Retirement (Page 2 of 4)
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Originally Posted By jaqufrost: I'm around 40 with half a million in retirement accounts and I'm two years away from a military reserve pension (that starts paying around age 56). I've also got a paid for house, three paid off vehicles, full off grid solar power, about a years worth of food for the family a little bit of shiny metal, and a bitcoin. Hopefully I'll be ok at retirement time. I still need my own well  You really do-it makes the difference between having a place to go to having a place to be. Water is life, and it will likely be the largest consumer of power in your off grid life-pumping it heating it etc. for drinking, showering , cleaning, dishes, the garden etc. It was a huge relief when mine went in for this reason - it was a huge wait and cost to get it done (no well drillers want to work locally) but seeing the miracle of water come out of a hose for the first time after 15 years of hauling in every drop of water we used…. |
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I'm around 40 with half a million in retirement accounts and I'm two years away from a military reserve pension (that starts paying around age 56)... One thing to keep in mind with a reserve component early retirement is the medical insurance portion does NOT kick in early and instead starts at the normal age regardless of credited combat time. For me, I'll be buying Tricare for about $1,500 a month for those early 2.5 years- not great, not terrible- but certainly worth planning for. |
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Originally Posted By TheOtherDave: You really do-it makes the difference between having a place to go to having a place to be. Water is life, and it will likely be the largest consumer of power in your off grid life-pumping it heating it etc. for drinking, showering , cleaning, dishes, the garden etc. It was a huge relief when mine went in for this reason - it was a huge wait and cost to get it done (no well drillers want to work locally) but seeing the miracle of water come out of a hose for the first time after 15 years of hauling in every drop of water we used . It's a bit over 500ft to hit water here, so not a cheap option
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Originally Posted By jaqufrost: I have a pond next door and a creek a few hundred yards away. So if my city water connection failed I still have water access, but I'd love to have a good well. It's a bit over 500ft to hit water here, so not a cheap option I’ll bet-it was $13 and change to get 160 foot deep here. I had to wait a year from the time I put money down and signed the contract. Nobody wants to work up in that area-hope you have an easier time. |
Never make another person a priority when they merely see you as an option...
"Some People Are Like Slinkies. They're Not Really Good For Anything, But They Bring a Smile To Your Face When Pushed Down The Stairs."
"Some People Are Like Slinkies. They're Not Really Good For Anything, But They Bring a Smile To Your Face When Pushed Down The Stairs."
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Originally Posted By TheOtherDave: Financially, I started to get my shit together in my mid-late 30’s. That was when I started buying the land and building the cabin-I did that before I owned a home. Not everyone has the same life circumstances-I worked nights and was in a strange city I didn’t grow up in, so I bought my happiness in my early years with toys. That’s a hard habit to break but I did manage to get my shit together eventually. I’m still not Dave Ramsey. The house will be sold at retirement and I’ll move to the rural cabin. I’ll likely look into an Annuity and manage the next decade off of savings and 401K until the Annuity starts to pay out. Gotcha. At least you have a plan. Someone I know is 57 or 58 now and STILL doesn’t have a retirement plan. STILL lives paycheck to paycheck with tons of debt. I like the idea of a small rural cabin in retirement. Less to maintain and less cost. Only negative I see is….access to medical care. Not sure if that’s an issue for you. I would definitely look into to an air ambulance membership if they have such a thing up there as an emergency medical flight can take everything you have. In my area it’s like $100-120 or so a year in case you ever need it. Pretty cheap insurance I think. |
"It behooves every man to remember that the work of the critic is of altogether secondary importance, and that, in the end, progress is accomplished by the man who does things."
Theodore Roosevelt
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Originally Posted By ColtRifle: Gotcha. At least you have a plan. Someone I know is 57 or 58 now and STILL doesn’t have a retirement plan. STILL lives paycheck to paycheck with tons of debt. I like the idea of a small rural cabin in retirement. Less to maintain and less cost. Only negative I see is….access to medical care. Not sure if that’s an issue for you. I would definitely look into to an air ambulance membership if they have such a thing up there as an emergency medical flight can take everything you have. In my area it’s like $100-120 or so a year in case you ever need it. Pretty cheap insurance I think. Ugh,…. Debt. I really don’t like it after getting out of hand with it when I was younger. I have one $240 payment on a motorcycle that will be paid off next summer and it’s the only money I owe anyone in the world. I took the loan on partly because my credit score took a huge shit when I paid the house off. I have one credit card I have never used so it was only about 740 to begin with when the house was paid off, dropped to under 700 2 weeks after becoming debt free. I despise the credit industry. Believe me…. I spent this summer working without a paycheck so I could ride in the right seat of a helicopter-the only thing more expensive than taking lessons in one is being strapped to a gurney in the back… I am 45 minutes from the nearest hospital-Ambulance service is decent and so it cell coverage thanks to a new tower nearby. I do wonder how fast they could find me if they needed to as I am not on a main road.. It’s 2 miles down a private road and hidden in the woods-I purposely haven’t put an address on it as the county kinda doesn’t care if I live in it as long as I know I can’t without a C of O. The cabin itself is bigger than any apartment I ever lived in, and is off-grid solar with a well, washing machine, etc. I could live there now on SS alone if I needed to but it would be really tight. |
Never make another person a priority when they merely see you as an option...
"Some People Are Like Slinkies. They're Not Really Good For Anything, But They Bring a Smile To Your Face When Pushed Down The Stairs."
"Some People Are Like Slinkies. They're Not Really Good For Anything, But They Bring a Smile To Your Face When Pushed Down The Stairs."
| If you are not fortunate enough to have your home mortgage paid off in-full when you retire then you might consider downsizing so you can take your equity to pay for a less expensive property. Without having a monthly mortgage to pay, this releases quite a bit of monthly and yearly financial burden. My spouse and I are retiring in a few years so we're realizing that as much as we love the home where we raised our children we don't want the long-term upkeep of the property and we can still purchase a very nice home without a mortgage. You might also consider setting up a trust to protect your home and other investments so that your children can benefit from your investments once you are gone. Using a trust is also extremely helpful in protecting your money (at least in FL) so that your long-term care costs are split between your monthly income and also Medicare/Medicaid. Lastly, even though I do not want to work a great deal during my retirement you are allowed to make supplemental income with some limitations set by Social Security which I plan to take advantage of through doing either through consulting projects or part-time work as needed. In a worst case scenario being able to work on a limited basis can help off-set unexpected costs (i.e. repairs or healthcare expenses) or better yet allow for more vacation opportunities during our Golden Years. |
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Originally Posted By FNFalGuy: If you are not fortunate enough to have your home mortgage paid off in-full when you retire then you might consider downsizing so you can take your equity to pay for a less expensive property. Without having a monthly mortgage to pay, this releases quite a bit of monthly and yearly financial burden. My spouse and I are retiring in a few years so we're realizing that as much as we love the home where we raised our children we don't want the long-term upkeep of the property and we can still purchase a very nice home without a mortgage. You might also consider setting up a trust to protect your home and other investments so that your children can benefit from your investments once you are gone. Using a trust is also extremely helpful in protecting your money (at least in FL) so that your long-term care costs are split between your monthly income and also Medicare/Medicaid. Lastly, even though I do not want to work a great deal during my retirement you are allowed to make supplemental income with some limitations set by Social Security which I plan to take advantage of through doing either through consulting projects or part-time work as needed. In a worst case scenario being able to work on a limited basis can help off-set unexpected costs (i.e. repairs or healthcare expenses) or better yet allow for more vacation opportunities during our Golden Years. All valid, but for many of us there isn't anything special about a mortgage any more- it's just another expense to be offset by income, if you choose to have one during retirement. The days of "no mortgage means I own it free and clear" are gone in most of the US due to property taxes. A house with a mortgage has two payments- one to the lender and one to the gov for the privilege of buying it. A house without a mortgage still has the second- and failing to make it will mean you don't "own" it for very long. |
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Originally Posted By TAP: All valid, but for many of us there isn't anything special about a mortgage any more- it's just another expense to be offset by income, if you choose to have one during retirement. The days of "no mortgage means I own it free and clear" are gone in most of the US due to property taxes. A house with a mortgage has two payments- one to the lender and one to the gov for the privilege of buying it. A house without a mortgage still has the second- and failing to make it will mean you don't "own" it for very long. House insurance and property taxes are a thing virtually everywhere in the US. And it doesn’t matter if you own your house without a mortgage or with a mortgage…..you’re still paying them. But without a payment to a bank, it does make it easier for most people to retire. Sure some can make a mortgage work for them in retirement but for most people, paying off the house before retirement is a good move. Not saying 100% of the time but much of the time it’s better to enter retirement with the house paid for rather than not paid for. I have a friend who sold their house and bought there retirement house. Their financial advisor recommended they keep a mortgage and invest the money from the sale of their last house because they got something like a 2% interest loan. On the other hand, if the interest rates were more like 6% or more, it probably would have been better to pay cash for the retirement house. But a real consideration in retirement is the overall tax burden of your area. High property taxes (and high insurance for you if you are in fire and hurricane prone locations) will potentially make it harder to retire. Not a big deal if you have planned for it but still it’s a consideration. Knowing you still have to pay property taxes and insurance is not a valid reason to keep a house payment. And, with interest rates as they are, it’s not as potentially beneficial to have a mortgage and keep the money invested. So, what works for someone who retired when the interest rates were super low may not work well for someone who retires today. There is no one size/fits all financial retirement plan. |
"It behooves every man to remember that the work of the critic is of altogether secondary importance, and that, in the end, progress is accomplished by the man who does things."
Theodore Roosevelt
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Originally Posted By jaqufrost: I have a pond next door and a creek a few hundred yards away. So if my city water connection failed I still have water access, but I'd love to have a good well. It's a bit over 500ft to hit water here, so not a cheap option How is the pond fed and is the stream a reliable year-round flow |
*post contains personal opinion only and should not be considered information released in an official capacity*
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Originally Posted By ColtRifle: Gotcha. At least you have a plan. Someone I know is 57 or 58 now and STILL doesn’t have a retirement plan. STILL lives paycheck to paycheck with tons of debt.. At that point in life they'd better hope they have a rich uncle die and leave them everything Late 50s is no time to start planning for retirement |
*post contains personal opinion only and should not be considered information released in an official capacity*
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...Knowing you still have to pay property taxes and insurance is not a valid reason to keep a house payment. ...Knowing you still have to pay property taxes and insurance is not a valid reason to keep a house payment. Spot on, because in the simplest sense, one's retirement plan needs to look at the flow of income compared to the flow of expenses- regardless of whether that expense list includes a mortgage or not. That bottom line is what should drive the decisions and planning, though I'd personally be uncomfortable with an adjustable rate mortgage on there regardless of the final result. I was shocked recently to read how many folks were back in ARMs, hoping for flips that didn't happen or rates to drop back down. A fixed 3% with 5 or 10 years left on it would be a non issue in my opinion as long as the cash flow worked out. ...But a real consideration in retirement is the overall tax burden of your area. High property taxes (and high insurance for you if you are in fire and hurricane prone locations) will potentially make it harder to retire. Not a big deal if you have planned for it but still it’s a consideration. That is a huge consideration, and sadly one folks actually have little influence over. There are areas of the country that were low tax burden 20 years ago, and aren't now due to the locusts moving in and bringing with them the failed policies and voting habits of the places they already destroyed. That process probably wouldn't be at full damage impact in 5 years, but it could be in 20 or more- which is a reasonable timeframe for someone's retirement planning. |
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Originally Posted By tc556guy: At that point in life they'd better hope they have a rich uncle die and leave them everything Late 50s is no time to start planning for retirement It's so prevalent, I call it the "LOTTO Retirement Plan." |
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Originally Posted By TomJefferson: It's so prevalent, I call it the "LOTTO Retirement Plan." Originally Posted By TomJefferson: Originally Posted By tc556guy: At that point in life they'd better hope they have a rich uncle die and leave them everything Late 50s is no time to start planning for retirement It's so prevalent, I call it the "LOTTO Retirement Plan." I've also heard it referred to as the "waiter" plan... the kids are waiting for parents to die so they can retire. |
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| My wife and I are just short of a million without the value of the house. And the house is paid for. So are the cars. And I'm able to work for at least three to six more years depending on how my employer sees things. We will make it fairly well to retirement. I just hope her health holds out. I want five good years with her and nobody else vying for my time. That's my dying wish. I just want five years of her and only her. That seems attainable at this point. |
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Originally Posted By tc556guy:
At that point in life they'd better hope they have a rich uncle die and leave them everything Late 50s is no time to start planning for retirement If you had asked me about retirement 5 years ago, I would have said my retirement plan was to die. No, I am not kidding, my ex-wife ate up so much of my money that I was deep in the hole every payday. Making it to payday with money in the bank was cause fore celebration...which she would do with my money. "Happy wife, happy life" is an absolute lie. Working overtime was just an excuse for her to order more pizza or buy more shoes. But...a little over 4 years ago I was FINALLY able to make the move I absolutely had to do if I was to live to see 60 - I divorced her, AND due to her running away after being served, I got everything, including my retirement, (I work for the state), with no alimony. We also donated a refrigerator box full of barely worn shoes and boots of hers that6 she refused to take with her. Then I married my new wife. She worked her entire life and is drawing a well earned retirement, plus still working part time to stave off the boredom until I retire in just under 4 years. I'm not saying I did anything special, but I put nose to grindstone and I did nothing but pay debts. Well, almost nothing, I did buy some guns, and my new wife told me that I would never ever sell or pawn them unless I wanted to, (I lost a LOT of stuff in the pawn shop with the ex), but I paid debts. Today, I have only one debt that I just recently acquired, 11 grand for a new AC system, (AZ eats AC units), which the chiselers want me to pay $130 a month, resulting in a 20 year loan...I don't think so, Tim. In two months I've paid a large chunk of it off already and will have that done very quickly. I don't want debt. I know what people say about good debt - I don't like owing people money. The house is paid for and the land was paid for over 100 years ago. Yes, I would LOVE to have a well, and if we end up staying here we will get one. But my wife is a saver, not a spender, and getting used to THAT lifestyle was a welcome, very welcome change. Now, I don't have to wonder if I will be able to afford cat food while living under a bridge. With two state retirements and SS, with no debts, (I haven't had a paid off car since the military, nice change), I think we can survive. |
| I just retired from the government early. Luckily i have a pension, along with a 401K (TSP). While my earnings are significantly lower now, I've spent the better part of my adult life preparing. I"m now in "maintenance" mode, which is much more affordable for me. Appreciate your assessment and best of luck in your retirement. Four months in and i'm LOVING it. |
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One thing to remember….if you are living on less than your income before retirement, it’s not hard to live on less in retirement. Let’s say you make $70k per year. You save/invest $10k. That means you are actually living on $60k. So, if your retirement plan has you spending $70k per year, you will actually have a higher standard of living once you retire since you don’t have to put money toward retirement savings/investing. |
"It behooves every man to remember that the work of the critic is of altogether secondary importance, and that, in the end, progress is accomplished by the man who does things."
Theodore Roosevelt
Theodore Roosevelt
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Originally Posted By jeepnstein: My wife and I are just short of a million without the value of the house. And the house is paid for. So are the cars. And I'm able to work for at least three to six more years depending on how my employer sees things. We will make it fairly well to retirement. I just hope her health holds out. I want five good years with her and nobody else vying for my time. That's my dying wish. I just want five years of her and only her. That seems attainable at this point. Yes, that's a battle. Over $1 mil and depending on which state and literally who's in charge at the time is the capital gains inheritance tax threshold. I have discussed this with family and friends probably more than any retirement question. There's three approaches. The most common is simply ignore it and hope for luck. That doesn't always work out well. Another is get it all out of your name usually a trust fund. The last is pay everything off, keep it barely under a $Mil but insure a high income so you don't need the assets to retire. Of course, that's very geographic dependent. CA, for example, if you own a home, it's impossible. |
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Can someone who knows explain how Roth conversions work for someone who is retired? Specifically, can I convert 401k monies to a Roth account? I keep getting advertisments about how great Roth conversions are as a retirment income strategy. FWIW, I converted my Traditional IRA to a Roth back when Roth became available. Back then I was able to spread the conversion over four years to lessen the tax bite. And I'm still putting money in the Roth to the yearly max allowed. |
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Originally Posted By bugs: Can someone who knows explain how Roth conversions work for someone who is retired? Specifically, can I convert 401k monies to a Roth account? I keep getting advertisments about how great Roth conversions are as a retirment income strategy. FWIW, I converted my Traditional IRA to a Roth back when Roth became available. Back then I was able to spread the conversion over four years to lessen the tax bite. And I'm still putting money in the Roth to the yearly max allowed. My answer would be hard to understand. Let’s get a guru in here. @Falarak |
"It behooves every man to remember that the work of the critic is of altogether secondary importance, and that, in the end, progress is accomplished by the man who does things."
Theodore Roosevelt
Theodore Roosevelt
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Originally Posted By bugs: Can someone who knows explain how Roth conversions work for someone who is retired? Specifically, can I convert 401k monies to a Roth account? I keep getting advertisments about how great Roth conversions are as a retirment income strategy. FWIW, I converted my Traditional IRA to a Roth back when Roth became available. Back then I was able to spread the conversion over four years to lessen the tax bite. And I'm still putting money in the Roth to the yearly max allowed. First - lets talk about the purposes of Roth IRA conversions. The primary purpose for most people is to pay taxes now on money in an IRA in a lower tax bracket, for the purpose of allowing that money to then grow tax free, and use it later. This is especially beneficial when your current tax bracket is in the 12%, 22%, or 24% tax brackets. The idea is that taxes will increase later over time. Another BIG reason to favor Roth IRA conversions, is to be proactive and reduce the amount of pretax money in IRA/401k accounts, because of RMD's (required minimum distributions). RMD's can end up forcing you to withdraw more than you need for income, and can push you into bigger tax brackets later in life. This is especially important for people who have other income (pensions, interest and dividends, rental property, social security) and the RMD from any pretax IRA/401k accounts could force you to be taxed at much higher tax brackets (and the unknown factor of how much might taxes go up in the future). This is also very important for people with very large pretax IRA/401k accounts where the RMD's are projected to be a big problem. Another reason to favor ROTH IRA conversions, is for inheritance. Money in a pretax IRA that is inherited must be withdrawn over a 10 year period, that might push the beneficiary into a VERY high tax bracket and you just end up giving more of your nest egg to the government. Additionally, if you were taking RMD's on these accounts at the time you pass and they are inherited, the beneficiary is forced to take those RMD's as well and they cannot control when they pull the money out on their own schedule. When you convert to a ROTH IRA, beneficiaries still have a 10 year window to empty the Roth, HOWEVER, there are no RMD's on any ROTH IRA account, so they can wait and let it grow tax free for 10 years, then withdraw it all lump sum at the end, with no tax consequences for them at all. Lastly, RMD's can have a cascading effect on total effective taxations, pushing the amount of your SS benefits that are taxed to a higher percentage, and pushing what you have to pay for Medicare part B costs (IRMAA). Based on all this - are Roth IRA conversions right for you? The answer is complex. It depends. It depends on how much you have in pretax IRA/401k accounts. It depends on your current income. It depends on your ability to control your taxable income now and in the future. It depends on your individual life expectancy. It depends on your beneficiaries, their tax situation now and/or in the future. It depends on the unknown - what will happen to future tax rates and brackets. It depends on if you have a spouse, and how much you will be impacted by losing half your standard deduction on your income taxes. |
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Originally Posted By FALARAK: First - lets talk about the purposes of Roth IRA conversions. The primary purpose for most people is to pay taxes now on money in an IRA in a lower tax bracket, for the purpose of allowing that money to then grow tax free, and use it later. This is especially beneficial when your current tax bracket is in the 12%, 22%, or 24% tax brackets. The idea is that taxes will increase later over time. Another BIG reason to favor Roth IRA conversions, is to be proactive and reduce the amount of pretax money in IRA/401k accounts, because of RMD's (required minimum distributions). RMD's can end up forcing you to withdraw more than you need for income, and can push you into bigger tax brackets later in life. This is especially important for people who have other income (pensions, interest and dividends, rental property, social security) and the RMD from any pretax IRA/401k accounts could force you to be taxed at much higher tax brackets (and the unknown factor of how much might taxes go up in the future). This is also very important for people with very large pretax IRA/401k accounts where the RMD's are projected to be a big problem. Another reason to favor ROTH IRA conversions, is for inheritance. Money in a pretax IRA that is inherited must be withdrawn over a 10 year period, that might push the beneficiary into a VERY high tax bracket and you just end up giving more of your nest egg to the government. Additionally, if you were taking RMD's on these accounts at the time you pass and they are inherited, the beneficiary is forced to take those RMD's as well and they cannot control when they pull the money out on their own schedule. When you convert to a ROTH IRA, beneficiaries still have a 10 year window to empty the Roth, HOWEVER, there are no RMD's on any ROTH IRA account, so they can wait and let it grow tax free for 10 years, then withdraw it all lump sum at the end, with no tax consequences for them at all. Lastly, RMD's can have a cascading effect on total effective taxations, pushing the amount of your SS benefits that are taxed to a higher percentage, and pushing what you have to pay for Medicare part B costs (IRMAA). Based on all this - are Roth IRA conversions right for you? The answer is complex. It depends. It depends on how much you have in pretax IRA/401k accounts. It depends on your current income. It depends on your ability to control your taxable income now and in the future. It depends on your individual life expectancy. It depends on your beneficiaries, their tax situation now and/or in the future. It depends on the unknown - what will happen to future tax rates and brackets. It depends on if you have a spouse, and how much you will be impacted by losing half your standard deduction on your income taxes. Good stuff, thank you. Not having a 401K but my son now has a couple of them, so I don't know shittake about this- Can he do a regular Roth contribution yearly and then some time in the future convert the 401Ks to Roth? Or it is also the $7500. yearly limit? |
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Originally Posted By Lowdown3: Good stuff, thank you. Not having a 401K but my son now has a couple of them, so I don't know shittake about this- Can he do a regular Roth contribution yearly and then some time in the future convert the 401Ks to Roth? Or it is also the $7500. yearly limit? Originally Posted By Lowdown3: Originally Posted By FALARAK: First - lets talk about the purposes of Roth IRA conversions. The primary purpose for most people is to pay taxes now on money in an IRA in a lower tax bracket, for the purpose of allowing that money to then grow tax free, and use it later. This is especially beneficial when your current tax bracket is in the 12%, 22%, or 24% tax brackets. The idea is that taxes will increase later over time. Another BIG reason to favor Roth IRA conversions, is to be proactive and reduce the amount of pretax money in IRA/401k accounts, because of RMD's (required minimum distributions). RMD's can end up forcing you to withdraw more than you need for income, and can push you into bigger tax brackets later in life. This is especially important for people who have other income (pensions, interest and dividends, rental property, social security) and the RMD from any pretax IRA/401k accounts could force you to be taxed at much higher tax brackets (and the unknown factor of how much might taxes go up in the future). This is also very important for people with very large pretax IRA/401k accounts where the RMD's are projected to be a big problem. Another reason to favor ROTH IRA conversions, is for inheritance. Money in a pretax IRA that is inherited must be withdrawn over a 10 year period, that might push the beneficiary into a VERY high tax bracket and you just end up giving more of your nest egg to the government. Additionally, if you were taking RMD's on these accounts at the time you pass and they are inherited, the beneficiary is forced to take those RMD's as well and they cannot control when they pull the money out on their own schedule. When you convert to a ROTH IRA, beneficiaries still have a 10 year window to empty the Roth, HOWEVER, there are no RMD's on any ROTH IRA account, so they can wait and let it grow tax free for 10 years, then withdraw it all lump sum at the end, with no tax consequences for them at all. Lastly, RMD's can have a cascading effect on total effective taxations, pushing the amount of your SS benefits that are taxed to a higher percentage, and pushing what you have to pay for Medicare part B costs (IRMAA). Based on all this - are Roth IRA conversions right for you? The answer is complex. It depends. It depends on how much you have in pretax IRA/401k accounts. It depends on your current income. It depends on your ability to control your taxable income now and in the future. It depends on your individual life expectancy. It depends on your beneficiaries, their tax situation now and/or in the future. It depends on the unknown - what will happen to future tax rates and brackets. It depends on if you have a spouse, and how much you will be impacted by losing half your standard deduction on your income taxes. Good stuff, thank you. Not having a 401K but my son now has a couple of them, so I don't know shittake about this- Can he do a regular Roth contribution yearly and then some time in the future convert the 401Ks to Roth? Or it is also the $7500. yearly limit? The above comments focus on *pretax* contributions and earnings. If you have one or more 401k accounts with ROTH contributions and earnings, those ROTH status funds still grow tax free, and can always be rolled over to a Roth IRA account if you are no longer an active employee in that plan. So MOST people will roll over their 401k accounts to a new 401k or a personal IRA. Those funds will be classified as pretax or Roth in the case of a 401k to 401k rollover, or they will be separated into two different personal IRA's, with pretax money rolling over into a traditional (pretax) IRA, and Roth funds rolling over into a ROTH IRA. There are no limits on how much you can "convert" when doing a Roth IRA conversion. There are also no limits on the amounts you can "rollover" when needed. Limits are generally based on how much you are allowed to contribute in a given year. |
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Here is an example where Roth IRA conversions could have been significant. Joe and Jane retired at age 65 and have about $48k in pension and SS income. Their expenses are VERY low, and they are able to live completely on this income. Based on this, NONE of their SS income is taxable. They have a total taxable income of $15,000 (from pension). Their standard deduction is $34,700, so they pay NO federal income tax. They also have $200,000 (pretax contributions and earnings) in a 401k/IRA account, that they do not need income from. At age 75, their 401k has grown to $300,000 and their RMD on this money is $12,000. Since their standard deduction easily covers this RMD, they do not owe any Federal income tax. Now, Joe dies. Jane's SS benefits are now partially taxable, so they have a taxable income of $18,250. Her standard deduction is now $17,750, so with the RMD she has a tax bill of $1660.00. At age 80, taxes are $2300 per year. At age 85, taxes are $3200 per year. Had Joe and Jane simply CONVERTED $20,000 per year for those first 10 years of retirement, they would have converted almost ALL of their pretax funds at no cost to them, and a lot of the growth would have converted to tax free Roth as well. Once Joe dies in that scenario, Jane would not have a federal income tax bill (or it would be very, very low) AND Jane would have the added benefit or not creating any tax burdens for her children who inherit a Roth IRA instead of a traditional IRA. The above is a simplified scenario but one I see a lot across low income retirees. The higher income models are more complex, but generally apply the scame concept of converting in the 12% tax bracket to keep from getting forced into higher brackets or higher impact of RMD's once a spouse dies. |
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Originally Posted By FALARAK: There are no limits on how much you can "convert" when doing a Roth IRA conversion. There are also no limits on the amounts you can "rollover" when needed. Limits are generally based on how much you are allowed to contribute in a given year. So does this means I can convert some or all of my 401k monies (~3.5 million) into my personal Roth IRA? I have some cash on hand to pay the taxes. |
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Originally Posted By bugs: So does this means I can convert some or all of my 401k monies (~3.5 million) into my personal Roth IRA? I have some cash on hand to pay the taxes. Originally Posted By bugs: Originally Posted By FALARAK: There are no limits on how much you can "convert" when doing a Roth IRA conversion. There are also no limits on the amounts you can "rollover" when needed. Limits are generally based on how much you are allowed to contribute in a given year. So does this means I can convert some or all of my 401k monies (~3.5 million) into my personal Roth IRA? I have some cash on hand to pay the taxes. Yes, however here is the typical process: 1. You do a rollover of all or some of your 401k pre-tax balances from the 401k into a Traditional (or sometimes called Rollover) IRA. This is a non-taxable event. 2. You then do a "conversion" of some or all of your pretax IRA balance into a personal Roth IRA. The amount you convert will be taxable income. You should have the cash available on hand to cover the taxes on this. Generally speaking MOST people will not have a 401k account once they retire. They would immediately roll their 401k pretax balances fully over to a Traditional IRA, because old 401k accounts often have limited investment choices, and fees applied once you separate from the company you worked for. An IRA opens up investment opportunities significantly. This is not always the case, but usually is true. With 3.5 million in a 401k, the RMD could become very large as you age. With a balance that large, most people would advise to work with a financial advisor to help you through this process, and ensure you are tax and inheritance optimized. Not something you want to DIY with those balances unless you become a student of all the tax complexities. But the time to act is now. You need to leverage a financial advisor who is competent and who provides tax planning, SS planning, estate planning, as part of their services offering. At those balances, I'd recommend a fee based advisor, instead of an assets under management advisor, because AUM can end up costing you tens of thousands per year. Here is an example of a fee based financial advisor that offers a full suite of tax and estate planning, that I am familiar with. This is not a recommendation per se to use these guys, just someone I have interacted with, am impressed with their services, and to help you understand how a fee based expense might look like: https://tenonfinancial.com/services-and-fees |
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Originally Posted By bugs: So does this means I can convert some or all of my 401k monies (~3.5 million) into my personal Roth IRA? I have some cash on hand to pay the taxes. What’s your age now? |
"It behooves every man to remember that the work of the critic is of altogether secondary importance, and that, in the end, progress is accomplished by the man who does things."
Theodore Roosevelt
Theodore Roosevelt
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Originally Posted By taliv: I was shocked to hear some say you should always do Roth conversion. In my experience so far, no.... not all. But I will say - for most people who DO convert and do it with intelligence from a tax perspective, they would rarely be any worse off. Most of the time if it does not benefit them, it will at least be a wash. Nobody has a crystal ball, and all of this gets impacted by what they are invested in, how much it might grow, and what happens with taxation in the future..... things we just cannot reliably predict. So we use models based on what we know. In all likelihood, people who do Roth conversion at the worst will have a wash. That's probably why some people say "always, yes". |
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Originally Posted By FALARAK: Here is an example of a fee based financial advisor that offers a full suite of tax and estate planning, that I am familiar with. This is not a recommendation per se to use these guys, just someone I have interacted with, am impressed with their services, and to help you understand how a fee based expense might look like: https://tenonfinancial.com/services-and-fees Thanks for the free advice. I do need a financial advisor as I have assets all over the map; stocks, mutual funds, T-bills, 401k, real estate, left over 529 plan money, and of course cash. Care to share your opinion on Fisher Investments? This firm shows up a lot in my feed. |
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Originally Posted By bugs: I do need a financial advisor as I have assets all over the map; stocks, mutual funds, T-bills, 401k, real estate, left over 529 plan money, and of course cash. Care to share your opinion on Fisher Investments? This firm shows up a lot in my feed. They spend a LOT in advertising.  I don't have direct experience with them - but my father-in-law uses them. However, he uses them to manage only a portion of his portfolio, and it is 100% focused on aggressive growth. They do sector rotations, and individual stock investing, so they can more easily benefit from tax loss harvesting. He likes them. I don't know if he repeatedly beats the S&P500 index or not, but I'd assume so. The real question will be - how do they manage a recessionary period? It's pretty easy to make money in a rising tide. They are an assets under management (AUM) model. They do not provide him with any advice on tax planning, social security, estate planning, etc. They only manage their portion of his portfolio. He uses a different advisor for all that other stuff. I'd have to assume that Fisher would also offer a full package approach, but I don't know and don't have direct experience. |
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Just retired early at 55. Agency offered me a retirement package I couldnt refuse. I was scared as shit to sign the line, but now that its been about 5 months, I'm so, so happy I did it. Life is good. OP, your estimate/assessment is pretty spot on. I was government so I actually have a pension. My net pension is about 60% of my salary. I took a chunk out of my 401k, but havent decided if I'm going to take a monthly amount yet. We'll see. Since I'm 55, I'm not eligible for SS benefits just yet. I have a supplemental I'll be eligible at 57, which will be $1,6000 a month. I've adjusted to the drop in pay. From a "preparation" perspective, I have all the big ticket items covered, so not i'm in maintenance mode. I rotate, and replace perishable items as needed. LOVING RETIREMENT!!! |
“Out of every one hundred men, ten shouldn't even be there, eighty are just targets, nine are the real fighters, and we are lucky to have them, for they make the battle. Ah, but the one, one is a warrior, and he will bring the others back.”
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Originally Posted By TomJefferson: It's so prevalent, I call it the "LOTTO Retirement Plan." Yeah I hear you. Then ask them how many people they know have actually won the Lotto Better to plan to fend for yourself and if some extra cash comes along that was unexpected then be thankful for that happening |
*post contains personal opinion only and should not be considered information released in an official capacity*
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Originally Posted By armoredman: Well, I didn't really have much of a choice... If you had asked me about retirement 5 years ago, I would have said my retirement plan was to die. No, I am not kidding, my ex-wife ate up so much of my money that I was deep in the hole every payday. Making it to payday with money in the bank was cause fore celebration...which she would do with my money. "Happy wife, happy life" is an absolute lie. Working overtime was just an excuse for her to order more pizza or buy more shoes. But...a little over 4 years ago I was FINALLY able to make the move I absolutely had to do if I was to live to see 60 - I divorced her, AND due to her running away after being served, I got everything, including my retirement, (I work for the state), with no alimony. We also donated a refrigerator box full of barely worn shoes and boots of hers that6 she refused to take with her. Then I married my new wife. She worked her entire life and is drawing a well earned retirement, plus still working part time to stave off the boredom until I retire in just under 4 years. I'm not saying I did anything special, but I put nose to grindstone and I did nothing but pay debts. Well, almost nothing, I did buy some guns, and my new wife told me that I would never ever sell or pawn them unless I wanted to, (I lost a LOT of stuff in the pawn shop with the ex), but I paid debts. Today, I have only one debt that I just recently acquired, 11 grand for a new AC system, (AZ eats AC units), which the chiselers want me to pay $130 a month, resulting in a 20 year loan...I don't think so, Tim. In two months I've paid a large chunk of it off already and will have that done very quickly. I don't want debt. I know what people say about good debt - I don't like owing people money. The house is paid for and the land was paid for over 100 years ago. Yes, I would LOVE to have a well, and if we end up staying here we will get one. But my wife is a saver, not a spender, and getting used to THAT lifestyle was a welcome, very welcome change. Now, I don't have to wonder if I will be able to afford cat food while living under a bridge. With two state retirements and SS, with no debts, (I haven't had a paid off car since the military, nice change), I think we can survive. There are always exceptions, but most people have a choice. My ex made the choice to not put anything away for retirement for 30 years. I was shocked at our divorce to find that she had almost nothing saved, just a small amount that her employer had put aside Now she's been playing catch up in her fifties and complaining that she will have to retire in her 70s. She wouldn't waiver on taking part of my pensions because that's all she will really have other than social security and a very small payout from TIA-CREF once she does retire. I started thinking about retirement when I was 21 A word to the wise, never assume that your spouse has the same financial and retirement mindset that you do, if you plan to be together for life. My brother pulled his big spending wife out of the financial hole he was in, and she thanked him by dragging his through divorce court for years and she's now deep into the hole again and I'm sure angling for part of my late brother and fathers' estates once they're settled. |
*post contains personal opinion only and should not be considered information released in an official capacity*
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Last year I retired at 48 Not the plan but the way it worked out. Gave up a 6 figure career that I was doing really well at. We sold our old 40 acre homestead in an area any home property over 10 acres was going for over a million And moved to an area with low cost of living and property a fraction of the cost in the old area. But no jobs besides $7hr dollar general. We now have better homestead than before, more money in the bank, and zero debt. My wife still works remotely and I’m an in demand substitute teacher do to holding a bachelor degree. I also have a monitized homestead/ prepping YouTube channel. Cost of living is almost nothing out here. Just an example plates and registration: Wisconsin about $130 a year for vet plates and like $8 here Property taxes in our old area $7k-10 And here less than $1k In 10 years + that adds up to a big savings. We also live simply 2014 Silverado work truck and 2020 Hyundai awd suv. Both paid off years ago. Not the perfect vehicles for our area (we live on top of a mountain on a rugged rural rocky road) but it works. The only concern is the cost of rugged 4x4 vehicles as they are currently trendy and really expensive. We will need to replace the Hyundai in 5 years when the warranty is over. And finding a vehicle that will last 10-20 years will be tough. Simple living is the greatest |
have gun will travel
Well you seen much combat? ......... I've seen a little on TV.
We are jolly green giants, walking the Earth with guns.
Lifetime NRA member SADLY
now GOA and ASA member!!!!!
Well you seen much combat? ......... I've seen a little on TV.
We are jolly green giants, walking the Earth with guns.
Lifetime NRA member SADLY
now GOA and ASA member!!!!!
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Originally Posted By tc556guy: There are always exceptions, but most people have a choice. My ex made the choice to not put anything away for retirement for 30 years. I was shocked at our divorce to find that she had almost nothing saved, just a small amount that her employer had put aside Now she's been playing catch up in her fifties and complaining that she will have to retire in her 70s. She wouldn't waiver on taking part of my pensions because that's all she will really have other than social security and a very small payout from TIA-CREF once she does retire. I started thinking about retirement when I was 21 A word to the wise, never assume that your spouse has the same financial and retirement mindset that you do, if you plan to be together for life. My brother pulled his big spending wife out of the financial hole he was in, and she thanked him by dragging his through divorce court for years and she's now deep into the hole again and I'm sure angling for part of my late brother and fathers' estates once they're settled. Oh, she had a plan-You. |
Never make another person a priority when they merely see you as an option...
"Some People Are Like Slinkies. They're Not Really Good For Anything, But They Bring a Smile To Your Face When Pushed Down The Stairs."
"Some People Are Like Slinkies. They're Not Really Good For Anything, But They Bring a Smile To Your Face When Pushed Down The Stairs."
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Originally Posted By dayphotog: Last year I retired at 48 Not the plan but the way it worked out. Gave up a 6 figure career that I was doing really well at. We sold our old 40 acre homestead in an area any home property over 10 acres was going for over a million And moved to an area with low cost of living and property a fraction of the cost in the old area. But no jobs besides $7hr dollar general. We now have better homestead than before, more money in the bank, and zero debt. My wife still works remotely and I’m an in demand substitute teacher do to holding a bachelor degree. I also have a monitized homestead/ prepping YouTube channel. Cost of living is almost nothing out here. Just an example plates and registration: Wisconsin about $130 a year for vet plates and like $8 here Property taxes in our old area $7k-10 And here less than $1k In 10 years + that adds up to a big savings. We also live simply 2014 Silverado work truck and 2020 Hyundai awd suv. Both paid off years ago. Not the perfect vehicles for our area (we live on top of a mountain on a rugged rural rocky road) but it works. The only concern is the cost of rugged 4x4 vehicles as they are currently trendy and really expensive. We will need to replace the Hyundai in 5 years when the warranty is over. And finding a vehicle that will last 10-20 years will be tough. Simple living is the greatest Why ditch a paid off car? I never get rid of a car until the repairs start to average out to a car payment every month, usually at between 250-280k miles. |
Never make another person a priority when they merely see you as an option...
"Some People Are Like Slinkies. They're Not Really Good For Anything, But They Bring a Smile To Your Face When Pushed Down The Stairs."
"Some People Are Like Slinkies. They're Not Really Good For Anything, But They Bring a Smile To Your Face When Pushed Down The Stairs."
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Originally Posted By TheOtherDave: Oh, she had a plan-You. Yep, It happens. I can recall a good ten plus years ago chasing a gal who was non committal and liked the friends only route. Suddenly she does a 180 and I was already moved on. My buddy then told me that the girls were hanging out at his house with his wife and noncommittal girl’s sister started spelling out the whole lifetime pension thing I had as a Gov worker. One phrase was you don’t have to love him to marry him, just get what you need in life. Not that I was ready to go over old ground but thanks for guy friends out there letting me know I was someone’s mark for a retirement plan. |
The only hyphenated names I like are cartridge names......30-06, 30-40, 38-55 etc.
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One thing @FALARAK did not mention is the 5 year rule for ROTH conversions. I'm currently in the same boat, just recently retired and rolling my 401k into IRA's. One choice was to start a new ROTH IRA at the firm but then a new 5 year clock runs on the Roth IRA, or transfer it to a ROTH IRA I already had at another firm where the 5 year clock was already running. What is a 5 year rule? Well there are two of them. Here is the explanation from Google. Roth 5-Year Rule for Earnings What it is: This rule determines when you can withdraw the earnings from your Roth IRA without paying federal income tax or a 10% early withdrawal penalty. How the clock starts: The clock starts on January 1st of the tax year you make your first contribution to any Roth IRA. What you need to meet: To withdraw earnings tax- and penalty-free, you must meet both of these conditions: Your first Roth IRA account must have been open for at least five tax years. You must be at least 59 years old, or meet another qualifying exception like death, disability, or a first-time home purchase up to a certain limit. Roth 5-Year Rule for Conversions What it is: This rule applies specifically to the principal you converted from a traditional IRA or 401(k) to a Roth IRA. It determines when you can withdraw that converted principal without a 10% early withdrawal penalty. How the clock starts: Each conversion has its own separate 5-year clock, starting on January 1st of the tax year in which the conversion occurred. What you need to meet: To avoid the 10% penalty on the converted principal, you must wait five years from the year of the conversion to withdraw it. You can still withdraw the converted principal without a penalty after five years, even if you are under age 59 , as the 10% penalty on the principal is the main issue here. Have I said, TAXES SUCK yet? |
Then conquer we must, when our cause it is just,
And this be our motto: 'In God is our trust.'
And the star-spangled banner in triumph shall wave
O'er the land of the free and the home of the brave!
And this be our motto: 'In God is our trust.'
And the star-spangled banner in triumph shall wave
O'er the land of the free and the home of the brave!
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Originally Posted By 7: One thing @FALARAK did not mention is the 5 year rule for ROTH conversions. I'm currently in the same boat, just recently retired and rolling my 401k into IRA's. One choice was to start a new ROTH IRA at the firm but then a new 5 year clock runs on the Roth IRA, or transfer it to a ROTH IRA I already had at another firm where the 5 year clock was already running. @7 This is not correct. The IRS sees all personal ROTH IRA's as a single account. There is no 5 year rule for second or third ROTH IRA accounts. If you open a new Roth IRA account, it does not start a new 5 year clock just for that account. This is true even if you close the original ROTH IRA account. However, each Roth IRA conversion does have its own 5 year timer. |
| Thanks for the clarification, seems I wasn't informed correctly, however it worked out well as I wanted to move the Roth money anyway. |
Then conquer we must, when our cause it is just,
And this be our motto: 'In God is our trust.'
And the star-spangled banner in triumph shall wave
O'er the land of the free and the home of the brave!
And this be our motto: 'In God is our trust.'
And the star-spangled banner in triumph shall wave
O'er the land of the free and the home of the brave!
| As a retired Financial Advisor I'll toss in the thought process that changed a lot of my clients thoughts about retirement. Sometimes I found it hard to convince folks that were focused on trying to keep up with their neighbors with high, immediate returns, instead of thinking for the long term. I came up with an exercise that I would do with couples. I'd ask them to close their eyes and envision THEIR retirement. Then I'd give them about a half minute to do that. Then I ask them to open their eyes and each of them tell me what they saw. Better than 90% of the time they had dramatically different visions. They seldom talked to their spouse in detail about it, and they hadn't come up with a joint vision and plan to get there. I even had a couple of arguments break out in my office about it. (Those are interesting) Everyone always thinks of retirement in terms of not having to report to a job every day, and there's a lot more to it than that. Do yourselves a favor and try thinking about retirement not as 20-30 years of vacation, but instead, as 20-30 years of unemployment. That changes the picture a lot, and it might provide some additional motivation. With God's grace, we all have a little old man or little old lady in our futures. Your job, while you're young and working, is to make sure you can take care of them. |
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Originally Posted By XSabers: As a retired Financial Advisor I'll toss in the thought process that changed a lot of my clients thoughts about retirement. Sometimes I found it hard to convince folks that were focused on trying to keep up with their neighbors with high, immediate returns, instead of thinking for the long term. I came up with an exercise that I would do with couples. I'd ask them to close their eyes and envision THEIR retirement. Then I'd give them about a half minute to do that. Then I ask them to open their eyes and each of them tell me what they saw. Better than 90% of the time they had dramatically different visions. They seldom talked to their spouse in detail about it, and they hadn't come up with a joint vision and plan to get there. I even had a couple of arguments break out in my office about it. (Those are interesting) Everyone always thinks of retirement in terms of not having to report to a job every day, and there's a lot more to it than that. Do yourselves a favor and try thinking about retirement not as 20-30 years of vacation, but instead, as 20-30 years of unemployment. That changes the picture a lot, and it might provide some additional motivation. With God's grace, we all have a little old man or little old lady in our futures. Your job, while you're young and working, is to make sure you can take care of them. Solid advice. My wife and I had that conversation a few years ago while we were in the pool with an adult beverage one evening. We were mostly on the same page and mostly solid on saving/investing/pensions. We did tweak a few things after the conversation but it was a good thing to have. I'd say you should ideally have that conversation no later than 45 yrs old and sooner is better in case you discover that you aren't where you need to be to meet your retirement goals. |
"It behooves every man to remember that the work of the critic is of altogether secondary importance, and that, in the end, progress is accomplished by the man who does things."
Theodore Roosevelt
Theodore Roosevelt
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Originally Posted By bugs: Can someone who knows explain how Roth conversions work for someone who is retired? Specifically, can I convert 401k monies to a Roth account? I keep getting advertisments about how great Roth conversions are as a retirment income strategy. FWIW, I converted my Traditional IRA to a Roth back when Roth became available. Back then I was able to spread the conversion over four years to lessen the tax bite. And I'm still putting money in the Roth to the yearly max allowed. Yes, you can, however you will have to pay tax on the 401k withdrawal. Best method is to piece meal it out to avoid higher tax brackets. Some wait until they retire and their income is much lower. This means lower income rates impacts the timing. I'd say we're in as good a shape as possible for the nest three years. Republican's lose in 28, 29 the Dems will tax us to hell and back using Trump hate as the excuse. |
"We prepare so we don't have to go to the Superdome!"
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Originally Posted By TheOtherDave: Why ditch a paid off car? I never get rid of a car until the repairs start to average out to a car payment every month, usually at between 250-280k miles. Not sure I trust Hyundai after warranty and it’s got too low of ground clearance and we have scraped bottom a few times |
have gun will travel
Well you seen much combat? ......... I've seen a little on TV.
We are jolly green giants, walking the Earth with guns.
Lifetime NRA member SADLY
now GOA and ASA member!!!!!
Well you seen much combat? ......... I've seen a little on TV.
We are jolly green giants, walking the Earth with guns.
Lifetime NRA member SADLY
now GOA and ASA member!!!!!
|
Originally Posted By dayphotog: Not sure I trust Hyundai after warranty and it’s got too low of ground clearance and we have scraped bottom a few times I see your point, however what I do is a bit different. Too late for this but I will mention it. First step is buy a cool fun vehicle that never goes out of style. Second is after it's paid for, buy another vehicle. My usual is muscle car or sports car and truck. The issues are tags, taxes, and insurance. Stay on top of it's blue book and when it gets so low an average accident repair, they'll total the vehicle. Drop the collision. The advantage is you divide your miles up between vehicles. That greatly reduces the time to have to buy again. |
"We prepare so we don't have to go to the Superdome!"
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Originally Posted By TomJefferson: I see your point, however what I do is a bit different. Too late for this but I will mention it. First step is buy a cool fun vehicle that never goes out of style. Second is after it's paid for, buy another vehicle. My usual is muscle car or sports car and truck. The issues are tags, taxes, and insurance. Stay on top of it's blue book and when it gets so low an average accident repair, they'll total the vehicle. Drop the collision. The advantage is you divide your miles up between vehicles. That greatly reduces the time to have to buy again. We usually do a modified version of this- buy a new car for either me or the wife once every 5-6 years. This way one car is usually always under 100K miles and newer (in general less problems). Last time however we didn't go this route. I had to buy a new truck and was paying cash, but we always get them to check credit while we are there. Having been out of debt and not adding anything new for over 10 years, FICO score had dropped a good bit (they want you in debt for a "good score.") F and I guy says "it's because you don't have anything going on here, looks like your dead..." So we jumped the shark a bit and about a month later bought the wife a new car also but financed a little bit of it for 2 years to get something "new" on there. With the way they do it basically demanding an autodraft from your account for the payment, it made me forget about it. And that would be the first car loan we have not paid off ahead of time due to that. I miss the old coupon book type setup. Yes I could have called for an early payoff but honestly it was busy and I forgot to do that. They definitely try to penalize the folks that pay cash, don't carry debt and aren't living large. |
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Over 30 Years in business- Thank you for your business!
Quickest ways to contact us-
912.375.1480
[email protected]