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Debt-free (almost), no kids, wife is 54, I'm 52
Old 09-11-2019, 08:16 PM   #1
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Debt-free (almost), no kids, wife is 54, I'm 52

Hi. I just found the forums this evening. I have a ton of reading to do here but thought I'd introduce myself and seek any feedback.

We have 16K left on the mortgage on a 350K house where we would like to stay as long as possible. No kids. We have lots of non-work interests in the arts, fitness, etc. I'm 52 and my wife is 54. My dream is to volunteer or work in a part-time job I love, maybe fitness-related or arts-related, and to spend parts of the winter in a warmer place.

Once the mortgage is paid off, yearly expenses would be around $60,000, which would include paying some money for house projects and some travel.

We both work in education. Wife makes 75K a year with good insurance (public university in administration). It is the most she's ever made. I took a big pay cut for my job at a private school, where I also make around 75K and insurance is OK. I had been at a law firm that was very generous with its profit sharing, which went into a 401(k) during some good years to be investing.

So that has helped me have about 840K in an IRA, about 60K in my 403(b) [I'm maxing the contributions], and 100K in already-taxed savings. Wife has about 150K in retirement. I'm due to receive about 30K a year in Social Security at age 67. I'm not sure about my wife's Social Security take. Probably 20K?

I do not see retirement as imminent, but I could see pulling the plug in 3-5 years to go do some volunteer or low-paying stuff. But I am interested in thoughts and/or advice about what I should be considering. Health insurance is my main concern. My health is very good though my mom died young and my dad is deceased. My wife's health is just OK but her family health history is excellent. That being said, I do not think I should bank on being on her insurance.

Any thoughts or advice would be appreciated but certainly not expected at this early stage in my participation here!

Thanks for reading.
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Old 09-12-2019, 10:19 AM   #2
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SS for someone at your age is "iffy"...if they go to means testing or some other reduction...so perhaps you estimate only receiving 80% of what they tell you. Also, if you read your SS statement, it will say that you will get $30k/year "if you keep working and making the same amount of money until age 67" ...which you have stated you don't plan to do....so give another haircut of 10% or so just in case.

As for health care, I FIREd at 57 and we bought insurance through the marketplace. If you can keep your MAGI income below about $64k, you can get a subsidy that SIGNIFICANTLY reduces premiums....but if you go over by even $1 you lose the subsidy...so careful tax planning is needed. Our situation was a $1,214 premium, with a $928 credit, so we pay about $300/month. That credit is worth $11,000/year.

Consider creating an LLC for your retirement business. If you do that, you can deduct health insurance premiums as a business expense.

Not sure what your asset allocation is...but I recommend looking at that and reducing it when you are within about 3-5 years of FIREing.

Sounds like you don't have Roth IRAs...but if you can stuff money in a Roth and leave it there at least 5 years, it gives you an opportunity to "manage" your MAGI income since Roth withdrawals don't count against MAGI income...see above re: health insurance.

There are a lot of smart people on here...I'm sure you'll get many more ideas.

As for understanding your wife's SS...you said she's a teacher...so is she instead in a 403b? Either way, get an estimate and then use the logic above to "haircut" the estimate.


Good luck and welcome.
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Old 09-12-2019, 10:45 AM   #3
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This is so wonderful ... thank you for taking time to reply.

Wow that tax credit is huge. I think we probably could get MAGI below 64K with careful planning.

Thanks a ton for the perspective on the Roth. Actually, yes, I've had a Roth (two now -- one an IRA and my 403(b) at work) for more than five years. I have about 30K in them combined. This year I started one for my wife, too, with just 7K and it hasn't moved much.

I'm going to search the forums for pros and cons of rolling over funds from a traditional IRA into the Roth, but it sounds like in my situation there would be strong positives to get enough in the Roths to live on after age 59.5, till Medicare kicks in, as long as I do not convert an amount that puts us in a new tax bracket.

Great idea on the LLC. I'm a lawyer turned teacher, actually, but in my law practice I shied away from most tax-related things so I have some learning to do. Being a professional fiduciary myself, I'm not averse to paying for good advice. But I'm not really interested in an ongoing relationship even with a fiduciary adviser. I actually enjoy learning stuff like this on my own ... but I know I have lots of learning to do.

Asset allocation is heavily into stocks right now -- too much, probably 80%. But that strategy has gotten me to a pretty favorable position now, so I don't want to pull the trigger too soon. Not to go political, but my sense is we will see the White House do whatever it can to keep stocks up -- for example, creating favorable China news at just the right time. It is stressful though!

Thanks again.
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Old 09-12-2019, 11:28 AM   #4
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As Educators do either your wife or you have pensions?

Are you saving the max retirement funds you are both eligible to save towards your goal to RE?

How long will it take you to pay the remaining balance on the house?

Your current stash will get you around $44k a year at a 4% WR if you retire before FRA where will the difference come from?

You will have to do some serious saving and planning to pull off an early exit but at a combined saving of 50k a year I am sure you can make it happen by 59.5.

Best of luck to you!
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Old 09-12-2019, 11:43 AM   #5
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Hi, have you already discovered the blog of the "millionaireeducator"?
He + wife are teachers, too, and seem to have an interesting approach to retirement and investing for teachers.
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Old 09-12-2019, 12:08 PM   #6
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Welcome! DH/me on ACA, high deductible with HSA. Our deductible combined is $12K. After that, 100% paid. BUT we're both healthy (so far) and we're paying less in HC costs on Bronze plan than on Silver plan. DH created an LLC and his income stays under $60K to qualify for ACA subsidy.

DH career in food science allowed him to create the LLC, work from home, organize his own schedule, write off expenses and monitor his income. We have a cash stash to make up for expenses as we spend @ $60-$70K/year.
HSA and tIRA contributions are taken off yearly taxable income.

Best of luck. You'll learn so much here.
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Old 09-12-2019, 12:16 PM   #7
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Quote:
Originally Posted by SAinMinn View Post
Hi. I just found the forums this evening. I have a ton of reading to do here but thought I'd introduce myself and seek any feedback.

We have 16K left on the mortgage on a 350K house where we would like to stay as long as possible. No kids. We have lots of non-work interests in the arts, fitness, etc. I'm 52 and my wife is 54. My dream is to volunteer or work in a part-time job I love, maybe fitness-related or arts-related, and to spend parts of the winter in a warmer place.

Once the mortgage is paid off, yearly expenses would be around $60,000, which would include paying some money for house projects and some travel.

We both work in education. Wife makes 75K a year with good insurance (public university in administration). It is the most she's ever made. I took a big pay cut for my job at a private school, where I also make around 75K and insurance is OK. I had been at a law firm that was very generous with its profit sharing, which went into a 401(k) during some good years to be investing.

So that has helped me have about 840K in an IRA, about 60K in my 403(b) [I'm maxing the contributions], and 100K in already-taxed savings. Wife has about 150K in retirement. I'm due to receive about 30K a year in Social Security at age 67. I'm not sure about my wife's Social Security take. Probably 20K?

I do not see retirement as imminent, but I could see pulling the plug in 3-5 years to go do some volunteer or low-paying stuff. But I am interested in thoughts and/or advice about what I should be considering. Health insurance is my main concern. My health is very good though my mom died young and my dad is deceased. My wife's health is just OK but her family health history is excellent. That being said, I do not think I should bank on being on her insurance.

Any thoughts or advice would be appreciated but certainly not expected at this early stage in my participation here!

Thanks for reading.
You said that the law firm you were at were very generous in their profit sharing, which all went into a 401K? What happened to that? Was that rolled into an IRA?
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Old 09-12-2019, 12:59 PM   #8
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The biggest watch-out on the Roth conversion is that you must claim the amount as income in the year you make the conversion from TIRA to Roth...so just be sure that doesn't "mess up" something else you're doing for tax or ACA purposes. For example, if you're trying to keep MAGI below $64k (by the way, that's for married filing jointly) and you do a Roth conversion, that will drive your MAGI up and you may lose the subsidy.

You get to "estimate" your income on the front end at healthcare.gov to see if you get the subsidy, but if you estimate wrong and end up over $64k after the year is over you must pay back all the subsidy...OUCH!
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Old 09-12-2019, 01:00 PM   #9
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Oh, and another trick...

Don't make your TIRA deposit until late in the year if you're "managing" MAGI.

If you get late in the year, run a "mock" tax return to see where you are relative to the $64k. If you are slightly above, make a contribution to the TIRA, which will drive down your MAGI to keep you below the $64k.

Takes careful planning, but can be done.
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Old 09-12-2019, 01:02 PM   #10
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Quote:
Originally Posted by Rianne View Post
Welcome! DH/me on ACA, high deductible with HSA. Our deductible combined is $12K. After that, 100% paid. BUT we're both healthy (so far) and we're paying less in HC costs on Bronze plan than on Silver plan. DH created an LLC and his income stays under $60K to qualify for ACA subsidy.

DH career in food science allowed him to create the LLC, work from home, organize his own schedule, write off expenses and monitor his income. We have a cash stash to make up for expenses as we spend @ $60-$70K/year.
HSA and tIRA contributions are taken off yearly taxable income.

Best of luck. You'll learn so much here.
This is so close to what I'm doing that it's scary lol. All I want to do in my LLC is earn about $6k/year lol. Just enough to pay for health care premiums and a little left over for beer money LOL.
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Old 09-12-2019, 01:06 PM   #11
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Oh one more thing....the LLC must generate "active" income to deduct health care premiums. Passive income for example from rental properties does not allow you to deduct health insurance as a business expense.

We already had a rental business LLC...and I investigated this.

Fortunately I had a 2nd LLC as a home inspector, which I just "retired" from...so now I just do minor handyman work out of that LLC to generate the small income needed.
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Old 09-12-2019, 01:22 PM   #12
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This is so close to what I'm doing that it's scary lol. All I want to do in my LLC is earn about $6k/year lol. Just enough to pay for health care premiums and a little left over for beer money LOL.
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Oh, and another trick...

Don't make your TIRA deposit until late in the year if you're "managing" MAGI.

If you get late in the year, run a "mock" tax return to see where you are relative to the $64k. If you are slightly above, make a contribution to the TIRA, which will drive down your MAGI to keep you below the $64k.

Takes careful planning, but can be done.
Thank you for the bold part. We kept contributing to Roth and didn't realize taxable income is lowered by contributing to tIRA. So, this year we get to contribute to tIRA and make more $$ in LLC. I e-mailed our CPA a couple of weeks ago and asked this question. Now he tells us, yes contribute to tIRA and you're fine. Why didn't you tell us this 5 years ago?

Plus, when we reach 65, we can pull from the HSA for medicare premiums and HC payments. We're maxing out the HSA now.
What would we do without this forum? Forge on and keep learning.
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Old 09-12-2019, 03:31 PM   #13
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Wow, this is superb stuff, thanks so much!

In answer to great questions, and with a couple questions of my own:

1. House will be paid off in about 14 months. I could pay it off tomorrow from savings if I wanted to but don't see a huge reason to do so, even though we can't deduct the interest anymore (we take standard deduction).

2. I will have a small pension from my very first career, which was in the newspaper biz actually. It is projected to be only $3,500 a year last time I checked, so not a huge factor. Wife has no pension. For more recent hires such as her, they set up a 401(k)/403(b) instead and contribute toward it -- 10% of her income I believe it is.

3. I have contributed the max to my 401(k) and now 403(b) for several years, and foresee continuing to do so. Currently half (12K) goes to Roth and half to traditional 403(b). Now I'm thinking about that in light of the suggestion about contributing to a TIRA directly. Could I contribute 12K to my TIRA at the end of the year to bring the tax bill down lower ... as long as my combined contributions to the traditional 403(b) and TIRA do not exceed 24K?

4. As for my wife, unfortunately she is contributing just a few percent beyond what the employer puts in, enough to get the additional match. It's "an issue," shall we say. She comes from a family where saving is not valued and investments seemed like another world. Her family members literally work till they die and spend what they have when they have it. So this is new to her, and I'm introducing these things slowly. You know how it goes. But ... could I max out a contribution to a TIRA in her name as long as her combined 403(b) and TIRA contributions do not exceed 24K?

5. Millionaire educator blog ... love it! I will check it out.

6. My 401(k) from my former law firm, which was generous with profit sharing, all is in a Vanguard TIRA.

7. The LLC idea is brilliant. I've been meaning to set one up anyway for a little side legal work I do, which is not much at present (sort of want to keep it that way). In Minnesota it would be a "PLLC," which is a professional limited liability company, but all the same principles would apply I would imagine. Whether I continue to do legal work or something else on the side is not clear. Like I said, I'd like to do something in the arts or fitness.

8. For sure I would do a conversion into a Roth very late in the year. Probably just do a Vanguard transfer but interested in any thoughts. Keeping MAGI under 64K is impossible now and likely will be for several years ... but good to think about. Correct me if I'm wrong, but my primary concern at this stage should be converting too much so we go above $168,400 in taxable income.

Gosh so much to think about. Thanks a ton!
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Old 09-12-2019, 04:31 PM   #14
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It sounds like you'll be at a much lower tax rate in retirement than you are now. I'd be concerned about paying too much on taxes on the Roth conversions.
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Old 09-14-2019, 07:17 PM   #15
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It sounds like you'll be at a much lower tax rate in retirement than you are now. I'd be concerned about paying too much on taxes on the Roth conversions.
Thanks, yes, you make a good point. We can't predict the future, of course, but among my concerns is what the tax tables will look like in seven years when I realistically can/will pull the trigger.
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Old 09-15-2019, 09:40 AM   #16
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If you have access to a copy of Quicken Deluxe or higher versions, it includes a Lifetime Planner that is a good tool for retirement planning.... it includes the ability to compare plans with different assumptions using its "What-If" function... it is a pretty comprehensive and intuitive tool.

Also, once you have a plan established you can monitor your progress with Quicken.

If you don't need the liability protections of a PLLC or LLC, even with a simple Schedule C you can deduct your health insurance premiums. https://turbotax.intuit.com/tax-tips...oyed/L6bRhLaVE
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Old 09-15-2019, 08:41 PM   #17
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If you have access to a copy of Quicken Deluxe or higher versions, it includes a Lifetime Planner that is a good tool for retirement planning.... it includes the ability to compare plans with different assumptions using its "What-If" function... it is a pretty comprehensive and intuitive tool.

Also, once you have a plan established you can monitor your progress with Quicken.

If you don't need the liability protections of a PLLC or LLC, even with a simple Schedule C you can deduct your health insurance premiums. https://turbotax.intuit.com/tax-tips...oyed/L6bRhLaVE
Great to know, thanks for taking time to share that!
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Old 09-15-2019, 11:33 PM   #18
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Watch the different planners... I have used probably 30 but prefer FireCalc here for the Monte Carlo and New Retirement for the level of detail and ability to see detailed future calculations. The warning is each defines “living expenses” differently; some do a tax estimate or healthcare estimate on top of your expenses and some assume you are including those.
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