Should I stay or should I go?

[Odduck]

[FONT=Calibri, serif]I've been lurking around here for some time. I'm single. I stared earning decent money late, but I've always tried to live as cheaply as possible including renting a small place, buying only used cars, etc. - around 25K/year with the company pays for most of health care. As I hit 50, I had about 2M in total assets, but no home.
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[FONT=Calibri, serif]I've run numbers with Fire Calc and Flexible Retirement Planner and it appears as though I could quit working, spend twice as much and live to 100 with fairly low risk. That's what I've been working for, but it's a big mental leap. Retire, buy a house, and kick around doing projects all day? Unreal at this point [/FONT][FONT=Calibri, serif]and its scary.
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[FONT=Calibri, serif]I'm not the sharpest on investing and it took me years just to get onto the [/FONT][FONT=Calibri, serif]B[/FONT][FONT=Calibri, serif]oglehead thing. I've struggled at times doing my own taxes [/FONT][FONT=Calibri, serif]with odd investments[/FONT][FONT=Calibri, serif]. I've read some things that retiring after turning 55 opens up a few more options in terms of shifting things out of the company's 401K into my own IRA at Fidelity/Schwab/Vanguard, but there might be some benefits to leaving them at my company. Any opinions on before vs. after 55?[/FONT]

 

[Out-to-Lunch]

Welcome to E-R!

There is a lot to unpack in your post. I gather you are still trying to envision what a good retirement for you would look like.

You also have some technical 401K questions. It sounds like you have it a bit garbled. The "Rule of 55" holds that if you separate from your company in the year that you will turn 55, you can access the money in your 401K at that time, rather than wait until 59.5. BUT, your company plan may not allow partial withdrawals (so check with your plan adminstrator or their Summary Plan Document, SPD). And you seem to have it wrong about moving it to an IRA. IRAs do NOT have the "Rule of 55," so if you move it to an IRA, you cannot access it until you are 59.5.

 

[Odduck]

Ah yes. So role it out when I retire, but not be able to access it until 59.5 or leave it in to use the Rule of 55, depending on my company's plan allows partial withdrawals. Well, I new there were some choices. That's something to investigate, along with their retiree medical plan costs. Thank you.

 

[pb4uski]

While there isn't enough information to tell, you may be in the zone where you "have enough" but you don't have enough in the right places where you have penalty-free access to it.

Of your $2m, how much is taxable, tax-deferred and tax-free?

OTL gives you good advice above, however there are a couple ways to access tax-deferred money in a tIRA without penalty even if you are under 59-1/2. One is a 72t/SEPP where you can take out amounts based on a formula but you must keep taking them until you are 59-1/2. Another is a Roth ladder where you would make Roth conversions and would have access to that money after 5 years.

But if you have more 10 years of spending in taxable accounts and/or in contributions to Roth accounts (contributions can be withdrawn penalty and tax-free as long s the roth account more than 5 years old) then you would have sufficient penalty-free access to get you to 59-1/2.

 

[Odduck]

Thanks for the reply.

Funds are about evenly split between a tax-deferred 401k and post-tax brokerage and savings accounts - about a million in each. I don't believe I would need access to the 401k until after 70, but 18 years seems like a long time and I try to be pretty conservative on financial matters.

I have a Roth account of $25k, which I started investing in late and then started running into the variable contribution limits as my earnings are in the cut-off range. I had to pay an additional tax for putting too much in the Roth one year and had to claim the excess the next year. I haven't contributed to that for a few years. If I could go back 20 years, I would have max'ed that every year when my income was lower.

I just don't want to do something else that's stupid at this point and regret it in 5 or 10 years. My other concern is having a 401k wrapped up in the company I work for now. I suppose that's just paranoia, but I would feel better having that at some other financial institution than where I have most of my taxed money.

 

[pb4uski]

.... My other concern is having a 401k wrapped up in the company I work for now. I suppose that's just paranoia, but I would feel better having that at some other financial institution than where I have most of my taxed money.

I wouldn't fret about that unless the employer is particularly dodgy or a lot of your 401k is invested in company stock.

Usually the only reason for keeping a 401k if you leave before the rule of 55 is if the 401k has a good stable value fund or access to some good fund choices at really low expense ratios.

You could easily retire now and live off of taxable money and do no or low tax-cost Roth conversions.

What would your plan for health insurance be if your retired soon? ACA subsidies?

 

[The Cosmic Avenger]

I just don't want to do something else that's stupid at this point and regret it in 5 or 10 years. My other concern is having a 401k wrapped up in the company I work for now. I suppose that's just paranoia, but I would feel better having that at some other financial institution than where I have most of my taxed money.

First off, you WILL do something "stupid"; because by "stupid", I'm pretty sure you mean "something that I later learned I could have done at least a little more efficiently". I think we've all been there and done that, and all that means is that you don't know everything now, but you're still learning more about money management, and that's a GOOD thing! So don't be afraid to make decisions based on what you know...as long as you don't get in over your head and invest in something complicated that you don't understand.

And while I'm still working, from what I understand my 401(k) is with Fidelity, and while it's "sponsored" by my employer, once I retire, I deal with Fidelity, my employer is completely out of the picture. I don't think you have anything to worry about there, but if you still want to move it, I know that you can sometimes move even tax-advantaged accounts "in-kind" to other brokerages, although I think I've only heard about rolling old ones into new ones. But a quick call or email to your preferred brokerage should tell you whether you could move your 401(k) there after separating from your employer.

 

[Odduck]

I wouldn't fret about that unless the employer is particularly dodgy or a lot of your 401k is invested in company stock.

Usually the only reason for keeping a 401k if you leave before the rule of 55 is if the 401k has a good stable value fund or access to some good fund choices at really low expense ratios.

You could easily retire now and live off of taxable money and do no or low tax-cost Roth conversions.

What would your plan for health insurance be if your retired soon? ACA subsidies?

I try to keep everything in index funds or similar low-expense funds that mix a bit of investment types. My biggest mistake is having to much out of the market waiting for the next pullback and no, I can't time the market. The options in the 401k aren't bad.

Health insurance scares me. Someone at work (also looking at retiring) recently told me that cobra is around $1600/month (single person) and our health insurance is a high deductible plan with an HSA. I have about 19k in that HSA and contribute the maximum each year.

First off, you WILL do something "stupid"; because by "stupid", I'm pretty sure you mean "something that I later learned I could have done at least a little more efficiently". I think we've all been there and done that, and all that means is that you don't know everything now, but you're still learning more about money management, and that's a GOOD thing! So don't be afraid to make decisions based on what you know...as long as you don't get in over your head and invest in something complicated that you don't understand.

And while I'm still working, from what I understand my 401(k) is with Fidelity, and while it's "sponsored" by my employer, once I retire, I deal with Fidelity, my employer is completely out of the picture. I don't think you have anything to worry about there, but if you still want to move it, I know that you can sometimes move even tax-advantaged accounts "in-kind" to other brokerages, although I think I've only heard about rolling old ones into new ones. But a quick call or email to your preferred brokerage should tell you whether you could move your 401(k) there after separating from your employer.

Thanks for the kind words. I only worry that ability to learn new money management skills is diminishing over time.

Many years ago, I put a minimal amount into some gas wells. I was over my head and so glad when I closed it out after about a decade and almost broke even. I probably didn't take advantage of it in every way possible. I remember there were odd laws that allowed the corporation to not report things to the IRS using the standard forms. That led to an audit and I came OK after just explaining how I had reported everything. I'd also invested in stocks for a year and figuring out the basis for everything was a lesson. I didn't want to do either again.

I used to work for a company that used Fidelity for the 401K, but the bigger company that bought us runs their own 401K. I rolled the Fidelity 401K out to Vanguard rather than allow it to get rolled into the new company's 401K. I wish my current 401K was with a similar financial institution, but that's just personal preference.

 

[MRG]

With about a million in post tax you appear in very good shape to coast to 59.5. If you can keep your income lower and buy into a subsidized ACA plan you can do much better than 1600 a month.

 

[pb4uski]

+1 check into healthsherpa.com for an initial look at what a subsidized ACA plan would cost.