Anything to Do during My Last Year of Earnings?

[retiringby50]

I'm probably overthinking this, but I'll just put it out there. If all goes right, I will retire 10/1/2021, and husband will retire approx. 11/1/2022. According to financial planner, retirement calculator, etc., we will have enough money to retire and outlive our money and leave something for our 1 child... the only thing we didn't account for is long term care, but I applied and was rejected, and my husband decided he didn't want to buy it.

Here's my question: during this final year of earnings for me, is there anything extra I should be doing? For example, try to live on 4% of our retirement income (which we're probably doing already)? Track our expenses (failed in doing this at the beginning of each year? Sweep any extra money into a separate account to ensure we don't piddle it away? I guess COVID-19 is helping since we're not spending any money Or just let it go?

I just feel like there's something more I should be doing to prepare. As usual, thanks in advance. You folks are the best!

 

[REWahoo]

An old thread on that very subject with many things you should consider, especially post #9.

https://www.early-retirement.org/forums/f29/how-do-did-you-prepare-for-er-20952.html

 

[mrfeh]

How can you know if you have enough to retire when you don't know what your expenses are?

 

[Montecfo]

Will your tax bracket change dramatically post retirement?

If so you may want to double up on charitable contributions or set up a donor advised fund.

Max out tax favored savings if that makes sense relative to your financial plans.

Consider getting a home refi or home equity line of credit while earned income is there.

You must know your expenses. That is the most important thing.

 

[Aerides]

For example, try to live on 4% of our retirement income (which we're probably doing already)? Track our expenses (failed in doing this at the beginning of each year?

You don't need to "start" this anytime. You can do it now, and go back a few years, at least at a macro level. Go look at whatever accounts you pay things out of - say your main checking account(s). Tally those up. You'll then get at least an understanding of how much money you typically spend. Don't retire until you have that "probably" well understood.

And shame on your financial planner for not reinforcing that with you while telling you that you are ready to retire.

 

[Bryan Barnfellow]

I will jump on this important bandwagon: being very confident of your projected retirement period expenses is job one. Without that, you are just throwing darts in the dark.

If you have company healthcare/dental care/eye care that will not continue in retirement, consider using it now for elective procedures.

If you have company supplied equipment such as a laptop or a mobile phone that are fairly new and in good condition, ask if you can buy them at a discounted cost. Always worth a try.

If you haven't drawn up wills and other documents yet, make that a goal. It's easy to forget/procrastinate when you are retired and having fun.

-BB

 

[COcheesehead]

Create a budget using both of these approaches and you’ll end up being close.
1. Top down. Take you income minus savings and that is what you spend each year.
2. Track or guess everything you spend on, including taxes, future vehicle purchases, future medical, etc and that is what you will spend.

Without a grasp of expenses, you are a ship without a rudder.

 

[pb4uski]

+1 Easiest is top down... take your take-home pay less any after-tax savings and presumably that is what you spent... then adjust if necessary for any unusual items for that year and any expected changes going forward (for example if you paid off your mortgage or a car loan or add retirement travel). Also useful to do bottoms up budget.

Many of us self-insure for LTC... to me the value proposition of LTC insurance isn't very compelling.

While it i probably good to try to live on your retirement budget with appropriate adjustments, it isn't really necessary. One thing to do is to get your physicals, dental, vision all up-to-date while you still have employer coverage, as applicable.

You don't say how old you are or where your assets are located (taxable, tax-deferred, tax-free), but there is commonly a period of time from ER until pensions and SS start that you will be in a low tax bracket and stra that is an ideal time to do low cost Roth conversions from tax-deferred accounts. Over the last 7 years I converted almost $390k and only paid $33k in federal tax.... 8.5% vs 22% later... saving over $50k by converting when I had low tax rates.

Another thing to start to think about is your SS claiming strategy.... check out opensocialsecurity.com and check the Advanced Options box at the top of the page.

 

[yakers]

If you want to keep a financial alternative, get a Home Loan Line of Credit now while working, it gets a lot harder when not working, You never have to use it but it is there if you want finance something.

 

[Marita40]

I'm retiring this year and in the market for a HELOC, if anyone knows one with good rates/low fees. I kind of hate the idea of paying an annual fee for something I quite probably won't use, but I'm not seeing alternatives. Debating whether I really want to do this at all.

 

[COcheesehead]

Ask for credit line increases on your credit cards. Great double secret short term emergency fund.
Explore living on a 3% withdrawal rate.

 

[pacergal]

Under the Forum FAQs, there is a sticky "Questions to answer before you retire"
Review that and honestly answer all of the questions, it will give you insight on where you stand, and what you may still need to do.
At least it did for me.

 

[UtahSkier]

Determine your ACA subsidy strategy. If you are going to utilize the subsidy, you need an income plan to stay below the cliff. You will need to harvest money to live off of while recognizing income below the cliff.

In my last year, I aggressively adjusted the cost basis of my taxable portfolio by selling securities and buying back the equivalent. Now, I can sell and not have a huge capital gain.

For DW and I, our cliff is around $65K. I recognize about $61K in income. About $20K in dividends, $20K from Capital gains and $20K from IRA distributions.

I'm a big fan of budgeting and planning and use quicken to track everything.

 

[retiringby50]

An old thread on that very subject with many things you should consider, especially post #9.

https://www.early-retirement.org/forums/f29/how-do-did-you-prepare-for-er-20952.html

Thank you all... I will check out the link and review your comments... that was way more than I was expecting. We've hardly lived on a budget because we normally spend within our means. Our financial planner projected our retirement use at about 6% because he didn't believe we'd only spend about 4%. Obviously he's a rich dude with a higher standard of living.

At retirement I'll be 55 and husband at 57 (he'll be 58 when he retires), and unless I get fired before retiring, we have retiree medical, which means we'll have access to employer plan coverage, and retiree medical benefits will pay about half the premiums.

We have a HELOC (not using but have) of $250K and just closed a credit card where I was able to transfer credit line to another account. Hopefully I'll never need that much but good point... i'll ask for credit limit increase on all the other cards too.

Oh taxes and will... we were supposed to consult with estate attorneys and then COVID hit. That was the biggest item for this year.

 

[SecondCor521]

Minor thing, but if your employer(s) have Flexible Spending Accounts, sometimes called cafeteria plans for use-it-or-lose-it medical reimbursements, you can select an amount, use it up, and then not have to pay back the extra for the months you don't work.

So for example, select $100 a month starting January, have $1200 of medical expenses reimbursed in the summer, retire in the fall, and not have to pay that $100 in November/December.

Also, review any retirement savings contributions in your last calendar year. I know many people want to max out their 401(k) and IRA one last time, and I understand that feeling. In my case, I retired early in the year, so my income was relatively low, so I elected to only defer enough to get the match, and then do a Roth IRA contribution and pad my taxable instead of maxing my 401(k).

+47 on getting your expenses understood very well.

 

[mystang52]

I'll echo others' comments and suggest you get a hard figure on your expenses.
If you want to get LTC, don't presume a rejection is final. I have a preexisting condition, was rejected, and I appealed. They reversed the rejection and gave me the pleasure of giving them a lot of money every year

 

[street]

LTC is an insurance like any other insurance you have in your everyday life now. Remember LTC can start at any age not not when you are 80 plus (an accident etc.) I have seen many families ruined finically because a member had to be places in a facility.

I have not ever made a claim on a vehicle in 40 plus years of owning and driving. Do I need auto insurance? I could of bought a few new one with the money I have spent on auto insurance.

 

[COcheesehead]

Trivial stuff, but I stopped buying work clothes and shoes and actually started selling off some of my work related items on eBay.
We also ramped up small, passive income streams: Ibotta, eBay, paid research.
Bought recreational items while we still had pay checks. Couple of bikes, golf clubs.
Got all our exams: doctor, dentist, eye doctor. Bought new glasses.

 

[Rex]

Consider getting a home refi or home equity line of credit while earned income is there.


+1 on this...We learned the hard way that in ER, even though you are in a better financial position that any other time in your life, you may easily learn you do not qualify.

 

[Go-NoGo]

I'm retiring this year and in the market for a HELOC, if anyone knows one with good rates/low fees. I kind of hate the idea of paying an annual fee for something I quite probably won't use, but I'm not seeing alternatives. Debating whether I really want to do this at all.

Check out the HELOC's from Alliant credit union:
https://www.alliantcreditunion.org/borrow/home-equity-line-of-credit

They do not have any closing costs or appraisal fees of any kind. it takes about 4 weeks from application to the HELOC becoming available. Definitely do it while you have a job as they will verify your income

 

[Marita40]

Just a final report that I did apply for and received a no closing cost HELOC with Alliant and found it a quick and user friendly process. All done online and efficiently, with people answering my questions usually within a couple hours.