs.gov/retirement-plans/ir ... ion-limits

If the couple does have an employer retirement plan available, can you post the investment options and associated expense ratio's to this thread? If the couple does or does not have a retirement plan available, they are still eligible to open an Individual Retirement Account (IRA) and given their ages, each can contribute $5,500 + $1,000 in "catch-up" contributions for a total of $6,500 each.

Now, if they are not eligible for an employer retirement plan (401k or otherwise), I would suggest they use a Traditional IRA and take the associated tax deduction on their current year taxes. Why do I suggest that? I suggest it because given the low to no current pool of tax deferred savings and the reduced number of years they will be working before retirement, it is unlikely they will be in an equivalent or higher tax bracket at retirement as they are currently in today. In other words, they are likely paying the most in taxes today and during their working years, but come retirement will be in a lower to zero tax bracket.

If they are eligible for an employer retirement plan, then use the "backdoor" ROTH option. Search the forum site for "backdoor roth" for a description of how that works.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
trueblueky
Posts: 2365
Joined: Tue May 27, 2014 3:50 pm

Re: Investing advice for couple (late start to investing)

Post by trueblueky »

https://www.irs.gov/retirement-plans/pl ... tributions discusses limits.

The IRA limit is $6,500 for 50 or older.
The 401k limit is $18,000 plus $6,000 catchup if the plan allows catchup for employees 50 and over. (Her 401k is limited by her compensation, so if she only makes $15,000, she can't reach the max.)

The general thought is to fill in this order:
1) 401k to the maximum employer match, then
2) IRA to max, then
3) additional 401k to personal maximum

In most cases, 2) is better than 3) because the IRA allows one to purchase funds with lower ER and/or fund choice is limited in the 401k. However, some 401k plans are so good that 3) is better than 2).
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