I'm helping my parents with their retirement and home purchase situation and I have some general questions I would like to get some advice on. Here are the details of what's going on:
- My parents are going to move closer to us (my wife and I) after retirement and are ready to buy a house (cash sale, no mortgage).
- Their current house is paid off.They will be selling that house and using the money to put towards the new house.
- My father is 71 years old and will be retiring in the next couple of months.
- He has a 401(k) and social security.
- My mother is 62 and quit working a few years ago and had her 401(k) rolled over to a traditional IRA.
- Since they won't have a mortgage, my parents plan on living on their social securities and not use my father's 401k money or his savings account unless needed.
The funds for the new house will come from
- Mother's IRA + savings account
- Money from the sale of their current house
- Some contribution from my uncle and my wife and I
My questions are:
- Since my father prefers not to use his 401k money and let it grow, what is the best thing for him to do with it after retirement? From what I understand, if he rolls it over to a traditional IRA, he would be required to take minimum distributions. Is he eligible to rollover to a Roth IRA and avoid the RMDs? Is there a way to estimate how much a rollover to Roth IRA will be taxed? Are there any other options available to him that wouldn't involve taking RMDs?
- We are planning for him to rollover to Vanguard (from Principal). What is the best fund for him to use to generate a decent amount of income into his savings account to make his savings grow? I had done a little research and some good ones seem to be VWIAX, VPGDX, and VSCGX.
- My mother will be withdrawing all of her IRA money to her savings account to use towards the house. Would she just be withdrawing all the money and then paying the tax on it in next year's tax return? Or does she have to pay tax on it now?