Nearing retirement assistance

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Joined: Fri Dec 05, 2008 6:30 pm

Nearing retirement assistance

Post by kidsgone » Wed May 22, 2013 11:41 am

As my wife and I head into retirement this year we welcome any comments about our plans.
We are 62 and 66 and both plan on taking SS and quitting our jobs. We have no Roth accounts, pensions, rental properties, or annuities. Our savings, with a 50/50 AA, consists of 86% tax deferred (401k and roll over IRA’s) in 6 Van index funds, 4% in company stock—a very large cap health care company, and 10% in taxable (MM paying 1%). We estimate needing 3% from our savings each year to supplement the SS income, and will take those funds from the taxable account over the next 3 yrs and leave alone the other money to allow it all to grow. For any unplanned emergencies in retirement, we could sell the stock and pay the 15% cap gains tax, sell the 2nd home (our biggest expense) that was purchased to be near grand kids but the home is starting to wear out it’s usefulness as the kids get older, or either of us could work part time for additional income. Our goal is not to leave much money to others when we die; the kids are doing fine and want us to die broke which is easier said than done.
A few issues: Our tax deductions (primarily property taxes on 2 homes, mortgage interest on the 2nd home, and charities) will easily exceed our combined SS income; therefore, I don’t believe we will pay taxes for the next 3 years. We have paid taxes in the 25% or higher fed bracket all of our lives and really don’t know how to take advantage of this situation. Are we correct in taking out the taxable money first for the next 3 years? Would you do anything differently?

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Re: Nearing retirement assistance

Post by mnvalue » Wed May 22, 2013 12:04 pm

I'm nowhere near retired, so take this with an appropriate grain of salt. First off, are you sure that money market is actually paying 1% (and not say 0.1% or 0.01%)? If so, where are you getting that rate? If it's not, you may want to move some of your safe money into a high yield online savings account and/or CDs. I like Ally Bank, but is a good resource to see which companies are out there and what their current rates are. These are paying better than money market, and are FDIC insured (obviously, if you have more than the limit, you probably want to split it across ownership types and/or banks). Second, why are you still holding 4% in company stock. If you're not restricted from selling it, that might be wise (to diversify your risk). Or is that the question--that's the taxable that you're looking to reduce over the next 3 years?

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Re: Nearing retirement assistance

Post by jane1 » Wed May 22, 2013 1:02 pm

It appears Yr 1,2,3 of retirement, your income is from SS only, but future years you would have SS income as well as 401k withdrawal income putting you in a higher tax bracket that Yr 1-2-3. If that is the case, you should evaluate whether to start converting some 401k/IRA to Roth and pay taxes in low brackets. The idea is to minimize taxes over the long-term. This might also help with some RMDs. You should also evaluate if delaying SS for one/both while withdrawing from 401k might be better. Longevity insurance + % of SS income that is taxable depends on your other income.
Create some scenarios in Excel and see how they play out.

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