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In Philly and tired of snow
Old 03-04-2010, 02:57 PM   #1
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In Philly and tired of snow

Just joined the community. I am 41 and my wife is 45, we have no kids and plan to retire at 55 (59 for my wife ). Excluding our home we have about $725,000 saved so far. We are trying very hard to pay the house off and if we stay on track we will have that done in 2016. We have no other debt. We can save about $70,000 a year, but most of it can not be put in tax defered accounts . I think I know what we need to retire on, but very concerned about health costs and the cost of the "gap" between 55 and the time we start collecting social security. We have no pensions and will be relying solely on retirement savings. We look forward to buying my mom's NC beach house from her when she is ready. 14 years to go !!
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Old 03-04-2010, 03:32 PM   #2
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Welcome. There are ways to minimize taxes on your investments in after tax accounts, if you have not already sorted that out.
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Old 03-04-2010, 03:53 PM   #3
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Thanks Travelover! I am using mainly a muni bond fund for my state, but if there are other options out there I am all ears. My biggest issue in saving for retirement is that we are excluded from the ROTH and I am limited by my 401K plan to no more than 5% of my salary. I have looked into a ROTH conversion on our existing IRA's but haven't pulled the trigger because I can't figure out the tax liability and whether it is worth the hassle.
BTW is it travel lover or travel over (as in over to the retirement life) ??
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Old 03-04-2010, 04:25 PM   #4
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Originally Posted by OINC View Post
Thanks Travelover! I am using mainly a muni bond fund for my state, but if there are other options out there I am all ears. My biggest issue in saving for retirement is that we are excluded from the ROTH and I am limited by my 401K plan to no more than 5% of my salary. I have looked into a ROTH conversion on our existing IRA's but haven't pulled the trigger because I can't figure out the tax liability and whether it is worth the hassle.
BTW is it travel lover or travel over (as in over to the retirement life) ??
It is lover of travel, thanks. One standard way of minimizing taxes on equities is to simply hold them in an index fund. Capital gains are minimized as turnover is low. Of course, you can also go with a tax managed fund like VTMFX that strategically tax loss harvests. Re the Roth, have you thought of doing a nondeductible IRA for 2010, then converting it to a Roth?
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Old 03-04-2010, 04:55 PM   #5
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Hey fellow Philly person, actually I'm more of a Philly burbs person.

You can get some good advice here but also over at the Bogleheads Forum:

www.bogleheads.org/forum/index.php

Those that follow the investing advice of another Philly person John Bogle.

I'm about the same age trying to do the same thing, but I work for the government so I get a pension and the TSP.
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Old 03-04-2010, 05:03 PM   #6
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Thanks for your input. It is always nice to bounce strategies and ideas of another person ! I thought (I am probably wrong) that you had to pay taxes on % that is converted that was un-taxed. In other words you can't just select certain years to convert and leave other years alone, you pay taxes based on a % of taotal assets that have been taxed vs the % that hasn't. Believe me I could be totally wrong. BTW are you in a similar boat with minimizing taxes??
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Old 03-04-2010, 05:28 PM   #7
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Thanks for your input. It is always nice to bounce strategies and ideas of another person ! I thought (I am probably wrong) that you had to pay taxes on % that is converted that was un-taxed. In other words you can't just select certain years to convert and leave other years alone, you pay taxes based on a % of total assets that have been taxed vs the % that hasn't. Believe me I could be totally wrong. BTW are you in a similar boat with minimizing taxes??
You are correct. All IRAs are considered to be one and conversions are prorata between pre and post tax contributions. But in the end, you have a Roth account with no more taxes, even on the earnings. If you have a lot of pre tax money in IRAs now, this might not be for you. I have about 10% of my portfolio in an after tax account. I got a nasty surprise a few years back with a managed account that presented a whopping capital gains tax bill, unexpectedly.
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Old 03-04-2010, 06:29 PM   #8
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Ouch, you have to hate those unexpected tax bills. I have about 20% in taxable accounts, about 5% in various IRA's (Roth and Non-deductible) and 75% in rollover IRA's and 401K's.

How close to retirement are you (or are you already retired)? How much of gap did you/are you covering before Soc Sec kicks in? I am worried about the gap. I figure I will need $300-$400,000 in after tax to cover living expenses in the time between retirement and the beginning of soc sec, and to cover medical.

Just curious what stage you are at?
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Old 03-04-2010, 07:33 PM   #9
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Ouch, you have to hate those unexpected tax bills. I have about 20% in taxable accounts, about 5% in various IRA's (Roth and Non-deductible) and 75% in rollover IRA's and 401K's.

How close to retirement are you (or are you already retired)? How much of gap did you/are you covering before Soc Sec kicks in? I am worried about the gap. I figure I will need $300-$400,000 in after tax to cover living expenses in the time between retirement and the beginning of soc sec, and to cover medical.

Just curious what stage you are at?
I retired in 2007 at age 54 - but with a pension. Since I retired from a US auto company, my pension is not something that I know that I can depend on - though so far, knock on wood, it has remained solvent. Fortunately I saved enough when I was w*rking that my retirement is secure if the pension defaults. You'll find the full spectrum here from full COLAed pensions with paid medical benefits to strong lifetime savers paying all their own expenses including their own medical insurance.

Check out our search function to get a flavor of other people's situations - it is a favorite pastime here to compare notes.
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Old 03-05-2010, 08:21 AM   #10
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In Philly, tired:

Accu weather say not to get too excited about the warm weather we're having right now. They say one more big one possibly next week, and then spring.

Z
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Old 03-05-2010, 01:17 PM   #11
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Gee thanks for the snow update

G worker, I am also more of a Philly burbs person, but figured it was easier to just say philly....nice to have that pension, maybe I should switch careers
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Old 03-05-2010, 01:23 PM   #12
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OINC,

Which burbs? I'm in what Adam Joseph calls the far western suburbs. I usually say Lancaster, but I actually live about 35 minutes south of it into Amish Country.

Z
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Old 03-06-2010, 09:04 AM   #13
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Gee thanks for the snow update

G worker, I am also more of a Philly burbs person, but figured it was easier to just say philly....nice to have that pension, maybe I should switch careers
Welcome to the board. I am a actual Philly resident living within the City of Brotherly Love. Been retired since 2005. You will get loads of great information here.

Re. the snow....hubby is out reeving up the motorcycle as I post this. Wants to take advantage of the relatively nice weather. The man is a diehard. The maps have been out for weeks. Hes been pacing like a caged tiger (and working my nerves) He is more that likely going to take a quick ride to New Hope and back. Hopefully the roads will be OK. It is pot hole city around here.
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Old 03-06-2010, 09:47 AM   #14
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North of Philly - up I-476 (hint: Billy Joel cut a record about our town )...
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Old 03-06-2010, 11:15 AM   #15
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Zarathu, know where you are...nice area. We are half way between Philly and you...near the nuclear power plant
Rescueme...the clue was way to easy...you should have said "home of the Iron Pigs"..that would have been a little tougher
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