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Short term advice- 6 yrs
Old 08-12-2018, 08:01 PM   #1
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Short term advice- 6 yrs

Would like some advice from the experts on the forum

Current: Retired 6/1/2018 @ 63

Current Plan:
Delay SS until 70
Indexed Annuity @ 70
85K cash
850K IRA
75K Roth
Spouse SS and small pension
Conservative lifestyle with only small mortgage as debt (<40K)


Wish to apply for ACA subsidy next year until MCR is available in 18 months So minimizing income for 12 months is important.

Question: Best strategy for income for the next 6.5 years? without working

Fixed Annuity from IRA?
Regular distributions from IRA?
Other

Thank you
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Old 08-12-2018, 08:09 PM   #2
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Most here (myself included) don’t care for Annuities as you don’t get the principal back. I’d just make sure your asset allocation is good for you and take regular distributions.

Make sure all other things are taken care of too: will, power of attorney, trusts, etc.
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Old 08-12-2018, 10:02 PM   #3
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Quote:
Originally Posted by nazoomer View Post
Would like some advice from the experts on the forum
Question: Best strategy for income for the next 6.5 years? without working
a hobby that entails barter as payment

say doing home brewing but swapping for preserved fruit , or swapping home-made cakes for a buddy's fish ( stuff where cash doesn't change hands but cuts your expenses at the same time )
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Old 08-12-2018, 10:08 PM   #4
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I assume you want to keep your taxable income low enough to get maximum ACA subsidy but high enough so you don't fall into Medicaid territory. Seems like you could easily do that by spending down the 85K cash and cashing enough IRA money to give you an above-Medicaid income.


Once you hit Medicare, just withdraw from your IRA accounts to meet your needs and balance your asset allocation.
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Old 08-13-2018, 07:44 AM   #5
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Quote:
Originally Posted by nazoomer View Post
Would like some advice from the experts on the forum

Current: Retired 6/1/2018 @ 63

Current Plan:
Delay SS until 70
Indexed Annuity @ 70
85K cash
850K IRA
75K Roth
Spouse SS and small pension
Conservative lifestyle with only small mortgage as debt (<40K)





Wish to apply for ACA subsidy next year until MCR is available in 18 months So minimizing income for 12 months is important.

Question: Best strategy for income for the next 6.5 years? without working

Fixed Annuity from IRA?
Regular distributions from IRA?
Other

Thank you
You could take 400k of your IRA and dollar cost into CD's over a 6 year period earning 3%. That would be $1,000 a month without reducing your IRA.

So, as a starting point $1,000 + small pension + wife's SS = XX.xx

Figures out your monthly budget: = YY.yy

The difference between the two is what you need to look at. The important missing variable is your monthly spending.

I
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Old 08-13-2018, 07:53 AM   #6
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Most here (myself included) don’t care for Annuities as you don’t get the principal back. .....
Depends on how long you live.

Anyhow, I think the OP was taklking about a period certain annuity, not a life contingent annuity, in which case you get your principal back plus interest.... but the interest return is rarely compelling.
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Old 08-13-2018, 07:56 AM   #7
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Originally Posted by nazoomer View Post
....Question: Best strategy for income for the next 6.5 years? ....
Need more infornation.

How much do you need each year for living expenses? What is your income before any IRA withdrawals?
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Old 08-13-2018, 09:45 AM   #8
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@nazoomer, you'll accumulate some good answers to your question here. But this made me grit my teeth:
Quote:
Originally Posted by nazoomer View Post
... Indexed Annuity @ 70 ...
I suggest the following:

For the next 6 1/2 years repeat this mantra at least once a day:

"I am an intelligent investor and I will never buy anything that I do not completely understand."

Then, when the day comes, you will not even consider an indexed annuity. I looked at one for a friend. The prospectus was 218 pages and a keyword search for the word "fee" was very productive. Fees to get in, annual fees, fees to wiithdraw, etc. Quite amazing. Clearly the vendor was counting on the suckers not understanding what they were buying.

Problems too many to enumerate and they probably vary from vendor to vendor, but one clever one I have seen is that the "index" value is based on the change sticker price of the index over the year. For example, if the S&P was 3,000 at the beginning of the year and 3,300 at the end, then your number is 10%. This totally ignores the total return of the S&P, which IIRC throws off about 4% per year in dividends. So you are giving the vendor all of the dividend gain, plus your gain is capped at maybe 10% so if the index goes up more than 10%, the vendor keeps that too.

But ... just remember the mantra and you will be safe from most charlatans and hucksters. The more complicated the product, the more likely it is that it was designed to make money for the seller, not for the sucker.
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Old 08-13-2018, 11:02 AM   #9
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An alternative to the annuity to cover the next 6 years Would be to purchase a ladder of CDs. With rising short term rates, a conservative approach would be to buy 1 year or 2 year CDs now and then reinvest to buy more in one or two years.
Re. Old Shooter's warning about indexed annuities, I think you have 6 years to mull this over. I have annuities from TIAA, part of which are indexed to the stock market and I have been happy with them.
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Old 08-13-2018, 08:05 PM   #10
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Quote:
Originally Posted by nazoomer View Post
Current: Retired 6/1/2018 @ 63

Current Plan:
Delay SS until 70
Indexed Annuity @ 70
85K cash
850K IRA
75K Roth
Spouse SS and small pension
Conservative lifestyle with only small mortgage as debt (<40K)


Wish to apply for ACA subsidy next year until MCR is available in 18 months So minimizing income for 12 months is important.

Question: Best strategy for income for the next 6.5 years? without working

Fixed Annuity from IRA?
Regular distributions from IRA?
Other

Thank you
For me, the best strategy would be one that minimizes taxes now, by withdrawing from the IRA, while keeping the ROTH intact as much as possible. In 2018, the standard exemptions for 2 are: $24K. I would start by: 1) Taking at least $24K out of the IRA (essentally, tax-free), then hit up the ROTH in the good times, or the cash in the bad times.

The more you take out of the IRA before 70.5, the lower your RMDs will be then, which will help lowering your tax bill when SS kicks in, and you are potentially paying taxes on up to 85% of the SS benefits. Of course, this plan of action was based on not knowing what your spending needs are .
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Old 08-13-2018, 08:51 PM   #11
Confused about dryer sheets
 
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Old Shooter, I meant that I have indexed annuity I started 11 years ago and is a 15 yr annuity that will generate 1000 / month for life starting at age 70, with a death benefit. Plus SS, mine, and wife's ss and pension should generate close to 7K per month, plus RMD's which will be ampule for our life style by a lot! My advisor was suggesting a 6 year fixed annuity to generate income until 70 yoa. I am not a fan of annuities either but am not that savvy at financial strategies. I hate to spend the cash, it is comforting to have 85K liquid just in case, even though it generates only 1.5%. thanks for your reply, Nazoomer
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Old 08-13-2018, 09:51 PM   #12
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Originally Posted by travelover View Post
I assume you want to keep your taxable income low enough to get maximum ACA subsidy but high enough so you don't fall into Medicaid territory. Seems like you could easily do that by spending down the 85K cash and cashing enough IRA money to give you an above-Medicaid income.


Once you hit Medicare, just withdraw from your IRA accounts to meet your needs and balance your asset allocation.

+1... remember if it is a regular IRA then the distributions are 100% taxable... I am currently selling shares from my taxable account up to a certain amount and then filling in the rest with ROTH distributions... have not touched the tIRA or 401(k) money yet....
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Old 08-14-2018, 05:10 AM   #13
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Most here (myself included) don’t care for Annuities as you don’t get the principal back. I’d just make sure your asset allocation is good for you and take regular distributions.

Make sure all other things are taken care of too: will, power of attorney, trusts, etc.
+1. You should also look for other private insurance options. The individual mandate is repealed so you do not have to get ACA and might find something else that is affordable..
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Old 08-14-2018, 11:13 AM   #14
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I'm in a similar position with a gap until a pension hits. I had a larger stash of after-tax cash and thought about buying an annuity to mimic a 'salary.' I then looked at annuities, what they cost and what I would get. I realized I could 'roll my own' in that if I took equal payments from my after tax stash over that time frame, I would get the same effect without paying the fees (so more of it in my own pocket).

Since you are looking at a 'cliff' position, you could put together a spreadsheet and look at the different streams and calculate what you could transfer and build your own 'annuity' while meeting or staying under that cliff. It is a bit more work, however, once the spreadsheet is built, it is just a matter of entering the numbers and you have your amount. I've done that for my Roth conversions and the different tax brackets.

I understand your dilemma, by the way. I had REWahoo and Nords kick me in the butt and bring me back to thinking DIY. It was a matter of starting friction for the spreadsheet, but that took about 30-60 minutes. It was the mental overhead that was inhibiting me.

Last (sorry this has dragged on), the other posters are correct. The missing number is your expenses or lifestyle costs.
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Old 08-14-2018, 04:32 PM   #15
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+1. You should also look for other private insurance options. The individual mandate is repealed so you do not have to get ACA and might find something else that is affordable..
Be careful, the individual mandate is still on the books and applies to 2018. The penalty for not having health insurance can still be levied for 2018. For 2019, the penalty is set to zero.
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