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Old 03-08-2009, 03:24 PM   #1
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Request comments on plan

Background
Me 66, DW 65
Me - retired military with cola'd pension providing 3/5ths of retirement needs
DW no retirement
DW's family long living (both parents over 95)
Me - SS provides 2/5ths retirement needs (not yet taking it)
Wife - SS not required for retirement but would be 1/2 mine (not yet taking it)
Me - County retirement not cola'd would provide about 2/5th retirement needs when started. (this is a sum of money that is guaranteed to increase at 7% till I decide to take it, then an annuity is determined based on the funds available and life expectancy. the annuity will pay the same amount till both I and DW die, taking it now would provide 2/5th of retirement funds needed)
IRA's to cover about 15 years at 2/5ths expenses.
No expected changes in expenses expected

OK,
Now I think this is a pretty good position to be in, as SS and Military cover more than 100% of our retirement needs. But here is what I have been pondering. I can take money out of the IRA's (all taxable) over the next four years and delay SS and the County pension.

Right now SS grows at 8% plus inflation. With the maket being the way it is, that sounds pretty good. DW's genes tell me she will benifit from delaying this. Delaying the County pensions seems to make sense also.

I have 1.5 years of cash, so I don't have to touch the IRAs till then. But my plan is to withdraw from the IRA's to cover living expense till I reach 70 and then tap the other two accounts. Also plan to convert IRA's to Roth to the extent I can stay at 15%.

So, we seem to be fat, dumb and happy, but still there is that little voice that says "maybe', so any comments would be appreciated. Well let's say most comments. Never know about this crowd.
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Old 03-08-2009, 03:38 PM   #2
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This is, more or less, DW and my situation (close in ages (DW 71 Me 68)). Military retired pay and SS (recently taken at 67.5). The only "catch" I can see here is IF they (The Government) decide we can only draw some percent of, say the Poverty Level for a family of X, (maybe 200 - 300% of that level). I doubt they would cut the Military retired pay but SS may be open. May be an easy sell for the Government to do this - doubt they will for current recipients (but who knows). You also did not mention Medical Care (TFL) which is another plus. There may, or may not, be a weakness for you in the County Pension but I have no idea. In any event - you are IMO "set" and the only weakness I can see in your plan is that you may leave a lot of money "on the table" even if you predecease DW - nice problem to have.
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Old 03-08-2009, 03:45 PM   #3
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OAG, I left out TFL and just lumped it into the 'No expected changes in expenses expected' catagory. Right after I posted this I saw the SS now or later thread. So some of my answers may come there. I agree with you there will be changes with SS, but I don't expect them to be drastic for those that are presently covered.
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Old 03-08-2009, 04:10 PM   #4
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Another strategy would be to take the SS now and repay it at age 70. The repayment would give you a tax deduction against whatever you withdraw from the IRA that year (your RMD plus). Over the next four years, SS could be used to pay the taxes on the portion of the IRA you roll into a Roth. You'll have to work through the numbers, but this strategy might reduce your taxes overall, since at most 85% of SS will be taxed, while 100% of the IRA withdrawals will be taxed.
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Old 03-08-2009, 04:14 PM   #5
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I see another spread sheet in my future! Thanks, I'll take a look at it.
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Old 03-08-2009, 05:55 PM   #6
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That's pretty much my situation. You've got a lot of fifths there and haven't even touched the Scotch yet. In my case, DW and I are both taking SS early, and keeping our power dry in cash or cash equivalent, probably 10 years worth. If and when the party starts, we'll move part of it into the market (late, to make sure it's a real move) and ride a bit of it up. By using up the cash now, we'd be at the mercy of SS and the whims of Congress, and I'd rather not to that.
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Old 03-08-2009, 08:50 PM   #7
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Well one, we are Episcopalians and they say where ever you find four Episcopalians you will always find a FIFTH. I have also found it quite handy to have a few fifths handy when the other retired folks in the neighborhood drop by for a chat.
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Old 03-09-2009, 02:35 AM   #8
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Rustic, sounds like you have things well in hand. I second the notion of using out of the IRAs and converting to Roths. Should give you more flexibility than being trapped into higher RMDs at 70 1/2.

Even if you don't get it all exactly right, you should be fine if no one changes too many rules on us. Best luck.
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Old 03-09-2009, 07:31 AM   #9
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Quote:
Originally Posted by FIRE'd@51 View Post
Another strategy would be to take the SS now and repay it at age 70. The repayment would give you a tax deduction against whatever you withdraw from the IRA that year (your RMD plus). Over the next four years, SS could be used to pay the taxes on the portion of the IRA you roll into a Roth. You'll have to work through the numbers, but this strategy might reduce your taxes overall, since at most 85% of SS will be taxed, while 100% of the IRA withdrawals will be taxed.
Alternatively, you can take a tax Credit which is worth a lot more to you. It all depends on the amount of the repayment. You figure it out both ways but IMO and experience the Tax Credit will significantly improve the decision.
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Old 03-09-2009, 09:23 PM   #10
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It's probably smart to hold off on the remaining pension & SS until you're 70. Bud Hebeler always talks about the SS widows who wish their (now deceased) spouses had waited a little longer before tapping SS.

Quote:
Originally Posted by Rustic23 View Post
I see another spread sheet in my future! Thanks, I'll take a look at it.
Quote:
Originally Posted by Koolau View Post
Rustic, sounds like you have things well in hand. I second the notion of using out of the IRAs and converting to Roths. Should give you more flexibility than being trapped into higher RMDs at 70 1/2.
Another option on the green waste problem would be to donate your IRA RMD to charity instead of converting it.

There's probably a sweet spot where you could convert some of your IRAs to Roths (up to the top of the 15% tax bracket) and then leave the rest of the conventional IRAs for annual charitable donations.
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