Another Newbie thanks

[Luvmycav]

Hello all I have been lurking on these forums for a while. Thought I would finally join.

I am a SAHM, I have worked various jobs over the years enough to get small SS. Our kids are grown and have finished college two have advanced degrees and are all self sufficient. We are hoping that my husband can retire in three years and wanted to ask for a little help.

My husband has 30 years at maximum social security earnings and I will probably get the spousal benefit since this will be more then my benefit. no decision yet in when we will take but will wait till at least 67 since we are 54 and 53. Any thoughts?

We have 1,450,000 in his 401k and are contributing the max 24,000 since he turned 50.
And we have 330,000 in a after tax account at fidelity. We also have two deffered annuitys together have about 100,000 in them probably shouldn't of let our UBS advisor talk us into this but right now I am glad we just didn't put more in. Last year we moved everything to Fidelity who holds the 401k.
We have a mortgage of 105,000 that is worth 360,000 4.125% 28 years left. We did the 30 year loan for lower payment thinking my husband could get laid off which is still a possibility they have given good packages but we are hanging on as long as possible

Wondering if there is ever a time to stop contributing to 401k should we stop contributions and put that towards paying of mortgage the next few years. Does not affect employers contribution since that is all based on earnings. It will effect our taxes.

HC is a big one we do have HSA with 20,000 in it not invested (trying to talk husband into that) and are putting the max into that yearly without touching it. We can buy HC through his employer but as of now it's as much as ACA would be without tax credit. Hopefully in a few years we will know more.
He makes 130,000 to 150,000 and we are planning on living off 80,000 after tax.

Thanks any help is greatly appreciated.

[rodi]

Welcome!

You say you are living off of 80k net, - is the 130-150k net? Taxes change, but don't go away in retirement.... so you need to account for them. Does that 80k/year include the mortgage payment? What about healthcare?

Great job on building your savings to a nice level. You have lots of options if your DH gets laid off.

As for stopping 401k contributions to divert money to the mortgage... I'm not a fan. We knew that paying off the mortgage was a key (for us - not for everyone) to getting our spending down to a level we both felt comfortable retiring... But I also knew that 401k contributions were also important. 401k contributions have better tax advantages - so I'd focus on that. For us - I maxed out mine to the max (including catchup). DH did less because his plan was craptastic (High fees, loads, expense ratios). We diverted every penny we could get beyond the 401k saving into our mortgage.

You've obviously prioritized saving - hence your nice nestegg.

[rodi]

Welcome!

You say you are living off of 80k net, - is the 130-150k net? Taxes change, but don't go away in retirement.... so you need to account for them. Does that 80k/year include the mortgage payment? What about healthcare?

Great job on building your savings to a nice level. You have lots of options if your DH gets laid off.

As for stopping 401k contributions to divert money to the mortgage... I'm not a fan. We knew that paying off the mortgage was a key (for us - not for everyone) to getting our spending down to a level we both felt comfortable retiring... But I also knew that 401k contributions were also important. 401k contributions have better tax advantages - so I'd focus on that. For us - I maxed out mine to the max (including catchup). DH did less because his plan was craptastic (High fees, loads, expense ratios). We diverted every penny we could get beyond the 401k saving into our mortgage.

You've obviously prioritized saving - hence your nice nestegg.

[Luvmycav]

Thanks,
We will keep the 401k contributions as is I didn't really want to pay more taxes. Just wondering if it's going to be so big when RMD's come. But are planning on taking from here when we retire early so that should bring the amount down. 6 more months and he will be 55 and he will be able to take money out without the 10% penalty.
We are living on 60,000 net I am thinking 80,000 net to include health care. We have a lot of extras in our budget. The home loan is only 780 piti. As of now I can't see taking 100,000 out of our account to pay it off to save 550 a month since taxes and insurance won't go away, it is there if we absolutely had to. We have two car payments that are about the amount of the mortgage I am paying more so they will both be paid off at retirement. One was bought one year ago brand new the other this year but is two years old. They replaced two vehicles we had bought new in 2000 and 2001 so I don't feel bad about this spend. That's all our debt.

[pb4uski]

Since you are 54 and 53 now and plan to retire in 3 years or so... at 57 and 56... you'll have up to 13 years to do low-cost Roth conversions if you delay SS until 70 (for him... FRA for you). We have been doing Roth conversions for 4 years now and pay about 7% of the amount converted in federal tax... a screaming deal compared to the 28%+ that we avoided paying when we defered that income and the 28%+ that we would expect to pay once we start SS.

A married couple with standard deduction can have up to $96,700 of income and still be in the 15% tax bracket where qualified dividends and LTCG are tax-free and itemized decuctions increase the $96,700. While it varies from year to year based on what we have going on, we can convert about $50-65k a year.... you may be able to do more depending on your circumstances.

[Nightcap]

Welcome and Congratulations! You done good!

I wouldn't worry about the mortgage right now. I'm two years into ER and still carrying mine. It's useful leverage against sequence-of-returns risk. I'm planning to pay it off in a few years, but the years just before and just after retirement are critical.

[Luvmycav]

Definitely have to figure out Roth. We have only 30,000 Roth IRA from when I had worked and rolled it over.
And I was thinking the mortgage is so low why worry we could live in it forever or we may move again who knows.

[brucethebroker]

Quote:

Originally Posted by Nightcap Welcome and Congratulations! You done good! I wouldn't worry about the mortgage right now. I'm two years into ER and still carrying mine. It's useful leverage against sequence-of-returns risk. I'm planning to pay it off in a few years, but the years just before and just after retirement are critical.

+1.
Ours is small, and cheap (3.5%) and we got it on our new downsized home just before we semi-retired. No intentions of pay it off, but may start paying it down. Would rather have the cash available to fall back on instead.