Retirement Advice

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InvestorWannabe18
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Joined: Thu Aug 30, 2018 3:23 pm

Retirement Advice

Post by InvestorWannabe18 » Wed Oct 10, 2018 12:02 am

I. Background Information
Recently (early) Retired Teacher [Second Career]
Wife and Self; over age of 70.
Income: Military Retirement + Social Security [Just adequate to meet our expenses if we live moderately]
There is no teacher's pension involved as I chose to go with OGB approved personal investment option.
Life Insurance: Balanced package of Whole Life and Term; took out whole life while young so the premiums are minimal with the dividends paying most of it; the term has become very expensive at my age and I'm likely to drop that part of my program and rely on the retirement accounts for my needs (see Part III below).

II. Retirement Accounts: Approx: $250K
TIRA: $85.5K [Bank Account 75%;USAA Cap Growth 9%; USAA Intermed Term Bond 9%; USAA Cornerstone Mod Aggressive 7%]
401A: $61.8K [Vanguard Trgt Ret 2025 Fund (Low Risk) 41%; American Funds Wash Mutual R6 (Large Cap – Moderate Risk) 59%] (Note: Originally 60/40)
401A: $50.4 [VOYA Fixed Plus Account II (Stability of Princ - 3% minimum) 100%
403B: $52.4 [VOYA Fixed Plus Account II I(Stability of Princ - 3% minimum) 62%; Templeton Global Bond Fund A (Low Risk) 38%] (Note: Originally 60/40)
The Traditional IRA is with USAA and the other three with VOYA.

III. Re: my Retirement Accounts: Goals/Priorities/Needs
(A) Most of my income ceases upon my death so I need adequate resources for my surviving spouse. (This is my priority #1 in my Insurance and Retirement Account decisions).
(B) Having taken care of my mother for an extended period, I know the expenses for good home care is a budget-buster. (This is the second priority in my decision making).
(C) My third priority is to leave any remaining assets to my family (children and grandchildren).
For all three of these needs/priorities conservation of principle is important.

IV. Re: my retirement accounts – this is where I'd like to get some advice. [Although I'm not sure I have enough experience to even ask the right questions.]
Q #1: Should I consolidate some of my accounts into one IRA account? If so, which ones and why? [Note: I've been advised by the VOYA Rep that I need to at least convert my two 401As to (an) IRA(s) and I need to start taking my RMDs this year.]
Q #2: What are your comments/recommendations re: the distribution that I currently have? [Note: yes, I agree I have too much in my Bank Account (TIRA) and I'm ready to move that into something with equal safety but better return. So, are there some 'reasonably safe' options? Remember, I want to make sure there's money for my wife if anything happens to me.]

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celia
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Re: Retirement Advice

Post by celia » Wed Oct 10, 2018 2:28 am

InvestorWannabe18 wrote:
Wed Oct 10, 2018 12:02 am
Wife and Self; over age of 70.
Income: Military Retirement + Social Security [Just adequate to meet our expenses if we live moderately]
There is no teacher's pension involved as I chose to go with OGB approved personal investment option.
The good news here is that if your wife survives you, she will be able to collect your SS. While you both are living, she can collect based on her own work history or take half of your "Full Retirement Age" (66) benefit, adjusted for inflation.

What is OGB? Is it reflected in the accounts that were listed?
Q #1: Should I consolidate some of my accounts into one IRA account? If so, which ones and why? [Note: I've been advised by the VOYA Rep that I need to at least convert my two 401As to (an) IRA(s) and I need to start taking my RMDs this year.]
The four listed accounts are all tax-deferred, so they can all be rolled into the traditional IRA. It will be a lot easier to manage if everything is in one account. Whether you should keep this tIRA at USAA(??) or not should depend on the fees that you would incur. Anything you pay out in fees leases less for you to receive. Vanguard, Fidelity, then Schwab are known to have the lowest fees. So moving all these account to one of these custodian is recommended. But be sure the custodians to a rollover directly to the new custodian you choose. Do not have any money sent in a check to you, as you will owe penalties for having more than one indirect (check made out to you) rollover in a year.

Yes, you need to start taking RMDs in the year you turn 70.5, unless you are still working. In that case, the RMDs start when you stop working. You don't have to spend any of the RMDs, but you do have to pay taxes on the amount withdrawn as regular income (every dollar withdrawn is taxed).
Q #2: What are your comments/recommendations re: the distribution that I currently have? [Note: yes, I agree I have too much in my Bank Account (TIRA) and I'm ready to move that into something with equal safety but better return. So, are there some 'reasonably safe' options? Remember, I want to make sure there's money for my wife if anything happens to me.]
The starting point is to calculate your living expenses and the shortfall between your income and the living expenses. That will be the amount you need to live one. Hopefully it is less than 4% of all of your account values. (If it is more than that, you are in danger of running out of money while you are still living.) Then you look at your mutually agreed-on Asset Allocation to determine your stocks:bonds ratio.

If you can figure out these things, you will have a good start. If not, ask questions on the parts you don't understand.

InvestorWannabe18
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Joined: Thu Aug 30, 2018 3:23 pm

Re: Retirement Advice

Post by InvestorWannabe18 » Wed Oct 10, 2018 12:22 pm

Thanks Celia for taking the time to respond to my input.
[The good news here is that if your wife survives you, she will be able to collect your SS. While you both are living, she can collect based on her own work history or take half of your "Full Retirement Age" (66) benefit, adjusted for inflation.]

I took a late Social Security withdrawal (age 70). My wife did not qualify on her own for SS benefits so she is getting a portion of mine – I'm assuming it's half of my age 66 benefit as you mentioned.

[The starting point is to calculate your living expenses and the shortfall between your income and the living expenses. That will be the amount you need to live one. Hopefully it is less than 4% of all of your account values.]

The 4% is a valuable rule of thumb. If I apply it to my 250K retirement funds that comes out to $10K/Year. My (current) SS benefit after taxes and Medicare deductions will add another $35K/Year. So, the idea is to come up with a $45K/Yr budget. Is that right?
Also, will she get my current SS benefit or what it would have been had I taken it out at age 66?

[The four listed accounts are all tax-deferred, so they can all be rolled into the traditional IRA. It will be a lot easier to manage if everything is in one account.]

I was leaning towards this but needed to make sure it made sense to those who are more knowledgeable than I. And I like what I've been reading on Bogleheads. I take it you don't see any reason to not roll over the 403B?

[What is OGB? Is it reflected in the accounts that were listed?]
Oops! It stands for Office of Group Benefits. They handle the teacher benefits in my state. I don't think they'll have anything to do with my financial decisions as I did not take the standard state teachers retirement (long story) but elected to go with one of their recommended/approved investment firms.

Follow-on Question: Can you or another boglehead offer any evaluation of my current stock/bond selections? Knowing my desired goals which of these make sense?

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FiveK
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Re: Retirement Advice

Post by FiveK » Wed Oct 10, 2018 7:57 pm

InvestorWannabe18 wrote:
Wed Oct 10, 2018 12:22 pm
Follow-on Question: Can you or another boglehead offer any evaluation of my current stock/bond selections? Knowing my desired goals which of these make sense?
You could not only combine all accounts into one brokerage, but all investments into one fund. Perhaps the Conservative Growth Fund (if you choose Vanguard - Fidelity/Schwab would have analogous choices) would be appropriate. At the very least it makes sense. ;) Other choices would also be defensible, but you might start with that one for comparison.

delamer
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Re: Retirement Advice

Post by delamer » Wed Oct 10, 2018 8:12 pm

How much are you actually receiving from the following — gross, before deductions?

1. Your SS benefit
2. Your wife’s spousal SS benefit
3. Your pension

If you die first, your wife will lose her SS spousal benefit but will receive your full benefit.

Will she get any survivor benefit from your pension?

Is the OBG money counted in the $250,000?

How much life insurance do you have and what are the premiums?

I am asking all these questions because if your income is “just adequate” now, then your wife may really have difficulty if she survives you.

(I think you may have answered some of these questions already, but the information is kind of buried.)

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Watty
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Re: Retirement Advice

Post by Watty » Wed Oct 10, 2018 8:27 pm

InvestorWannabe18 wrote:
Wed Oct 10, 2018 12:02 am
Q #1: Should I consolidate some of my accounts into one IRA account? If so, which ones and why?
Having it in one account would make it easier to manage as you age. Just putting it all into a target date fund would be a reasonable choice.

The main reasons not to use a target date fund are;
1) You don't have a good low cost one in your 401k.
2) You have a lot of retirement funds in taxable accounts so that you have to worry about tax efficiency.

If I understand it right neither of these is a problems for you. People sometimes think that target date funds are some sort of dumbed down "investing for dummies" choice that need to be improved on. When I retired I put almost all of my retirement money into target date funds to make it easier for me to manage as I get older or if my wife who knows less about investing has to manage it some day.
InvestorWannabe18 wrote:
Wed Oct 10, 2018 12:02 am
Q #2: What are your comments/recommendations re: the distribution that I currently have? [Note: yes, I agree I have too much in my Bank Account (TIRA) and I'm ready to move that into something with equal safety but better return. So, are there some 'reasonably safe' options? Remember, I want to make sure there's money for my wife if anything happens to me.]
It really depends on your tax situation and you didn't say much about that. Putting them into a five year ladder of CD's would be one option to consider. As they mature they can be reinvested at the current rate.

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Peter Foley
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Re: Retirement Advice

Post by Peter Foley » Wed Oct 10, 2018 10:48 pm

I would not roll it all over into a single IRA if you have access to good stable funds that pay more than the rate of inflation. Stable value funds are a good alternative to bond funds, especially in a time of rising interest rates.

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