Answers
The questions people actually ask.
Plain answers to real questions about retirement income, rollovers, annuities and life insurance. General education, licensed in California, no product pitch attached.
Annuities
Are annuities a good investment right now?
Rates change the price, not the fit. Higher interest rates do buy more income per dollar, because the insurer is buying bonds with your money. But not…
How much does a $100,000 annuity pay per month?
For a 65 year old, 100,000 in an immediate life only income annuity has recently been quoted at roughly 600 to 700 dollars a month. Your age, whether …
What happens to an annuity when you die?
It depends on which kind you own and what you chose when you bought it. A life only income annuity stops paying, and heirs get nothing. Most other con…
What is an annuity, with a simple example?
An annuity is a contract with an insurance company. You hand over a sum of money, and the insurer promises either to grow it on stated terms for a set…
What is better than an annuity for retirement?
It depends on the job you are buying it for. For income that cannot run out, delaying Social Security beats almost any annuity. For a set number of ye…
What is the $1000 a month rule for retirees?
It is a shortcut for turning monthly income into a savings target: about 240,000 dollars saved for every 1,000 dollars a month you want. What the rule…
What is the downside of annuities?
The main downsides are liquidity, cost, and inflation. Your money is committed for a set period and coming out early usually triggers a surrender char…
Why are financial advisors pushing annuities?
Usually because of how they are paid. Most people selling annuities are licensed insurance agents earning a one time commission from the insurance com…
Why is Suze Orman against annuities?
She is not against all of them. Her long standing position separates simple income annuities, which she has spoken about favorably, from variable and …
401(k) Rollover
Can I retire at 55 with $3 million?
Usually yes, but the balance is the easy part. Three million at a withdrawal rate built for a forty year retirement is closer to 99,000 dollars a year…
Can I retire at 60 with 500k in savings?
Sometimes, and it depends far more on Social Security than on the 500,000. At a withdrawal rate built for a long retirement, that balance pays roughly…
How much money do I need to retire?
There is no single number, and the honest method is subtraction before multiplication. Add up the bills you have to pay, subtract the income that arri…
How much should you pay for retirement planning?
A one time written retirement plan usually runs about 2,000 to 5,000 dollars. Hourly planners charge roughly 200 to 500 an hour, and subscription plan…
How much will $20,000 in 401k be worth in 20 years?
Nobody can tell you, and a confident single number is usually a sales tool rather than an answer. With no new money added, the arithmetic runs about 6…
Is $2 million enough to retire at 67?
For most households, yes. Two million at a withdrawal rate built for a thirty year retirement produces about 80,000 dollars a year before tax, and Soc…
Is $200,000 enough to work with a financial advisor?
Usually yes, but not with everyone. Firms that charge a percentage of your balance commonly set a minimum at 250,000 or 500,000, so 200,000 gets turne…
Should I roll over my 401(k) to a Roth IRA?
Only if you can pay the tax with money from outside the account, and only in a year when your tax rate is genuinely lower than the rate you expect lat…
What does Dave Ramsey say about cashing out a 401k?
Dave Ramsey is broadly against it, and on this one the position holds up. Cashing out an old 401(k) before 59 and a half generally means ordinary inco…
Who is the best person to talk to about retirement planning?
It depends on the decision, not the title. Financial advisor is a job description, not a licence, so ask which licence sits behind it. A CPA handles t…
Life Insurance
Do my children have to pay taxes on my 401(k) when I die?
Generally yes. A pre tax 401(k) or IRA is the one large asset that reaches your children with the entire tax bill still attached, because nothing in i…
Do my children inherit my debt when I die?
Generally no. Your debts are owed by your estate, not by your children. Your executor pays valid bills out of what you leave before anyone inherits, a…
Is final expense insurance worth it?
Sometimes. Final expense insurance is a small whole life policy, usually 5,000 to 25,000 dollars, meant to pay for a funeral and the last bills. It is…
Tax Deferred Strategies
How are capital gains taxed on a rental property in California?
In two layers. Federally, the slice of your gain that equals the depreciation you took is taxed at up to 25 percent, and the rest at 15 or 20 percent,…
How much capital gains tax will I pay when I sell my house in California?
Often none. If it was your main home for two of the last five years, the first 250,000 of gain is excluded, or 500,000 for a married couple. Above tha…
How much tax will I pay when I sell my business?
Usually more than the capital gains rate suggests. Part of the price is often taxed as ordinary income, and how the price is split across the business…
Is it legal to defer capital gains tax?
Yes. Putting off tax on a gain is written into the federal tax code, and a 401(k) is the everyday example. What is illegal is evasion, which means hid…
Infinite Banking
How does infinite banking work?
Infinite banking is a way of using a dividend paying whole life policy. You pay a premium for years. Part of it buys the life insurance and part build…
Is infinite banking a scam?
No. Infinite banking is a way to use a dividend paying whole life policy: you build cash value, then borrow against it. The trouble is the pitch. Earl…
Is infinite banking better than a HELOC or a bank loan?
Usually not on cost. A HELOC borrows against home equity you already own. A policy loan borrows against cash value you first have to build with years …
Is whole life insurance a good investment?
Judged only as an investment, whole life usually comes up short. Cash value returns tend to land in the low single digits over decades, and they are n…
Retirement Income / Social Security
How much Social Security will I get if I make $25,000 a year?
Roughly 1,300 to 1,400 a month at full retirement age, if 25,000 a year is close to your average across 35 working years. The formula is progressive, …
Should I take my pension as a lump sum or monthly payments?
Neither is automatically better. Run one number first. Divide the yearly pension by the lump sum offer, and that is the payout rate anything else has …
Should I take Social Security at 62, 67, or 70?
There is no single right age. Claiming at 62 pays about 70 percent of your full benefit, 67 pays 100 percent, and 70 pays about 124 percent, all for l…
What is one of the biggest mistakes people make regarding Social Security?
Underrating what happens to the survivor. When one spouse dies, the household keeps the larger Social Security check and loses the smaller one for goo…
On Point Finances is a licensed insurance agency, not a tax, legal, or investment adviser. These pages are general education, not recommendations.