OT: Rule of 55 (Retirement)

[AtlantaHusky]

Love this so much more than telling Danny how to manage the team etc posts.

Anyways I'm 52 and don't have a hard timeline and less responsibilities than most. I've starting watching this guy on youtube he has a lot of scenarios covered and offers services.

Drew Blackston, CRC®

TO, THROUGH, & PROTECTING Your Ability to STAY in Retirement! Hi, I’m Drew Blackston, founder of Pearl Wealth Group and creator of the Your Financial EKG™ retirement planning system. I help individuals and couples create clear, confident retirement plans that maximize retirement income...

www.youtube.com

I'm also evaluating leaving US to go to Asia where I've never been to live there for a few years and see how it goes. Money can go a lot longer if you are in the right position. A lot aren't, totally, but I may be.

 

[husky429]

Love this so much more than telling Danny how to manage the team etc posts.

Anyways I'm 52 and don't have a hard timeline and less responsibilities than most. I've starting watching this guy on youtube he has a lot of scenarios covered and offers services.

Drew Blackston, CRC®

TO, THROUGH, & PROTECTING Your Ability to STAY in Retirement! Hi, I’m Drew Blackston, founder of Pearl Wealth Group and creator of the Your Financial EKG™ retirement planning system. I help individuals and couples create clear, confident retirement plans that maximize retirement income...

www.youtube.com

I'm also evaluating leaving US to go to Asia where I've never been to live there for a few years and see how it goes. Money can go a lot longer if you are in the right position. A lot aren't, totally, but I may be.

I don't know what "CRC" is, but can we all agree the acronym nonsense in the financial world is ridiculous? Save that nonsense for an actual degrees and for nerds in email signatures.

Ironically, my highest degree you've probably never heard of.

Signed,

Husky429, SYC

 

[Waquoit]

yes. Once you hit full retirement age you can make infinite amount of money and your SS payment will never lower.

One more question coop if I may. I know the basic rules, start early and pay 1 for 2 after a given amount. But just to make sure, if you start early then reach your FRA, that penalty goes away? Starting early doesn't hang that burden on you for life? I don't have that part nailed down yet.

 

[Minicoop69]

One more question coop if I may. I know the basic rules, start early and pay 1 for 2 after a given amount. But just to make sure, if you start early then reach your FRA, that penalty goes away? Starting early doesn't hang that burden on you for life? I don't have that part nailed down yet.

If you claim SS early like at 62 or 64 or before your Full Retirement Age (FRA) you are locked in at that amount for life. When you reach your FRA then the penalty does go away and your earned income earning potential is unlimited.

You can into SSA.gov and find out what your approximate SS payment would be at each age and that can help you decide whether to retire early or not. If you decide to retire before 65 and start claiming SS, you cannot get Medicare until age 65, so that is a big hiccup of people claiming SS early.

 

[Waquoit]

If you claim SS early like at 62 or 64 or before your Full Retirement Age (FRA) you are locked in at that amount for life. When you reach your FRA then the penalty does go away and your earned income earning potential is unlimited.

Thanks again. I already started and I'm good with the reduced payouts. If I waited until my FRA, my break-even point at current rates would be when I'm in my 80's. Bump that.

 

[Edward Sargent]

Sometimes it pays to take on some debt as in our case when we bought a second home to be close to our children and grandchildren and out of Florida during hurricane season we had enough to pay cash but got a 3% mortgage and banked the money where we made out better than 3% in the market. Credit card debt is another beast altogether

 

[Minicoop69]

Thanks again. I already started and I'm good with the reduced payouts. If I waited until my FRA, my break-even point at current rates would be when I'm in my 80's. Bump that.

Exactly. My wife works for SSA and she basically says that you should start ASAP because the break even point is so far in the future. If you don't need it then invest it and let it grow.

 

[Waquoit]

Exactly. My wife works for SSA and she basically says that you should start ASAP because the break even point is so far in the future. If you don't need it then invest it and let it grow.

Yes, now I can leave the money I would need to cover my nut in the TSP.

 

[Lafayette]

Wouldn't it make sense to have at least enough income from traditional IRAs and 401Ks to at least get you through the 12% tax bracket? The 12% bracket goes up to around $94,000 for a married couple. Add on the $30,000 standard deduction, and you are paying minimal taxes on $124,000. Effective rate should be around 9%. That is much lower than the marginal rate you are likely paying upfront with a Roth.

There's too many factors to say yes or no to you. First would be if IRA contributions over the years netted tax deductions or if they did not. Any year that it does not is a year to put money into a Roth thru a backdoor approach.

Then I question why you are looking at tax brackets, and not what amount of money you need in retirement each year. Some want to travel and go nuts, others are content to stay small, save, and live on less. There's also medical costs which are hard to predict and medicare a and b from social security will certainly help so that is why some take SS earlier than others.

Also some states don't tax IRAs but most do; most states don't tax social security but some do.

And maybe you have some brokerage to take tax losses in if you take in too much from IRAs and 401ks, but if you took money from a Roth you wouldn't need to shelter it.

So lot's of scenarios to consider.

 

[Kolumbo]

You can withdraw at any age without penalty, any age

As long as your withdrawals are calculated based on your remaining life expectancy

------------------------------------------

5. Substantially Equal Periodic Payments​

If you’re considering early retirement or need a steady income stream before reaching 59 1/2, you should learn about the Substantially Equal Periodic Payments (SEPP) exception.

It allows you to withdraw IRA funds at no penalty by setting up a series of substantially equal payments based on your life expectancy or the joint expectancies of yourself and your designated beneficiary.

To qualify, you must continue these payments for at least 5 years or until you reach age 59 1/2, whichever comes later.

The amounts you withdraw are calculated using one of three IRS-approved methods.

As you’d expect, this option is complex and requires careful planning to avoid potential pitfalls.

Be careful because this is absolutely not accurate. There may be exceptions but many people get hit with penalties they weren't expecting. One should always consult an expert in financial planning.

 

[Kolumbo]

Is anyone like me, 56, 2 kids still in High School? My oldest is heading off to college next year, and my youngest will be a junior in HS this fall. So, she'll graduate in 2031, at which time I'll be 63. I imagine I'll be drawing on some equity accounts to pay off their tuition, and so I'll need another few years to pay that off.

In other words, people who had kids between the ages of 35-40 can only dream of retiring at 55 unless they are well, well, well above upper middle class.

I'm a tad older with younger kids. My retirement package includes a small wooden studio with no windows.

 

[willie99]

Be careful because this is absolutely not accurate. There may be exceptions but many people get hit with penalties they weren't expecting. One should always consult an expert in financial planning.

OMG, please

I described what one had to do and why, and it's 100% accurate. Yes, follow the rules and yes it may not be the wisest thing to do.

But it absolutely can be done

 

[Kolumbo]

OMG, please

I described what one had to do and why, and it's 100% accurate. Yes, follow the rules and yes it may not be the wisest thing to do.

But it absolutely can be done

I'm just saying, that statement was flat out false. One cannot simply withdraw at any age without penalty. Sure you can go through some complex process but by and large, people pay penalties when they withdraw early. That's what she said.

 

[willie99]

I described what one had to do and why. You must have missed that. I described it accurately in post 3, then I elaborated in post 7

Substantially Equal Periodic Payments​

If you’re considering early retirement or need a steady income stream before reaching 59 1/2, you should learn about the Substantially Equal Periodic Payments (SEPP) exception.

It allows you to withdraw IRA funds at no penalty by setting up a series of substantially equal payments based on your life expectancy or the joint expectancies of yourself and your designated beneficiary.

To qualify, you must continue these payments for at least 5 years or until you reach age 59 1/2, whichever comes later.

The amounts you withdraw are calculated using one of three IRS-approved methods.

As you’d expect, this option is complex and requires careful planning to avoid potential pitfalls.

 

[Kolumbo]

I described what one had to do and why. You must have missed that. I described it accurately in post 3, then I elaborated in post 7

Substantially Equal Periodic Payments​

If you’re considering early retirement or need a steady income stream before reaching 59 1/2, you should learn about the Substantially Equal Periodic Payments (SEPP) exception.

It allows you to withdraw IRA funds at no penalty by setting up a series of substantially equal payments based on your life expectancy or the joint expectancies of yourself and your designated beneficiary.

To qualify, you must continue these payments for at least 5 years or until you reach age 59 1/2, whichever comes later.

The amounts you withdraw are calculated using one of three IRS-approved methods.

As you’d expect, this option is complex and requires careful planning to avoid potential pitfalls.

I saw that. But your first statement made it sound like the rule rather than the exception. I'd say most people who take an early withdrawal do so because they need the cash for something specific and they pay the penalties. If they are wealthy enough to retire that early and spread the payments over that long a period of time, then they probably have quite a few other financial resources making the early withdrawals unnecessary in the first place.

 

[Fan1978]

I described what one had to do and why. You must have missed that. I described it accurately in post 3, then I elaborated in post 7

Substantially Equal Periodic Payments​

If you’re considering early retirement or need a steady income stream before reaching 59 1/2, you should learn about the Substantially Equal Periodic Payments (SEPP) exception.

It allows you to withdraw IRA funds at no penalty by setting up a series of substantially equal payments based on your life expectancy or the joint expectancies of yourself and your designated beneficiary.

To qualify, you must continue these payments for at least 5 years or until you reach age 59 1/2, whichever comes later.

The amounts you withdraw are calculated using one of three IRS-approved methods.

As you’d expect, this option is complex and requires careful planning to avoid potential pitfalls.

72t distribution begins 54.5 earliest

 

[DemonDeac22]

“Pay yourself first” is the best advice I ever received from a friend who’s dad gave him this guidance.

Started at age 24, early in my working career, putting 6% of my income into a 401k and gradually inched it up over the years until I was saving the max every year and had my wife do the same thing. This discipline made me learn to live within 94% of my salary initially and after a while I never thought about the spending dollars I was potentially missing.

Did the same thing once married before having kids as we wanted to save for our future kids’ college education so they would graduate with no debt. Started putting money aside with every paycheck and learned to live off the rest that was available after setting aside the 401k and college funding. The college money was invested and grew over time and it allowed us to handle the college payments over 7 years while both kids went through college.

Saving takes discipline and sacrifice by living within your reduced means and this approach worked for us.

 

[LBird33]

You said it the key is discipline!

 

[BlueandOG]

Thanks for starting this thread. I learned a lot - mostly that I have to keep working....

 

[Chin Diesel]

As someone who is 5-10 years from retirement, I spend way more time than I should contemplating what type.of injury I'd be willing to accept to go on SSDI and live off that along with pension from the military.

 

[Stew Crew]

There's too many factors to say yes or no to you. First would be if IRA contributions over the years netted tax deductions or if they did not. Any year that it does not is a year to put money into a Roth thru a backdoor approach.

Then I question why you are looking at tax brackets, and not what amount of money you need in retirement each year. Some want to travel and go nuts, others are content to stay small, save, and live on less. There's also medical costs which are hard to predict and medicare a and b from social security will certainly help so that is why some take SS earlier than others.

Also some states don't tax IRAs but most do; most states don't tax social security but some do.

And maybe you have some brokerage to take tax losses in if you take in too much from IRAs and 401ks, but if you took money from a Roth you wouldn't need to shelter it.

So lot's of scenarios to consider.

Thanks for the reply. Maybe I didn't frame my question correctly. My question (or premise) is that a married couple should have enough taxable income in retirement, regardless of source, to cover the standard/itemized deduction, and the 10% and 12% tax brackets. Of course, this assumes they were in a much higher marginal tax bracket when contributing to a traditional 401K. I guess that also assumes no contribution to a traditional IRA, as the contributions likely would not be deductible. It also assumes that for every $1 of traditional 401K contributions, I can afford to contribute roughly $0.60 into a Roth after accounting for the upfront tax payments.

I don't understand your comment questioning why I am looking at tax brackets. Part of retirement planning is minimizing tax liability, i.e., maximizing available income, over a lifetime. My wife and I are currently in the 32% bracket. It seems silly to contribute solely to Roth products and then have no taxable income in retirement when I can pay 9% on the first $125k or so. I do admit that my initial premise does not consider impact of state taxes but 9% vs. 32% seems like a no brainer, regardless of state tax implications.

 

[Stew Crew]

As someone who is 5-10 years from retirement, I spend way more time than I should contemplating what type.of injury I'd be willing to accept to go on SSDI and live off that along with pension from the military.

I'm a little closer than you. I think about what I can do to get fired but still collect a severance package.

 

[Hey Adrien!]

This would be my suggestion also. Take a job you want in the private sector and make more money but just be disciplined in putting away money for retirement.

That's my approach.

I've been in private school teaching for 15 years now, a 401k that the school matches at 6%. Currently, according to most calculators that I see, I'll have about $1 million in the account by age 65 (a shade under 500k in today's $$$) and we'll pay off our mortgage by the time I'm 55. Currently, the balance of our 2.25% mortgage is less than the value of our home, which is insanely lucky since we only put 3% down payment nine years ago and re-fied into a 20-year 2.25% about four years ago. The 420k purchase price of the house is now solidly in the 600k range.

 

[Scot-e]

I don’t know if this has been mentioned but I’m a big fan of having at least one rental property. The dept can be paid down over time so you own it free and clear by the time you retire and you can depreciate the asset saving on taxes. It can also be used to create expenses to offset annuity income. It’s a good way to diversify your holdings.

 

[Chin Diesel]

I'm a little closer than you. I think about what I can do to get fired but still collect a severance package.

I'm three years from that point.

 

[Kolumbo]

I don’t know if this has been mentioned but I’m a big fan of having at least one rental property. The dept can be paid down over time so you own it free and clear by the time you retire and you can depreciate the asset saving on taxes. It can also be used to create expenses to offset annuity income. It’s a good way to diversify your holdings.

I've been wanting to get a rental property but never got around to it. It can be difficult and risky though depending on the type of property. Gotta steer clear of a potential money pit. Just like owning a home but on top of property taxes and maintenance and repairs, there are potential tenant issues.

 

[Excalibur]

I don’t know if this has been mentioned but I’m a big fan of having at least one rental property. The dept can be paid down over time so you own it free and clear by the time you retire and you can depreciate the asset saving on taxes. It can also be used to create expenses to offset annuity income. It’s a good way to diversify your holdings.

This made sense when money was cheap/free. At current rates I'm not so sure.

This also becomes much easier if you have the time and aptitude to fix things yourself.

 

[ecasadoSBU]

Thanks for starting this thread. I learned a lot - mostly that I have to keep working....

hahaha. that's how I feel.

 

[Stew Crew]

I don’t know if this has been mentioned but I’m a big fan of having at least one rental property. The dept can be paid down over time so you own it free and clear by the time you retire and you can depreciate the asset saving on taxes. It can also be used to create expenses to offset annuity income. It’s a good way to diversify your holdings.

I'm not sure I want to be a landlord in retirement. One bad tenant could lead to tons of aggravation I don't need, especially in Connecticut where the laws provide a lot of protections to tenants.

 

[ecasadoSBU]

I don’t know if this has been mentioned but I’m a big fan of having at least one rental property. The dept can be paid down over time so you own it free and clear by the time you retire and you can depreciate the asset saving on taxes. It can also be used to create expenses to offset annuity income. It’s a good way to diversify your holdings.

I been investing heavily in real estate for the past 8 years. I'm glad I started young. Now I have 4 triplex multi-family homes in NJ. It's been a great tax saving strategy in addition to the cash flows. The homes were new construction which for me (someone who didn't want to get into the business of extensive repairs and maintenance up front) has so far been an excellent strategy.

Real Estate is definitely a good long-term strategy to creating some wealth and also tax savings along the way (esp. If you have W-2 jobs to offset)