Personal Investments • Retirement is imminent - are we ready?

Here's the details. Assets are $1.6M, 66% domestic stock, 27% bonds, 5% foreign stock and 2% short term. Of that $544k is in traditional IRAs, $714k is in brokerage accounts, and $312k is in a 401k.

Don't you have any Roth IRAs? Are you aware that your current $856K in tax-deferred could more than double before RMDs start? That would put you over $1.5m in tax-deferred even with taking distributions of small amounts before that to cover current expected living expenses. Then when you reach RMD age, the RMDs would start at $68K and keep growing after that until your late 80's when the account value(s) start to decrease.

But the bad part is that when one of you dies, the survivor still has to take the same RMDs and keep paying taxes on them. But the survivor will have to start filing as Single in the year after death. The space in each tax bracket for Singles is half as much compared to the space in the tax bracket for MFJ. Then the Survivor is usually pushed into the next tax bracket.

I would seriously consider doing Roth conversions of more than the yearly account growth to try to keep your Taxable Income (a line on the 1040 tax return) level instead of having a few years of low income (and low taxes) followed by many years later of high income (and taxes).

By starting SS at age 70, that gives you more room in your tax brackets for doing Roth conversions instead of filling it up with SS.

The hourly CFP ran some SS simulations for us.

COLA (nominal): 2.0%
me 61, PIA $3,352
spouse 62 $1,180

Best approach was for my spouce to start getting SS now, at $860/month. I wait until age 70, where I get $4,870 month, and my spouse gets the add on, boosting them to $1,450/month. (Note I find this add-on confusing since they were born after 1954 the loophole is closed, but maybe I'm just missing something and I'll have the CFP explain it when we hire them.)

I don't understand what your "add-on" is. If your PIA amount at age 67 is $3,352, by waiting 3 more years, you get 8% more for each year you wait. so 124% of that amount is $4,156. Maybe that advisor is including inflation in his-her estimates. I prefer to leave inflation out of it as it doesn't stay consistent. The IRS will automatically adjust most of their limits including the tax bracket boundaries yearly to correspond to the latest inflation numbers.

Am I missing anything? Are we ok for retirement?

I think you be a lot safer by delaying retirement a year. We did this and lived only on the expected retirement income. All of the rest of our income went into savings.

I also suggest doing at least a small Roth conversion for each of you this year to start the 5-yr clock. If done this year, your clock will be considered as having started at January 1, 2024.

Statistics: Posted by celia — Mon Sep 16, 2024 7:24 pm — Replies 53 — Views 8018

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