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ER...the early years questions
Old 06-08-2015, 11:24 AM   #1
Confused about dryer sheets
JohnKeating's Avatar
Join Date: Jun 2015
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ER...the early years questions

Here is my early thinking for how to handle the years between ER and RMDs. I'm looking to minimize taxes down the road while maximizing growth. This is probably a given but I figured I'd state the goal.

For reference here's our current standing for ER (removing kids from this picture as by ER they should be taken care of by other accounts).

Today: Me: 40, DW: 49 (retired)
Taxable: $175,000
My 401k: $575,000
My Roth IRA: $50,000
DW 401k: $400,000
DW tIRA: $80,000

I plan to retire at age 52. At that point DW will be 61.

At retirement I hope to start moving DW's (starting with her as she's older) tIRA to a Roth IRA and then start working on her 401k to Roth. I'll move the max amount per year possible to stay in the 15% tax bracket. We'll live off our taxable account @ 15% LTC (We are planning to increase our % of savings allocated here going forward for this reason).

Also, when DW turns 62 she will file and suspend her SS and I will claim the spousal benefit. This will hopefully continue until I turn 72 and start collecting on my SS.

Hopefully, by the time I turn 59 1/2 we'll have all her accounts converted (not expecting it to be done in 7 1/2 years but we'll continue the process) over to Roth and I can start the process with my 401k. At this point we can start using her Roth as another income stream if the taxable account is getting low.

I do plan on staying with my company until I retire at 52 so there is always the possibility of doing a 72t to access my 401k early if needed.

I'm not looking into the details as of yet because we're still 12 years away and a lot can change by then but I would like to have a general understanding of what it might look like at that point given what we know today.

So, from a high level is this a decent plan? Other thoughts/suggestions?



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Old 06-08-2015, 12:32 PM   #2
rodi's Avatar
Join Date: Apr 2012
Location: San Diego
Posts: 6,753
Your SS options are wrong.

For you to collect on your spouse's benefit you must be of full retirement age. (You may be able to collect when you're 62, but NOT when she is 62).

Having her file and suspend at age 62 serves no purpose... She is not collecting her reduced benefit - you're not of SS age.

Also, any filings prior to full retirement age (67 for you guys) will reduce benefits going forward.

My husband is almost 10 years older than me, but I was the higher earner.... we looked at this fairly closely in the past and I didn't see any way to take advantage of a file and suspend option. That said - if you have kids who will still be minors when she turns 62 (unlikely unless adoption were involved since women have this darn bio-clock.) you might be able to collect child benefits for minor children of SS retirees. We are taking advantage of this.

Retired June 2014. No longer an enginerd - now I'm just a nerd.
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Old 06-08-2015, 12:40 PM   #3
Confused about dryer sheets
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Join Date: Jun 2015
Posts: 7
Thanks Rodi,

I was assuming I could collect as long as I wasn't working. Thanks for setting me straight. As you said since this isn't possible then there is no benefit.

I am the higher earner anyhow so the impact is minimal but it would have been nice.

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Old 06-08-2015, 01:07 PM   #4
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For timing of withdrawals from tax deferred accounts an aspect to consider is the difference between your income tax and capital gains tax rates.

My opinion for our current tax-deferred assets we intend to continue to hold for which we anticipate an increase in value is that we are better off distributing the assets now, in such annual amounts as to not jump our tax bracket and let future appreciation become capital gains vs normal income if left inside the account and distributed in the future.

An aspect of this opinion is that I anticipate a significant increase in inflation as politicians attempt to cope with off the books debt coming due…
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