financialforum
Important Moves
Your second career is a time of change and challenges, but paying
attention to a few key issues can help make your transition —
and fi nances — fl ow more smoothly. By Phil Dyer, CFP
W
ith the current economic If you accumulate signifi cant amounts
challenges facing the coun- of retirement assets in traditional quali-
try, signifi cant numbers of fi ed retirement plans and IRAs, you are
retirement-eligible servicemembers have required to start taking minimum distri-
reconsidered putting in their paperwork butions at age 70½. Assuming you have a
and elected to extend their military ser- balance of $750,000 in retirement assets,
vice. Because military service is about as your fi rst-year distribution under current
“recession-proof” as careers come, this law would be approximately $27,400 of
makes sense for some folks. For others federally taxable income in addition to
who are moving forward with retirement military retired pay and Social Security.
Roth Versus
or are well into second careers, there Because the long-term direction of tax
Traditional 401(k)
are some important money and mindset rates likely is up, creating an income tax-
■ To help you determine moves you can make to improve your free source of retirement funds makes
whether a Roth or a
fi nancial situation. sense for many people.
traditional 401(k) is bet-
Debt payoff: A widening gap between Note: As this column was being writ-
ter for you, visit www
.moaa.org/calculators
money market fund/CD rates and credit ten, a Roth option still was not available
and select Retirement
card rates makes paying off nondeduct- for Thrift Savings Plan participants (mil-
Savings and Planning ible consumer debt a smart move. With itary or civilian), but Congress has been
and then “Roth 401(k)
money market returns hovering around considering this option.
or Traditional 401(k).”
1 percent and the average credit card rate Overall investment allocation: For
at 14.17 percent (as of early May), paying similar reasons, second-career military
down consumer debt easily can net you retirees generally can afford to be a bit
8 percent to 13 percent. (Try to fi nd a CD more aggressive with their IRA and 401(k)
yielding that much.) Lowering debt is investments, because their military retired
also benefi cial because many credit card pay acts as a fi xed-income component of
issuers have started lowering available their overall portfolio. Therefore, it might
credit limits, which can affect your credit be reasonable to allocate an extra 5 per-
score adversely if you are carrying bal- cent to 15 percent to stocks for your long-
ances from month to month. term money, based on your timeframe, risk
Roth 401(k): With at least two sources tolerance, and overall needs. MO
of guaranteed, COLA-adjusted, lifetime
income (military retired pay and Social
— Former Army Capt. Phil Dyer, CFP®, is
Security), second-career retirees should
deputy director, Benefi ts Information and Finan-
consider putting a portion of their 401(k)
cial Education. To fi nd a fi nancial planner near
you, contact Garrett Planning Network at
or similar defi ned contribution plan sav-
(866) MOAA-GPN (662-2476) or
www.moaa
ings into a Roth 401(k), if their employer
.org/garrett, or visit
www.moaa.org/fi nancial
offers this feature. center for other resources.
40 MILITARY OFFICER JULY 2009 PHOTO: SEAN SHANAHAN
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