Serious retirement savings question…

[Axtremus]

Start with the more conservative plan (@LuFins-Dad’s plan) for now, and observe how the kids do over time.

Maybe the kids will do so well that your inheritance will look like pittance to them, maybe not.

The answer will come in time, and you can adjust towards the less conservative plan (Karla’s plan) later depending on how kids do.

[George K]

Any such planning has to include what your projected expenses in retirement will be.

When I sat down with my guy, we went through all of our essential expenses (insurance, utilities, food, auto, etc) and developed a plan to guarantee that level of income (with Social Security being part of that plan).

"Touching the nut" is then for non-essential expenses - concerts, dining out, etc. Of course, when you reach a certain age (was 70, then 72 and now 73), you encounter the RMD - Required Minimum Distribution. Your uncle in DC doesn't want you hoarding your funds, so he REQUIRES you to withdraw a certain amount based on your age and what projected earnings will be.

[LuFins Dad]

@George-K said in Serious retirement savings question…:

(was 70, then 72 and now 73), you encounter the RMD - Required Minimum Distribution. Your uncle in DC doesn't want you hoarding your funds, so he REQUIRES you to withdraw a certain amount based on your age and what projected earnings will be.

Wait, what? I have never heard about this….

[George K]

@LuFins-Dad said in Serious retirement savings question…:

Wait, what? I have never heard about this….

Surprise, surprise, surprise.

https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-required-minimum-distributions-rmds

Also that amount goes up every year.

In my case it's the amount in my IRA divided by 25.5 - so a bit more than 4%.

Here's a nice little calculator to see what you MUST take out. If you don't, penalties are YUGE - about 50%, iirc.

https://www.aarp.org/work/retirement-planning/required-minimum-distribution-calculator.html

[LuFins Dad]

@George-K said in Serious retirement savings question…:

@LuFins-Dad said in Serious retirement savings question…:

Wait, what? I have never heard about this….

Surprise, surprise, surprise.

https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-required-minimum-distributions-rmds

Also that amount goes up every year.

In my case it's the amount in my IRA divided by 25.5 - so a bit more than 4%.

Here's a nice little calculator to see what you MUST take out. If you don't, penalties are YUGE - about 50%, iirc.

https://www.aarp.org/work/retirement-planning/required-minimum-distribution-calculator.html

You seriously have to be effin with me… Yhose amounts are entirely too much. If you live to be 95 you’ll basically be living off of SS…

[Mik]

5% is aggressive for returns we can expect to see. Plan for 3% and hope for better.

[Mik]

@George-K said in Serious retirement savings question…:

@LuFins-Dad said in Serious retirement savings question…:

Wait, what? I have never heard about this….

Surprise, surprise, surprise.
https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-required-minimum-distributions-rmds
Also that amount goes up every year.
In my case it's the amount in my IRA divided by 25.5 - so a bit more than 4%.
Here's a nice little calculator to see what you MUST take out. If you don't, penalties are YUGE - about 50%, iirc.
https://www.aarp.org/work/retirement-planning/required-minimum-distribution-calculator.html

Look up RMD.

[George K]

@Mik said in Serious retirement savings question…:

Look up RMD.

As I said, it's not a consideration until you're 73. However, it might affect your planning.

[Mik]

73 is around the point where you might expect your discretionary spending to slow a bit. But RMD messes with that and you need to have aa plan to reinvest some of that money.

[Copper]

@LuFins-Dad said in Serious retirement savings question…:

If you live to be 95 you’ll basically be living off of SS…

Just because you take it out of the IRA doesn't mean you can't still invest it.

You just don't have as much to invest because the democrat IRS take it to pay for their office parties.

[Jolly]

@LuFins-Dad said in Serious retirement savings question…:

@George-K said in Serious retirement savings question…:

@LuFins-Dad said in Serious retirement savings question…:

Wait, what? I have never heard about this….

Surprise, surprise, surprise.

https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-required-minimum-distributions-rmds

Also that amount goes up every year.

In my case it's the amount in my IRA divided by 25.5 - so a bit more than 4%.

Here's a nice little calculator to see what you MUST take out. If you don't, penalties are YUGE - about 50%, iirc.

https://www.aarp.org/work/retirement-planning/required-minimum-distribution-calculator.html

You seriously have to be effin with me… Yhose amounts are entirely too much. If you live to be 95 you’ll basically be living off of SS…

Roth. Either front door or back door.

You can also do a SPDA, although I don't think you can do that with a roll-over from a tex deferred fund such as a standard 401k.

[Jolly]

Secondly, do you have LTC insurance? If not, and y'all are in fairly decent health, do consider it. At 65, your chances of needing long term care are about 3 in 4, or a bit less. The average expenditure a couple of years ago was somewhere around $170,000.

If you don't have the money, the state will impoverish you, then put you on Medicaid. After your death, they will go after any other assets that don't count against Medicaid with a vengeance...This means your home and property, including your car.

For asset protection, you may wish to consider a revocable or irrevocable trust for one or both of you. The current look-back period is 5 years. That's a decision to be made in a good lawyer's office. The advantage of a trust, besides asset protection, is avoiding probate.

[Jolly]

And...be careful where you retire. Some states have no state income tax. My state does, but none of my 401A is taxed by the state.

[Doctor Phibes]

@Jolly said in Serious retirement savings question…:

And...be careful where you retire. Some states have no state income tax. My state does, but none of my 401A is taxed by the state.

You'll most likely get taxed one way or another. No state income tax can often mean high property taxes or sales tax.

[Jolly]

@Doctor-Phibes said in Serious retirement savings question…:

@Jolly said in Serious retirement savings question…:

And...be careful where you retire. Some states have no state income tax. My state does, but none of my 401A is taxed by the state.

You'll most likely get taxed one way or another. No state income tax can often mean high property taxes or sales tax.

Sales tax is a bitch, 10% or 10.5%. My property tax on my home = $0. My daughter's home (which I own) is a bit less than $700/year. My property tax on my timberland (23 acres) is $65.

[Jolly]

One of my favorite websites (thank you, Jon)...

https://www.bogleheads.org/forum/index.php

[LuFins Dad]

That’s weird… My 401K has an app that shows in a glance your balance, rate of return, recent transactions, and estimated retirement income including SS at retirement… I give it a quick check once a month or so… Last month I noticed that the balance went up, the rate of return went up, but the estimated annual income went down. I wasn’t sure, so I screenshot it… I just checked for this month. The balance is higher again, the rate of return is up .26%, and the estimated annual income is down $1100 per year.

Any thoughts, @jon-nyc ?

[LuFins Dad]

Figured out the oddity... The app was set up to show the annualized return over a three year period. Three years ago the stock market was having it's COVID spasms and was all over the place...