10 year check up, look back and look forward to retirement

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radeon962
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Joined: Wed Dec 30, 2009 9:20 pm

10 year check up, look back and look forward to retirement

Post by radeon962 » Fri Aug 10, 2018 1:34 pm

I made my initial post here back in 2009 and received a lot of good advice that I implemented and stayed the course since that time.

Moved away from managed funds and just moved everything to index funds and ignored the noise over the past many years. Retirement account at that time was $270,000 with $15,000 in cash and a 30-year 5.25% mortgage at $187,000.

I turned 50 earlier this year, recently was promoted to a new position that included a $20,000 raise. Wife works sporadically, but no full-time work and her contributions are mainly used for fun money (trips, out to eat, etc.).

2 children have graduated college and have great jobs, 2 more are in college with one graduating this year and the other graduating in 2 years and the remaining 2 have not started yet.

Refinanced my mortgage to a 15-year fixed at 2.75% early 2017 and will have it paid off in 10 more years or less, but see no reason to rush to pay it off sooner than the additional principal payments we currently make to get rid of it by the time I am 60.

We have no debt other than the mortgage and have a 6-month emergency savings.

Retirement accounts now total $900,000 and are split between a 401 and 457 through work and then a Roth through Vanguard.

Options in my work plan are sparse so I split it:

• 25% - Core Bond Index – 0.19 ER
• 37% - 500 Stock Index – 0.19
• 13% - Mid/Small Index – 0.20
• 25% - Overseas Equity Index – 0,19

Funded at approximately $22,000/yr 401 and $13,000/yr 457 based on my new salary.

Funds at one time had a Stock Symbol but ICMA restructured the investment options in the plan to a Collective Investment Trust, so they are not on the index.

Roth is in Vanguard ($44,000) and funded at $6,500/yr going forward:

• VTSAX – 0.04

AA is 75/25 and is a little out of whack currently at: 56% US, 22% Int’l, 19% Bonds and 4% Cash.

I know I have overlap in my funds/AA, but like a team on draft day, sometimes you have to take the best available. No desire to slice and dice any further than I do and most likely will move to 70/30 or even 60/40 within the next 5 years.

My questions:

1. What are things I should be looking at now that I do have retirement looming in the next 12 years, assuming I work until 62? I qualify for retiree medical at 54 at which point I may consider a job switch as my current drive is very long. Love my job, but hate the commute but don’t anticipate retirement until 62 due to my youngest just entering 6th grade this year, paying off the mortgage and SS at 62 as an additional option.

2. Estate plan, trust, wills, etc. What should I be looking at/for? I have a will, but understand that an Estate plan and/or trust will make things easier for beneficiaries should I pass (both parents are still alive at 80 and 76), so I hope to make it to 80+ as well as I am still in good health.

3. Other topics that I should be reviewing/investigating/considering?

Thanks and hopefully this holds me over for another 10 years when I can come back with a question on what to think of when retired.

ExitStageLeft
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Re: 10 year check up, look back and look forward to retirement

Post by ExitStageLeft » Fri Aug 10, 2018 2:44 pm

If the market behaves anything like it has over the past 100+ years, your current savings rate should result in a portfolio of over $2M in twelve more years. That's in real dollars, and with a 4% withdrawal rate would allow $80k or more per year. Add in social security at 62 or later and you will likely have a very comfortable retirement.

I am a couple years away from eligibility for a pension retirement. It snuck up on me, as I was busily shoveling money into the retirement plan and not thinking very far ahead. I wish I had planned better because I feel we have too much of our savings in tax-deferred and not enough of a Roth portion.

I'm a spreadsheet nerd and have built some elaborate calculations based on various parameters such as allocation, market return, year of retirement, etc. You may wish to do the same. My objective is to determine how much of our reirement savings should be in tax-deferred and how much in Roth accounts, from now to the day we both pass away.

That is pretty far on the horizon for you, but it would be a good idea now to figure out if you're good staying on the present trajectory. Or should you look into annual contributions in your spouse's Roth IRA.

radeon962
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Joined: Wed Dec 30, 2009 9:20 pm

Re: 10 year check up, look back and look forward to retirement

Post by radeon962 » Fri Aug 10, 2018 2:55 pm

I have been in the accumulation phase and have not been too concerned with the taxable up to this point but thanks for the input as that will be important as I move along so that I don't waste money in retirement on taxes that I could have otherwise done a better job of planning for.

I do anticipate finding a fee only financial advisor this year so that the wife and I can both sit down with to come up with an overall game plan while I have time to implement before retirement.

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Peter Foley
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Re: 10 year check up, look back and look forward to retirement

Post by Peter Foley » Fri Aug 10, 2018 3:12 pm

I would echo Exitstateleft's comment about being careful not to have too much of your retirement savings in tax deferred accounts. It was good to see you had started a Roth.

While it will raise the ire of many, I will go on record as saying I think trusts are oversold. There are some very good reason to have trusts, however, and leaving assets to a family member who cannot handle money is near the top the the list.

I would first look at how accounts are titled (joint/transfer on death/payable on death) and make sure you have beneficiaries and contingent beneficiaries named. You should also have a will and a living will. If you intend to get a will professionally prepared read up on estate planning and trusts prior to meeting with the attorney so that you can ask intelligent questions.

Note - beneficiary designations, wills, and trusts can conflict with each other. The ideal is to have them working in concert and sometimes that does take professional help.

nwffdiver
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Re: 10 year check up, look back and look forward to retirement

Post by nwffdiver » Fri Aug 10, 2018 3:27 pm

ExitStageLeft wrote:
Fri Aug 10, 2018 2:44 pm

I am a couple years away from eligibility for a pension retirement. It snuck up on me, as I was busily shoveling money into the retirement plan and not thinking very far ahead. I wish I had planned better because I feel we have too much of our savings in tax-deferred and not enough of a Roth portion.

I'm a spreadsheet nerd and have built some elaborate calculations based on various parameters such as allocation, market return, year of retirement, etc. You may wish to do the same. My objective is to determine how much of our reirement savings should be in tax-deferred and how much in Roth accounts, from now to the day we both pass away.

That is pretty far on the horizon for you, but it would be a good idea now to figure out if you're good staying on the present trajectory. Or should you look into annual contributions in your spouse's Roth IRA.
Not to hijack the OP, but I too will have a pension ( about 45-50% ) of my needs, and have been considering getting more Roth assets. My 457 doesn’t have a Roth option, and our ROth IRAs are only about 10% of our retirement savings. Would it be worthwhile in the 24% tax bracket to have my wife split her 401k maybe 50/50?

I’m about 6 years out from eligibility.

OP looks like you have been doing the right thing over the past decade... stay the course.

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calmaniac
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Re: 10 year check up, look back and look forward to retirement

Post by calmaniac » Fri Aug 10, 2018 3:45 pm

radeon962 wrote:
Fri Aug 10, 2018 1:34 pm
.... SS at 62 as an additional option.
It would be helpful to know what your wife's age is relative to yours.

IF you do not need the SS money to manage from age 62-70, there is a good case to be made for waiting until age 70. Around age 80 is the breakeven point where the advantage of taking a larger check later outweighs the smaller check earlier. It is very likely that either you or your wife will last well beyond 80. Even more so if she is substantially younger than you.

megabad
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Re: 10 year check up, look back and look forward to retirement

Post by megabad » Fri Aug 10, 2018 3:49 pm

radeon962 wrote:
Fri Aug 10, 2018 1:34 pm
1. What are things I should be looking at now that I do have retirement looming in the next 12 years, assuming I work until 62? I qualify for retiree medical at 54 at which point I may consider a job switch as my current drive is very long. Love my job, but hate the commute but don’t anticipate retirement until 62 due to my youngest just entering 6th grade this year, paying off the mortgage and SS at 62 as an additional option.
Congratulations on growing your retirement portfolio to almost $1 million! I might suggest you examine the 529 since I believe Michigan offers a state tax deduction. I would not prioritize this more than you are currently as retirement is looming, but if you are contributing anything at all to your childrens education, then why not pay that with funds that are free from state tax?

2. Estate plan, trust, wills, etc. What should I be looking at/for? I have a will, but understand that an Estate plan and/or trust will make things easier for beneficiaries should I pass (both parents are still alive at 80 and 76), so I hope to make it to 80+ as well as I am still in good health.
Will, POA, POA for healthcare and associated directives. That's where I would start. It is my personal opinion that your situation does not warrant a trust, but you can speak to a lawyer and make decision for yourself.

3. Other topics that I should be reviewing/investigating/considering?
Considering the tax implication of your retirement holdings as you approach retirement was a great suggestion from ExitStageLeft. Also I would run the math on SS as suggested above. I don't know your spouse's age so it is hard to figure when it would be best, but generally delaying on the highest benefit is where I would land.

Thanks and hopefully this holds me over for another 10 years when I can come back with a question on what to think of when retired.

megabad
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Re: 10 year check up, look back and look forward to retirement

Post by megabad » Fri Aug 10, 2018 3:52 pm

nwffdiver wrote:
Fri Aug 10, 2018 3:27 pm
Not to hijack the OP, but I too will have a pension ( about 45-50% ) of my needs, and have been considering getting more Roth assets. My 457 doesn’t have a Roth option, and our ROth IRAs are only about 10% of our retirement savings. Would it be worthwhile in the 24% tax bracket to have my wife split her 401k maybe 50/50?
This short answer is always the same, right? Compare you current marginal tax rate and your future marginal tax rate to determine if Roth is more beneficial. Obviously calculating this for each circumstance is a thread in and of itself and will of course require a bit of clairvoyance.

ExitStageLeft
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Joined: Sat Jan 20, 2018 4:02 pm

Re: 10 year check up, look back and look forward to retirement

Post by ExitStageLeft » Fri Aug 10, 2018 4:02 pm

nwffdiver wrote:
Fri Aug 10, 2018 3:27 pm
Not to hijack the OP, but I too will have a pension ( about 45-50% ) of my needs, and have been considering getting more Roth assets. My 457 doesn’t have a Roth option, and our ROth IRAs are only about 10% of our retirement savings. Would it be worthwhile in the 24% tax bracket to have my wife split her 401k maybe 50/50?

I’m about 6 years out from eligibility.

OP looks like you have been doing the right thing over the past decade... stay the course.
The short answer is "it depends."

It depends on your pension, on your portfolio size, on when you take social secuurity, etc. My situation is even worse, as we have about 1% in Roth. Our solution will be wait until we retire, then do small Roth conversions each year until we get to about 50/50 between tax-deferred and Roth.

I would think about that as an option before I would consider doing Roth conversions or Roth 401k at 24%.

ETA: We're looking at about twelve years of retirement before we draw SS, so that gives us some time and some head room in the lower tax brackets.

nwffdiver
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Location: End of the Oregon trail

Re: 10 year check up, look back and look forward to retirement

Post by nwffdiver » Fri Aug 10, 2018 4:06 pm

ExitStageLeft wrote:
Fri Aug 10, 2018 4:02 pm
nwffdiver wrote:
Fri Aug 10, 2018 3:27 pm
Not to hijack the OP, but I too will have a pension ( about 45-50% ) of my needs, and have been considering getting more Roth assets. My 457 doesn’t have a Roth option, and our ROth IRAs are only about 10% of our retirement savings. Would it be worthwhile in the 24% tax bracket to have my wife split her 401k maybe 50/50?

I’m about 6 years out from eligibility.

OP looks like you have been doing the right thing over the past decade... stay the course.
The short answer is "it depends."

It depends on your pension, on your portfolio size, on when you take social secuurity, etc. My situation is even worse, as we have about 1% in Roth. Our solution will be wait until we retire, then do small Roth conversions each year until we get to about 50/50 between tax-deferred and Roth.

I would think about that as an option before I would consider doing Roth conversions or Roth 401k at 24%.

ETA: We're looking at about twelve years of retirement before we draw SS, so that gives us some time and some head room in the lower tax brackets.
Thanks for the insight, I will have 4 years before my wife can, and 7 years before I can get SS, will probably due some Roth conversions in those years...

radeon962
Posts: 53
Joined: Wed Dec 30, 2009 9:20 pm

Re: 10 year check up, look back and look forward to retirement

Post by radeon962 » Fri Aug 10, 2018 5:14 pm

calmaniac wrote:
Fri Aug 10, 2018 3:45 pm
radeon962 wrote:
Fri Aug 10, 2018 1:34 pm
.... SS at 62 as an additional option.
It would be helpful to know what your wife's age is relative to yours.

IF you do not need the SS money to manage from age 62-70, there is a good case to be made for waiting until age 70. Around age 80 is the breakeven point where the advantage of taking a larger check later outweighs the smaller check earlier. It is very likely that either you or your wife will last well beyond 80. Even more so if she is substantially younger than you.
She is 3 years younger than me (ie 47).

When to take SS is not as simple as waiting to 70 for the 124% as if it's taken at 62 you may not need to use your Retirement savings to as great an extent which would leave more for your heirs. If you live to 80 then yes you would get more money moving forward but you would have missed out on 96 checks during a time when you will more than likely actually be able and want to do more things like traveling.

I do check my SS annually and my wife does qualify for her own SS so if I had to say it now then she would take hers at 62 and I 3 years later at 65. Situation at that time may make my decision for me but looking in a crystal ball and knowing I want to leave something for my kids when we both pass, seems like that scenario would allow for the use of SS and less retirement savings.

I will have retiree medical so a bit chunk of money that would normally be needed for that will be substantially provided from my employer.

radeon962
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Re: 10 year check up, look back and look forward to retirement

Post by radeon962 » Sat Aug 11, 2018 8:24 am

I'll look more into the 529 and see as it may help with our 6th grader.

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Peter Foley
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Re: 10 year check up, look back and look forward to retirement

Post by Peter Foley » Sat Aug 11, 2018 1:58 pm

Since the topic of when to take SS benefits came up, Mike Piper created a calculator that helps couples optimize their benefits. I ran the numbers for my wife and me and it had a better plan than the one I had in mind.

Here is a link to the thread. viewtopic.php?f=2&t=250983

radeon962
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Joined: Wed Dec 30, 2009 9:20 pm

Re: 10 year check up, look back and look forward to retirement

Post by radeon962 » Sat Aug 11, 2018 3:41 pm

Peter Foley wrote:
Sat Aug 11, 2018 1:58 pm
Since the topic of when to take SS benefits came up, Mike Piper created a calculator that helps couples optimize their benefits. I ran the numbers for my wife and me and it had a better plan than the one I had in mind.

Here is a link to the thread. viewtopic.php?f=2&t=250983
I'll check it out

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