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401K – Rollover or Lifetime Annuity
Old 02-03-2018, 07:17 AM   #1
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401K – Rollover or Lifetime Annuity

Question for the ER Braintrust

Background: I’m 57 years old and married and just Er’d. Wife is 57 and still working. We have no children. Both of us have met the requirements for State of NC Retirement Healthcare upon attaining age 60. Will begin receiving a $1,350 monthly pension at age 60 or $2,650 a month if I opt to select a blended pension which pays more up front and is reduced at age 62 once SS kicks in. House is paid off and we are both modestly frugal and I am extremely conservative.

So, I have $200,000 in a 401K. It is currently earning 2.02% interest and will go up in correlation with any interest rate increases. I have three choices that I am considering:

a. Transfer the balance to Vanguard and purchase equal amounts of both Wellesly Funds.
b. Wait until age 59 ½ and move to Vanguard and purchase the Managed payout fund – and receive monthly distributions, or
c. Wait until age 59 ½ and transfer the funds to our Credit Union which will annuitize the monies based on current interest rates and inflation adjusted rates and provide me a monthly check. As of today, the rate is 3.31 but would go up in correlation with any interest rate increases over the next couple of years. No fees and is SAFE. (Right now this would pay me 800 per month and 400 per month to my wife upon my death.)

With the above scenario in mind, it is my intention to try to cap my income at $51,200 (1/2 of $78,400 + 12,000 standard deduction) based on the new tax laws and in conjunction with my wife still w*orking. This way I would be limited to the 12% Federal tax. Oh, I would withdraw monies from my Fidelity IRA (around 600K) to make up any shortfall. I do plan to use some of that 600K in 2019 and 2020 converting to a Roth.

So, what would you do with the 200K?

I
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Old 02-03-2018, 01:56 PM   #2
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I would start with selecting an appropriate AA and use the 401k for the cash allocation and move the rest to an IRA to fill out the stock and bond allocations. I'm not sure how 59.5 comes into play unless you've decided you need to balance taxable vs tax deferred.
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Old 02-03-2018, 02:21 PM   #3
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I can't offer any specific advice, but would be very cautious about doing anything that locks in today's low interest rates for a long time, or a lifetime.
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Old 02-03-2018, 03:43 PM   #4
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Since they are 401k monies I wasn't planning on making any decision until age 59 1/2. At that point, I'd look at where interest rates are and make a decision based on the monthly factor at that time.

I
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Old 02-03-2018, 05:31 PM   #5
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Your already getting 2 annuities(SS/Pension). I wouldn't get another one.
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Old 02-03-2018, 05:47 PM   #6
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None of the above.

I would (and did) consolidate all the tax-deferred $$ with one provider and invest according to my asset allocation.
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Old 02-03-2018, 07:26 PM   #7
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Your already getting 2 annuities(SS/Pension). I wouldn't get another one.
+1. There was a thing called WIN badges when you were a kid. If you don't remember, google it. An SPIA (or deferred fixed) might make sense perhaps north of 70 - - - maybe. There is no case to be made for variable annuities except for the salesperson.
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Old 02-03-2018, 08:37 PM   #8
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I agree with the others about probably not needing an annuity plus the fact that the annuity you were offered doesn't sound like a good deal. You could get a $200K SPIA today with a spousal option that pays ~$800/mo as long as one or both spouses are still alive, it doesn't get cut by 50% if you were to die first.
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Think long term
Old 02-03-2018, 08:45 PM   #9
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Think long term

Quote:
Originally Posted by IMATERP View Post
So, I have $200,000 in a 401K. It is currently earning 2.02% interest
Seriously?
2%
You are going to live for another 30+ years.
You need to have all of that in the stock market.
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Old 02-04-2018, 12:39 AM   #10
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Originally Posted by zinger1457 View Post
I agree with the others about probably not needing an annuity plus the fact that the annuity you were offered doesn't sound like a good deal. You could get a $200K SPIA today with a spousal option that pays ~$800/mo as long as one or both spouses are still alive, it doesn't get cut by 50% if you were to die first.
Out of curiosity would you have a link to an SPIA like this?
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Old 02-04-2018, 01:25 AM   #11
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Out of curiosity would you have a link to an SPIA like this?
I use the annuity estimator on the web site below. Just fill out the bottom section if you want the spouse benefit included.

https://www.immediateannuities.com/
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Old 02-04-2018, 02:15 AM   #12
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Thanks for the help
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Old 02-04-2018, 06:55 AM   #13
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And if you do decide to purchase an SPIA, I would look into purchasing it from Vanguard. For the same annuity, they take 1 point less and that's one point more for you. But check.

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Old 02-04-2018, 08:25 AM   #14
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Since they are 401k monies I wasn't planning on making any decision until age 59 1/2. At that point, I'd look at where interest rates are and make a decision based on the monthly factor at that time.



I

59.5 is when you can take money out without penalty. I wouldn't wait till then to make changes if your AA is not what you want. Look at all your retirement accounts together to see what percentage of stocks bonds cash you have for the whole portfolio.

If the allocation is not what you want, you should try adjusting it now. If the choices within your 401k are not good, consider rolling it over to an IRA now rather than waiting. The 2% you're getting is pretty good for the cash portion of your AA.
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