Retirement in 2-3 years-moves to make?

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winterfan
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Retirement in 2-3 years-moves to make?

Post by winterfan »

Forgive me if this post is somewhat scattered. I'm trying to figure out what to do with our money in the next year or two, plus deal with a looming retirement.

Age (me): 50
Spouse: 62

Some background: Spouse is still working and plans to work for a couple more years or more (he is unsure though, who knows, could be tomorrow!). I've been a stay at home parent for over a decade to our 13 yo child. Right now, we have most of our assets in tax deferred IRAs and my husband's 401K. Right now we have 27-30x expenses in these accounts (1/3 of that total is mine). I'm estimating the multiplier because we will need health insurance and we'll have to pay taxes on our withdrawals. I haven't completely figured that out yet. Our allocation is 70% S&P/10% Intl/20% Total Bond. We are pretty comfortable with this.

My husband will probably take SS when he is 70. He will receive 3640 then, but 2920 at FRA (I would take the spousal benefit since it's more).

I have about 130K in a Roth and my husband has 88K (both are invested 100% S&P). We currently have 40K in cash, 56K in a 529 and 70K in a taxable account.

We have a monthly surplus of about $1500. Our Roths have already been funded this year and we have no debts. Our monthly obligations are about $4300. There is some fluff (hobbies, summer camps, eating out, etc.) in there that we can probably tighten up. However, that total doesn't include a sinking fund for home maintenance, etc. We just figure we can tap our savings or investments if we really need to. We don't anticipate anything major in the next few years though. Possibly a new furnace or dishwasher, but we've taken care of most of the big stuff already.

What I am having some trouble with is trying to prioritize what to do with the extra money. Next year, my child will be in HS. We would like to keep her in the same private path she is in now. That will add 8-10K more a year to our current expenses. Plus, we will still need to fund our Roths in 2023. There goes our surplus. Also, my husband will probably need a new to him car in the next year or two. He keeps it on the road, but it's pretty old. That will consume some of our cash.

We currently contribute 7500 to my husband's 401K and 8800 in our HSA. We can pause those as well if we need to. I kind of want to stop the 401k contributions. I think we have enough in deferred money and the company doesn't have a match. The HSA seems worth keeping though? I don't know.

I would like to find a PT job next spring. I have some family obligations and logistic/transportation issues that make it more difficult, but not impossible. Obviously, that will alleviate some pressure. I have no idea what I'm qualified for anymore. That might be a challenge. Maybe temp work? Or perhaps just reworking our budget and squeezing all we can out of it.

I would also like to do some Roth conversions eventually. I just don't know when or how much to convert or what is the best way to pay for the taxes owed? Do we even need to worry about it? We aren't a super high earning household. If my husband retires at 65, that is right before my child will be off to college. Would that be the best time to do them? Our 529 should cover at least a couple years of college. We will pay for the remainder from our savings/taxable. I haven't even really considered how much financial aid we would qualify for, if any. We don't want our kid to take out loans though.

I do worry about health insurance. We would have to keep our income low enough for the subsidies. I wonder if we should add more to her 529 plan? Or maybe we should try to build up more cash in the next couple of years? I'm tempted to just throw more into our taxable while the market is down. The only problem is we may need the money sooner than later.

There are just a lot of unknowns and I'm having trouble mapping it out. Maybe I'm fretting over nothing. I hope this makes sense.
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Re: Retirement in 2-3 years-moves to make?

Post by sailaway »

What I, personally would do: buy ibonds for everyone and start rebuilding cash.

Does you husband have a Roth 401k available?

Do you know your tax bracket?
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winterfan
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Re: Retirement in 2-3 years-moves to make?

Post by winterfan »

sailaway wrote: Wed Sep 21, 2022 3:53 pm What I, personally would do: buy ibonds for everyone and start rebuilding cash.

Does you husband have a Roth 401k available?

Do you know your tax bracket?
Yes, I forgot to mention that half of our cash is in Ibonds. We bought them earlier this year, but did not buy any in my daughter's name though.

My husband does have a Roth 401K.The company just implemented it last year. We don't contribute to it. Do you think RMD's would be an issue eventually? We have so much of our NW in deferred.

This tax year we will will have some room in the 12% bracket. Maybe around 20K worth?
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Re: Retirement in 2-3 years-moves to make?

Post by sailaway »

winterfan wrote: Wed Sep 21, 2022 4:10 pm
sailaway wrote: Wed Sep 21, 2022 3:53 pm What I, personally would do: buy ibonds for everyone and start rebuilding cash.

Does you husband have a Roth 401k available?

Do you know your tax bracket?
Yes, I forgot to mention that half of our cash is in Ibonds. We bought them earlier this year, but did not buy any in my daughter's name though.

My husband does have a Roth 401K.The company just implemented it last year. We don't contribute to it. Do you think RMD's would be an issue eventually? We have so much of our NW in deferred.

This tax year we will will have some room in the 12% bracket. Maybe around 20K worth?
It would make more sense to contribute to the Roth 401k than to stop contributing to the 401k altogether. Whether or not it makes more sense than contributing to traditional, you have not given us enough information.

If you need the money, your husband is already eligible to withdraw from his IRAs and you have access to your Roth contributions in your IRA. By making Roth 401k contributions, you are moving that money around, rather than keeping it in taxable.

In your original post, you said you are comfortable with your 80/20 allocation, but it is sounding less and less like that is true. You want more safe money available than you have right now. That is certainly reasonable, but actually acknowledging it might help you settle into a decision.

Consider filling a case study, as your narrative leaves a lot of holes. We can't tell you if you should add more to the 529 without knowing how much you are currently putting in and what kind of state tax break it offers, for example.
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Re: Retirement in 2-3 years-moves to make?

Post by Watty »

Retirement in 2-3 years-moves to make?
See this web site to see what Social Security claiming stragety it suggests.

https://opensocialsecurity.com/

Start researching you healthcare options after your spouse retires, assuming that you get it through their job now.
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winterfan
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Re: Retirement in 2-3 years-moves to make?

Post by winterfan »

sailaway wrote: Wed Sep 21, 2022 4:37 pm
winterfan wrote: Wed Sep 21, 2022 4:10 pm
sailaway wrote: Wed Sep 21, 2022 3:53 pm What I, personally would do: buy ibonds for everyone and start rebuilding cash.

Does you husband have a Roth 401k available?

Do you know your tax bracket?
Yes, I forgot to mention that half of our cash is in Ibonds. We bought them earlier this year, but did not buy any in my daughter's name though.

My husband does have a Roth 401K.The company just implemented it last year. We don't contribute to it. Do you think RMD's would be an issue eventually? We have so much of our NW in deferred.

This tax year we will will have some room in the 12% bracket. Maybe around 20K worth?
It would make more sense to contribute to the Roth 401k than to stop contributing to the 401k altogether. Whether or not it makes more sense than contributing to traditional, you have not given us enough information.

If you need the money, your husband is already eligible to withdraw from his IRAs and you have access to your Roth contributions in your IRA. By making Roth 401k contributions, you are moving that money around, rather than keeping it in taxable.

In your original post, you said you are comfortable with your 80/20 allocation, but it is sounding less and less like that is true. You want more safe money available than you have right now. That is certainly reasonable, but actually acknowledging it might help you settle into a decision.

Consider filling a case study, as your narrative leaves a lot of holes. We can't tell you if you should add more to the 529 without knowing how much you are currently putting in and what kind of state tax break it offers, for example.
We only keep our bonds in our IRAs, aside from the ibonds. I think we are comfortable because the worse case scenario is that my husband loses his job tomorrow and can't find one (nor can I) ever. We can use our bonds to supplement our unemployment for a while, put our kid in public school and cut our outflow drastically. The bonds would tide us over until SS at 67, assuming stocks don't come back at all. If we really cut back, maybe even to 70.

I agree that I would like a little more cash outside of retirement accounts. Maybe that's the crux of it.

I think the most frustrating thing is that there are so many unknowns that it's hard to articulate what my question actually is. Maybe my husband will work until he is 67. He doesn't even know. He likes his work and doesn't want to leave yet. I have no idea what our expenses will be in 3 years. It could be 50K, or maybe even 85K. Another wrench is that we may buy a new house after my kid finishes HS. We don't know though.

A case study is probably a good idea.
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winterfan
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Re: Retirement in 2-3 years-moves to make?

Post by winterfan »

Watty wrote: Wed Sep 21, 2022 4:45 pm
Retirement in 2-3 years-moves to make?
See this web site to see what Social Security claiming stragety it suggests.

https://opensocialsecurity.com/

Start researching you healthcare options after your spouse retires, assuming that you get it through their job now.
When I've used that tool before, it says it's best for him to collect at 70 and me at 62. I think 70 is a better idea for the survival benefits.
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Re: Retirement in 2-3 years-moves to make?

Post by Dottie57 »

winterfan wrote: Wed Sep 21, 2022 5:42 pm
sailaway wrote: Wed Sep 21, 2022 4:37 pm
winterfan wrote: Wed Sep 21, 2022 4:10 pm
sailaway wrote: Wed Sep 21, 2022 3:53 pm What I, personally would do: buy ibonds for everyone and start rebuilding cash.

Does you husband have a Roth 401k available?

Do you know your tax bracket?
Yes, I forgot to mention that half of our cash is in Ibonds. We bought them earlier this year, but did not buy any in my daughter's name though.

My husband does have a Roth 401K.The company just implemented it last year. We don't contribute to it. Do you think RMD's would be an issue eventually? We have so much of our NW in deferred.

This tax year we will will have some room in the 12% bracket. Maybe around 20K worth?
It would make more sense to contribute to the Roth 401k than to stop contributing to the 401k altogether. Whether or not it makes more sense than contributing to traditional, you have not given us enough information.

If you need the money, your husband is already eligible to withdraw from his IRAs and you have access to your Roth contributions in your IRA. By making Roth 401k contributions, you are moving that money around, rather than keeping it in taxable.

In your original post, you said you are comfortable with your 80/20 allocation, but it is sounding less and less like that is true. You want more safe money available than you have right now. That is certainly reasonable, but actually acknowledging it might help you settle into a decision.

Consider filling a case study, as your narrative leaves a lot of holes. We can't tell you if you should add more to the 529 without knowing how much you are currently putting in and what kind of state tax break it offers, for example.
We only keep our bonds in our IRAs, aside from the ibonds. I think we are comfortable because the worse case scenario is that my husband loses his job tomorrow and can't find one (nor can I) ever. We can use our bonds to supplement our unemployment for a while, put our kid in public school and cut our outflow drastically. The bonds would tide us over until SS at 67, assuming stocks don't come back at all. If we really cut back, maybe even to 70.

I agree that I would like a little more cash outside of retirement accounts. Maybe that's the crux of it.

I think the most frustrating thing is that there are so many unknowns that it's hard to articulate what my question actually is. Maybe my husband will work until he is 67. He doesn't even know. He likes his work and doesn't want to leave yet. I have no idea what our expenses will be in 3 years. It could be 50K, or maybe even 85K. Another wrench is that we may buy a new house after my kid finishes HS. We don't know though.

A case study is probably a good idea.
Why don’t you track your expenses now? No need to wait. In retirement you need to make sure you include taxes and medical insurance in expenses. Social security will no longer be an exenses.

Create a list of must have expenses.
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winterfan
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Re: Retirement in 2-3 years-moves to make?

Post by winterfan »

Dottie57 wrote: Wed Sep 21, 2022 6:01 pm

Why don’t you track your expenses now? No need to wait. In retirement you need to make sure you include taxes and medical insurance in expenses. Social security will no longer be an exenses.

Create a list of must have expenses.
That's a good idea. I only track our current expenses.I haven't really done it for retirement expenses. It seems so far away, but it's not! For college, I should probably go to the EFC calculator of a potential school and figure it out. I assume we won't get much, but maybe that's not true.

You know, I can probably get a pretty good estimate the next 5 years or so. Close enough anyway. Maybe Roth conversions don't really matter if our income is low enough in retirement.

Part of the problem is I don't really like keeping a lot of cash around. What we have now is unusual because we'd rather invest it. Maybe this market is just making me rethink it since our days of having a paycheck are dwindling and we have some big expenses coming up.
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Re: Retirement in 2-3 years-moves to make?

Post by Dottie57 »

One thing to think about is having cash or something close to cash is good

I retired at 61 and was cash rich at the time. Wanting to wait until 70 for SS, I have been spending the cash. I have not had to sell depreciated assets. I’m half way to 70 and things are looking good.
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Re: Retirement in 2-3 years-moves to make?

Post by Wannaretireearly »

I’m 5-6 years away from any kind of retirement.
Cash is what I’m aiming for. At least 2X. The rest will take care of itself (25-30x) however, I just can’t help be tempted by low intl prices though! Older I get receiving the dividend checks in cash is nice & helps me SWAN. So a combo of 2X cash, create some kind of bucket strategy where I always have 2X in cash & divs, and then retire around age 50 🙏
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Re: Retirement in 2-3 years-moves to make?

Post by whodidntante »

Apparently, you need to learn how to play something called "pickleball."
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Re: Retirement in 2-3 years-moves to make?

Post by slow n steady »

Knowing your expenses is going to become very important to have confidence in your plan.

As far as actionable steps, please post your portfolio details using the outline in the link below.

viewtopic.php?t=6212
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Re: Retirement in 2-3 years-moves to make?

Post by Jack FFR1846 »

It is very important to make a dedicated list of RETIREMENT expenses. What you spend money on now is nearly unrelated to what you'll spend in retirement. So when you say 27X to 30X, you're not really accurate because the X is what's important. I built my list and modified it as I learned more along the way. Some things I know now is that medicare is going to cost me a ton the first year as will ACA for you because of working income the year ahead of taking either. What about college costs? Have you looked at the COA (cost of attendance) at potential colleges? The average time now to graduate is 5 years, so it's quite possible that you'll be paying an extra year (I did for my son). The upside of retirement income is that you can take income from where it makes the best sense. You might want to do Roth conversions to the top of a bracket and can do that. If your income is within the limits, you can sell the savings bonds and pay no taxes at all.

You also could build a "lifetime" spread sheet where you include all income and expenses year by year. What this does is gives you a better view of what one time costs do to your savings. A new car, roof on the house, painting the house, college are not every year.

DW has left her job this year (I say she's retired) and I'll retire early next year. In anticipation, we're simplifying accounts, transferring bank accounts to reduce their number, moving DW's 401k to her IRA and transferring taxable accounts to reduce their numbers. DW is executor of her aunt's estate and we've noted how even a small number of assets has made things quite difficult. Had she properly taken care of her parents' savings bonds and her own stock, we'd have saved nearly a year in probate. But that's thinking way ahead. We also have done and will continue to do house maintenance before retirement. New garage doors, new roof, painted and repaired rotted wood has been done and paid for. We'll be doing some interior work next and hope to complete all work before I retire. Unlike some, I don't understand why anyone would carry a mortgage into retirement, but we were quite aggressive paying bills and our mortgage was paid off 20 years ago.

If you feel you have a shortfall in savings, you mentioned that you could get a job but transportation might be a problem. Perhaps DH could get his newer car sooner and you could use the old car to get to a new job. I would warn not to jump to an Uber/Lyft/eats delivery job without talking to your insurance agent. DS wanted to do this and my agent did extensive looking and the premium on my car that he's using would jump from $2200 to over $6000. Not insuring for commercial use would mean that in any accident, the insurance would drop to the state minimum. For me, that would mean $5k total for any accident including liability. So yah, a simple accident while doing Uber could easily cost you your house. Uber supposedly has insurance on its drivers. Go look for stories about drivers who try to use that. Plenty of stories of reasons why they provide zero coverage.
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Re: Retirement in 2-3 years-moves to make?

Post by tennisplyr »

Make sure you have a plan for all your free time. Relax and enjoy your retirement, it’s goes very fast!
“Those who move forward with a happy spirit will find that things always work out.” -Retired 11 years 😀
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Re: Retirement in 2-3 years-moves to make?

Post by winterfan »

whodidntante wrote: Thu Sep 22, 2022 1:51 am Apparently, you need to learn how to play something called "pickleball."
Ha!
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Re: Retirement in 2-3 years-moves to make?

Post by winterfan »

slow n steady wrote: Thu Sep 22, 2022 4:39 am Knowing your expenses is going to become very important to have confidence in your plan.

As far as actionable steps, please post your portfolio details using the outline in the link below.

viewtopic.php?t=6212
Yes, I think I will. I need to try to pin down expenses for the next few years.
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Re: Retirement in 2-3 years-moves to make?

Post by winterfan »

Wannaretireearly wrote: Thu Sep 22, 2022 12:08 am I’m 5-6 years away from any kind of retirement.
Cash is what I’m aiming for. At least 2X. The rest will take care of itself (25-30x) however, I just can’t help be tempted by low intl prices though! Older I get receiving the dividend checks in cash is nice & helps me SWAN. So a combo of 2X cash, create some kind of bucket strategy where I always have 2X in cash & divs, and then retire around age 50 🙏
It's super tempting isn't it? I think we are OK on assets, but probably a little cash poor (OK, not really compared to most people I know, but you know what I mean...).
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Re: Retirement in 2-3 years-moves to make?

Post by winterfan »

Dottie57 wrote: Wed Sep 21, 2022 11:16 pm One thing to think about is having cash or something close to cash is good

I retired at 61 and was cash rich at the time. Wanting to wait until 70 for SS, I have been spending the cash. I have not had to sell depreciated assets. I’m half way to 70 and things are looking good.
I think we are a bit cash poor. We have all these impending expenses for the next eight years, but I can't seem to pin them down accurately. That's frustrating! I know we can access my husband's retirement accounts, but in my mind it still feels like those assets are locked away for the future, but the future is coming up way faster than I thought! :happy
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Re: Retirement in 2-3 years-moves to make?

Post by JoeRetire »

whodidntante wrote: Thu Sep 22, 2022 1:51 am Apparently, you need to learn how to play something called "pickleball."
That's a given! :happy
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Re: Retirement in 2-3 years-moves to make?

Post by Iorek »

Are college expenses taken care of/planned for?
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Re: Retirement in 2-3 years-moves to make?

Post by winterfan »

Jack FFR1846 wrote: Thu Sep 22, 2022 6:47 am It is very important to make a dedicated list of RETIREMENT expenses. What you spend money on now is nearly unrelated to what you'll spend in retirement. So when you say 27X to 30X, you're not really accurate because the X is what's important. I built my list and modified it as I learned more along the way. Some things I know now is that medicare is going to cost me a ton the first year as will ACA for you because of working income the year ahead of taking either. What about college costs? Have you looked at the COA (cost of attendance) at potential colleges? The average time now to graduate is 5 years, so it's quite possible that you'll be paying an extra year (I did for my son). The upside of retirement income is that you can take income from where it makes the best sense. You might want to do Roth conversions to the top of a bracket and can do that. If your income is within the limits, you can sell the savings bonds and pay no taxes at all.

You also could build a "lifetime" spread sheet where you include all income and expenses year by year. What this does is gives you a better view of what one time costs do to your savings. A new car, roof on the house, painting the house, college are not every year.

DW has left her job this year (I say she's retired) and I'll retire early next year. In anticipation, we're simplifying accounts, transferring bank accounts to reduce their number, moving DW's 401k to her IRA and transferring taxable accounts to reduce their numbers. DW is executor of her aunt's estate and we've noted how even a small number of assets has made things quite difficult. Had she properly taken care of her parents' savings bonds and her own stock, we'd have saved nearly a year in probate. But that's thinking way ahead. We also have done and will continue to do house maintenance before retirement. New garage doors, new roof, painted and repaired rotted wood has been done and paid for. We'll be doing some interior work next and hope to complete all work before I retire. Unlike some, I don't understand why anyone would carry a mortgage into retirement, but we were quite aggressive paying bills and our mortgage was paid off 20 years ago.

If you feel you have a shortfall in savings, you mentioned that you could get a job but transportation might be a problem. Perhaps DH could get his newer car sooner and you could use the old car to get to a new job. I would warn not to jump to an Uber/Lyft/eats delivery job without talking to your insurance agent. DS wanted to do this and my agent did extensive looking and the premium on my car that he's using would jump from $2200 to over $6000. Not insuring for commercial use would mean that in any accident, the insurance would drop to the state minimum. For me, that would mean $5k total for any accident including liability. So yah, a simple accident while doing Uber could easily cost you your house. Uber supposedly has insurance on its drivers. Go look for stories about drivers who try to use that. Plenty of stories of reasons why they provide zero coverage.
I have done the net price calculators. When I try them at the various private colleges, it looks like we will have to pay anywhere from 30-35K a year, based on 65K income. The X really is the tricky part. The one thing I haven't done is future spending projections. I need to figure out a realistic budget. It's easy to say that we'll be frugal, but maybe we'll want to take a couple extra vacations now that we'll have some free time.

I'm in charge of all our finances. I think we've OK over the years following BH principles (thank goodness I discovered them years ago!), but I don't want to go into retirement just winging everything. I'll build some spreadsheets for the next four years at least. If my husband keeps working, we will be fine and we can just let our retirement money grow. He isn't sure when he will stop working. He still enjoys it. I've had no issues being at home and keeping myself busy, lol.

As far as transportation issues, I have my own vehicle, but I have to transport my daughter to/from school and her activities. Her schedule lightens up in the spring and then in HS she will have transportation. I think I can probably get something PT. It probably won't pay that great, but maybe 15/hr? I have no idea. I don't think I would ever do Uber or the like. I would have to have a different car anyway.
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Re: Retirement in 2-3 years-moves to make?

Post by winterfan »

Iorek wrote: Thu Sep 22, 2022 7:53 am Are college expenses taken care of/planned for?
Sort of. Right now she has 56K in her 529 plan. That would cover 2 years of in-state public (28K). She can also work summers and there's the AOTC credit too right? The rest we can pay for from our savings. I am open to private schools too. When I do the calculators, our EFC is anywhere from 30-35K, so not too far off our state school.
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Re: Retirement in 2-3 years-moves to make?

Post by CaptainT »

A few things
1. Do you use a budget now? Ynab,mint everydollar ect If not I would start not because you need to spend less but realistic knowledge of how you spend d now can help you Guage future spending. Your spending will change a ton over the next 8 years. Also a budget will help you with identifying lumpy true expenses
2. Can you find a work from home job or part time job that has health insurance. That is a huge benefit in your situation
3. In your shoes I would look carefully what could happen in terms of long term care costs for your husband. You are likely to outlive him for 20ish years and a horrible situation would be his long term care taking all the saved money and you have to find a job in your 70s with no work experience
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Re: Retirement in 2-3 years-moves to make?

Post by winterfan »

CaptainT wrote: Thu Sep 22, 2022 9:14 am A few things
1. Do you use a budget now? Ynab,mint everydollar ect If not I would start not because you need to spend less but realistic knowledge of how you spend d now can help you Guage future spending. Your spending will change a ton over the next 8 years. Also a budget will help you with identifying lumpy true expenses
2. Can you find a work from home job or part time job that has health insurance. That is a huge benefit in your situation
3. In your shoes I would look carefully what could happen in terms of long term care costs for your husband. You are likely to outlive him for 20ish years and a horrible situation would be his long term care taking all the saved money and you have to find a job in your 70s with no work experience
I've been tracking every expense for the last three years on a spreadsheet. I'm glad I did because there are a lot of things I wouldn't have even thought we needed to buy.

For a job, I think I'd rather get out of the house. I'd prefer to be around some other people I think. I'm going to do a four year projection. It might be more trouble than it's worth. If my husband retires, then I'll retire with him. The extra income would be nice for school if the markets don't return.

#3 is a concern for sure. Not sure what to do about that now. LTC insurance is pretty expensive. We never considered buying it.
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