62 yo, 1 more year ... savings strategy for 1 more year?

[albireo13]

I'm 62 yo now and feeling the aches and pains more than ever. I've run the numbers and I could pull the cord today but .. I want OMY. I get profit sharing bonus in April so, I figure after the 2019 bonus I'll give notice. This Spring the goal is to pay off all debts (except mortgage). This will give me one full year for one last push of savings. I am currently putting in 401K enough to get the full matching but, not maxing it out. I also have about $350K in an IRA.


I was thinking that just maxing out 401K is the best plan, and save any extra in money market or liquid accounts.

Another suggestion I saw was max the 401K and start ROTH conversions from my IRA right now. Not sure about that since my taxable income would be high this last year.

Any other good ideas for my last gasp push for savings?

Thx,
Rob

 

[VanWinkle]

I'm 62 yo now and feeling the aches and pains more than ever. I've run the numbers and I could pull the cord today but .. I want OMY. I get profit sharing bonus in April so, I figure after the 2019 bonus I'll give notice. This Spring the goal is to pay off all debts (except mortgage). This will give me one full year for one last push of savings. I am currently putting in 401K enough to get the full matching but, not maxing it out. I also have about $350K in an IRA.


I was thinking that just maxing out 401K is the best plan, and save any extra in money market or liquid accounts.

Another suggestion I saw was max the 401K and start ROTH conversions from my IRA right now. Not sure about that since my taxable income would be high this last year.


Any other good ideas for my last gasp push for savings?

Thx,
Rob

Hi Rob,

You don't mention having a cash or taxable brokerage account. If you don't have either, that is where I would push money after getting the match on you 401K. You will need some cash to help reduce withdrawals of taxable funds in your 401K. I would wait until after retirement to start the conversions when taxes are low. If health care is a concern, you will have to manage your income to maximize subsidies in the Affordable Care Act. Cash or a taxable account you can draw from will be a plus in the early years of retirement.

VW

 

[joeea]

I was thinking that just maxing out 401K is the best plan, and save any extra in money market or liquid accounts.

Another suggestion I saw was max the 401K and start ROTH conversions from my IRA right now. Not sure about that since my taxable income would be high this last year.

Any other good ideas for my last gasp push for savings?

There's not enough information here to make real informed suggestions.

Depending on your plan for funding healthcare between 63 and Medicare, it may make more sense to put your savings into the bank rather than maxing out a 401k. That way funds withdrawn won't count as income, and could enable you to spend less on an ACA health plan (and to get subsidies).

Certainly you want to make sure you get your 401k match.

If you have an HSA, you might want to pack that as full as possible over the next year.

Certainly it makes sense to get this year's and next year's bonus under your belt before pulling the plug, if you can stick it out.

Paying off debts probably makes sense, but it might depend on the interest rates involved.

Have you decided your Social Security claiming plan? That may impact the amount of liquid assets you need.

If you have a spouse, have you coordinated things with them? That could impact where you save.

Have you estimated your planned spending in retirement? Do you have Long Term Care insurance? Are you planning to remain in your current house, or will you be moving and/or downsizing and potentially need a downpayment? What is the total of your savings? Will you have a pension?

Etc, etc.

In addition to thinking about savings, also think about these as you round the home stretch:
- get major dental work done while still on an employer plan
- get eye exams done (and new glasses if needed) while still on an employer plan
- consider signing up for group legal benefits if offered by your employer to have wills, trusts, etc updated as needed
- consider any other company-discounted benefits that you could use to your advantage while remaining on the payroll

 

[RunningBum]

Was going to reply but joeea covered it more completely and better than I could've.

 

[bada bing]

Does your 401k plan allow after tax contributions (not the same thing as Roth contributions) ?
Do you also have any long term non-tax deferred savings balances ? If so, you could
use a version of the "Mega Backdoor Roth" to shuttle some money into Roth space.

 

[DrRoy]

I held off on Roth conversion until I was in the (now) 12% bracket. Didn't want to pay (then) 25% to convert.

 

[FI_RElater]

your age 63 wage might affect Part B

don’t forget... your income at 63 will affect the rates you pay for your Medicare Part B

you might check if putting just a bit more into your 401k will drop your costs... if not, I’d keep it around as cash for flexibility, i.e., you can maximize how much you take from 401k/IRA without tax and still have cash flow from that amount in taxable

 

[HadEnuff]

don’t forget... your income at 63 will affect the rates you pay for your Medicare Part B

you might check if putting just a bit more into your 401k will drop your costs... if not, I’d keep it around as cash for flexibility, i.e., you can maximize how much you take from 401k/IRA without tax and still have cash flow from that amount in taxable

I am confused by this. They look at one's income at age 63 to determine the Part B premium that you don't get until 65?
Edit: I just saw this on the government website:
"Your modified adjusted gross income as reported on your IRS tax return from 2 years ago is above a certain amount. If so, you'll pay the standard premium amount and an Income Related Monthly Adjustment Amount (IRMAA). IRMAA is an extra charge added to your premium."

I was not aware of this...good thing I sold my business in 2015...

 

[FI_RElater]

yes, there B gotchas...

That’s why I made the comment

for example:
let’s say a couple had income of $115 k, with $50k from pension- - and the annuitant passed, leaving a pension benefit of $25k and thus a new income of $90k

previously, Medicare Part B for the couple would have been $134 x 2 x 12 = $3216 while now the surviving spouse would be in a new bracket with costs of $187.50 x 12 = $2250 ; so a difference of only $966... but also because the surviving spouse is above the IRMAA limit of $85k, they have to pay a surcharge for the amount above the $85k (surcharge on $5k). That’s on top of the fact that now the survivor is paying income tax at the single rate with fewer personal deduction ; likely paying federal tax now while before not, if a large amount was long term capital gains, so that would indicate that one should pull as much out of IRA’s (into either Roth or taxable accounts) to ameliorate the potential tax hit if one passes.

... the joys of tax planning

 

[albireo13]

Who?

I was thinking it didnt make sense to do any after tax savings
since Im probably at my max tax bracket status right now.

 

[brucethebroker]

Hi Rob,

You don't mention having a cash or taxable brokerage account. If you don't have either, that is where I would push money after getting the match on you 401K. You will need some cash to help reduce withdrawals of taxable funds in your 401K. I would wait until after retirement to start the conversions when taxes are low. If health care is a concern, you will have to manage your income to maximize subsidies in the Affordable Care Act. Cash or a taxable account you can draw from will be a plus in the early years of retirement.

VW

+1. I was also concerned about the ACA situation. Perhaps more in personal savings and less qualified savings at this point. Then live off your after tax savings during ACA years. Just a thought.....

 

[pb4uski]

I held off on Roth conversion until I was in the (now) 12% bracket. Didn't want to pay (then) 25% to convert.

Exactly, makes no sense to convert in a tax bracket higher than your ultimate tax bracket once you are retired and collecting pensions, SS and RMDs.

 

[albireo13]

In my 401K allocation, some of the funds are in cash. Easily to draw from.
Why build up after-tax cash savings now?, when I'm paying max taxes?