Retiring early, but where dump 401k for yearly withdrawal?

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Topic Author
RomeSobe
Posts: 14
Joined: Mon Oct 06, 2014 6:33 pm

Retiring early, but where dump 401k for yearly withdrawal?

Post by RomeSobe »

Hi All,

I'm new on here.. I would like some advice on where to dump my 401k after I retire in a few years, and I plan on withdrawing 5-6% yearly (until I turn 62, then Social Security would kick in also)..
(my current situation)

I am 40yrs young, and plan on retiring in 4yrs (end of 2018).
I am single, no kids..
I currently have 400k in my 401k, average growth has been 6-10% yearly, and I add 12k to it every year from my salary.
If things go right, I should have a little over 510k in my 401k, and another 120k in my bank savings.

I will be moving to Thailand when I retire and will only need around 28-30k yearly to live comfortably.. (I've been to Thailand many times, so I know that amount will be fine for my lifestyle)

Using the S&P 500 dividend yield or 10-year treasury yield as a safe withdrawal rate will ensure that I do not run out of money in retirement, so I will not drain the principal.
++ withdraw 6% yearly ++ (withdraw 6% until I turn 62, when I start to receive Social Security, and my withdraws will go down to about 2-3% yearly, if needed)

Retirement Nut - 6% withdraw rate - 10-year yield withdraw rate (3%) - withdrawal overage - Year left until your money runs out
500k - 30k - 15k - 15k - 33yrs

I will use my 120k bank savings during those first 4yrs ($30k yr), so I will not need to dip into my retirement money.. (So, my Retirement Nut could be closer to 600k by then)

So, my question is, where should I dump my 401k, that will provide around 3% (for higher) interest every year, and will allow me to start making withdraws 4yrs after I dump my money there.?? ** with the least amount of taxed penalty **
Laura
Posts: 7975
Joined: Mon Feb 19, 2007 6:40 pm

Re: Retiring early, but where dump 401k for yearly withdrawa

Post by Laura »

Although you are retiring soon your portfolio will need to last you 40-50 years so you will need to keep investing for growth. That leads you toward selecting an asset allocation that will have enough growth to give you 3% after inflation which will require taking on equity risk. Once you settle on a desired asset allocation I suggest you consider a Vanguard Target Retirement fund which will give you a broadly diversified portfolio in just one fund that will be very easy to manage from Thailand.

When calculating your budget, don't forget to take into account major medical expenses. While less costly in Thailand, at some point you may need to return to the US for medical care. That can really kill your budget. To help you cover that you might add on another few years of work or increase your savings into retirement accounts to the annual maximum limit of $17.5k.

Also, because you will need to withdraw money early you could be hit with a 10% penalty. Instead, you should consider Substantially Equal Period Payments (SEPP) which allows you to make withdrawals over an extended period of time.

Hope this helps.

Laura
The views presented are my own and not necessarily those of the Department of State or the U.S. Government.
Topic Author
RomeSobe
Posts: 14
Joined: Mon Oct 06, 2014 6:33 pm

Re: Retiring early, but where dump 401k for yearly withdrawa

Post by RomeSobe »

Thanks Laura..!

I've done some reading on Substantially Equal Periodic Payments (SEPP), but it does not fully make sense to me.. Not really understanding how it works..
Once initiated, the payments must be maintained for the greater of either 5 years and a day, or until one reaches the age of 59 1/2, the age at which IRA withdrawals can usually avoid the early withdrawal penalty tax.
** Not sure what those payments are.??
Laura
Posts: 7975
Joined: Mon Feb 19, 2007 6:40 pm

Re: Retiring early, but where dump 401k for yearly withdrawa

Post by Laura »

There are three methods to determine the amount you will need to take. Vanguard has some information on them but also advises that this is complex and you may need help. This document from Vanguard might help.

Laura
The views presented are my own and not necessarily those of the Department of State or the U.S. Government.
bhsince87
Posts: 2914
Joined: Thu Oct 03, 2013 1:08 pm

Re: Retiring early, but where dump 401k for yearly withdrawa

Post by bhsince87 »

Your withdrawal assumptions seem a bit aggressive to me, but to each his own....

I'd consider moving some of your 401k to a Roth account while you are in the zero income years. That should buy you few years of tax free withdraws later on.
Time is what we want most, but what we use worst. William Penn
madbrain
Posts: 6804
Joined: Thu Jun 09, 2011 5:06 pm
Location: San Jose, California

Re: Retiring early, but where dump 401k for yearly withdrawa

Post by madbrain »

RomeSobe wrote:.
I currently have 400k in my 401k, average growth has been 6-10% yearly, and I add 12k to it every year from my salary.
10% is on the optimistic side for long term returns in your 401k unless you are taking quite a bit of risk.
What's your annualized return since you have been investing in your 401k ? This is a better predictor than a range of 6-10% .
I will be moving to Thailand when I retire and will only need around 28-30k yearly to live comfortably.. (I've been to Thailand many times, so I know that amount will be fine for my lifestyle)
Have you been sick in Thailand before ? How much did treatments cost ?
Are you accounting for health costs in those 28-30k ?
You may be healthy right now, but in old age it's a good bet you won't always be.
I have heard that healthcare in Thailand is pretty good. I don't know about the price.
As a foreigner, you may have to pay a higher share of healthcare costs than a citizen.
I'm not sure if there are any pre-existing condition exclusions to worry about.
I have considered Thailand as a retirement destination myself, but I don't know if I could get coverage there as I live with HIV - I would hope so since HIV is very prevalent in Thailand.

I would also research the inflation rate in Thailand, as well as currency fluctuations.

Inflation does not look too threatening. http://www.tradingeconomics.com/thailand/inflation-cpi

For currency, it looks like there is quite bit of variance, which may move your living costs up or down if you are investing in US dollars.
http://www.xe.com/currencycharts/?from= ... B&view=10Y

Lastly, the political situation in Thailand can be unstable. Witness the coup earlier this year. And it wasn't the first one - every few years, there is another.
The residency conditions for expatriates may change over time.

Those issues are on the list that have made me take pause on retiring in Thailand. I'm only 38 and with a net worth about 4x yours - but married, also with no kids.

As far as the 401k goes, I believe SEPP are the way to go.
Topic Author
RomeSobe
Posts: 14
Joined: Mon Oct 06, 2014 6:33 pm

Re: Retiring early, but where dump 401k for yearly withdrawa

Post by RomeSobe »

madbrain wrote:
10% is on the optimistic side for long term returns in your 401k unless you are taking quite a bit of risk.
What's your annualized return since you have been investing in your 401k ? This is a better predictor than a range of 6-10% .
I mentioned 6-10% annualized, but have been using the low end (4-6%) as my measurement of things once I retire..
Have you been sick in Thailand before ? How much did treatments cost ?
Are you accounting for health costs in those 28-30k ?
I have never been sick before in Thailand, but I know how things work there.. Also, I will have international health care coverage, in which I can go to certain hospitals all around Asia if needed.. and yes, I have included that cost ($120 monthly) in my $28-30k.
I have many friends that live in Thailand now, who are retired military, including my cousin, so I understand all that I need while I am there..

Lastly, the political situation in Thailand can be unstable. Witness the coup earlier this year. And it wasn't the first one - every few years, there is another.
The residency conditions for expatriates may change over time.
Very true, if things do get out of control in Thailand, I would move to Philippines or Cambodia as backup plan.. I've thought about this point alot, but definitely good point.
Thanks for your input..!
madbrain
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Location: San Jose, California

Re: Retiring early, but where dump 401k for yearly withdrawa

Post by madbrain »

RomeSobe wrote: I have never been sick before in Thailand, but I know how things work there.. Also, I will have international health care coverage, in which I can go to certain hospitals all around Asia if needed.. and yes, I have included that cost ($120 monthly) in my $28-30k.
I have many friends that live in Thailand now, who are retired military, including my cousin, so I understand all that I need while I am there..
I believe your $120/month is likely way underestimated for health costs, even in Thailand.
I just spent a couple of hours researching the issue since it interests me in the long run, and I'm going to Thailand again later this year.

From what I found, all private medical insurance policies exclude pre-existing conditions coverage.

And the kicker - they all exclude coverage for HIV anyway, even if you contract it after you live there, something to consider when about 1% of the population already has it (vs 0.3% prevalence in the US).
Generics are are available for most of the HIV meds, but not all.
http://www.ajarnforum.net/vb/health-and ... and-3.html
As it turns out, the meds I take are not on the generic list, and the current cost from the Red Cross for the regimen I am on would be 18780 THB per month or about $580.
The US retail price at Costco would be $2657/month without insurance.
But I currently pay $6/month copay for these 2 meds ($10 for 90 days each) currently on my Kaiser plan in California, and the pre-subsidy group premium is less than $306/month (less than $100/month after employer subsidy). The plan has no deductible. And I have 6 other prescriptions as well. And the prescriptions are not 100% of my healthcare costs, I visit the doctor and go to the lab too once in a while.

So, as strange as it might seem, my personal healthcare costs would actually be far higher if I lived in Thailand than they are in the US.
Even doing the math against an ACA plan instead of employer based plan, assuming early retirement in the US, the cost would still be higher in Thailand, just not by as much.

Now, I don't mean to say that this is directly relevant to your situation, but I would seriously check the fine print on the international health insurance coverage you have. HIV might not be the only condition that turns out to be more expensive for patients in Thailand.
Topic Author
RomeSobe
Posts: 14
Joined: Mon Oct 06, 2014 6:33 pm

Re: Retiring early, but where dump 401k for yearly withdrawa

Post by RomeSobe »

madbrain wrote: I believe your $120/month is likely way underestimated for health costs, even in Thailand.
I just spent a couple of hours researching the issue since it interests me in the long run, and I'm going to Thailand again later this year.

From what I found, all private medical insurance policies exclude pre-existing conditions coverage.

And the kicker - they all exclude coverage for HIV anyway, even if you contract it after you live there, something to consider when about 1% of the population already has it (vs 0.3% prevalence in the US).
Generics are are available for most of the HIV meds, but not all.
http://www.ajarnforum.net/vb/health-and ... and-3.html
As it turns out, the meds I take are not on the generic list, and the current cost from the Red Cross for the regimen I am on would be 18780 THB per month or about $580.
The US retail price at Costco would be $2657/month without insurance.
But I currently pay $6/month copay for these 2 meds ($10 for 90 days each) currently on my Kaiser plan in California, and the pre-subsidy group premium is less than $306/month (less than $100/month after employer subsidy). The plan has no deductible. And I have 6 other prescriptions as well. And the prescriptions are not 100% of my healthcare costs, I visit the doctor and go to the lab too once in a while.

So, as strange as it might seem, my personal healthcare costs would actually be far higher if I lived in Thailand than they are in the US.
Even doing the math against an ACA plan instead of employer based plan, assuming early retirement in the US, the cost would still be higher in Thailand, just not by as much.

Now, I don't mean to say that this is directly relevant to your situation, but I would seriously check the fine print on the international health insurance coverage you have. HIV might not be the only condition that turns out to be more expensive for patients in Thailand.
I totally hear where your coming from, and your input is definitely noted..! I am taking a risk moving to Thailand when I retire when it comes to certain things (health care being the main one), but I am currently very healthy (eat right, exercise daily..etc..etc), and only issue that runs in my family is diabetes, which I do not have.. As for HIV, it is high everywhere, you just have to be careful, which I am..
As I mentioned before, I've been to Thailand 20+ times, and many other countries in Asia and South America, so I'm not a rookie at this.. :D
The pros far outweigh the cons..

My main concern is just deciding where to dump my 401k after I retire, where I am able to withdraw 2-6% every year, as needed..
I will study up on SEP, which yourself and Laura have mentioned..
anonforthis
Posts: 414
Joined: Sat Oct 19, 2013 1:45 pm

Re: Retiring early, but where dump 401k for yearly withdrawa

Post by anonforthis »

RomeSobe wrote:
madbrain wrote: I believe your $120/month is likely way underestimated for health costs, even in Thailand.
I just spent a couple of hours researching the issue since it interests me in the long run, and I'm going to Thailand again later this year.

From what I found, all private medical insurance policies exclude pre-existing conditions coverage.

And the kicker - they all exclude coverage for HIV anyway, even if you contract it after you live there, something to consider when about 1% of the population already has it (vs 0.3% prevalence in the US).
Generics are are available for most of the HIV meds, but not all.
http://www.ajarnforum.net/vb/health-and ... and-3.html
As it turns out, the meds I take are not on the generic list, and the current cost from the Red Cross for the regimen I am on would be 18780 THB per month or about $580.
The US retail price at Costco would be $2657/month without insurance.
But I currently pay $6/month copay for these 2 meds ($10 for 90 days each) currently on my Kaiser plan in California, and the pre-subsidy group premium is less than $306/month (less than $100/month after employer subsidy). The plan has no deductible. And I have 6 other prescriptions as well. And the prescriptions are not 100% of my healthcare costs, I visit the doctor and go to the lab too once in a while.

So, as strange as it might seem, my personal healthcare costs would actually be far higher if I lived in Thailand than they are in the US.
Even doing the math against an ACA plan instead of employer based plan, assuming early retirement in the US, the cost would still be higher in Thailand, just not by as much.

Now, I don't mean to say that this is directly relevant to your situation, but I would seriously check the fine print on the international health insurance coverage you have. HIV might not be the only condition that turns out to be more expensive for patients in Thailand.
I totally hear where your coming from, and your input is definitely noted..! I am taking a risk moving to Thailand when I retire when it comes to certain things (health care being the main one), but I am currently very healthy (eat right, exercise daily..etc..etc), and only issue that runs in my family is diabetes, which I do not have.. As for HIV, it is high everywhere, you just have to be careful, which I am..
As I mentioned before, I've been to Thailand 20+ times, and many other countries in Asia and South America, so I'm not a rookie at this.. :D
The pros far outweigh the cons..

My main concern is just deciding where to dump my 401k after I retire, where I am able to withdraw 2-6% every year, as needed.
I will study up on SEP, which yourself and Laura have mentioned..


Congrats on your successful planning and early retirement. I think 28-30k a year is a lot to live on in Thailand. If you live a little further outside a big city, you don't have to worry about HIV too much. Also, try to learn the local language, things will be a lot cheaper if you do speak the language.
Topic Author
RomeSobe
Posts: 14
Joined: Mon Oct 06, 2014 6:33 pm

Re: Retiring early, but where dump 401k for yearly withdrawa

Post by RomeSobe »

anonforthis wrote: Congrats on your successful planning and early retirement. I think 28-30k a year is a lot to live on in Thailand. If you live a little further outside a big city, you don't have to worry about HIV too much. Also, try to learn the local language, things will be a lot cheaper if you do speak the language.
Thank you, and you are definitely correct.. 28-30k is alot to live in Thailand for someone not living in BKK.. Even 24k a year is fine.. I'm still debating on Chang Mai or Pattaya (Jomtien area).. As for learning Thai, I definitely plan on it, and it helps that my cousin who lives there is fluent.
anonforthis
Posts: 414
Joined: Sat Oct 19, 2013 1:45 pm

Re: Retiring early, but where dump 401k for yearly withdrawa

Post by anonforthis »

RomeSobe wrote:
anonforthis wrote: Congrats on your successful planning and early retirement. I think 28-30k a year is a lot to live on in Thailand. If you live a little further outside a big city, you don't have to worry about HIV too much. Also, try to learn the local language, things will be a lot cheaper if you do speak the language.
Thank you, and you are definitely correct.. 28-30k is alot to live in Thailand for someone not living in BKK.. Even 24k a year is fine.. I'm still debating on Chang Mai or Pattaya (Jomtien area).. As for learning Thai, I definitely plan on it, and it helps that my cousin who lives there is fluent.

Do you have a degree? If you get bored (after hanging out at the beach all day). You can get a part time job teaching English in the evening. It will be only a few hours but you will meet good people while making some money. You get pay more if you have a bachelor degree.
Topic Author
RomeSobe
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Re: Retiring early, but where dump 401k for yearly withdrawa

Post by RomeSobe »

anonforthis wrote: Do you have a degree? If you get bored (after hanging out at the beach all day). You can get a part time job teaching English in the evening. It will be only a few hours but you will meet good people while making some money. You get pay more if you have a bachelor degree.
Yes, I have a Master's degree in Engineering.
Have any links or info on part time job teaching English..?
Swampy
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Re: Retiring early, but where dump 401k for yearly withdrawa

Post by Swampy »

I suggest you read Otar's work sometime in the next four years, especially the book entitled "High Expectations and False Dreams."
If I have seen further, it was by standing on the shoulders of giants.
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swimirvine
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Re: Retiring early, but where dump 401k for yearly withdrawa

Post by swimirvine »

This is a very Vanguard biased site ... but for a good reason. If you don't know about Vanguard, it's the closest thing to a non-profit investment company that you will find. Increases in revenue are given back to the investors in the form of lower fees.

My suggestion would be to roll over your 401k to a roll over IRA at Vanguard. Then invest the money in a balanced mutual fund that matches your desired asset allocation. Some possibilities include:

Vanguard Target Retirement Funds
or
Vanguard LifeStrategy Funds

Good Luck!
The way I invest my money is not the right way to invest, it's the right way for ME to invest.
Topic Author
RomeSobe
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Joined: Mon Oct 06, 2014 6:33 pm

Re: Retiring early, but where dump 401k for yearly withdrawa

Post by RomeSobe »

swimirvine wrote: My suggestion would be to roll over your 401k to a roll over IRA at Vanguard. Then invest the money in a balanced mutual fund that matches your desired asset allocation. Some possibilities include:

Vanguard Target Retirement Funds
or
Vanguard LifeStrategy Funds

Good Luck!
Thanks for the input.. Laura also mentioned Vanguard Target Retirement Funds, so I will definitely look into it.!
Spirit Rider
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Re: Retiring early, but where dump 401k for yearly withdrawa

Post by Spirit Rider »

Have you calculated your SS benefit at 62. You should really download the AnyPIA app from SS.GOV. That is the only thing that will allow you to properly calculate your benefit given the planned scenario.

Since you have a masters degree, you probably will only have 20 years of significant earnings. Your SS benefit is calculated from your 35 highest wage indexed earnings. You will have many zero years and low wage (school) years. Even if many of those 20 years are near or above the max wage base, your average indexed monthly earnings are probably mid range. Now consider that if you retire at 62 (being born in 1970) your benefits will only be 70% of your benefit at 67. I would take a WAG and guess your benefit at 62 in current dollars to be about $1500.
anonforthis
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Re: Retiring early, but where dump 401k for yearly withdrawa

Post by anonforthis »

RomeSobe wrote:
anonforthis wrote: Do you have a degree? If you get bored (after hanging out at the beach all day). You can get a part time job teaching English in the evening. It will be only a few hours but you will meet good people while making some money. You get pay more if you have a bachelor degree.
Yes, I have a Master's degree in Engineering.
Have any links or info on part time job teaching English..?

You have to go there to apply. Or ask your cousin to take you to the local colleges. I'm sure you will get more info after living there a few years. Enjoy the food and the weather !!
Topic Author
RomeSobe
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Joined: Mon Oct 06, 2014 6:33 pm

Re: Retiring early, but where dump 401k for yearly withdrawa

Post by RomeSobe »

Spirit Rider wrote:Have you calculated your SS benefit at 62. You should really download the AnyPIA app from SS.GOV. That is the only thing that will allow you to properly calculate your benefit given the planned scenario.

Since you have a masters degree, you probably will only have 20 years of significant earnings. Your SS benefit is calculated from your 35 highest wage indexed earnings. You will have many zero years and low wage (school) years. Even if many of those 20 years are near or above the max wage base, your average indexed monthly earnings are probably mid range. Now consider that if you retire at 62 (being born in 1970) your benefits will only be 70% of your benefit at 67. I would take a WAG and guess your benefit at 62 in current dollars to be about $1500.
Hi Spirit Rider, you are correct..! I used Social Security Quick Calculator : http://www.ssa.gov/OACT/quickcalc/index.html
$1500/month covers all my expenses that I would need to live comfortably in Thailand, and I would withdraw also 2-3% yearly from my 401k depending on what the S&P 500 dividend yield or 10-year government bond yield rate, to cover any extra money that I might need.. So technically I would not be touching my 401k principal.
cherijoh
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Location: Charlotte NC

Re: Retiring early, but where dump 401k for yearly withdrawa

Post by cherijoh »

RomeSobe wrote:Thanks Laura..!

I've done some reading on Substantially Equal Periodic Payments (SEPP), but it does not fully make sense to me.. Not really understanding how it works..
Once initiated, the payments must be maintained for the greater of either 5 years and a day, or until one reaches the age of 59 1/2, the age at which IRA withdrawals can usually avoid the early withdrawal penalty tax.
** Not sure what those payments are.??
The payments are based on your life expectancy and frankly your balance isn't large enough to sustain your desired withdrawal rate. The most conservative method (which minimizes the risk that you will deplete your account prematurely), would only allow you to withdraw ~2% of your balance per year. The other two methods would give you higher withdrawal rates, but nowhere in the neighborhood of 6% in this low interest rate environment.

FYI, if you don't meet the terms of the SEPP rules for the entire period (in your case from age 44 to 59 1/2), then all early withdrawals will become subject to the 10% penalty retroactively.

You need a new plan.
Topic Author
RomeSobe
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Joined: Mon Oct 06, 2014 6:33 pm

Re: Retiring early, but where dump 401k for yearly withdrawa

Post by RomeSobe »

cherijoh wrote: The payments are based on your life expectancy and frankly your balance isn't large enough to sustain your desired withdrawal rate. The most conservative method (which minimizes the risk that you will deplete your account prematurely), would only allow you to withdraw ~2% of your balance per year. The other two methods would give you higher withdrawal rates, but nowhere in the neighborhood of 6% in this low interest rate environment.

FYI, if you don't meet the terms of the SEPP rules for the entire period (in your case from age 44 to 59 1/2), then all early withdrawals will become subject to the 10% penalty retroactively.

You need a new plan.
Thanks for your input, but I do not need a new plan.. I read over the SEPP rules a few times over, and just talked with someone from Vanguard..
Everything still works out..

even with my withdrawing 5% yearly, until I turn 62, when I start to receive Social Security

Retirement Nut - 5% withdraw rate - 10-year yield withdraw rate (3%) - withdrawal overage
500k - 25k - 15k - 10k

62 yrs old (when I can start getting Social Security)
-47 yrs old (age when I start the SEPP program withdrawing money from 401k)
------------
15 yrs (yrs of taking withdrawal/touching my 401k principal)

500k * .02 (2% withdrawal overage) = 10k (depleting from my 401k principal yearly) * 15 yrs = 150k

500k
-150k
-------
350k (401k principal once I start to receive Social Security money)

350k * .03 = 10,500 (yearly withdraw)

$1500 (monthly Social Security)
+ 875 (monthly from 401k withdraw)
--------
$2375 still living comfortably in Thailand..

and I am basing only a 3% yearly return on my 401k once I retire.. that can easily be 6% a year, if I am smart with my investments..
So, I see no issues with my plan.. If I am missing something, feel free to point it out, as I am always open for input and suggestions.
Kaufmanrider
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Re: Retiring early, but where dump 401k for yearly withdrawa

Post by Kaufmanrider »

I retired early (49) and have 72T plan in place.

I ran your numbers in the calculator at 72t.net (good site to read and learn about 72T distributions).

With a $500,000 balance I came up with these numbers:

Minimum Distribution - $13,513.51
(this one must be recalculated annually based on age and IRA balance. It can go up or down)

Amortization - $20,117.96
(calculate once and stays the same during the 72T)

Annuitized - $20,049.72
(calculate once and stays the same during the 72T)

For Annuitized and Amortization, you use your age, account balance and 120 percent of the federal mid-term rate for either of the two months immediately preceding the month in which the distribution begins. Currently it is low but in 4 years it should be higher which will help give you a bigger annual payout.
Topic Author
RomeSobe
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Joined: Mon Oct 06, 2014 6:33 pm

Re: Retiring early, but where dump 401k for yearly withdrawa

Post by RomeSobe »

Kaufmanrider wrote:I retired early (49) and have 72T plan in place.

I ran your numbers in the calculator at 72t.net (good site to read and learn about 72T distributions).

With a $500,000 balance I came up with these numbers:

Minimum Distribution - $13,513.51
(this one must be recalculated annually based on age and IRA balance. It can go up or down)

Amortization - $20,117.96
(calculate once and stays the same during the 72T)

Annuitized - $20,049.72
(calculate once and stays the same during the 72T)

For Annuitized and Amortization, you use your age, account balance and 120 percent of the federal mid-term rate for either of the two months immediately preceding the month in which the distribution begins. Currently it is low but in 4 years it should be higher which will help give you a bigger annual payout.
Thanks for that link.. I like the 72(q) SEPP Calculator, it provides me with more detailed info.!!!
I will retire end of 2018, but won't start using SEPP until 2021 (since I will have around 120k in bank savings), so my 500k might be more like 540k or so by that time, so I should see higher annual payout.
Thanks again for the website..!
madbrain
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Re: Retiring early, but where dump 401k for yearly withdrawa

Post by madbrain »

RomeSobe wrote: I totally hear where your coming from, and your input is definitely noted..! I am taking a risk moving to Thailand when I retire when it comes to certain things (health care being the main one), but I am currently very healthy (eat right, exercise daily..etc..etc), and only issue that runs in my family is diabetes, which I do not have..
It's great that you are healthy now, keep it up ! But things generally don't stay that way forever. Most of us will get some serious illness in our life.
Healthcare costs typically grow with age as a result. You may have a $120 premium now because of your age and because you are not utilizing the healthcare system much, but it could become higher over time as you age and become less healthy.

For example, US health insurers, pre-Obamacare, used to basically drop patients when they got too sick by raising the premium to an unaffordable level. You will want to make sure your insurer can't do that to you in Thailand, otherwise, it won't do you much good when you actually get sick. The healthcare system in Thailand and in most Asian countries likely offers much less protections for patients than what we have in the US now - which is still far from ideal, but that's another debate.

Even with my own situation, I could switch to some other drug combination that has generics in Thailand and be able to afford the meds. But the combo I am on has the fewest side effects on the market and that's why I am on that particular one, so I'm not keen on switching meds. My husband takes a different combo which has generics in Thailand and would cost less than $100/month.
Eleven
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Joined: Wed Oct 08, 2014 4:04 am
Location: Thailand

Re: Retiring early, but where dump 401k for yearly withdrawa

Post by Eleven »

.
Hello from Thailand.

I've been living in Thailand for 10+ years -- retired from the USA.
Perhaps I can offer suggestions for anyone considering retiring here -- as is RomeSobe.
RomeSobe wrote: I am 40yrs young, and plan on retiring in 4yrs (end of 2018).
... Please be sure you meet the age requirement for visa extensions before making plans.
At this time, the legal minimum age for retirement visa in Thailand is 50 years.
There are other ways to stay in Thailand for several years at a time -- for example: to study the language -- but those ways have their own requirements.
Best to discuss with a Thai lawyer visa specialist during a reconnaissance visit here.
(Email won't work, because most Thai businesses simply don't answer emails.)
RomeSobe wrote: in my 401k, average growth has been 6-10% yearly ... I will be moving to Thailand when I retire and will only need around 28-30k yearly to live comfortably.
... That amount is just above the minimum legal requirement.
At this time, Thailand requires retired expats to have verified income of US$ 24,000 per year.
You don't need to spend it all in Thailand, just show that you have it available every year.
There are several ways to satisfy that money requirement: easiest is to deposit US$ 24,000 in a savings account or fixed deposit account in a Thai bank.
The interest is virtually nothing.
And with steady inflation in Thailand now, the minimum is likely to increase in the future.
I wouldn't be surprised to see minimum US$ 30,000 before long.
where dump 401k for yearly withdrawal?
... Have you considered gold & silver storage?
(Real metal, not paper metal, not ETF metal.)
As I write this, gold and silver prices are at long-time lows -- contrarians like me are very happy about that.
Because metal prices are so depressed right now, some dealers in Asia are offering very low markups over spot.

... If any specific or personal questions, I'm willing to discuss in private messages or email.

.11.
Thailand
Topic Author
RomeSobe
Posts: 14
Joined: Mon Oct 06, 2014 6:33 pm

Re: Retiring early, but where dump 401k for yearly withdrawa

Post by RomeSobe »

Eleven wrote: ... Please be sure you meet the age requirement for visa extensions before making plans.
At this time, the legal minimum age for retirement visa in Thailand is 50 years.
There are other ways to stay in Thailand for several years at a time -- for example: to study the language -- but those ways have their own requirements.
Best to discuss with a Thai lawyer visa specialist during a reconnaissance visit here.
(Email won't work, because most Thai businesses simply don't answer emails.)
hi Eleven, and thanks for your input..
I do know about the minimum age and verified income of US$ 24,000 per year needed for retirement visa.
My first year, I plan on doing the visa extension runs, until I decide that I stay or move to Philippines or Cambodia..
Eleven wrote: ... Have you considered gold & silver storage?
(Real metal, not paper metal, not ETF metal.)
As I write this, gold and silver prices are at long-time lows -- contrarians like me are very happy about that.
Because metal prices are so depressed right now, some dealers in Asia are offering very low markups over spot.
I haven't considered gold & silver storage.. I'll look into it.. thanks..
Alan S.
Posts: 12669
Joined: Mon May 16, 2011 6:07 pm
Location: Prescott, AZ

Re: Retiring early, but where dump 401k for yearly withdrawa

Post by Alan S. »

Comments on your proposed SEPP:

1) Starting at 47.5 means you will be committed to 12 years in this rigid plan. That is a very long plan, and therefore more subject to unintended disruptions.
2) While interest rates are almost sure to be higher in 4 years, with the current 120 mid term rate, you can only withdraw 4% of your opening value. A fixed dollar plan contemplates taking out the same amount every year.
3) The IRS has approved a recalculated plan, under which you must apply the current 120 mid term rate each year, update your balance (typically 12/31 balance), and update your age. Since rates would rise and your higher age would boost the payout, the only question is how your balance would change. A bear market could blow this up. SInce you must do a new calculation every year, it is also more risky due to execution error risk. (3 factors every year for 12 years is 36 figures that must be applied without error). Also, the IRS sees very few recalculated plans, so this would attract more attention. In the unlikely event your investments did so well along with much higher interest rates that you wanted to reduce your distribution, you always have a one time option to switch to the RMD method which produces a much lower payout.
4) Even though your plan would be a long one, it may still save more taxes if you started somewhat sooner and each year you added withdrawals from taxable savings to supplement the SEPP. That would reduce your taxable income in each year due to a lower SEPP distribution. Better check on tax treaty between US and Thailand to determine your total tax liability.
5) Do NOT execute a SEPP from your 401k plan. It is legal, but you have much better control of your account using an IRA rollover. Too many things can happen in a 401k plan that you have no control over, and 401k administrators provide no support for your plan. For example, if you take out too much from an IRA you can roll it back within 60 days, but you could not roll anything back to your 401k. The 401k could be changed, plan administrator changed, etc.
Topic Author
RomeSobe
Posts: 14
Joined: Mon Oct 06, 2014 6:33 pm

Re: Retiring early, but where dump 401k for yearly withdrawa

Post by RomeSobe »

Alan S. wrote:Comments on your proposed SEPP:

1) Starting at 47.5 means you will be committed to 12 years in this rigid plan. That is a very long plan, and therefore more subject to unintended disruptions.
2) While interest rates are almost sure to be higher in 4 years, with the current 120 mid term rate, you can only withdraw 4% of your opening value. A fixed dollar plan contemplates taking out the same amount every year.
3) The IRS has approved a recalculated plan, under which you must apply the current 120 mid term rate each year, update your balance (typically 12/31 balance), and update your age. Since rates would rise and your higher age would boost the payout, the only question is how your balance would change. A bear market could blow this up. SInce you must do a new calculation every year, it is also more risky due to execution error risk. (3 factors every year for 12 years is 36 figures that must be applied without error). Also, the IRS sees very few recalculated plans, so this would attract more attention. In the unlikely event your investments did so well along with much higher interest rates that you wanted to reduce your distribution, you always have a one time option to switch to the RMD method which produces a much lower payout.
4) Even though your plan would be a long one, it may still save more taxes if you started somewhat sooner and each year you added withdrawals from taxable savings to supplement the SEPP. That would reduce your taxable income in each year due to a lower SEPP distribution. Better check on tax treaty between US and Thailand to determine your total tax liability.
5) Do NOT execute a SEPP from your 401k plan. It is legal, but you have much better control of your account using an IRA rollover. Too many things can happen in a 401k plan that you have no control over, and 401k administrators provide no support for your plan. For example, if you take out too much from an IRA you can roll it back within 60 days, but you could not roll anything back to your 401k. The 401k could be changed, plan administrator changed, etc.
Hi Alan.. Your provided alot of great feedback..!
One question from your comments is, after I retire (44yrs old), I should rollover my 401k into an IRA, and then execute a SEPP from there when I turn 47 & half (47.5)..
Do I need to need to setup a separate SEP IRA to begin the payouts (withdraws), or can setup them from the IRA that I rolled my 401k into.?

Also, I probably will plan on using Amortization method, until later years, and then switch to the RMD method.
Minot
Posts: 454
Joined: Sat Jan 29, 2011 1:35 pm

Re: Retiring early, but where dump 401k for yearly withdrawa

Post by Minot »

RomeSobe wrote:
anonforthis wrote: Do you have a degree? If you get bored (after hanging out at the beach all day). You can get a part time job teaching English in the evening. It will be only a few hours but you will meet good people while making some money. You get pay more if you have a bachelor degree.
Yes, I have a Master's degree in Engineering.
Have any links or info on part time job teaching English..?
Google is your friend. teach english thailand pulled up lots; one useful looking site is at http://www.gooverseas.com/blog/teaching ... iland-tips
FinancialDave
Posts: 1819
Joined: Thu May 26, 2011 9:36 pm

Re: Retiring early, but where dump 401k for yearly withdrawa

Post by FinancialDave »

I haven't seen much talk about currency risk in this thread. I see this as a major unknown if most of your retirement money is in US currency and you are living in Thailand.

If it was me - I would instantly stop investing in the 401k and go to Roth and taxable accounts from here until retirement, unless of course you are getting a match in the 401k, then only invest enough to get the match. Taxable account gives you a much better option for early retirement, especially in your 40's.

Just a thought.

fd
I love simulated data. It turns the impossible into the possible!
Topic Author
RomeSobe
Posts: 14
Joined: Mon Oct 06, 2014 6:33 pm

Re: Retiring early, but where dump 401k for yearly withdrawa

Post by RomeSobe »

FinancialDave wrote:
If it was me - I would instantly stop investing in the 401k and go to Roth and taxable accounts from here until retirement, unless of course you are getting a match in the 401k, then only invest enough to get the match. Taxable account gives you a much better option for early retirement, especially in your 40's.
Hi FinancialDave..
I have thought about that, but my employer matches up to 6% in my 401k.. can't miss out on the extra money.
I will read up on Taxable accounts, to see if I should be dumping money in there also..
Eleven
Posts: 2
Joined: Wed Oct 08, 2014 4:04 am
Location: Thailand

Re: Retiring early, but where dump 401k for yearly withdrawa

Post by Eleven »

FinancialDave wrote:I haven't seen much talk about currency risk in this thread. I see this as a major unknown if most of your retirement money is in US currency and you are living in Thailand.

This is a critical factor.
Thank you, FinancialDave, for bringing it up here.

And there are two sides to that risk factor: exchange rate and inflation.
Together, they are likely to put one's retirement plans in a painful squeeze.
Many who plan retirement abroad don't consider how this might affect them.

In 10 years I have seen US dollar exchange rate decline 25% against Thailand currency.
Somebody arriving 10 years ago, with a $2,000 monthly budget, would, today, have only $1,500 in spending power -- just from decline of the dollar.
Ouch!

On the other side of the squeeze, there is local inflation.
Difficult to measure because not spread evenly, but let's take as an example a very common lunch meal here: a plate of steamed rice and sauteed pork.
In 10 years, the price of that meal has almost doubled.
Not every consumer item has doubled in price -- bus and taxi fares are still about the same -- but I'll use 2x for discussion.
On that basis, $1,500 available in the monthly budget, now buys only $750 worth of local food and other goods in the country.

This is bad.
But it gets even worse.
While the price of rice and pork are going up, restaurants are desperate to hold prices down.
So they start cutting quality and quantity of food served.
Lower quality rice, and less of it.
Cheaper cuts of meat, and less of it.
Cheaper cooking oil, cheaper seasonings and sauces.
So the meal you are served, while more costly than before, is less quantity and lower quality.

And that's happening everywhere, in many things, not just restaurant meals:
medical and dental care; construction and safety factors in hotels, houses, condos; maintenance of roads, bridges, buses and trains.

So, while our US dollar is headed for more decline, the currencies of countries attractive for retirement are strengthening.
Inflation is everywhere in these countries (with no exceptions that I'm aware of).

The OP, plans to retire on about US$2,500 a month in Thailand.
As all these currency trends continue in the future, is that enough for a comfortable retirement?

And this adds a new corollary to to the question, "where to dump 401K?".
That is, in what countries?
As FinancialDave implies, it's a topic for careful thought.

.11.
Thailand
Topic Author
RomeSobe
Posts: 14
Joined: Mon Oct 06, 2014 6:33 pm

Re: Retiring early, but where dump 401k for yearly withdrawa

Post by RomeSobe »

Eleven wrote: In 10 years I have seen US dollar exchange rate decline 25% against Thailand currency.
Somebody arriving 10 years ago, with a $2,000 monthly budget, would, today, have only $1,500 in spending power -- just from decline of the dollar.
Ouch!

On the other side of the squeeze, there is local inflation.
Difficult to measure because not spread evenly, but let's take as an example a very common lunch meal here: a plate of steamed rice and sauteed pork.
In 10 years, the price of that meal has almost doubled.
Not every consumer item has doubled in price -- bus and taxi fares are still about the same -- but I'll use 2x for discussion.
On that basis, $1,500 available in the monthly budget, now buys only $750 worth of local food and other goods in the country.

This is bad.
But it gets even worse.
While the price of rice and pork are going up, restaurants are desperate to hold prices down.
So they start cutting quality and quantity of food served.
Lower quality rice, and less of it.
Cheaper cuts of meat, and less of it.
Cheaper cooking oil, cheaper seasonings and sauces.
So the meal you are served, while more costly than before, is less quantity and lower quality.

And that's happening everywhere, in many things, not just restaurant meals:
medical and dental care; construction and safety factors in hotels, houses, condos; maintenance of roads, bridges, buses and trains.

So, while our US dollar is headed for more decline, the currencies of countries attractive for retirement are strengthening.
Inflation is everywhere in these countries (with no exceptions that I'm aware of).

The OP, plans to retire on about US$2,500 a month in Thailand.
As all these currency trends continue in the future, is that enough for a comfortable retirement?

And this adds a new corollary to to the question, "where to dump 401K?".
That is, in what countries?
As FinancialDave implies, it's a topic for careful thought.

.11.
Thailand
Both of you make very valid points.!
I am definitely aware of the fact that the US dollar could decline against Thai Baht, thus taking monthly funds away from me.
Thailand is just my initial starting point for retirement, Cambodia (which uses U.S. dollar) and Philippines are also in consideration, in which both are cheaper to live then Thailand.
I am very good at budgeting my spending when needed, so $2500/month in Thailand, Cambodia or Philippines, is very easily doable.
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