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  • Please critique my plan

    I have been grinding hard on the WCI course and am about ready to implement the initial part of our plan which entails untangling us from NWM. I think I have the basics covered but I have zero experience with this stuff so I would appreciate any constructive criticism the wise folks here have to offer. Here goes...

    1. Purchase new term insurance facilitated by a trusted broker from WCI site. 750k for me and 1.5 M for my wife.

    2. Additional disability for my wife of 10k per month on top of the 10k she gets from her employer.

    3. Open two Roth IRA accounts at Vanguard in order to roll our Roth IRA's from NWM into them.

    4. Open two Traditional IRA accounts at Vanguard

    5. Surrender the various Variable Comp life policies we have on myself, my wife and our two boys and take the cash value after taxes to put into the Traditional Vanguard IRA's we just opened. We should have enough to make a 2017 & 2018 contribution for each of us. We would surrender after the approval of our new life and disability policies of course.

    6. Roll aforementioned IRA's into our new Roth IRA's immediately. Fill out the appropriate tax forms. Would it be 4 in total? One for each conversion per person per year?

    7. Open two 529 plans at Vanguard through UT/NY/OH (any real preference here?) as MN doesn't give any tax breaks as far as I know. Use the money saved from lowering our insurance costs to start contributing to the 529's.


    Thanks so much for any advice you all may have. It is much appreciated!

  • #2
    Sorry to hear you were another victim of the NWM experience.  I'll try and go through your points in order.

    1. What term are you thinking here?  I typically like a term that will cover you until Financial Independence.  The amounts seem reasonable, but you may think about $2-3mm on your wife.  You may also want to check out if she has access to cheaper group life coverage through her employer.

    2. Sounds reasonable.

    3. Good idea

    4. Yes

    5. You will have to pay ordinary income tax rates on whatever you surrender so please keep that in mind in your budgeting

    6. To clarify, you will contribute $5,500 for each of you for both 2017 and and 2018.  When you contribute on Vanguard you will select the appropriate tax year and yes there will be 4 in total.  After you have contributed to your Traditional IRA, you can do two conversions (one for you and one for your wife).

    7. Minnesota does offer tax breaks, but you can use any State 529 plan.  Vanguard's plan through their website is through Nevada, but there are other state plans that offer their funds.  Since you are trying to keep everything at Vanguard, this is the plan you would use.  It is a very good plan.

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    • #3
      Thanks very much @cgossage. To answer your questions...

      1. We were looking at 20 year level term which would carry us to age 59 which by then we will be free and clear of outstanding debts like mortgage and loans.

      5. As I understand it my ordinary income rates will only be counted towards our gains correct? My main policy which is roughly 23k has gains of approximately 5.5k. Can I have NWM take out the taxes and be done with it or do I have to handle it myself?

      7. I will have to check again for MN. In the WCI course I thought it said MN didn't have any advantages for our income level.

      As an aside, is there any reason I shouldn't put everything under Vanguard? My other option would be Fidelity as my 403b is currently housed there.

      Thanks again!

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      • #4
        I think I misread the MN state 529 plan. I can take a deduction of up to 3,000 but probably not the credit since we earn too much. I think that is where I got confused.

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        • #5




          I think I misread the MN state 529 plan. I can take a deduction of up to 3,000 but probably not the credit since we earn too much. I think that is where I got confused.
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          1. Sounds good and you should be able to find a good term policy for relatively little cost.

          5. Right, you will only pay taxes on the gains.  I wouldn't have NWM withhold anything.  Especially with gains that low.  You will get a 1099-R from them at the end of the year.  Just include the income when you file your taxes.

          7. The only reason to not put everything under Vanguard is if you want to use non-Vanguard investments (you can buy some but you would be better off opening a brokerage account elsewhere) or if you want to open a Solo-K at some point that accepts IRA Rollovers.  Otherwise, they are a great firm, with good customer service, low-cost funds and an easy to use website.

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          • #6
            Good stuff. I am glad to know I am learning something and haven't made any awful blunders. I like the simplicity of Vanguard and so thats why I am leaning towards them. I will not pretend to be something I am not. I just want a reasonable and simple investment portfolio to grow our money. Gosh I sound like  WCI!  8O

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            • #7




              Good stuff. I am glad to know I am learning something and haven’t made any awful blunders. I like the simplicity of Vanguard and so thats why I am leaning towards them. I will not pretend to be something I am not. I just want a reasonable and simple investment portfolio to grow our money. Gosh I sound like  WCI!
              Click to expand...


              That's a great attitude to have for investing and life!

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              • #8
                7. Vanguard 529 - Nevada is a great plan, direct with Vanguard as mentioned above and has 20+ investment choices. You can do age-based or build a simply portfolio.

                i think you might have a #8: consider doubling up on 403/457? My wife takes home about 21 cents on the dollar, but on the flip side has amassed a tidy sum.

                Overall, sounds like a great plan!

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                • #9
                  I do have a governmental backed 457 at my disposal. However, if I max that out I don't think I can payroll that as I believe with a maxed 403b and then 457 I don't think my paycheck can cover it lol. Our family health insurance through my district takes a large cut of my check. A high deductible plan isn't really an option as we have a son with an immune deficiency who gets weekly treatments.  Can I contribute from outside, say in a lump sum?

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                  • #10
                    To my knowledge, 457 contributions would have to come from paycheck withholding. In your case, you can use lump sums to a) fill backdoor Roth, b) 529's or c) simply build up a taxable account at VG.

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                    • #11


                      I do have a governmental backed 457 at my disposal. However, if I max that out I don’t think I can payroll that as I believe with a maxed 403b and then 457 I don’t think my paycheck can cover it lol
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                      Does your wife's job not have a health insurance plan?  Certainly the specifics would be important with known costs for your son, but that might allow you more pre-tax space with the 457.  Sounds like you are doing well getting things together!

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                      • #12
                        Yeah I thought about that too. She does have a plan at her work but it actually isn’t even close to what we have in my school district. Very high deductible and not as good of coverage. All the folks at her work are jealous of us. Basically I am working for insurance and 403b contributions lol.

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                        • #13
                          If you haven't already, be sure to run the numbers on health insurance plans comparing premiums paid, max out of pocket deductible, etc. I had to make a spreadsheet to prove to my wife that even with having a child this year, we pay the least overall (annual premiums + max OOP) with each of us using our respective employers' HDHP with HSAs. Factoring into that cost analysis is the employer contrib to the HSA and tax saved on our paycheck deductions to fill our HSAs. The other benefit is having an HSA to use as a "stealth IRA" retirement account. Even if you want to use the HSA to pay for current health bills, you're saving money by paying with pretax money.

                          Im not sure you're going to be able to get an additional $10k in individual disability for your wife based on the fact that you're saying you don't have money to fund all these things and aiming for $20k/mo benefit implies she makes $30k/mo or $360k/year. At that income you should be able to fund all these things unless I missed something!

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                          • #14
                            Thanks for the feedback @nachos31! You make a good point of running the numbers comparing the two policies again. I should really do that to make sure we are doing the best thing financially.

                            With respect to the funding I am just having issues taking advantage of my 457 option. My current teacher paycheck won't cover a max 403b, max 457, and health insurance lol. We could certainly fund the policies with my wife's paycheck but I believe they have to come from my payroll don't they? Now, with that said, I need to do some due diligence as well and try to maximize my take home pay. Currently our withholdings are both single and zero so we actually get a significant tax return every year. As I am gaining knowledge I see clearly now the benefits of not having a significant tax return and making sure that money goes into other savings accounts. I am going to go to my check estimator at work and look to see what we can squeeze out of my payroll to try and maximize these other accounts available to me.

                            Thank you for the feedback!

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                            • #15


                              With respect to the funding I am just having issues taking advantage of my 457 option.
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                              Remember... you don't have to solve all the problems today. You'll get there. Just start a better course. We can't do it all, but we can all usually do something.

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