We are playing the pre 65 Medicare retirement game same as vwlizard Our premiums on the NJ insurance market are the lowest we have ever paid (and will certainly be lower than Medicare.) We effectively have no income the past few years (will continue that way until we are both on Medicare.) Despite being retired early, we are not collecting SS or taking out from our 401K investments. We are living off our non-retirement savings instead (since they are being spent in retirement they are technically retirement savings, but they are in unrestricted accounts - so already taxed).
I believe because of things like this and the ever changing required distributions, it is important to accrue unrestricted savings as well as IRA/401K savings. (I did mention this in the thread about maxing out your 401 K contributions).
Repairs and replacement of household infrastructure can deplete emergency funds.
How long should one try to make retirement funds last if aged 85 or older?
Here is a scenario: a friend in stable health may deplete funds in five years at current rate of spending and asks me for advice.
Doesn’t like my response: pause unnecessary expenses to get credit card debt down.
I’m older than most of you – age 74; DH is 72 – and I went through this exact scenario. I basically tiptoed into full retirement.
In 2012, at age 63, I left my last major corporate job. I knew I wanted to sell our house, in which we had raised our kids, to eliminate the mortgage. We downsized and moved to the next town, with no mortgage.
After I left the corporate job, I was able to get some contract work very close to home and did that for a couple of years. Then I got a gig where I could work from home and did that for three more years, each year working fewer hours, until I decided at age 70 that I was done.
When I turned 65, I had to start taking a small pension. I wanted to postpone SS until age 70, so between the pension, my income, DH’s income, and some small withdrawals from the IRAs, we were able to maintain our income at a reasonable level. Then, when I turned 70, I started SS; DH also waited until 70.
I’m now required to take my RMD, which we basically use to pay the property taxes and insurance on the house. DH will be required to take his RMD next year.
According to our FA, there’s a 99% chance we will be fine, and also be able to leave a chunk of $$$ to our kids.
I’m willing to touch my retirement accounts, but the FA said we wouldn’t need to. Like I said, I’m not convinced, but it was nice to hear.
I imagine that we will get one last, good car out of those funds, for instance. But I am kind of hoping to leave most of it to my kids, along with our house. It may not work out that way, but my greatest hope is to at least not be a financial burden on them as we age. Very grateful that my parents did that for us. Well, so far. Mom is 91 but in good shape financially.
We do plan to draw from our 401k when retired as this is why we have saved for the past 39 years. H has a very small pension and he will have the maximum social security at full retirement age. My social security is less than H’s since I worked part time for 15 years when our girls were younger. We do have an investment account outside of our 401k where we put the money H got when he sold his mom’s home when she passed. We pay taxes on earnings and dividends each year so we can draw from this account without paying taxes. Our FA said we can retire when we are ready which is great to know.
As others have said we hope to not burden our girls as we age and our FA says we should achieve this.
One of my relatives sold his private practice to a hospital system and now has cut back to working 2 days/week and being granddad & husband the other days. He seems pretty content with his new balance and is able to use his earnings to fund their trips and other fun things. He’s a urologist.
Going into a situation where you still have a lot of debt (CC or whatever source) but have reduced income would make me very uncomfortable and nervous. There will always be unexpected expenses but rarely (if ever) unexpected income or assets coming to you.
Running out of money as you age sounds very very uncomfortable and miserable to me. We really don’t want to be a financial burden to our kids nor loved ones.
This is someone who’s been very independent, generous, optimistic/entrepreneurial… perhaps some magical thinking going on, more of a grasshopper personality not sweating the details, rather than an ant. But it raises question- is health still stable, or is it sign of possible cognitive decline?
Are you a close enough friend to talk to loved ones to see whether there is a cognitive issue? And close enough to give him advice? I mean, did he ask for help or just mention what’s happening in passing?
That was one point of contention between dh and I. He was trying to find ways to cut costs to make his retirement possible, and I said that I don’t want to have to live significantly smaller in retirement. If we have to curtail our lifestyle, which as I’ve already said is by no means grand, then, IMO, he can’t afford to retire. This was a guy who refused to draft an actual budget but thought the answer to finance retirement was for me to switch to a cheaper protein bar. Just. No.
Yes, when we are still healthy, we will be doing more travel and dining out. As we get older and less interested in going out and about, it may be for more help—housekeeping, ordering in food, yardman, caregiver, etc.
Don’t count on expenses going down dramatically unless you really want to box yourself and spouse into spending much less. Many of us envision living similarly in retirement as we did previously—if that’s what you want, budget and plan accordingly.
@kiddie, when I realized just how much of our assets were in qualified plans/pension/IRA/future SS, I told DH we needed to get more money into unrestricted, already taxed funds. That’s where we’re throwing the $$ that doesn’t go to the mortgage or car payments any more. Makes me feel better that we’re getting an emergency cushion/after-tax amount that we can use for emergency funds or to reduce our taxable income in some years.
I’ve read that 401k catch up contributions can only be made after-tax starting next year. H’s plan doesn’t allow Roth 401k contribs. Not fond of trying to back door it. Guess we may throw it at HYSAs or mutual funds.
Our state is one of the worst for taxing pension/SS. That 8% would buy a lot of groceries.
This change only applies to persons who made >$145k in 2023 with the employer providing 2024 401k. Given this rule change, I expect a large number of employers who didn’t offer Roth 401k contributions in the past will begin offering it in 2024, even if just for catch-up.
The best time to do it is after you retire, but are living on after tax dollars if you have that luxury. That way your income is only what you convert to Roth. Depending on what your tax rate will be once you are drawing SS, it certainly makes sense for most to convert up to the top of the 12% bracket. For others it makes sense to convert up to even higher brackets.
Remember, when you hit 70(ish) you’ll have both SS and RMDs. It can created an unanticipated jump in tax bracket unless you manage for it.