How Much Do You think You Need to Retire/What Age Will You/Spouse Retire: General Retirement Issues (Part 2)

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1886

@kiddie it depends on how comfortable one is on managing the lump sum money.

It took us years with our financial guy to put all our pieces in place – it was with a plan and not too drastic with each move. For example, we first consolidated all our loose Sar-Sep, IRA, Roth, etc all under his financial group. Then we moved IRA to Roth IRA. Then we started buying annuities when the market was right for such. I still manage DH’s work 401k - company pays the fees; they have good investments and we have done well with the choices we have made.

It sounds like you have other financial pieces to perhaps look to finding a financial advisor; and you have some time before making the pension decision. I have a friend who has 100% survivor of her DH’s pension and they have kept with the pension. Many pensions are only 50% survivor. So look into details of the pension and also ask around with friends/coworkers to find the right financial person for you.

We attended a seminar (we paid for materials) 5 years ago where our financial guy was the instructor. We have been working with our fellow since then and have been meeting with him twice a year and attending the company information sessions “state of the market”. I have two graduate business degrees and he knows lots of things I am not interested in researching and learning. This is what he does for his clients and his company will be here - solid person and company. He also has been good over the years for DH to understand it all. Now that DH is retired, he looks at the financial picture often.

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1887

Due to corporate changes over the years, no old fashioned big pension for me. But with the plan I had choice of Cash or Monthly payments. I chose monthly because it had decent payout (even a financial advisor itching for investment money from us suggested the Monthly option) and I wanted something, along with SS, that was a for-life payment without concerns about investing … already sweating that on my 401K. I can certainly see why it is a big decision and understand why a lot of people would choose Cash.

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1888

Thanks for all the info, very helpful.

Husband will have 40 years in if he makes it to next year. Any pension payout would have 100% spousal benefits. So the odds of there being at least 20 years of payout would almost certainly be 100% since it’s both of us.

And thanks for explaining about Roth conversions, again very helpful.

It’s hard figuring out what to do, since the FA has a vested interest in us choosing the lump sum. We’ve been very steady savers and not been living an extravagant lifestyle. It’s hard to figure out this last part as we’ve only been in a saving and raising children mode for the last 40 years.

We are in the boat that the pension will pay our monthly expenses and any we take out from the 401k will be “fun” money if that makes any difference. Still have 2 car payments and a house payment. Cars because of wrecks, house will have a few years left after refinancing a few years ago

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1889

We already had a financial advisor and lots of stuff in place. The big motivator was it was an early buy-out, so the lump sum now (pre-retirement) was more than the lump sum would have been at retirement. We couldn’t say no to extra money (and it was a nice bit of extra money).

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1890

If monthly pension sum pays for normal expenses, and if it doesn’t drop on death (or reduce at 62, which H’s would have done), I might lean toward that. It would really help you sleep at night knowing you are set for life. The other money you have can be for unexpected expenses, health care costs, luxuries, etc. Knowing that you can cover your costs if you live to 100, regardless of what the market does, is pretty cool.

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1891

One other thing to think about regarding lump sum vs annuity for payout is with the annuity you get that money each month, and can’t control withdrawals. With you controlling the money, if paying for Medicare is part of your plan, you could choose to do withdrawals such that some years you take more, so Medicare costs go up, but other years you take less, so Medicare is less for the related year.
It’s certainly complicated.
We consider ourselves lucky to be sweating similar decisions.

1892

bluebayou is correct. Your portfolio manager wants the lump sum to add to your portfolio. He is paid according to how much $$ he has under his management. That’s not to say it’s not the better idea; I don’t know. But just be aware of that fact.

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1893

To my vast surprise, despite a salary under $50K, I’ve won the jackpot.

D is going in-state, and the money’s saved and taken care of. I should have my house paid off around the time she graduates. My town is very walkable and bikeable, my ancient Volvo’s in good repair and seldom used, and the bus downtown goes past my house on the half-hour. Lots of parks and a shopping center in walk/bike distance. I’ve got solar panels, a big veg garden and fruit trees, a paid-off rental property. I don’t eat much and already have a house full of stuff I like.

My base COL should come in well under $2K/mo, including home upkeep and various types of insurance. And that in turn means I’ll actually be able to live on Social Security, assuming it still exists, plus rents. I’ll have been socking it away, though, between paying off the house and retiring, so between that and earlier savings – I imagine in total it’ll come to around $300-400K – I should be absolutely fine for whatever travel I want to do (likely not much, don’t fancy the GHG cost, and have seen plenty already) the demise of Soc Sec, or most other contingencies that don’t involve a kleptocracy and war. When I’m old and feeble, my kid will be able to decide whether she wants to use my money to have me taken care of or collect it herself and take on the job. I’m in pretty good nick though so it might be a while.

I like my job, and unless things change a lot I’ll keep my zebra-mussel-like job security and benefits until at least 65.

Not bad! I think I’ve accidentally won Boomer status: multiple houses, great health insurance, mad stability, decades of vacation, and (by then) a restored classic car. Crazy.

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1894

I took the annuity instead of the lump sum. It has let me invest my 401k aggressively. The monthly pension is guaranteed by PBGC and is much better than any annuity in open market.

A lot of AT&T folks are in a similar situation

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1895

Oh: and I’ve never had a financial advisor, strictly DIY, started learning to invest in elementary school and set up a Roth at Schwab decades ago. There are a few other accounts scattered around, including a TIAA (not good), but if you can read the tax docs, which are well-written, and prospectuses and filings, and have some industry-analysis and fin background, and understand clearly how much you can and can’t afford to lose, it’s not that difficult. You already know that as an individual investor you’re in the sucker chair, and the thicket of lies that fin serv and oversight lives in now means that unless you can afford to lose a whole lot, there’s no reason to stray far from home. The nature of the economy’s also changed markedly in the last 40 years and Bogle-style investing’s of limited utility. At this point you’re mostly looking to buffer from the rise and fall of rickety titans.

I’ve never really liked annuities, but I like them even less in an environment of opacity, lies, and large upheavals with thin insulation from global financial events. Annuities’ value depends on the longevity of the company issuing the annuity. Do I think that any given company’s going to survive as long as I will? No, not really. Could happen, but I don’t want to gamble a retirement on it.

1896

Portfolio managers also love individual annuities – from insurance/investment companies, not pensions – as they come with high commissions…

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1897

kiddie - that’s a really interesting plan about reducing your taxable income before Medicare to qualify for a cheaper market insurance plan. Does that mean you draw only from Roths? We don’t have any of those, just 401ks. This is a basic question I know.

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1898

We are living off of other savings (non-retirement plan savings), which includes money from a severance package my husband received.

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1899

This strategy was suggested by a tax expert. The savings from the cheaper insurance is significant enough to mean that my annual spending is a lot less than a typical year.

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1900

There are whole threads on Bogleheads about early retirees delaying taking their retirement benefits, living on their taxable savings or their only income is tax-qualified funds they convert to Roths up to the ACA limits, all managing their income to stay within the ACA subsidy ranges.

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1901

@bennty you are following your own strategy that has worked out well for you. You are in a location that has benefits that work out for you. Having a rental property for cash flow and gains on value.

I would not want to ‘research’ annuities and other investment options. But that is what my financial guy and his group do; they also contract some with gaining financial insight in deeper areas. Our financial guy has proposed the best product match for our needs to reduce our overall risk.

We have two DDs - and I think they will help look out for DH and I and ‘preserve’ our estate as much as possible – my mom was able to get good care and oversight in her home and preserved my parent’s estate (dad died at 64, and mom at 77 - he had cancer and she had dementia/Alzheimer’s).

We are training DDs as well as possible on how to build up their own household financial stability and estate.

For having a 18 year gap of employment (being SAHM due to H’s extensive work travel and no family in state) I worked enough over the last 4 1/2 years to gain social security beyond 1/2 rate of DH’s. I collect my first check for Oct mid-Nov. We are holding off drawing on DH’s to get as close as we can to 66 and 4 months to not have a lifetime penalty of ‘full Social Security’.

I also benefitted from 4% 401k match with employer after meeting requirements. To date I contributed $4679 and my account total is $14.5K. Last two years with high rate of return, utilizing two of the best performing stock groups (one was small cap, the other large cap). We also participate with the small cap fund that is also in DH’s 401k plan.

So once all is in for my earnings through Sept, I am going to ‘cash out’ this 401k for helping us ride out until we start drawing DH’s SS.

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1902

Thanks for sharing, kiddie! We don’t have huge amounts of non-401k savings but may in the near future. Good strategy to consider.

somemom- thanks, will have to check out Bogleheads, have heard that mentioned on this thread more than once!! I’m slowly getting over my overwhelm with this topic bit by bit. lol

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1903

I will check out Boggleheads. I don’t intend to work past 50 (may retire at 48) so will need healthcare prior to Medicare for a long time. I’ve budgeted for it, but keeping the cost as low as possible would free up more funds for travel. As for social security, it’s just gravy for me, so I have no interest in maximizing the amount and will take it at 62. With each additional year of dealing with corporate politics, the more eager I get to retire as soon as possible. I now have three potential retirement dates that depend on how truly over corporate America I get.

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1904

Many Bogleheads also delay SS so they can keep income low to qualify for greater ACA subsidies…

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1905

For those engaged in longterm planning for healthcare, etc - keep the political and demographic landscape in mind. Millennials and Gen Z are far poorer and more communal generations than Boomers and GenX, esp. white GenX men, have been at the same ages, and the usual “oh don’t worry, you’ll make money as you get older” business isn’t so likely for them; there’s much more inequality of opportunity now, which they’re aware of and vocal about. I don’t think most are anti-capital, but the sense of proportion is different and the material aspirations much more modest, and there’s a much stronger sense of “who do you think you are?” about expectations that you should go enriching yourself beyond modest living without a thought for anyone else.

So barring a slide into autocracy, I would expect the lights to be going out on Reaganism and its followup. Meaning I’d expect both Soc Sec and Medicare to be means-tested within 10-15 years, meaning that if you’ve got a pile, not only will your Soc Sec drop or be taxed far more heavily (probably won’t affect you much in any practical way), but your cost-share on Medicare will, I think, likely go up by quite a lot, much more like healthcare’s taxed in other countries. I would not expect the new kids to be sympathetic to “but I earned it/I deserve it!” arguments, especially if you’re still living very nicely and your main concern is that you’ll have less to pass to your kids. Like the generation that came up in the Depression, they know what poor and unstable is, and their concern is going to be equity: provision of moderate living standards and opportunity, including educational opportunity, for all. They’re further informed by newer thinking about structural inequality, especially as it relates to race. Old white guy with millions, fit as a fiddle after a lifetime of success, expensive recreational sports and nice food, outraged by having to pay serious money for Medicare? I don’t think this person will get much of a hearing.

Some years ago I was looking at a Pew demographics chart and realized that Boomers become politically irrelevant around 2025-28, meaning that those still alive will still be using hella resources, but will not have the votes to hold them in place. Gen X, as usual, is too small to make much noise, and it’s a fractured generation anyhow: white Gen X men tend to behave and vote much more like Boomers, while Gen X women/minorities lean Millennial, so I would expect fair support from Gen X for the equity stance of the young people coming into power – and a core of real, real frustrated Gen X men.

Bottom line: if your advisor’s looking at a “where we’ve been is where we’re going” sort of trajectory, I’d keep Scenario B in mind. If you’re collecting a lot of money, I’d expect to be giving some back. Which, again, won’t likely affect you much in a material sense unless you’re trying to budget to the edge, but will likely affect what you’re passing on.

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