Need Advice for age 50 Retirement

[PeteD]

Hello everyone,
My wife and I will be retiring in about 10 years at age 50. I work for local government and will receive a pension that will be around $2000 before tax each month in retirement. I also already received $3500 non taxed each month from the military until I die. My wife will be kicking in about $800 before tax each month from her pension each month I do understand that with about $5500 coming in after tax each month I can retire no problem. My question is where should I be putting some money so that I can get to it at age 50 with no crazy issues. I do have a 401k that does have a good deal of money in it that I can grow over the next 9 years until I retire but from what I read I can't mess with that money until age 59.5 without jumping through hoops or paying penalties. Where should I be building up easy access money to pad my living even more until age 62. I want to have around $1000 after tax on top of our job and military pensions for 12 years in retirement, age 50 until age 62 when I can get the social security money. And before anyone asks. No credit card debt, there will be no car loans when I retire but yes there will be a new mortgage when I leave from my current area in retirement.

Thanks in advance

 

[exnavynuke]

Roth IRAs will give you access to your contributions tax free at any time. At $11k between the two of you plus growth accessible without penalty when you're 59 1/2 it should cover pretty much what you're looking for.

Then just taxable brokerage accounts are a good option as well.

Roth conversions aren't that much work either.

 

[MoneyIsMyHobby]

Roth IRAs will give you access to your contributions tax free at any time. At $11k between the two of you plus growth accessible without penalty when you're 59 1/2 it should cover pretty much what you're looking for.

Then just taxable brokerage accounts are a good option as well.

Roth conversions aren't that much work either.

To add to this...

A Roth IRA (which has income limits) allows you to withdraw the money you put in anytime you want. The gains, on the other hand, have to stay put until you're 59 1/2 like a normal IRA to avoid penalties. Another great thing is that, you put the money in AFTER TAX so there are no taxes when you withdraw from the account... on principal or gains.

You can contribute up to $5,500 per person per year (as long as you each earn income, which is where the $11k comes from.

My fear, if I were in your shoes, is that SSI is on schedule to be broke by 2034. That is unlikely to happen, and it will probably be reformed before it goes broke. Who knows how it will be reformed... but trusting, when you're 40, that you will get social security starting at age 67-70 that looks like what it looks like today is a risky move. It is possible, obviously it can be fixed by simply increasing taxes, but we don't know what they'll do until they do it. It is very likely that increased taxes on your retirement income, income-based eligibility rules, decreased payment amounts, or increased allowable age are all possibilities for reform.

Now, if you'll have an OK retirement without SSI... just possibly not quite the retirement you hoped for... then that might be a risk worth taking I personally believe that there will be a system in place that ensures you're not starving to death, but beyond that, I have no clue... and I don't think anyone else does either until they start the reform process.

MIMH

 

[MBAustin]

Personally, I like to have the money I need for the next 3 years in a low-volatility taxable account. So I would aim to invest enough each year in a taxable account (could be moderate risk such as a 60/40 balanced fund) so that by 3 years before retirement, you'll have at least $50K (plus anything you need set aside for major expenses such as car replacement, house repairs, etc.). Then 3 years out, move that money into a low-risk fund (I use VMLUX and get tax-free dividends in cash each month). The rest I agree could go into a Roth IRA.

 

[armor99]

Strangely enough.... if you read the previous topic I posted, I am in a similar situation.... I looked at a lot of the options and I think this is what I will do. I am currently 45, hope to retire by 55 or earlier. Obviously I do not want to pay tax penalties for just trying to get to my own money.
So for a Roth IRA, all the money you personally contribute, you can take out at any time, tax and penalty free. As long as the money has been there for five years. (From the time you put it there)I am going through now to figure it out. However, I believe that with money that is already in there, plus the money I will be able to contribute over the next 10 years, should be enough to tide me over easily till I am 59.5, and all penalties are not a problem...

 

[kgtest]

Some 401k plans allow for early separation withdraw at age 55. Check with plan sponsor. I like the idea, if you have 0 in roth and 0 in broker, to max roth, then put another bit in broker. I myself have real estate that will cover some expenses, but cash and broker will need to hold us over until 55 when I take the 401k early withdraw to give ourselves a raise...if neeeded. otherwise pension raise and SSA raises kick-in at 65 and 70. Although by 70 not sure how much I will care about or need the raises unless inflation somehow outpaces the middle class... in that case I rise and fall with the tide and curse the moon!

It's good to have a few extra legs on the stool.

Real estate could decline when you need to sell, since you aren't liquid and short on income.
Investment income could be down due to SORR or volatility.
Tax laws could turn your expenses higher.

It's good to be able to counteract as much as possible, while protecting and maximizing growth on principle, reducing tax liability and maximizing QOL at the same time.

 

[4legsgood]

Do you have a 457 plan, or deferred compensation, available to you? You can contribute to that -and- max out ira/401k. It's a screaming deal, and did get discussed as being eliminated in the last tax bill, so might not last. You can take money out from it upon separation, nothing to do with age.

 

[PeteD]

Thanks for all the advice. It really helped me get going in the right direction