How to practice peace-of-mind investing? Construct a diversified investment portfolio made up of stocks and bonds and stay with it. When stocks are roaring, you will not hit a homer but you will, most probably, hit a triple. When stocks are tumbling you will not suffer severe losses because bonds, most probably, will be doing well. “Doing well” with bonds means they generate interest payments while increasing in capital value. In this time of national and personal uncertainty I welcome, as always, your questions.
Q.: I am 65 and a member of the New York City Teachers' Retirement System. I plan to retire on July 1, 2020. Due to the Covid-19 pandemic my wife urges me to put off retiring for one year. What do you advise?
A.: I disagree with your wife. The great thing about a defined-benefit pension system is the fact that your monthly pension is guaranteed to be paid to you for the remainder of your life, regardless of what is going on in the world during the short term. The same holds true with your expected payments from the Social Security System. In August the TRS will be celebrating its 103rd birthday. For 103 years the System has always discharged its financial obligations in-full and in a timely manner. Retire and sleep well.
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Tom wishes to move his IRA with institution 1 to institution 2. Tom instructs institution 1 to send him a check representing the balance of his IRA. He knows he has 60 days from the day he receives the check to deposit the same amount in the new IRA he plans to establish with institution 2. For safety, Tom deposits the check in his checking account.
Tom’s sister dies 55 days after he received the check. Tom establishes his new IRA on the 75th day after receiving the check. Is the death of his sister a legitimate reason for Tom not to effectuate the rollover by the 60th day after his receipt of the check? Yes, it is. The IRS permits Tom to self-certify the death of his sister as the reason for the delay. Tom must write a letter to institution 2 setting forth the reason he needed an additional 15 days to effectuate the rollover contribution.
Drop me a line if you would like to know the other reasons the IRS accepts for not consummating a rollover transaction within 60 days of receiving the distribution check.
Tip: Have the check made payable to yourself only when you plan to no longer dedicate the funds to retirement-account investing.
To continue dedicating the funds to retirement-account investing, never use the 60-day rollover method where the check is made payable to you. Life events get in the way. When transferring funds from an IRA to another IRA or qualified plan, use the Direct Rollover method where the distribution check is made payable by institution 1 to institution 2 for the benefit of Tom and is mailed directly by institution 1 to institution 2.
Mr. Frank is a fee-only Retirement Financial Planner and a retired city high school Teacher of Accounting. He can be reached by phone at (732) 536-9472, or via email at firstname.lastname@example.org.
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