Scared Stiff to retire

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Luckygirl
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Joined: Tue Jun 12, 2018 6:18 pm

Re: Scared Stiff to retire

Post by Luckygirl »

I think being scared is normal. You might enjoy reading the retirement interviews at esimoney.com Click on retirement and you can scroll down to any heading that says retirement interview. I found them helpful and interesting when I retired. I also was one of the interviews! He has other articles geared toward retirement. I retired a year ago and love it. I had planned to start taking money out of my IRA, but because my husband can get a subsidy with his healthcare insurance, that would have increased our income and put him over the limit. I’m using money from my MM account and just took out $10,000. When that runs out I’ll take another $10,000 out of MM. Since his subsidy is based on this years income, I’m limited with what I can withdraw or rollover to Roth this year. Even though he’s getting Medicare in April, we can’t increase our income this year. Next year I will start taking money out of IRA, probably proportionally from each account. I’ll also be applying for SS so it begins in January 2021. Enjoy your retirement!
supersharpie
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Joined: Wed Dec 22, 2010 1:28 pm

Re: Scared Stiff to retire

Post by supersharpie »

MathIsMyWayr wrote: Sun Jan 19, 2020 7:48 pm
wrongfunds wrote: Sun Jan 19, 2020 7:34 pm
Zso wrote: Sun Jan 19, 2020 3:11 pm
dbr wrote: Sun Jan 19, 2020 2:49 pm
MathIsMyWayr wrote: Sun Jan 19, 2020 2:42 pm
Are you sure it will be $4k/mon.?
I think the age 70 max in 2018 was $3698/mo. but that might be close enough for estimating.
I checked the SS website before I posted. OK so it $3945
SS website assumes you continue to work until your full age. There is another option where you have to enter expected annual income for years from you stop working until that age to the actual number. Granted, if you have enough credits, that number will drop by about $20 per month; not much to make a difference but you should use that
"maximum Social Security retirement benefits in 2020: $3,790 for someone who files at age 70"
Why is there a discrepancy of about 4%? Is it due to inflation in the next 4 years or a certain peculiarity of ss benefit calculation?
Due to the anticipation of at least 4% inflation over the next four years. Actual figure will probably be even higher.
KATNYC
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Joined: Fri Apr 07, 2017 4:34 pm

Re: Scared Stiff to retire

Post by KATNYC »

JoeRetire wrote: Mon Jan 20, 2020 8:42 am
KATNYC wrote: Mon Jan 20, 2020 8:28 am
JoeRetire wrote: Sun Jan 19, 2020 7:16 pm
KATNYC wrote: Sun Jan 19, 2020 3:34 pmMy dad is 70 and has not retired or taken his social security. He said taking SS will put him in another tax bracket and he doesn't need to take it.
:confused

Uhm, are you sure?

There is no case where it ever makes sense not to start collecting at 70. That is the age where the benefits can no longer grow by delaying. He is just throwing money away.

If your dad wants to give the money away, he can. I'll volunteer to take it if you don't want it. I like to be helpful that way. :wink:
Positive. I asked multiple times. It makes no sense to me either but he said his wife, who is 57, can take it when she qualifies.
I have no idea who he's been talking to but it sounds a lot like people who don't like to work overtime because they pay more taxes and it doesn't seem worthwhile....which of course is a myth.
It does make no sense.

Unlike working overtime to get more pay, you don't have to give up anything to collect social security benefits.

It makes me worry what else confuses your dad financially.
Same. His dad had dementia before he died. I've talked to his wife and my siblings who live closer. Hopefully, they will talk some sense into him.
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Watty
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Re: Scared Stiff to retire

Post by Watty »

lakpr wrote: Mon Jan 20, 2020 7:56 am OP = original post or original poster
Just FYI,

There is a list of abbreviations.

https://www.bogleheads.org/wiki/Abbrevi ... d_Acronyms
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Watty
Posts: 20900
Joined: Wed Oct 10, 2007 3:55 pm

Re: Scared Stiff to retire

Post by Watty »

On being scared about retiring.

There was one year when I was in my early 50's when I went to three funerals of people that were more or less my age. I was not real close to any of them but that does get you thinking.

I retired when I was 58 in part because I was scared not to retire.
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ruralavalon
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Location: Illinois

Re: Scared Stiff to retire

Post by ruralavalon »

Zso wrote: Sun Jan 19, 2020 12:35 pm I will be 66 next week and planning on retiring within next 3-4 months. Actually I was going to retire last year but hesitated since I am only working part time. Why stop when I am still getting full benefits and getting a 4 day weekend.
I had paid off all my depth last year, started planning for retirement, however now I am looking to a financial planner to see what to do with my nest egg. I found this forum last week and I cannot stop reading all the useful advice on this forum.
So before I move all In, I am now thinking I can do this myself without a planner. “Scared stiff to retire”.

Should I get a financial planner? Most want a portfolio size of 1M to start.
I am reading a lot about the Vanguard diehards. Is having a Vanguard 401K plan any advantage?
I have 200K in savings are there better options?
No Roth or IRA accounts, should I ?
I am thinking that my net worth is acceptable, but “Scared Stiff” if am wrong. Myself and the missus live a life with no major material desires.
My wife is still working and will retire in 2-3 years. I do not plan on tapping into Social security till 70, my wife will probably start social security at 62.

Some background;
Net worth about 1.8 million
1.1M in 401k accounts between the missus and me
200k in 1.6% saving accounts
500k house no mortgage, two cars paid off
20K in check/saving accounts
4K per monthly spending budgeted, however I am planning on 6K for the unknowns.
Future spending, 2 wedding for the kids, Say 50K. possible a RV 50K

Me - Vanguard 401k 820K
Vanguard Wellington Fund Admiral Shares (VWENX) 39%
Vanguard Instl 500 Index Trust (—/7504) 22%
Vanguard Mid-Cap Index Inst Plus (VMCPX/1859) 20%
Vanguard PRIMECAP Fund Admiral (VPMAX/0559) 19%

Wife – TIAA CREF 403b 320K
T. Rowe Price Blue Chip Growth TRBCX 20%
Vanguard Extended Market Index Fund Admiral VEXAX 40%
Vanguard Institutional Index Fund Institutional VINIX: 40%
Zso wrote: Sun Jan 19, 2020 2:29 pmNo pensions just the 401K and 403B
SS will be 4k at 70 for me and 1500 for the missus at 62.
Zso wrote: Sun Jan 19, 2020 3:09 pmSo this is the problem with my Vanguard 401K plan. And I stated this to the Vanguard planner. At the time there were no Bond funds available to pick from. I believe this year they added VBMPX, VTAPX not available.
In my opinion you have generally chosen very good funds to use.

In my opinion the asset allocation is light in fixed income.
Your savings account of $200k plus ($180k x .32 = $58k) $58k in Wellington = total $258k fixed income, which gives about 14% of portfolio in fixed income. In my opinion, that is pretty aggressive at age 66, on the verge of retirement, without a pension. Please see the wiki article "Asset allocation, and the wiki article Bogleheads® investment philosophy, part 3 "Never bear too much or too little risk" .

My suggestion is around 40% in fixed income (bond funds, CDs, savings accounts, money market funds). I suggest adding a diversified low expense fund like Vanguard Total Bond Market Index Fund (VBTLX or VBMPX) or Vanguard Intermediate-term Bond Index Fund (VBILX) in his 401k if available, or in her 403b if available.

What bond funds are currently offered in his 401k and her 403b? Please give fund names, tickers and expense ratios. You can simply add this to your original post using the edit button (the pencil icon near the upper right corner of your post).

Make sure you have a solid estimate of your retirement spending needs, based on your actual current spending over the last few years, adjusted for what will change with retirement. I looked at our check register and credit card statements for the last few years before retirement to get a baseline. Be sure to include the cost of medical insurance before age 65, and the cost of Medicare premiums after age 65.

You can get a better rate than 1.6% on your $200k savings:
1) high yield online savings accounts or short-term CDs, www.bankrate.com;
2) a good money market fund like Vanguard Prime Money Market Fund (VMMXX) or Vanguard Federal Money Market Fund (VMFXX); and
3) very short-term bond funds like Vanguard Ultra Short-term Bond Fund (VUBFX) or iShares Ultra Short-term Bond ETF (ICSH).

You can contribute to IRAs while you have earned income.

I think is natural to be nervous, to be scared stiff to retire. It does require a change in thinking to shift from saving to using your savings. And no one has experience at this shift until they do it.

I retired January 2011, and really enjoy it.

A little education will make you a lot less nervous about retirement.

The Boglehead's wiki contains a lot of information on retirement planning. Wiki article, "Retirement planning start-up kit".

You could also read one or two books on investing or retirement. Wiki article, "Books: recommendations and reviews".

You could use these calculators to help in planning:
1) www.firecalc.com; and
2) www.i-orp.com.

For ideas on managing your own investments you could post your full details here using this format: "Asking Portfolio Questions".

If you want a professional planner, look for a fee only planner, and try these two resources:
1) Garrett Planning Network; and
2) National Association of Professional Financial Planners.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
IowaFarmBoy
Posts: 855
Joined: Fri Jan 22, 2010 8:19 am

Re: Scared Stiff to retire

Post by IowaFarmBoy »

I'm planning to retire in about 5 months and have been scared too. I've come to the conclusion this is pretty normal and am coming to grips with it. I've got what I believe is a well thought out plan that gives us a significant cushion over the expenses needed to maintain our current lifestyle. I've toyed with going to a planner for confirmation but have concluded that my spreadsheets are better than what most planners would do. In our case, I think the recommendation/decision really comes down to risk tolerance, i.e., how much of a cushion do I want to protect against the unknown. And that is a question a planner really can't answer for me, I have to answer it for myself.

I had anticipated that I would work another 1-3 years since that would be safer (mainly due to not having to fund as many years before starting SS) but there have been a lot of changes in our department that make it not as much fun and have increased the stress level. I'm also realizing more and more that I would like to get out sooner rather than later to maximize the healthy years. I'm a little afraid of the stress causing me issues so I think in terms of optimizing my life, now is the time to go.

The best analogy I can come up with is that I am flying on a good airplane. I have a well-packed parachute and we haven't lost any skydivers yet. But that first step out of the plane is still huge.....

It's time to yell "Geronimo" and jump!
smectym
Posts: 846
Joined: Thu May 26, 2011 5:07 pm

Re: Scared Stiff to retire

Post by smectym »

Millionaires of retirement age, no mortgage no car payment, spouse still working, maxing out SS, virtuously frugal lifestyle, really shouldn't start threads on this forum titled "Scared Stiff to Retire"; but nothing is stopping them, and they seem to attract hundreds of wide-eyed and sympathetic
replies, so why not?

Zso wrote: Sun Jan 19, 2020 12:35 pm I will be 66 next week and planning on retiring within next 3-4 months. Actually I was going to retire last year but hesitated since I am only working part time. Why stop when I am still getting full benefits and getting a 4 day weekend.
I had paid off all my depth last year, started planning for retirement, however now I am looking to a financial planner to see what to do with my nest egg. I found this forum last week and I cannot stop reading all the useful advice on this forum.
So before I move all In, I am now thinking I can do this myself without a planner. “Scared stiff to retire”.

Should I get a financial planner? Most want a portfolio size of 1M to start.
I am reading a lot about the Vanguard diehards. Is having a Vanguard 401K plan any advantage?
I have 200K in savings are there better options?
No Roth or IRA accounts, should I ?
I am thinking that my net worth is acceptable, but “Scared Stiff” if am wrong. Myself and the missus live a life with no major material desires.
My wife is still working and will retire in 2-3 years. I do not plan on tapping into Social security till 70, my wife will probably start social security at 62.

Some background;
Net worth about 1.8 million
1.1M in 401k accounts between the missus and me
200k in 1.6% saving accounts
500k house no mortgage, two cars paid off
20K in check/saving accounts
4K per monthly spending budgeted, however I am planning on 6K for the unknowns.
Future spending, 2 wedding for the kids, Say 50K. possible a RV 50K

Me - Vanguard 401k 820K
Vanguard Wellington Fund Admiral Shares (VWENX) 39%
Vanguard Instl 500 Index Trust (—/7504) 22%
Vanguard Mid-Cap Index Inst Plus (VMCPX/1859) 20%
Vanguard PRIMECAP Fund Admiral (VPMAX/0559) 19%

Wife – TIAA CREF 403b 320K
T. Rowe Price Blue Chip Growth TRBCX 20%
Vanguard Extended Market Index Fund Admiral VEXAX 40%
Vanguard Institutional Index Fund Institutional VINIX: 40%
Topic Author
Zso
Posts: 28
Joined: Fri Jan 10, 2020 9:14 am

Re: Scared Stiff to retire

Post by Zso »

ruralavalon wrote: Mon Jan 20, 2020 4:35 pm
Zso wrote: Sun Jan 19, 2020 12:35 pm
Zso wrote: Sun Jan 19, 2020 2:29 pmNo pensions just the 401K and 403B
What bond funds are currently offered in his 401k and her 403b? Please give fund names, tickers and expense ratios. You can simply add this to your original post using the edit button (the pencil icon near the upper right corner of your post).
Wow Thank you thank you for the advice.
I also update my original post to include all the funds available.
Topic Author
Zso
Posts: 28
Joined: Fri Jan 10, 2020 9:14 am

Re: Scared Stiff to retire

Post by Zso »

smectym wrote: Mon Jan 20, 2020 7:29 pm Millionaires of retirement age, no mortgage no car payment, spouse still working, maxing out SS, virtuously frugal lifestyle, really shouldn't start threads on this forum titled "Scared Stiff to Retire"; but nothing is stopping them, and they seem to attract hundreds of wide-eyed and sympathetic
replies, so why not?

Yes I think the title was intentional to entice feedback. "Worried about retirement" is probably a better.
I am just amazed on the feed back. I will have to study this thread for days.

Thank you thank you all.
Topic Author
Zso
Posts: 28
Joined: Fri Jan 10, 2020 9:14 am

Re: Scared Stiff to retire

Post by Zso »

dratkinson wrote: Mon Jan 20, 2020 10:20 am RV. There was a recent topic on RVs. For $50K you could probably get a used class-B (van) or a heavy travel trailer. However, a heavy trailer will require a heavy duty tow vehicle, so the expectation is that the combination of tow+towed will be more than $50K.

Are you looking to buy a black used class-B van? I guess a black class-B cabin-on-wheels would keep your warmer traveling through Min.ne.so.ta. Will you get AWD for winter travel?



In the '80s, I recall meeting a retired couple in Omaha living temporarily in an RV park down the street from my apartment complex. They had a large class-A towing a small car. They had sold their home and spent every year traveling to visit their 3 children scattered to Nebraska, Texas, and Florida: 4mos here to visit one child/grandchildren, 4mos there to visit another child/grandchildren,.... Seems like a fun leisurely life.

They said the large class-A didn't give them enough living space and the towed vehicle was difficult to drive... so they wanted to upgrade to a larger converted Greyhound bus that carried a small car internally in the luggage bay. Would like to have seen it.
The Black RV was a joke. I have done many RV shows and did my homework, looking for a used RV Class A, no bigger that 32" as a start.
Yes I have seen the RV post. Buts that another story, this topic certainly does not belong in this thread.
smectym
Posts: 846
Joined: Thu May 26, 2011 5:07 pm

Re: Scared Stiff to retire

Post by smectym »

Zso wrote: Mon Jan 20, 2020 7:47 pm
smectym wrote: Mon Jan 20, 2020 7:29 pm Millionaires of retirement age, no mortgage no car payment, spouse still working, maxing out SS, virtuously frugal lifestyle, really shouldn't start threads on this forum titled "Scared Stiff to Retire"; but nothing is stopping them, and they seem to attract hundreds of wide-eyed and sympathetic
replies, so why not?

Yes I think the title was intentional to entice feedback. "Worried about retirement" is probably a better.
I am just amazed on the feed back. I will have to study this thread for days.

Thank you thank you all.
Zso, your feedback enticement strategy has worked well! And have a great retirement. Typically, at your asset level and with your responsible habits re debt, it’s smooth sailing insofar as the factors bogleheads might discuss are involved. I’m pretty sure a lot of people on this forum “worry too much...” and I’m probably one of them
brajalle
Posts: 337
Joined: Tue Jul 13, 2010 12:03 pm

Re: Scared Stiff to retire

Post by brajalle »

Zso wrote: Mon Jan 20, 2020 7:58 pm The Black RV was a joke. I have done many RV shows and did my homework, looking for a used RV Class A, no bigger that 32" as a start.
Yes I have seen the RV post. Buts that another story, this topic certainly does not belong in this thread.
Side topic I know, but RV's are quite the rabbit hole! I'll summarize because there's alot of financial considerations with an RV, and I think it possible that $50k may be under-budgeted. There's basically not alot frugal about a house that shakes while traveling down the road (in terms of maintenance/breakage costs long-term). Many of the used ones are starting to have significant needs (leakages, for example, are a real nemesis). A used Class C for $50k? Could be ok if you're lucky, could be a real rabbit hole. I've seen some great financial calculations that it's cheaper to use hotel rooms than to use an RV! That being said, it's pretty amazing to travel with one. Just make sure you do a ton of research about them. We had originally wanted to buy a used Class C ourselves, but discovered some of the pitfalls of buying used and the quality of RV's (which are horrible)...then looked at Super C's (Renegades are wow), and finally ended up settling on truck campers as a cost compromise (Host). When looking at A's, be aware that many of the smaller ones aren't diesel pushers, they're gas. Typically have a Ford V10 if I recall...and that there's alot of complaints about their ability to go up inclines, ie a 6% incline for 1mile may put you down to 30mph. Also could be a big deal if towing a vehicle. Also, worth noting, Class A's are horrible in crashes, they're basically a ladder frame that you sit on top of, and have no crash protection so to speak. The Class C's have a truck cab at least and some crash protection in the design (especially the Super C's). Those considerations are why we ended up looking at Class C's and ultimately ended up looking at truck campers - the Host line is luxurious and large enough for us (not at all what you'd expect), we have the safety of a pickup cab, we aren't as long as a C/A, and we can still tow a boat or vehicle if we want. I might add, there's some mighty nice Class B campers nowadays too. With a truck camper, we also get a pickup and the ability to get serviced almost anywhere, and I don't have to worry about having an extra motorized vehicle to maintain in our car fleet, because the truck fits our 4wd vehicle need. With 2 vehicles instead of 3 it's lower costs, and the truck camper doesn't even need it's own license/registration or insurance (although we increased our policies to make sure it was covered).
tibbitts
Posts: 12249
Joined: Tue Feb 27, 2007 6:50 pm

Re: Scared Stiff to retire

Post by tibbitts »

Zso wrote: Sun Jan 19, 2020 2:22 pm
Watty wrote: Sun Jan 19, 2020 12:56 pm
Zso wrote: Sun Jan 19, 2020 12:35 pm 4K per monthly spending budgeted, however I am planning on 6K for the unknowns.
How much will you get in Social Security?

You can get your basic benefit numbers off of the Social Security website then enter them on this web site to get a suggested claiming strategy.

https://opensocialsecurity.com/

One other important question, What color RV do you want?
at 70 my SS will be about 4K, my wife's at 62 will be 1.5K, 2.3k at 67.

a black RV
That SS is a life-changing number. People here do that all the time, say that have this and that with many details. Then halfway through the thread they mention that they'll receive a six-figure pension and lifetime healthcare and $75k in SS.

Unless you've done it before beware of one person working and the other retiring You might end up back here in a few months posting about your divorce.

I didn't have a 3-workday option. If I felt I was still productive and could fully contribute at my job (while I was there, at least) I probalby would have done that deal, especially with 8 weeks or so vacation and holidays on top of that, as long as I could take the time off whenever I wanted.

I guess I missed where you mentioned a black RV. As long as you never take it out of the garage (you do have a garage for it?) that will work, otherwise one day you'll find it melted into a huge blob of plastic and rubber, at which point you'll buy a white one.
Topic Author
Zso
Posts: 28
Joined: Fri Jan 10, 2020 9:14 am

Re: Scared Stiff to retire

Post by Zso »

brajalle wrote: Tue Jan 21, 2020 7:44 am
Zso wrote: Mon Jan 20, 2020 7:58 pm The Black RV was a joke. I have done many RV shows and did my homework, looking for a used RV Class A, no bigger that 32" as a start.
Yes I have seen the RV post. Buts that another story, this topic certainly does not belong in this thread.
Side topic I know, but RV's are quite the rabbit hole! I'll summarize because there's alot of financial considerations with an RV, and I think it possible that $50k may be under-budgeted. There's basically not alot frugal about a house that shakes while traveling down the road (in terms of maintenance/breakage costs long-term). Many of the used ones are starting to have significant needs (leakages, for example, are a real nemesis). A used Class C for $50k? Could be ok if you're lucky, could be a real rabbit hole. I've seen some great financial calculations that it's cheaper to use hotel rooms than to use an RV! That being said, it's pretty amazing to travel with one. Just make sure you do a ton of research about them. We had originally wanted to buy a used Class C ourselves, but discovered some of the pitfalls of buying used and the quality of RV's (which are horrible)...then looked at Super C's (Renegades are wow), and finally ended up settling on truck campers as a cost compromise (Host). When looking at A's, be aware that many of the smaller ones aren't diesel pushers, they're gas. Typically have a Ford V10 if I recall...and that there's alot of complaints about their ability to go up inclines, ie a 6% incline for 1mile may put you down to 30mph. Also could be a big deal if towing a vehicle. Also, worth noting, Class A's are horrible in crashes, they're basically a ladder frame that you sit on top of, and have no crash protection so to speak. The Class C's have a truck cab at least and some crash protection in the design (especially the Super C's). Those considerations are why we ended up looking at Class C's and ultimately ended up looking at truck campers - the Host line is luxurious and large enough for us (not at all what you'd expect), we have the safety of a pickup cab, we aren't as long as a C/A, and we can still tow a boat or vehicle if we want. I might add, there's some mighty nice Class B campers nowadays too. With a truck camper, we also get a pickup and the ability to get serviced almost anywhere, and I don't have to worry about having an extra motorized vehicle to maintain in our car fleet, because the truck fits our 4wd vehicle need. With 2 vehicles instead of 3 it's lower costs, and the truck camper doesn't even need it's own license/registration or insurance (although we increased our policies to make sure it was covered).
Wow! Again I am amazed at this forum. No moderator is calling out “this topic does not belong here”.
Reminds me of Usenet Newsgroup. The classic was ALT: 2000. A little trivia.

Brajalle
Thanks for the heads up on the RV. I would love a 32’ diesel pusher. And I do realize 75k-100k is probably a better figure. I do not want to spend that much. The missuss on the other hand says a class A would suffice. I may have to side with her. I realize that the valve of RV decreases fairly quickly.
GrowthSeeker
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Joined: Tue May 15, 2018 10:14 pm

Re: Scared Stiff to retire

Post by GrowthSeeker »

Psychology note: it is normal during the transition to retirement to be scared of the unknown. No more paycheck coming in. For me, being the paranoid self that I am, I assumed the Social Security income was never going to happen. But it did. I went through quite a bit of apprehension too, and I'm at near 50x (portfolio value is about 50 times annual cash flow needs).

The OP has a portfolio of $1.3M.
In 4 or 5 years, income from SS will be $5,500 per month (OK maybe $5,400). Say spending is $6,000 per month. That's a deficit of $600/month or $7,200 per year.
The portfolio won't get spent down much over the next 5 years because the OP's wife will still be working part of that time. But say it gets spent down to $1M.
$1M / $7,200 is over 130x or a 0.72% withdrawal rate. There is zero problem. There is zero cause for worry or fear.

If you're a relentless optimizer (I know someone who looks a whole lot like me who is one), then you can do some fine tuning. But you're in great position.

- evaluate to see if Roth conversions would be of benefit
- consider a plan to deal with Sequence of Return risk
- review your AA to make sure it's what you want for now and the future
Just because you're paranoid doesn't mean they're NOT out to get you.
OldBallCoach
Posts: 332
Joined: Mon Dec 10, 2018 5:22 pm

Re: Scared Stiff to retire

Post by OldBallCoach »

Personally I would do three things...first I would do nothing for a few weeks...second I would contact Plan vision and Mark Zoril. For $149 this guy will give you a decent plan and give you a very solid road map on how to manage your money now and when you retire. Remember its not how much you take in retirement its how much you can keep...so think taxes as well...a 50K RV will be a money pig...I know...I have an older Prevost that is my wifes tailgate palace and I swear time we drive it dollar bills fall out of the back of it...but..we do enjoy it and its how fun bus...all the best!
csmath
Posts: 336
Joined: Sat Oct 13, 2018 11:32 am

Re: Scared Stiff to retire

Post by csmath »

JoeRetire wrote: Mon Jan 20, 2020 8:42 am
KATNYC wrote: Mon Jan 20, 2020 8:28 am
JoeRetire wrote: Sun Jan 19, 2020 7:16 pm
KATNYC wrote: Sun Jan 19, 2020 3:34 pmMy dad is 70 and has not retired or taken his social security. He said taking SS will put him in another tax bracket and he doesn't need to take it.
:confused

Uhm, are you sure?

There is no case where it ever makes sense not to start collecting at 70. That is the age where the benefits can no longer grow by delaying. He is just throwing money away.

If your dad wants to give the money away, he can. I'll volunteer to take it if you don't want it. I like to be helpful that way. :wink:
Positive. I asked multiple times. It makes no sense to me either but he said his wife, who is 57, can take it when she qualifies.
I have no idea who he's been talking to but it sounds a lot like people who don't like to work overtime because they pay more taxes and it doesn't seem worthwhile....which of course is a myth.
It does make no sense.

Unlike working overtime to get more pay, you don't have to give up anything to collect social security benefits.

It makes me worry what else confuses your dad financially.
Actually... it makes perfect sense to me... wait for it....

It makes perfects sense to me if the person doesn't understand how marginal tax brackets work. Honestly, I am confident in saying that most people don't understand our tax system. So many people are afraid of moving up into a higher tax bracket because they think that all of their income will be taxed at the new higher rate. I've known people that were literally angry that a raise or bonus moved them into a higher bracket but "not by enough to make it better after the tax hit".

EDIT: To clarify, I understand that it makes not sense, but also know that many people would think it was perfect logic if they misunderstood how our tax system worked.
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JoeRetire
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Re: Scared Stiff to retire

Post by JoeRetire »

csmath wrote: Tue Jan 21, 2020 10:37 am Actually... it makes perfect sense to me... wait for it....

It makes perfects sense to me if the person doesn't understand how marginal tax brackets work. Honestly, I am confident in saying that most people don't understand our tax system. So many people are afraid of moving up into a higher tax bracket because they think that all of their income will be taxed at the new higher rate. I've known people that were literally angry that a raise or bonus moved them into a higher bracket but "not by enough to make it better after the tax hit".

EDIT: To clarify, I understand that it makes not sense, but also know that many people would think it was perfect logic if they misunderstood how our tax system worked.
It objectively makes no sense.

That isn't to say that some would somehow find a way to fit such an action into their personal belief system. Perhaps they misunderstand how social security benefits work. Perhaps they misunderstand how marginal tax brackets work. Perhaps they are afraid that the government can spy on them while depositing their monthly benefits. Whatever. The reasoning doesn't change the facts.
It's the end of the world as we know it. | It's the end of the world as we know it. | It's the end of the world as we know it. | And I feel fine.
bearwithbear
Posts: 88
Joined: Thu Jun 28, 2018 5:55 pm

Re: Scared Stiff to retire

Post by bearwithbear »

OP,

You should retire now if that RV is ready for you and your wife to start doing the traveling.
If your wife working keeps that from happening, then IF you work where you and your work are respected AND you enjoy it, you should continue to work. Otherwise retire and start the "honey do list".

Money is not the issue. Your wife already told you that.

Best,
Bear
User avatar
dratkinson
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Joined: Thu Jul 26, 2007 6:23 pm
Location: Centennial CO

Re: Scared Stiff to retire

Post by dratkinson »

Zso wrote: Tue Jan 21, 2020 9:15 am...
Wow! Again I am amazed at this forum. No moderator is calling out “this topic does not belong here”.
Reminds me of Usenet Newsgroup. The classic was ALT: 2000. A little trivia.
...
Almost any legal way you can spend your money (=time) is acceptable on this financial forum.

Haven't yet learned your personality, didn't know you were joking about a $50K+RV+black. Thought you were serious and wanted to point out that I couldn't think of a new no-problems solution that only cost $50K. A new solution would cost more, and a used solution might come with problems that may have caused previous owner to sell. Meaning you may be underestimating this retirement cost.

Glad we're back on track.

One possible $50K solution might be to use your building and carpentry skills to build a house truck during the 2-3 years your wife continues to work? By the time you were done, you'd know it inside and out so would have resolved all problems. It would keep you off the streets and out of trouble, avoid idle hands. :)

Search: http://www.google.com/search?q=house+truck&tbm=isch

Maybe build it on an M35 deuce-and-a-half, for year-round off-road fun, or in case you need to flee a zombie apocalypse. A surplus M35 should be <$10K, come with a multi-fuel engine that will run on any clear flammable liquid you can forage (gasoline, diesel, jet A, home heat oil, paint thinner,…), and can drive underwater and over Hummers.

Search: http://www.google.com/search?q=M35+house+truck&tbm=isch

If you would find a house truck difficult to store during the off season, wouldn't you have the same problem with a class-A? So does that bring us back to a garageable class-B?

Inquiring minds want to know.



Before buying, believe I’ve read that we should rent a few different classes, sizes of RVs to see which we prefer.
d.r.a., not dr.a. | I'm a novice investor, you are forewarned.
almostretired1965
Posts: 251
Joined: Mon Nov 13, 2017 2:02 pm

Re: Scared Stiff to retire

Post by almostretired1965 »

Zso wrote: Mon Jan 20, 2020 12:03 am
My idea of retirement is a log cabin in upper Minnesota. However, I have type 2 diabetes and my health is deteriorating slowly. Minnesota will not happen, the blood is running very tin.
I think it’s time to enjoy life. And It is getting shorter every year. My wife is more realistic...She says why are you so obsessed with the money? We can live on much less.

TMI....All these acronyms here. What does OP stand for?

I really appreciate everyone response and grateful for the forum.
Not that you were looking for this piece of advice, but about 2 years ago, I finally managed to get my diabetes under control via intermittent fasting (going from 210 to 170 lbs over the course of around 4 months). Doesn't work for everyone but it was the first diet that has ever worked for me in the medium/long term. It does mean I need to maintain it for the rest of my life, but so far so good. My doctor never suggested it to me and was quite skeptical when I mentioned it to him after reading about it on an economics website of all things.
brajalle
Posts: 337
Joined: Tue Jul 13, 2010 12:03 pm

Re: Scared Stiff to retire

Post by brajalle »

dratkinson wrote: Tue Jan 21, 2020 6:46 pm Haven't yet learned your personality, didn't know you were joking about a $50K+RV+black. Thought you were serious and wanted to point out that I couldn't think of a new no-problems solution that only cost $50K. A new solution would cost more, and a used solution might come with problems that may have caused previous owner to sell. Meaning you may be underestimating this retirement cost.
Yeah, $50k for a decent used Class A diesel pusher is going to be an interesting search (even $100k IMO for a nice used diesel - costs are much cheaper with the smaller gas A's - they start at about $100k new). You might check out a Renegade Veracruz though - it's an entry level Super C - it's a bit above $100k, but in a few years (it was new for 2019 if I recall), it may be available in your price range used. Renegade has a reputation for being higher quality in an industry rife with material & quality concerns. Don't get me wrong though, it's entry level and you really don't want to look at the models above it (and it's still an RV = things always cost $$). You might also check out a used Nexus Ghost, or if you must - a used Jayco Seneca. They're all "Super C's" - I found they were cheaper than A diesel pushers and felt like they had far more crash safety. In the end though we just couldn't make the costs reconcile for the quality we wanted for an A or C (no matter how much we wanted to get a $180k Renegade Verona). You can buy a heck of a nice trailer or truck camper brand new for that $50k you had budgeted btw (sometimes including tow vehicle). If you do buy an RV - used OR new (don't trust a new RV to not have issues - there's some horror videos on youtube if you're curious), do some research on how to do a pre-delivery self-inspection before finalizing everything. Do not be afraid to check mountings even - nothing like having stuff just pull apart because it's just stapled on a wall or such. There are some good resources out there (youtube, blogs, websites). I'd budget ~4 hours for a thorough inspection. If buying from a dealer, you can then start requesting them to fix what you find (or at least negotiate a bit). Two good checklists I bookmarked are here -
http://changingears.com/rv-checklist-inspection.shtml
https://www.rvwiththetanners.com/pre-de ... inspection
I would absolutely expect to go over every inch of every bit of the outside joints & seals if buying used. Heck, I've seen some horror pictures/videos that suggest you may want to do this on new ones. Watch some youtube videos on inspecting the various things in those checklists if you aren't sure how to do so properly. Everything is fixable of course, but water intrusion in particular is a pretty big deal and you need to do at least annual inspections & be prepared to do/have someone re-seal old/cracked/etc joints/seams. Why? Well, your not-very-aerodynamic house is going down the interstate at 70mph+ in rain and it can end up with water forced in...that infiltrates and then exits from all sorts of odd locations very distant from the actual leak (which can be very hard to actually find). Then things start to rot/mold and you have a real problem.
Rwsawbones
Posts: 133
Joined: Fri Jan 20, 2017 11:21 pm

Re: Scared Stiff to retire

Post by Rwsawbones »

KATNYC wrote: Sun Jan 19, 2020 3:34 pm
Grt2bOutdoors wrote: Sun Jan 19, 2020 2:51 pm
The law has changed - RMD's are extended to age 72 from 70 1/2. The SECURE Act changed that requirement but only applies to folks who turn 70.5 years of age after 2019.
Good to know. My dad is 70 and has not retired or taken his social security. He said taking SS will put him in another tax bracket and he doesn't need to take it. His wife is 57. I guess he is just going to work until he dies. We have people in our family who lived to over 100 years old.
At age 70 should take SS since there is nothing to be gained by waiting
Topic Author
Zso
Posts: 28
Joined: Fri Jan 10, 2020 9:14 am

Re: Scared Stiff to retire

Post by Zso »

dratkinson wrote: Tue Jan 21, 2020 6:46 pm
Zso wrote: Tue Jan 21, 2020 9:15 am...
Wow! Again I am amazed at this forum. No moderator is calling out “this topic does not belong here”.
Reminds me of Usenet Newsgroup. The classic was ALT: 2000. A little trivia.
...
Almost any legal way you can spend your money (=time) is acceptable on this financial forum.

Glad we're back on track.

One possible $50K solution might be to use your building and carpentry skills to build a house truck during the 2-3 years your wife continues to work? By the time you were done, you'd know it inside and out so would have resolved all problems. It would keep you off the streets and out of trouble, avoid idle hands. :)

Search: http://www.google.com/search?q=house+truck&tbm=isch

Maybe build it on an M35 deuce-and-a-half, for year-round off-road fun, or in case you need to flee a zombie apocalypse. A surplus M35 should be <$10K, come with a multi-fuel engine that will run on any clear flammable liquid you can forage (gasoline, diesel, jet A, home heat oil, paint thinner,…), and can drive underwater and over Hummers.

Search: http://www.google.com/search?q=M35+house+truck&tbm=isch

Before buying, believe I’ve read that we should rent a few different classes, sizes of RVs to see which we prefer.
LOL, seriously!
When I was in my teens I looked at being a car mechanic, not just any mechanic....but wanted to work on Porsche’s.
I rebuilt my 1st engine at 18 years old. Had the timing chain hanging on a rafter right over the windshield, needless to say...when it came time to reassemble. I had dropped the sprocket onto the windshield and cracked it. #$&@/...my dream died then.

Yes I probably can build me a custom RV. But I probably need a bigger garage and do not want the headache.
Topic Author
Zso
Posts: 28
Joined: Fri Jan 10, 2020 9:14 am

Re: Scared Stiff to retire

Post by Zso »

brajalle wrote: Tue Jan 21, 2020 10:10 pm
dratkinson wrote: Tue Jan 21, 2020 6:46 pm Haven't yet learned your personality, didn't know you were joking about a $50K+RV+black. Thought you were serious and wanted to point out that I couldn't think of a new no-problems solution that only cost $50K. A new solution would cost more, and a used solution might come with problems that may have caused previous owner to sell. Meaning you may be underestimating this retirement cost.
Yeah, $50k for a decent used Class A diesel pusher is going to be an interesting search (even $100k IMO for a nice used diesel - costs are much cheaper with the smaller gas A's - they start at about $100k new). You might check out a Renegade Veracruz though - it's an entry level Super C - it's a bit above $100k, but in a few years (it was new for 2019 if I recall), it may be available in your price range used. Renegade has a reputation for being higher quality in an industry rife with material & quality concerns. Don't get me wrong though, it's entry level and you really don't want to look at the models above it (and it's still an RV = things always cost $$). You might also check out a used Nexus Ghost, or if you must - a used Jayco Seneca. They're all "Super C's" - I found they were cheaper than A diesel pushers and felt like they had far more crash safety. In the end though we just couldn't make the costs reconcile for the quality we wanted for an A or C (no matter how much we wanted to get a $180k Renegade Verona). You can buy a heck of a nice trailer or truck camper brand new for that $50k you had budgeted btw (sometimes including tow vehicle). If you do buy an RV - used OR new (don't trust a new RV to not have issues - there's some horror videos on youtube if you're curious), do some research on how to do a pre-delivery self-inspection before finalizing everything. Do not be afraid to check mountings even - nothing like having stuff just pull apart because it's just stapled on a wall or such. There are some good resources out there (youtube, blogs, websites). I'd budget ~4 hours for a thorough inspection. If buying from a dealer, you can then start requesting them to fix what you find (or at least negotiate a bit). Two good checklists I bookmarked are here -
http://changingears.com/rv-checklist-inspection.shtml
https://www.rvwiththetanners.com/pre-de ... inspection
I would absolutely expect to go over every inch of every bit of the outside joints & seals if buying used. Heck, I've seen some horror pictures/videos that suggest you may want to do this on new ones. Watch some youtube videos on inspecting the various things in those checklists if you aren't sure how to do so properly. Everything is fixable of course, but water intrusion in particular is a pretty big deal and you need to do at least annual inspections & be prepared to do/have someone re-seal old/cracked/etc joints/seams. Why? Well, your not-very-aerodynamic house is going down the interstate at 70mph+ in rain and it can end up with water forced in...that infiltrates and then exits from all sorts of odd locations very distant from the actual leak (which can be very hard to actually find). Then things start to rot/mold and you have a real problem.
Thanks all good stuff.
I think my 1st step is to rent one. Have not done that yet. But they are awfully expensive to rent.
Topic Author
Zso
Posts: 28
Joined: Fri Jan 10, 2020 9:14 am

Re: Scared Stiff to retire

Post by Zso »

almostretired1965 wrote: Tue Jan 21, 2020 8:23 pm
Zso wrote: Mon Jan 20, 2020 12:03 am
My idea of retirement is a log cabin in upper Minnesota. However, I have type 2 diabetes and my health is deteriorating slowly. Minnesota will not happen, the blood is running very tin.
I think it’s time to enjoy life. And It is getting shorter every year. My wife is more realistic...She says why are you so obsessed with the money? We can live on much less.

TMI....All these acronyms here. What does OP stand for?

I really appreciate everyone response and grateful for the forum.
Not that you were looking for this piece of advice, but about 2 years ago, I finally managed to get my diabetes under control via intermittent fasting (going from 210 to 170 lbs over the course of around 4 months). Doesn't work for everyone but it was the first diet that has ever worked for me in the medium/long term. It does mean I need to maintain it for the rest of my life, but so far so good. My doctor never suggested it to me and was quite skeptical when I mentioned it to him after reading about it on an economics website of all things.
Wow thanks ... advice on diabetes
I was in the same boat. 210 now About 190 lbs. the missuss says if I got to 170, I would not have to take all those pills.
I fast daily but it is apparent that it’s not good enough. What the intermittent diet?
bltn
Posts: 912
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Re: Scared Stiff to retire

Post by bltn »

Watty wrote: Mon Jan 20, 2020 4:33 pm On being scared about retiring.

There was one year when I was in my early 50's when I went to three funerals of people that were more or less my age. I was not real close to any of them but that does get you thinking.

I retired when I was 58 in part because I was scared not to retire.
Very good point.
I have retired at 66 due to similar concerns. My father, a good role model in many ways, worked until age 75. He was in very good physical condition. At age 76, he had a massive heart attack. He was moderately disabled the rest of his life.
I thought at the time I retired that time might be what I had the least of. Any concerns I had about boredom in retirement have been completely forgotten.
I agree that with the education you will get from reading books and this forum, you ll be able to manage your finances. Particularly if you simplify to a two or three fund portfolio. With the majority of your money in tax deferred accounts , this can be done without tax concerns.
Best of luck.
almostretired1965
Posts: 251
Joined: Mon Nov 13, 2017 2:02 pm

Re: Scared Stiff to retire

Post by almostretired1965 »

Zso wrote: Wed Jan 22, 2020 9:31 am
Wow thanks ... advice on diabetes
I was in the same boat. 210 now About 190 lbs. the missuss says if I got to 170, I would not have to take all those pills.
I fast daily but it is apparent that it’s not good enough. What the intermittent diet?
There are different strategies, but what worked for me was fasting every other day, three days a week, usually MWF. When I fast, I do not eat anything other than drinking water, tea, or coffee, so zero calories. On days that I eat, I restricted it to a 6 to 8 hour window, typically with one meal at the beginning of the window and another at the end of the window. In between, I tried not to snack too much and when I do, I avoided carbs. I did not avoid carbs during meals since I love rice/pasta, etc., but I did cut back in terms of relative proportions, say 1 bowl of rice at dinner instead of two. This meant that I go around 40 hours or so every two days with no food whatsoever. I ate the same amount of food at each meal as before and did not change the foods I ate other than being a bit more conscious about carbs. It's not magic, though, I was basically consuming half the calories I was before. What made it work for me was the fact that I've never had problems skipping meals and frankly find it easier to not eat anything at all as opposed to watching my portions. Some of the proponents of the diet claim that one of the advantages of intermittent fasting compared to simply cutting calories at each meal is that your metabolism does not slow down as much in response to the reduced calories, but I'm not sure how strong the evidence really is on that.

On this schedule, I was able lose around 1 to 2 lbs a week after the initial drop. Once I hit my goal at 170, I cut it back to 2 days a week and that stabilized my weight. I also became less strict about snacks and avoiding carbs. I do cheat every once in awhile, as it were, but by regularly measuring my weight, I know when things are headed south, and simply go back to 3 days a week until things are back to normal.

If you decide you are interested, look up Jason Fung. He's an MD who has popularized the approach over the past few years. There are videos and a couple of books that are worth checking out.

A
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celia
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Re: Scared Stiff to retire

Post by celia »

What we did before retiring, so we could test if we were financially ready, was to calculate our retirement living expenses and actually live on that amount for a whole year. That means your taxes, premiums for various insurances, and medical co-pays, and the "emergencies" for the year had to be included in the expected yearly budget. Every other dollar of income went into savings that weren't touched. Since we easily made that budget work and had enough expected income (pensions and SS) to cover it, we pulled the plug and were "out of there".


As a side comment, you seem to have a lot in tax-deferred accounts. When you each turn 72, you will be required to withdraw from them. The percentage has not get been determined, but for those currently taking Required Minimum Distributions, the percentage is/was 3.65% at age 70.5, and increases each year after that. Now, that doesn't mean you have to spend all of that distribution. You can move it to taxable and pay the taxes on it. But here's the rub: Many people do not think about their future RMD when they retire and enjoy low taxes from when they retire until they start taking RMDs. Then they are blown away by the "unexpected" tax bill at age 70 (or72), since they didn't plan for it.

But all is not a disaster. You just have to plan for it. What most of us have figured out is that it is best to take IRA/403b withdrawals starting at retirement time. If you don't need them for living expenses, convert them to Roth, and let the continued growth on those distributions happen in the Roth instead. In other words, try to keep a "level income" from retirement to age 100, so that your taxes stay relatively level, instead of being extremely low for a few years, followed by what seems extremely high for the remaining years.

Spend some time reading the threads of people trying to figure out how much to convert in early retirement. This will help you learn what to look for. Here are some examples:
viewtopic.php?f=1&t=301295
viewtopic.php?f=2&t=297923
viewtopic.php?f=2&t=297386
bltn wrote:I agree that with the education you will get from reading books and this forum, you ll be able to manage your finances. Particularly if you simplify to a two or three fund portfolio. With the majority of your money in tax deferred accounts , this can be done without tax concerns.
Sure, there are no tax concerns with the money when it is in the tax-deferred accounts. But when it HAS TO be removed, taxes are a big concern.
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.
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dratkinson
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Location: Centennial CO

Re: Scared Stiff to retire

Post by dratkinson »

Zso wrote: Wed Jan 22, 2020 9:20 am...
I think my 1st step is to rent one. Have not done that yet. But they are awfully expensive to rent.
It's more expensive to buy wrong.


On the plus side, while you are renting, the dealership is giving you free off season storage, maintenance, and trip preparation. So when you are ready for your next trip, all you have to do is call and schedule your pickup date. Easy peasy.

What this means is that while renting you have the luxury of handling all problems like an American... throw money at 'em... and walk away when you are done, or become bored/disenchanted.


It's after you buy the beastie that your higher costs begin; hence the advice to rent to ensure you buy the right one.



Disclosure.

The wrong way to do it.

As a teenager in the ‘60s, cut a neighbor’s lawn with their Economy lawn tractor (all metal, gear drive, automotive-type clutch). Nice machine. Wanted an Economy tractor when I retired.

After retiring I got into the "old lawn tractors" hobby---had 3 at one time (2x ‘70s Allis Chalmers, 1x ‘70s Simplicity), with mowing decks, snowthrowers, tiller, lawn aerator---to maintain my postage stamp estate. Required storage space. Heavy to move around in storage. (Lawn tractor hobby advice: you need one tractor/attachment, so you don’t waste time changing attachments, so you get more “seat time”.)

These beasties must be maintained. So bought a welder (Lincoln tombstone stick welder), 3-in-1 machine lathe, hydraulic press, metal-cutting band saw, smaller tools,... to keep them running.

Long story short. Health deteriorated and they became too much to deal with. Sold all and now maintain my postage stamp estate with a self-propelled Snapper mower and 5/24" Craftsman track drive snowblower. That's all I really needed to begin with.

If I’d rented a few lawn tractors before buying and the hassle of messing with them had gotten to me then… it doesn’t get any better after buying. This lesson cost a few $K. (Though I still have, use, and enjoy the tools.)


The right way to do it.

Deteriorating health also made my old road bike less safe/comfortable to ride.

Short test rides at local bike shops were inconclusive to select a new bike. I needed longer rides/time to make up my mind. Thought I’d be happy with a semi-recumbent RANS Dynamic, but they are ~$3K and no local dealer. What to do?

I turned my old steel mountain bike into a laboratory bike to test different comfort geometries. Added a stem riser and adjustable stem (handlebar travel: 8" up/down, 8" fore/aft). Used heavy-duty (racecar frame steel) tubing to build a strong adjustable seat post (seat travel: 10" up/down, 7" aft). I could configure it to be a lean-forward road bike, up-right hybrid bike, or a laid-back semi-recumbent bike.

Played with different geometries until I'd ridden it for a year without changes and knew I’d found my preferred geometry. Found an aluminum bike (K2 Big Easy Deuce) on CL that matched it. Cost was $100.

The cost to modify my mountain bike to test different geometries was the rent paid for the long-term test rides. I easily recovered that cost by buying an exact-fit used bike from its disenchanted owner. Plus I saved several $K by not buying the RANS with similar geometry. :)

Sold my lab bike on CL to a guy who was 6'8" and having trouble finding a comfortable bike. We tweaked it a few times between our rides around the neighborhood. He was happy when he left.


No matter the expense, it’s cheaper to rent before buying.
d.r.a., not dr.a. | I'm a novice investor, you are forewarned.
Topic Author
Zso
Posts: 28
Joined: Fri Jan 10, 2020 9:14 am

Re: Scared Stiff to retire

Post by Zso »

celia wrote: Wed Jan 22, 2020 2:38 pm
As a side comment, you seem to have a lot in tax-deferred accounts. When you each turn 72, you will be required to withdraw from them. The percentage has not get been determined, but for those currently taking Required Minimum Distributions, the percentage is/was 3.65% at age 70.5, and increases each year after that. Now, that doesn't mean you have to spend all of that distribution. You can move it to taxable and pay the taxes on it. But here's the rub: Many people do not think about their future RMD when they retire and enjoy low taxes from when they retire until they start taking RMDs. Then they are blown away by the "unexpected" tax bill at age 70 (or72), since they didn't plan for it.

But all is not a disaster. You just have to plan for it. What most of us have figured out is that it is best to take IRA/403b withdrawals starting at retirement time. If you don't need them for living expenses, convert them to Roth, and let the continued growth on those distributions happen in the Roth instead. In other words, try to keep a "level income" from retirement to age 100, so that your taxes stay relatively level, instead of being extremely low for a few years, followed by what seems extremely high for the remaining years.



Thank you for the heads up. This is why I am enjoy reading all these good recommendations.
However I am a real novice, especially to the what is owed Uncle Sam. Last year I think I paid 8k to the 30k already taken from my check. Ouch! That hurt.

So if I under stand this correctly. If I withdraw the the RMD OF .0365 of 1M from 401k plan. That equal $36,500. I would pay taxes on the amount say 20%, ( not sure what the rate would be). That’s $7300 in taxes
Question, When I withdraw ...is it taxed at withdrawal? Or it it taxed when I do taxes?

I would like to the put the balance 36500-7300=29200 back into a Roth account. Is that possible?

I just received the two Bogleheads books “guide to investing”, “guide to Retirement Planning” and started read these.
wrongfunds
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Re: Scared Stiff to retire

Post by wrongfunds »

I would like to the put the balance 36500-7300=29200 back into a Roth account. Is that possible?
NO but you can put it in to taxable account. Once RMD start, you can NOT add to Roth at least in your case because you will have no earned income. I do NOT know if having earned income after 72 changes anything or not but I don't care about that situation and you don't either.
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dratkinson
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Re: Scared Stiff to retire

Post by dratkinson »

Zso wrote: Thu Jan 23, 2020 9:11 am.
So if I under stand this correctly. If I withdraw the the RMD OF .0365 of 1M from 401k plan. That equal $36,500. I would pay taxes on the amount say 20%, ( not sure what the rate would be). That’s $7300 in taxes
Question, When I withdraw ...is it taxed at withdrawal? Or it it taxed when I do taxes?

I would like to the put the balance 36500-7300=29200 back into a Roth account. Is that possible?
The excess of taxes on the RMD can not be put into a Roth... because it is a required distribution from the account. Taxed as ordinary income.



Roth conversions. But! you can convert an amount, above the annual RMD, into a Roth. And pay additional tax on that conversion. Taxed as ordinary income.



Taxes on RMDs and Roth conversion. The tax on the RMD + Roth conversion should be "paid as you go". This tax can be paid using:
--excess withholding from your salary (while working),
--or by excess withholding from your wife's salary (while working),
--or by excess withholding from a pension (if applicable),
--or by quarterly tax payments from your cash in savings (before SS begins),
--or by excess withholding from your SS,
--or by excess withholding from your wife's SS,
--or by an additional payment sent in with your request for automatic extension of time to file your taxes, in case you under withheld and are not saved by the IRS Safe Harbor rules.
--or by setting withholdings on your RMD (avoids estimated tax payments).

Withholdings on Roth conversion. But would need to think twice about withholdings on a Roth conversion. On one hand you want more money going into your Roth, which withholdings will minimize. On the other hand you need a source of dollars to pay for the conversion, but additional withheld dollars to maximize a Roth conversion will increase taxes. One member’s idea is to wait until yearend for tax-deferred withdrawals so you have a better understanding of your total taxes for the year. In this way you can dial-in your Roth conversion/withholding so you control advancing tax brackets.


N.B. SS will WH fed taxes for you as a percentage of your taxable SS income---Medicare and IRMAA are not taxable items. You tell SS the percentage to WH.

Example: Assume you tell SS to WH 20% fed taxes.
+Your total monthly SS benefit
-Medicare
-IRMMA
-(Your total monthly SS benefit -Medicare -IRMMA) x 20% fed WH (FYI: rounded to 10-cents.)
=Your received SS benefit, monthly DD to your checking account.


N.B. SS does not WH for state... you're on your own to WH that.



To reduce unneeded RMDs. Most retirees plan to begin Roth conversions after retirement begins (reduced taxable income), and hope to complete the process before the age when RMDs must begin.

If you KNOW you can't complete the conversions before RMDs start, then this is where celia's advice to plan the conversions to run until death comes into play. The effect is that you may need to bump up ONE or TWO retirement tax bracket to convert more sooner, so you can stay in the same tax bracket after RMDs begin and smaller conversions continue.

You'll need to use some method, in Dec of the prior year, to wag your total annual taxes for the new tax year, and tell SS how much to WH starting in Jan of the new tax year.

Believe most use the WH-planning feature built into their last tax return software.

Some use the free Excel1040.com. But this is a hobby for the author so can not be depended upon to continue. But you can use it now to begin your initial Roth conversion planning.

Simplifying assumption: the fed tax code will remain relatively stable for the foreseeable future.

Can search forum for other tools used to estimate annual income tax.



Annual retirement cash flows. Previously it was suggested to use Excel to wag your annual retirement cash flows. This is where you return to it and input:
--your larger Roth conversions and taxes on those conversions, in the years before RMDs are required.
--your smaller Roth conversions and taxes on those conversions, in the years after RMDs are required.

Simplifying assumption. Assume the current age 70.5 RMD percentages will hold for the age 72 RMD's.

Meaning, you can today use Excel to begin planning your Roth conversion for the next >30 years.

Tweak your retirement cash flow/Roth conversion plan as you learn more (RMD percentages change, actual investment growth of tax-deferred accounts,...).

For a little more certainty in planning, some advise skewing tax-deferred accounts to bonds for their stability, and to minimize growth and taxes on withdrawals. And skewing Roth accounts to equities to maximize tax-free growth.

Excel is your friend.

I may be forgetting some things.


Are we having fun yet?



Added dbr's idea: viewtopic.php?p=4977531#p4977531
Last edited by dratkinson on Sat Jan 25, 2020 9:27 pm, edited 2 times in total.
d.r.a., not dr.a. | I'm a novice investor, you are forewarned.
Independent George
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Re: Scared Stiff to retire

Post by Independent George »

I'd say the OP doesn't need any help managing his finances, but a CPA could still be very useful in managing his taxes.
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celia
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Re: Scared Stiff to retire

Post by celia »

Independent George wrote: Thu Jan 23, 2020 4:00 pm I'd say the OP doesn't need any help managing his finances, but a CPA could still be very useful in managing his taxes.
But tax preparers usually don't mention doing Roth conversions before RMDs start. Most often they just process the paperwork (for the past year) you bring in and don't advise you unless you already know the questions you want to ask.


Zso, I think the thing you're scared of is the things you don't know to even ask questions about. You can fix most of that by reading a lot in the forum. (Tax preparation questions are about to take over the forum in another week as it is that time of year.) Even when the topic title doesn't sound like it applies to you, at least read the opening question from the first post to confirm it is nothing like your situation. You can keep reading the thread if it is interesting to you, but don't dismiss a thread just because of a thread subject/title you don't understand. If it sounds anything like retirement, hang in there and keep reading.

Zso wrote: Thu Jan 23, 2020 9:11 am So if I under stand this correctly. If I withdraw the the RMD OF .0365 of 1M from 401k plan. That equal $36,500. I would pay taxes on the amount say 20%, ( not sure what the rate would be). That’s $7300 in taxes
Question, When I withdraw ...is it taxed at withdrawal? Or it it taxed when I do taxes?
When you withdraw from a tax-deferred account, whether you put that money into a taxable account or convert it to a Roth, you will have to pay taxes on the withdrawal. You will then have created a taxable event and are supposed to send in an approximate amount of the new tax increase to the IRS. However, you won't know the exact amount until you (or a tax preparer) prepares your tax forms. And if you often have a large refund, it could be that the tax refund that would be sent to you might cover most of the taxes.

Note that the taxes will be the same whether you put the money in taxable or convert it to Roth. So, it is a no-brainer to convert it (where the growth can become tax-free in the Roth) if you don't need to spend it. And, just so you know, you won't have to pay taxes on the withdrawal if you give the money directly to a qualified charity using a Qualified Charitable Distribution. Instead of having the money put in your account, the custodian writes out a check to the charity, but mails it to you to give/send to the charity. This way, the check shows you can't spend it yourself, and you have an opportunity to make a copy for your tax records before passing it onto the charity. You also need to ask the charity for an acknowledgement of receipt and you can't list the donation on the itemized part of your return (because you are already getting the tax benefit of not paying taxes on it).
I would like to the put the balance 36500-7300=29200 back into a Roth account. Is that possible?
This question is not clear and I interpret it differently than others. When you said "back into a Roth", some people read that as if you withdraw from the Roth and want to put the money back in. I think you meant you would "Convert" to a Roth. Terminology matters, especially when you are on the phone with your custodian. Yes, if you withdraw $36,5000 from the 401K, convert $29,200 of it directly into a Roth and withhold $7,300 for the IRS, you can do that and it will add another $36,500 to your Taxable income on your tax return. If you have enough money in taxable to pay the taxes, then convert all of it instead. (Many people convert to the top of a particular tax bracket instead of just their RMD amount, hence the frequent discussions on this site about that.)

Another topic you may not be aware of and we can't tell if it applies to you, is if you will be subject to increased Medicare and Drug Plan premiums, which would matter if you convert a lot. This applies to higher income folks in retirement who have more than $174K in Taxable income (MFJ) or $87K (Single). The increased premiums apply two years after the year of this high income (since you have until the following Oct 15 to file your taxes after the applicable tax year. This gives the government a few months to apply this higher rate to the appropriate people.
2020 Medicare Parts A & B Premiums and Deductibles
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.
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Zso
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Re: Scared Stiff to retire

Post by Zso »

celia wrote: Thu Jan 23, 2020 8:27 pm
This question is not clear and I interpret it differently than others. When you said "back into a Roth", some people read that as if you withdraw from the Roth and want to put the money back in. I think you meant you would "Convert" to a Roth. Terminology matters, especially when you are on the phone with your custodian. Yes, if you withdraw $36,5000 from the 401K, convert $29,200 of it directly into a Roth and withhold $7,300 for the IRS, you can do that and it will add another $36,500 to your Taxable income on your tax return. If you have enough money in taxable to pay the taxes, then convert all of it instead. (Many people convert to the top of a particular tax bracket instead of just their RMD amount, hence the frequent discussions on this site about that.)
Convert. What I was asking,,, myself and the missus retirement plans total about 1M, tax differed. If we die, the kids get the remainder. So they will be paying the taxes on the inheritance, correct? I was looking at protecting their inheritance. If I convert this the 401K to Roth, (maybe some not all). I pay the tax, correct.

On another matter, I have 200K sitting in a bank accounts at 1.7%. Would it be better to invest in Vanguard 2-fund portfolio? I would like to do this for about 70% of the 200K but worried the funds will not be liquid. or are they?
dbr
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Re: Scared Stiff to retire

Post by dbr »

Zso wrote: Fri Jan 24, 2020 11:56 am

Convert. What I was asking,,, myself and the missus retirement plans total about 1M, tax differed. If we die, the kids get the remainder. So they will be paying the taxes on the inheritance, correct? I was looking at protecting their inheritance. If I convert this the 401K to Roth, (maybe some not all). I pay the tax, correct.

The issue here would be who pays the most in taxes. You can analyze whether your kids lose more money by you paying taxes out of their inheritance now or they do later. It depends on what tax rates you all have at the time. It is possible a retiree at low income should pay the taxes ahead rather than dumping large tax costs on kids that have high incomes at the time.

On another matter, I have 200K sitting in a bank accounts at 1.7%. Would it be better to invest in Vanguard 2-fund portfolio? I would like to do this for about 70% of the 200K but worried the funds will not be liquid. or are they?

Money invested in funds at Vanguard is totally liquid. You can sell and have the money in hand in currency within a few days. Money in a bank account can also take a few days to be currency in hand allowing for weekends and holidays. It is possible to invest money in investments where the investment contract really does prevent you from selling your position for money right away. An example is that you cannot withdraw money placed in US Treasury I Bonds for a year. That would not be Vanguard funds. Funds do fluctuate in value, so there is no guarantee you will recover what you invested, but liquidity is not the word that describes that.
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Zso
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Re: Scared Stiff to retire

Post by Zso »

dbr wrote: Fri Jan 24, 2020 12:35 pm
Zso wrote: Fri Jan 24, 2020 11:56 am

Convert. What I was asking,,, myself and the missus retirement plans total about 1M, tax differed. If we die, the kids get the remainder. So they will be paying the taxes on the inheritance, correct? I was looking at protecting their inheritance. If I convert this the 401K to Roth, (maybe some not all). I pay the tax, correct.

The issue here would be who pays the most in taxes. You can analyze whether your kids lose more money by you paying taxes out of their inheritance now or they do later. It depends on what tax rates you all have at the time. It is possible a retiree at low income should pay the taxes ahead rather than dumping large tax costs on kids that have high incomes at the time.

On another matter, I have 200K sitting in a bank accounts at 1.7%. Would it be better to invest in Vanguard 2-fund portfolio? I would like to do this for about 70% of the 200K but worried the funds will not be liquid. or are they?

Money invested in funds at Vanguard is totally liquid. You can sell and have the money in hand in currency within a few days. Money in a bank account can also take a few days to be currency in hand allowing for weekends and holidays. It is possible to invest money in investments where the investment contract really does prevent you from selling your position for money right away. An example is that you cannot withdraw money placed in US Treasury I Bonds for a year. That would not be Vanguard funds. Funds do fluctuate in value, so there is no guarantee you will recover what you invested, but liquidity is not the word that describes that.
dbr
Thank you for all your responses. Any recommendations for vanguard funds”
I also noticed your thorough knowledge of “TIPS”, these can help with inflation, correct? However TIPS are not liquid? Correct?
dbr
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Re: Scared Stiff to retire

Post by dbr »

Zso wrote: Fri Jan 24, 2020 3:00 pm

dbr
Thank you for all your responses. Any recommendations for vanguard funds”
I also noticed your thorough knowledge of “TIPS”, these can help with inflation, correct? However TIPS are not liquid? Correct?
I am not sure what your concern is with liquidity. What do you mean by liquidity? Therefore your question might be complicated to answer. A holding in a TIPS fund or in individual TIPS is certainly liquid in the sense there is no ongoing restriction in being able to trade in and out of TIPS as such. It isn't like not being able to redeem I bonds in the first year or the chance a CD can't be broken early. It isn't like your house is illiquid because might take months or years to sell a house. There are investments where you can't redeem your assets for years or even ever. Financial analysts do speak of a liquidity premium in TIPS but that is an issue of degrees rather than to say TIPS are "not liquid." https://www.frbsf.org/economic-research ... s/2017/11/


It has happened that there was a "liquidity" crisis in TIPS at the time of the Lehman debacle. A result is that TIPS NAV took an unexpected dive, but I don't think anyone was not able to trade in TIPS at any time. Someone who understands that scenario might add more information. An odd thing about that TIPS dive, I think noticed by nisiprius for one, is that before that odd fall there was an equally odd rise in TIPS price, so I don't know what that was all about.

All TIPS are indexed for inflation so to that extent there is no inflation risk in a TIPS holding. To the extent that dilutes any inflation risk to your whole portfolio that helps, if enough of your portfolio is TIPS. People sometimes also advocate outrunning inflation by holding higher real return investments such as stocks.
kaapie
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Re: Scared Stiff to retire

Post by kaapie »

Congratulations on your plan to retire.

Most people do not actually know how much they spend each year and what they spend it on. To feel safe about retirement, compile a spreadsheet and track everything you and your wife spend. After a few months you will be surprised at what you find you spend your money on, and that will also help you plan for the future, as you will know how much you actually need in retirement, and can be used as a good budget guide for your future plans.
This may sound like a lot of work, but it is not, as long as both you and your wife agree to do it and you are honest about it.

As for RV's, if it is just the two of you and you need no assistance needed to walk, then look at a Class B. They are great for part time travel, though some people use them full-time. Cost can be much less than $50k to purchase a good used one.
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dratkinson
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Re: Scared Stiff to retire

Post by dratkinson »

Edited my reply above to include dbr's idea to set withholdings on tax-deferred account withdrawals. Why? Could simplify your annual tax planning by avoiding the need to make estimated quarterly tax payments, between the times when you can set excess withholdings on earned income and excess withholdings on SS.
d.r.a., not dr.a. | I'm a novice investor, you are forewarned.
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