Left our careers at 51 and 50

[rworell]

Wife and I are retired, I worked 30yrs at a jet engine manufacturer and my wife the same in insurance.
We presently work as work campers at campgrounds 6 months and travel in our RV the other 6 months. We have been able to earn enough to live from the 6 months of work. Now we would like to scale it back and pull from out retirement somehow and actually work less and travel more.

We are invested in a variable annuity presently. Now I realize and know all the wrongs of that and also understand the penalties to get out. I'm feeling like in some ways we made a bad decision. (it is what it is)... If I did get out from under it we would have about $675,000 to invest again. We live on about $28-$30 thousand a year and have "0" debt. I also have another $70,000 is cash for emergency. We would like to be able to invest, withdraw around our yearly expenditures and earn interest to never run out of money. We are not interested in making it big in the market or leaving a legacy. We just want to live simple for the next 30 yrs but always have money invested and to be able to pull from those investments.
We have no idea how that can happen. I've read where people do have index investments and pull off of dividends etc.

So glad we found this group. Thank you so much for any advice.
Richard and Kathi

[treeofpain]

If you live on 30k/year, your $70K cash is a bit over 2 years living expenses. Good. I would keep 2 years of expenses.

If you invest the $675K and draw, say, 3% average per year, that gives you $20K/year. You will need a plan for the remaining $10K/year. And this assumes that your costs will not go up over time.

This is a very high level initial response. Others can chime in with more details and nuance.

[euro]

You might want to post (or open a second thread with) additional detail on your annuity. Especially if ALL of your investments (other than the cash reserves) are tied up in it. For example, many have step-down surrender charges (e.g. 15% in year one, 12% in year two, etc), so you might save a lot by hanging in there a couple more years before surrendering it. Could amount to serious savings. Or maybe there are other ideas people here have to optimize this. Do you know what the annuity is investing in at the moment? All stocks? Balanced portfolio? Lots of details that are important.

[rworell]

Good point. The surrender charge is 8.5% first year and goes down a percent every yr after. I know we are invested in Large, Mid, Small cap stocks also tech. I took a snapshot and posted a jpg of it. 20% in each

[pb4uski]

Like you say, it is what it is. Is all of the $675k in the VA?

Most annuities allow up to 10% of the beginning of policy year balance to be withdrawn without surrender charges. Does yours?

Also, is your VA qualified (all withdrawals will be taxed) or non-qualified (only earnings will be taxed)?

What are the features and fees of the VA and the sub account investments?

[rworell]

Yes we can take up to 10% for free. I believe we will be taxed on that. We certainly would not take the full 10%. More like 4%.

[pb4uski]

Just because you take it out doesn't mean that you have to spend it... you can spend what you need to and save the rest and invest it if you want to. Meanwhile, that residual won't be subject to the fees and expenses that it would be if it was still in the VA.

If that is your only source of income then the tax hit should be light.... I get about 7% if you took out 10% and have no other sources of income.

$675,000*10%=$67,500 withdrawal... $67,500 income-$24,800 standard deduction=$42,700 taxable income...$42,700-$19,750=$22,950 in 12% bracket... $22,950*12%=$2,754... +$19,750*10%=$4,729 total tax... ~7% of $67,500 withdrawal

[Dtail]

Welcome to our wonderful site.
You stated that you would have 675k if you got out of the annuity. Does this mean that the annuity has a higher balance and you are factoring in the surrender charges.
What are your plans for medical coverage?
Have you checked out Social Security information as to how much can be received at various ages?

[rworell]

Yes we have $747,000 in it now. Our health insurance is really low cost due to our yearly income on $30,000 or less through Obama care

[Retireby45ish]

I don’t see a reason to pull the cash out now (outside of the penalty free 10% part). I’d wait till that percent goes down 1% each year. That’s a savings of about 7k per year if you can afford to wait.

But as others have said you can probably only withdraw at about 3% of your total net worth each year which would give you 22k each year (assuming you hold the 70k cushion part it cash or spend it down). Of course if you are ok spending it down to 0 that gives you more wiggle room since you can draw on principle. But knowing your life expectancy and hitting that 0 on your last day is tough. Ha!

Won’t you still continue to work part of the year to earn towards that 30k you spend? If that’s the case, depending on what you make, that might work in your favor. But of course that assumes you’ll work into your later years. And will you live this way in your 70s+?

I don’t think this would give me enough of a safety net at this point with your rate of spending...

But as far as the annuity, I’d try to leave that until the penalty is smaller...does penalty eventually go to 0%?

[pb4uski]

^^^ but if you favor leaving the annuity when the "penalty is smaller" why would you not favor taking out the maximum of 10% each year that can be withdrawn at 0% penalty?

[Retireby45ish]

Quote:

Originally Posted by pb4uski ^^^ but if you favor leaving the annuity when the "penalty is smaller" why would you not favor taking out the maximum of 10% each year that can be withdrawn at 0% penalty?

I do favor that. They should take out that 10% amount penalty free each year and invest it. I tried to say that in my first paragraph but maybe I wasn’t clear.

[MandM]

I do have a question as I thought variable annuities can't be taken out before 59.5 without IRS 10% penalty. I had notionally been thinking about setting up variable annuities at Fidelity for my two nieces and the penalty was something that I was hoping to be able to dissuade them from accessing before age 60.

Thanks for any insight.

[grayv]

what are the fees?


what would the annuity pay you if you took it now?

[rworell]

My variable annuity allows me a 10% withdrawal yearly before age 59 1/2. Or I would have an additional 10% penalty like most.

[rworell]

About $680,000

[pb4uski]

Quote:

Originally Posted by MandM I do have a question as I thought variable annuities can't be taken out before 59.5 without IRS 10% penalty. I had notionally been thinking about setting up variable annuities at Fidelity for my two nieces and the penalty was something that I was hoping to be able to dissuade them from accessing before age 60. Thanks for any insight.

I think the 10% penalty applies to qualified annuities but not non-qualified annuities.

https://www.annuity.org/annuities/ta...0the%20annuity.

While the OP hasn't been specific, from what they've written it sounds like their annuity is non-qualified, but if it is qualified then the 10% penalty would be an issue.

[Golden sunsets]

Quote:

Originally Posted by rworell Wife and I are retired, I worked 30yrs at a jet engine manufacturer and my wife the same in insurance. We presently work as work campers at campgrounds 6 months and travel in our RV the other 6 months. We have been able to earn enough to live from the 6 months of work. Now we would like to scale it back and pull from out retirement somehow and actually work less and travel more. We are invested in a variable annuity presently. Now I realize and know all the wrongs of that and also understand the penalties to get out. I'm feeling like in some ways we made a bad decision. (it is what it is)... If I did get out from under it we would have about $675,000 to invest again. We live on about $28-$30 thousand a year and have "0" debt. I also have another $70,000 is cash for emergency. We would like to be able to invest, withdraw around our yearly expenditures and earn interest to never run out of money. We are not interested in making it big in the market or leaving a legacy. We just want to live simple for the next 30 yrs but always have money invested and to be able to pull from those investments. We have no idea how that can happen. I've read where people do have index investments and pull off of dividends etc. So glad we found this group. Thank you so much for any advice. Richard and Kathi

I see on your other post that you will have Social security to offset a good portion of your expenses when you qualify for it. Is the estimate you shared in that post at age 62 or FRA, or 70?

I have another question though. Do you own a home or live in your RV full time without a permanent home? If the latter, what do you plan to do when the camper/RV life is no longer suitable for you? Will that same 30,00 draw accomodate home ownership with all of its costs or rental of a home/condo?

[rworell]

Quote:

Originally Posted by Golden sunsets I see on your other post that you will have Social security to offset a good portion of your expenses when you qualify for it. Is the estimate you shared in that post at age 62 or FRA, or 70? I have another question though. Do you own a home or live in your RV full time without a permanent home? If the latter, what do you plan to do when the camper/RV life is no longer suitable for you? Will that same 30,00 draw accomodate home ownership with all of its costs or rental of a home/condo?

SS is at 62. Yes the 30k can absolutely fund our lifestyle for rent, home, or otherwise. I will probably never own a home again. Next version of our retirement is caretaking or house sitting. I’ll worry about other things when they happen.

[pb4uski]

What are you doing for health insurance?