"I don't need my 401k"

scrabbler1 said:
I had to roll my old 401k into an IRA when I retired 16 years ago at age 45. That rollover IRA, along with SS and my frozen company pension, are what I have often described as my "reinforcements" to the taxable portion of my overall portfolio, the part which has been sustaining me comfortably for the last 16 years.

My goal was to get from age 45 to age ~60 intact (I am 61 now), then tapping into the IRA if needed. But the taxable part of my portfolio has grown from $650k to $1.1M since late 2008, the depth of the financial crisis. So, unless I plan to buy something really BIG (which could conceivably happen), I don't expect to need the rollover IRA any time soon. The income generated by the taxable part of my portfolio more than covers my expenses, so even if there was also no SS I'd still be fine. And don't forget the frozen pension.
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Sounds like you might be setting up for a Tax Torpedo in a few years?
Or have you been doing Roth conversions these past 16 years?
 
REIJM said:
One of the podcasts I listen to was talking about scenarios where you're leaving money, sometimes a significant amount, to heirs after you pass, and how having that money in a traditional 401k or IRA can be a financial burden to your heirs because of the 10 year withdrawal window.
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Our trusts/wills are quite simple when we're both gone: liquidate everything, pay the tax, "disperse as follows". There's still plenty enough to go around.
 
scrabbler1 said:
I had to roll my old 401k into an IRA when I retired 16 years ago at age 45. That rollover IRA, along with SS and my frozen company pension, are what I have often described as my "reinforcements" to the taxable portion of my overall portfolio, the part which has been sustaining me comfortably for the last 16 years.

My goal was to get from age 45 to age ~60 intact (I am 61 now), then tapping into the IRA if needed. But the taxable part of my portfolio has grown from $650k to $1.1M since late 2008, the depth of the financial crisis. So, unless I plan to buy something really BIG (which could conceivably happen), I don't expect to need the rollover IRA any time soon. The income generated by the taxable part of my portfolio more than covers my expenses, so even if there was also no SS I'd still be fine. And don't forget the frozen pension.
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You having been living for 15 or 16 years off the income from your taxable account, which you said was $650k the year you retired, and it still grew to 1.1M? If that's correct, that would be one frugal lifestyle.
 
TheWizard said:
Sounds like you might be setting up for a Tax Torpedo in a few years?
Or have you been doing Roth conversions these past 16 years?
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I have not been doing any Roth conversions. I checked out some Roth conversion calculators and they didn't show me saving anything. And they didn't include any ACA premium subsidy reductions. If I get hit with a tax torpedo, I will be able to afford it more easily than I would if I had done the conversions and paid more in taxes and net HI (due to ACA premium subsidy reductions).
 
Lorenzo said:
You having been living for 15 or 16 years off the income from your taxable account, which you said was $650k the year you retired, and it still grew to 1.1M? If that's correct, that would be one frugal lifestyle.
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Except for 2019, when my income taxes spiked upward due to large cap gain distributions, my annual expenses (1 person) have been between $20k and $28k. I don't live an extravagant lifestyle. I paid off my mortgage in 1998. I drive a 17-year-old car which has about 50k miles on it and runs great. My medical expenses will drop to an all-time low thanks to getting switched to a low-cost plan here in NY earlier this year.

My portfolio generated just over $30k [edit: annually] in monthly dividend income. I have some cap gains, not as much as I did in 2019, when I revamped the stock side at the end of that year.
 
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audreyh1 said:
I suspect these folks aren’t thinking about possible long term care costs or similar.
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Actually my mom has 100% medical. She worked for the state and her medicare premiums are reimbursed IRMAA included by the state. She also get free supplemental Blue Cross Blue Shield, vision, and dental covered by the state NO Premiums and had this since age 55 when she retired. So she has no OOP costs right now for medical care from age 55 to death.

So she is not going to be on the hook for long term care and with her previous career is well aware of costs. But one house alone would pay for care. The average long term care is between 2-5 years and at $20k/month so $500k-$2m before her insurance and penions/ss cover about half of that. Then she starts to touch her IRA which she hasn't been touching say another 20 years till age 92. Her $500k now will be $1m conservatively? And the homes will be definitely worth more than now.

Nope my mom is pretty solidly covered and she retired at age 55. The pension, free medical and 2 paid for homes probably made the 401k/ira unnecessary which is why she retired with only $200k in there.
 
For me, the amount of SS I am entitled to is a bit of a stunner and will more than offset withdrawals. Many folks assume SS will not be available but I actually used 75% of the statement estimate for planning. I planned to start SS between 62 and FRA. Here I am 2 yrs beyond FRA and haven’t started. It seems that when I do start distributions from the nestegg might not be necessary. Or maybe that will be for major expenses, BTD, etc.
 
We will need 401k but 6 yrs out from retirement, projecting withdrawal rate closer to 2% than 4%. We do have a non cola pension that will cover majority of fixed expenses to start ( before inflation erodes value) wife also has a maxed out SS that hopefully we don’t claim till 70. ( depending on health projections at that time)
 
I'd much rather have $X in regular investments than the same amount in a t401k. Gains in the former will be taxed at the lower cap gains rate, while all money trapped in the 401k will be taxed at the higher ordinary income rate.
 
We are retired almost 11 years, no pension, living on SS and dividends from after tax investments. I do not need the money from 401k and IRA but will have to take RMD starting in 2025 or 2026. I look at the 401k and IRA money as our long term care insurance. So I will probably reinvest the RMD, after paying the taxes. If we are fortunate enough not to need money for long term care, daughter is welcome to it after we are gone.
 
audreyh1 said:
I suspect these folks aren’t thinking about possible long term care costs or similar.
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I agree. I live on Social Security and a COLA pension. I do not need to touch the money in my IRA or 457b plan or my non-COLA pension. I am single and have no children so I think that eventually I will end up in a continuing care community. Who knows what those costs will be. I am saving money for that. I do have a LTC policy that covers about two years in a nursing home and also provides home care.
 
Though one can't disclaim an unneeded 401k and thereby avoid its RMD ordinary income tax hit, rolling it into an IRA can allow for tax-free charitable giving via QCDs.
 
So far, I have been living only off of my taxable account. With the sequence of returns and expenses in FIRE so far, despite 3 years of withdrawals it is actually very slightly up from the starting balance. I intended to draw from it for the first 5-8 years before starting withdrawals from my tax-deferred account. However, if my luck continues then I could conceivably not need it. -Note that without those funds I would be no where near a "safe" WDR so I would never claim not to need it. It is fun to see (and very surprising) that my taxable accounts have not declined. It is a fluke as my cash-flow has been lower than expected early in my retirement and the market has been kind so far; both of those factors will not last.
 
I've been retired over 8 years and only took withdrawals for the first 5 years when I finally started SS at age 66. I now have 2 SS and 2 pensions from SO and my finances. Between us we have 140% of what we spend coming in each year. We are both still too frugal to spend the other 40% so it just continues to grow in our investment accounts. We were going to buy a new pontoon boat as we live on a lake, but after renting one decided that owning would be much more expensive than renting a boat. It's a great problem to have, but I do wish I could spend more. We do travel quite a bit, but still well within our budget.
 
Since money is fungible, I don't think in terms of my 401(k) not being needed. BUT, I suppose, if I shifted things around and took money from other sources, I could come to the conclusion that I don't actually need the 401(k). BUT, I do use it along with SS and pension and other savings to meet my spending needs.

Big question (bigger question, really): WILL I need it? Too soon to tell. Memory care is very expensive. At 10K/month or more, my 401(k) could be gone in just a few years! YMMV
 
Lorenzo said:
You having been living for 15 or 16 years off the income from your taxable account, which you said was $650k the year you retired, and it still grew to 1.1M? If that's correct, that would be one frugal lifestyle.
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Not necessarily. I've mentioned a few times here that I retired 20 years ago with $X. Over 20 years, I've withdrawn $X yet today my portfolio is worth $2X (not counting for inflation).

Many here have had/claimed similar results. And let's just say that my 20 years have been considerably the opposite of frugal.
 
marko said:
Not necessarily. I've mentioned a few times here that I retired 20 years ago with $X. Over 20 years, I've withdrawn $X yet today my portfolio is worth $2X (not counting for inflation).

Many here have had/claimed similar results. And let's just say that my 20 years have been considerably the opposite of frugal.
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See above, where he replied, "my annual expenses (1 person) have been between $20k and $28k. I don't live an extravagant lifestyle. I paid off my mortgage in 1998."

I consider an annual budget of 20-28k to be very frugal. My incredulity wasn't directed to $X becoming some multiple of $X in 15 years--yes, I know that can happen with a reasonable withdrawal rate, a large enough X to start with, and a bull market. What I was remarking on was his specific case of X=$650k, and a 45-60 year-old living off something like 28k a year for all those years is pretty frugal in my world.
 
Lorenzo said:
See above, where he replied, "my annual expenses (1 person) have been between $20k and $28k. I don't live an extravagant lifestyle. I paid off my mortgage in 1998."

I consider an annual budget of 20-28k to be very frugal. My incredulity wasn't directed to $X becoming some multiple of $X in 15 years--yes, I know that can happen with a reasonable withdrawal rate, a large enough X to start with, and a bull market. What I was remarking on was his specific case of X=$650k, and a 45-60 year-old living off something like 28k a year for all those years is pretty frugal in my world.
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Gotcha.
 
street said:
Very true but looking at it from the other side of the fence it is free and more money than what they had. So, a bittersweet problem to have.
In my case leaving a legacy will leave them with a lot of tax because they would most likely not need an inheritance to survive life till death. They should have a lot more than me at my age with the professions they are in.
I do know if I would have gotten an inheritance I sure would not have complained if I had to pay more tax. Tax and death are a requirement at birth. I don't like either requirement, but life has been good.
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I agree. It’s nice to get their tax burden reduced but let’s be real, if children inherit a million dollars and have to pay taxes over a 10 yr period they can suffer thru.
 
I am looking forward to having much more money than I need when I'm older. My spending quite possibly won't increase a great deal, but I'll treat others to meals and coffee out more often, and give more to people in need. I have long thought it would feel good to pay the grocery bill for someone in front of me at the grocery store who is having trouble making ends meet, but that opportunity has not yet presented itself.

street said:
I do know if I would have gotten an inheritance I sure would not have complained if I had to pay more tax. Tax and death are a requirement at birth. I don't like either requirement, but life has been good.
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+1. I've never quite understood folk who complain about having to pay more tax. A bigger tax bill means that you made more money. I've had this discussion with friends who are not the most financially literate people around, but they don't seem to fully get it. Mostly, they are people who spend every cent of their paychecks, and struggle to find the money when a bigger bill of any kind comes in.
 
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