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Old 02-10-2024, 01:06 AM   #41
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Hi Glasswave:

Welcome to the forum.

I think your plan is sound. I wish to make two comments.

1. I am in full agreement with you about converting to a ROTH IRA, keeping in that 24% bracket. I agree with this so long as you have non IRA funds to pay the tax (you do) and it doesn't interfere with your lifestyle. Also, retiring young gives more time for tax free growth in the ROTH. Now, from a pure math perspective, you will probably (but not certainly) pay more in taxes this way but that number depends on lots of things, including future tax rates and the amount of growth your funds have over the years. Both of these factors are un-knowable.

But consider this. What if, at some future point, you needed to take a large chunk of money for some reason? Having a pool of tax free money allows you to do this without the many tax ramifications withdrawing a large chunk of money from a taxable account would have. If you had to, for some unknown future reason, pull a couple hundred thousand from a taxable account, the taxes that year would be high. Furthermore, it would change the amount you would have to pay for Medicare as "high income" folks pay more.

From a risk management standpoint, I like getting that money out of the taxable account and into the ROTH, even if it is true that you (might) end up paying more in taxes.


2. Why are you set on taking Social Security at age 67? Have you considered and done the math on waiting three more short years until age 70? The math on this is pretty clear. Unless you have some health condition or family history, waiting until 70 gives you the highest lifetime payout. Think about it.


But overall I think you plan is great. Good Luck!
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Old 02-10-2024, 08:49 AM   #42
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Location: San Diego
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Quote:
Originally Posted by glasswave View Post
Hello all,
I fear that there is some blatantly stupid blind spot to this plan, so I am hoping the posters here can quickly point out the errors of my ways. Please forgive my newbie naivete, but when I finally landed my first good job that had a savings plan, a TIAA advisor said, "Stick your money in a growth fund and forget about it," so that's what I did. 15% of my gross year since 1994. I have only been looking at retirement for the last few years and seriously, only recently.

Hear goes:
67 is my full retirement age. (spring 2030).
I am hoping to take early retirement in June of 2025 at age 62, but I could work longer.
  • I should have about $190k in liquid savings by July of 2025.
  • I have about $945,000 in a (TIAA) tax deferred retirement savings account.
  • I can receive about $18k in salary for 5 years by taking early retirement at 62.
  • House is paid off, no other debt whatsoever.
  • I can stay on the employer health plan until Medicare kicks in at 65 for about $300/yr.
  • Id like $4k/mo for expenses from 62 to 67. $3k monthly living & $1k/mo towards trips and large purchases.

Preliminary Plan:
  • I am thinking about living off of liquid savings and my early retirement income for the 5 years of early retirement. I am also are considering converting most of my retirement account to a Roth IRA over those 5 years, by converting about $170k a year so I can stay in the 24% marginal bracket.
  • At 67, I plan on accessing my SS which should pan out to $2500-$3000/mo, so I will need to start drawing at least $1000-$1500/mo from that Roth IRA at 67 so I can maintain my lifestyle. I will also have the added expense of Medicare Premiums.
  • I figure by converting it all to Roth asap, most of my taxes will be paid and I should be able to live mostly income tax free after that.

Is this a sound strategy or should I not worry so much about converting to Roth for the tax advantages?

What other strategies might you recommend?

Thanks.


~~~~
If you've gotten to ROTH conversions as a 'problem' you're pretty far ahead in the race already. When Roth was first offered where I work, I went in full, mostly for tax bracket quasi 'insurance' in the farther term future, in case the Government decides (or is compelled) to greatly increase tax rates. Of course they could also mess with the rules of ROTH itself, but that seems less likely comparatively. There's no getting out of paying taxes in our country.
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Old 02-15-2024, 09:28 PM   #43
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Originally Posted by isisdave View Post
The planning also depends on whether you're married, and what age the spouse is, and what would you like to have happen to the remainder of your estate when you die.
Single. As I don't have a gaggle of kids waiting on me to croak, I can use my estate to help those in need or promote good causes.

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Originally Posted by isisdave View Post
Also where do or will you live (that is, in an expensive, moderate, or lower cost area)?
I live in Salt Lake. If I move, it will be to somewhere somewhat rural (town of 3000 or more) and cheaper.


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Originally Posted by isisdave View Post
Maybe what your crystal ball says about your health? Got LTC insurance?
I am still on my work plan, no LTC.

Quote:
Originally Posted by isisdave View Post
nearly $30k standard deduction (for seniors).
What is this $30k deduction for seniors?

Quote:
Originally Posted by isisdave View Post
Also, that $18k -- if that's per year, I would inquire from your employer if you could have that paid differently. Maybe all at the end of five years, and delay SS start until after that? That would let you do more tax-free conversion in the meantime, probably avoid any IRMAA problems. Or alternatively, most of it up front in the year after your salary stops.
I assume it's paid as salary, twice monthly. My liquid savings likely will not last 5 years, unless I really scrimp.



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Old 02-15-2024, 10:52 PM   #44
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What is this $30k deduction for seniors?
They're probably talking about the standard deduction for a MFJ couple where both are over 65 and not blind. See Form 1040 line 12; I think it's $30,700 in 2023.
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