OT: Rule of 55 (Retirement)

[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)

 

[Drumguy]

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.

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.

Both of these statements might work for some people but are terrible advice for most others. Every year you defer taking SS income from age 62 to 70 your payout increases 8% per year. The actuarial facts support taking it later unless you have some chronic illness as most people will outlive their money. Btw sociaI security is up to 85% taxable income.
Most people will struggle financially in retirement. If you want to retire early check on what your insurance costs will be from age 50 to 65 - likely $27-$30k for most couples.

 

[HuskyHawk]

I'm three years from that point.

I am one year from that point. I grumbled about going back to the office, not because it's a bad commute but because I wanted to split time somewhere else (snow bird). So now I can't do that. 2-3 years of searching and planning down the drain.

So they said they could get me a package, even though they really, really didn't want me to take it. I said not yet. If it's available after my March bonus hits next year, I'll take it. I really don't think I have more than one more New England winter left in me. Could maybe tolerate winter on Cape Cod.

 

[HuskyHawk]

“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.

Good advice, but I'm curious how a Wake Forest fan found a retirement thread on a UConn board. I sometimes wonder if this place is just more well known than I appreciate.

 

[DemonDeac22]

Good advice, but I'm curious how a Wake Forest fan found a retirement thread on a UConn board. I sometimes wonder if this place is just more well known than I appreciate.

Born and raised in CT. Received my undergrad degree from Wake and my MBA from UConn and my son went to UConn and recently got his engineering degree there. We’ve lived in CT since the early 1990’s and have been attending men and women basketball games regularly since then. Go Huskies!

 

[HuskyHawk]

Born and raised in CT. Received my undergrad degree from Wake and my MBA from UConn and my son went to UConn and recently got his engineering degree there. We’ve lived in CT since the early 1990’s and have been attending men and women basketball games regularly since then. Go Huskies!

Ahh. Kindred spirit of sorts with me. The Hawk stands for Jayhawk. Born in KS, raised in CT undergrad UConn, law school Kansas.

 

[Shamon30]

I remember 55. Sadly, still on the job.

 

[pepband99]

Both of these statements might work for some people but are terrible advice for most others. Every year you defer taking SS income from age 62 to 70 your payout increases 8% per year. The actuarial facts support taking it later unless you have some chronic illness as most people will outlive their money. Btw sociaI security is up to 85% taxable income.
Most people will struggle financially in retirement. If you want to retire early check on what your insurance costs will be from age 50 to 65 - likely $27-$30k for most couples.

The one solid-gold fact - it's such a complex decision - no piece of advice would be good for everyone. The actuarial piece of it is key, though - imagine holding out for 70 to max out your money, and kicking the bucket at 60-something. All that contribution goes for naught.

I'll probably take it ASAP, so i can protect myself from sequence of returns risk on my portfolio, which, especially in this market, would scare me to death (bad pun)

 

[Stinger92860]

I retired, became bored, wanted to sell AI, back to working. I’m in Tech Sales and the amount of BS is starting to wear thin tho.

 

[Stinger92860]

The one solid-gold fact - it's such a complex decision - no piece of advice would be good for everyone. The actuarial piece of it is key, though - imagine holding out for 70 to max out your money, and kicking the bucket at 60-something. All that contribution goes for naught.

I'll probably take it ASAP, so i can protect myself from sequence of returns risk on my portfolio, which, especially in this market, would scare me to death (bad pun)

Very complex, very true, but on the other hand consider living into your 90’s and running out of money. My mom is in her 90’s, my dad drank himself into the ground but still made it to 84. I figure if I don’t get to 100 my kids and grand-kids will benefit from my efforts.

 

[UConnJim]

My advice to the board is to use the posts as concepts or ideas that you could use to plan for retirement as every single person/family has unique financial resources and requirements/desires. Please go to a financial planner and have them evaluate your situation to help you make your decisions about the future.