100% Tax Deferred (403b)

[want2er]

My BS bucket it about to overflow & there's no way I'll make it to FRA! So I'm refocusing on a retirement in 3 years at age 60. Single with 1 dependent. Looking at savings & tightening budget.

PLAN: Delay SS until age 66-70, but will reevaluate yearly after age 62.
Ages 60-65 Keep withdrawals below limit to receive health care subsidy & still make some small conversions to Roth to reduce future RMDs.
Ages 65-70 Continue conversions to Roth to reduce future RMDs.
Age 70 and beyond - Income from SS & RMDs. Roth funds growing in reserve & available for long term health care or inheritance for daughter.

PROBLEM: Almost 100% of my retirement savings is in a 403b account with my employer. 100% tax deferred!!! Ugggg!!! Investment options are limited so I know that I need to move the funds elsewhere. I can do inservice distribution of 50% at age 59.5 & move remainder at retirement. Planning to use Vanguard. Want simplicity.

QUESTION: If you were retiring today & rolling 100% of your funds into a Vanguard IRA, what would you do?

Thanks for any advice!

 

[travelover]

...........QUESTION: If you were retiring today & rolling 100% of your funds into a Vanguard IRA, what would you do?
......

Hopefully you have decided on an asset allocation. The general advice is to choose the best options in your 401(k) to complete part of your asset allocation, then complete the rest of allocation at Vanguard using stock and bond index funds.

 

[want2er]

Thanks, Travelover. I guess the issue is that I'm going from a 403b that has limited options (i.e. 1 bond fund, 1 international fund, 3 large cap) to Vanguard with so many choices. It feels like I'm jumping from a wading pool into the ocean! Maybe I'm a Wellington/Wellesley person?

Thanks again!

 

[travelover]

Thanks, Travelover. I guess the issue is that I'm going from a 403b that has limited options (i.e. 1 bond fund, 1 international fund, 3 large cap) to Vanguard with so many choices. It feels like I'm jumping from a wading pool into the ocean! Maybe I'm a Wellington/Wellesley person?

Thanks again!

I'm a fan of a simple portfolio. For stocks you can do Total Stock Market, for bonds, Total Bond. If you want to get fancy, you can get into their international stock fund All World except US, which includes some emerging markets. No need to get complicated.

http://www.forbes.com/sites/rickferri/2013/05/23/three-simple-index-fund-portfolios/

 

[seraphim]

+1 what Travelover said.

Just rolled over from my 457 to Vanguard. Called Vanguard, they established the account, and we rolled over 60% of the funds into VTSAX. So e VTIAX. The other 40% is still in SV account until bond values drop and SEC yields rise. Then it gets rolled over also -possibly VBTLX or a long term bond fund, depending on how far the values drop after QE. Right now that money earns about 2.5% and I can withdraw it without penalty. Id have to wait two years before I could do that with an IRA.

DW also has some funds in a 403b waiting to be rolled over. Same situation.

Wouldn't do a 50% distribution due to taxes. Can you rollover 50% prior to retirement? Probably a much lower ER with Vanguard if you do so .

 

[ziggy29]

Wouldn't do a 50% distribution due to taxes.

Historically I would agree but ACA may be a game-changer here. Even at a higher tax bracket you may want to capture as much income as possible in years when you are still working and have Megacorp health insurance, and then you can draw from that (already taxed) money to generate current income until Medicare eligibility age 65 that won't hit your MAGI for ACA purposes. Don't forget that the loss of ACA subsidy creates an effective 15-16% tax in many cases because you can lose 15-16 cents of the tax credit for every dollar you earn, sometimes even more depending on eligibility for cost sharing.

In other words, getting kicked from the 15% to the 25% or even 28% bracket while working might be less of a hit than taking that money in a future year, paying 15% marginal income tax and the 15-16% "tax" in ACA subsidy loss.

 

[jimnjana]

I probably would keep a few years worth of withdrawals in the prime money market or buy some short term cds with a portion of it.

 

[seraphim]

Ziggy

I agree, there's a point at which it might be financially feasible to take the tax hit...