Retirement Money

Discussion in 'The Okie Corral' started by DoubleWide, Apr 27, 2017.

  1. DoubleWide

    DoubleWide

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    It seems like we've had some retirement threads lately. It's got me curious on how people are planning to retire early or already have and they are living the good life. What are the ways to save money and make it grow? What are the pros and cons?
    I'm one of the people who can't see retiring before 70, but maybe with your help I can. When I think retirement, I usually just think of these three

    401k
    $18,000 limit plus $6,000 for age 50 and older
    Employer Match - employers contribute an amount or match a percentage of your contribution
    Combined contribution limit $54,000 and $60,000 for age 50 and older
    Contributions are tax free, but withdrawals are not
    Required Minimum distributions after age 70.5
    For good or bad, the money is in stock market

    Roth IRA
    $5,500 limit plus $1,000 for age 50 and older
    Contributions phase out as income increases
    Qualified distributions are tax free
    For good or bad, the money is in stock market

    HSA
    Contribution for Self $3,400 plus $1,000 for age 55 and older
    Contribution for Family $6,750 plus $1,000 for age 55 and older
    Contributions are tax free
    Interest/earnings are tax free
    Money can be invested after meeting a threshold usually the out of pocket limit for the health insurance
    Tax free withdrawals for qualified medical expenses
    After age 65, non-qualified withdrawals can be made penalty-free, but not tax-free
    Requires High Deductible Health Plan
    Designed for health insurance
     
  2. RenoF250

    RenoF250

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    I have not heard of an HSA that collects interest.
     
    Last edited: Apr 28, 2017

  3. *ASH*

    *ASH* FURBANITE

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    I REAP what YOU sow
    it depends of lot of variables .
    what you want to have and what you can have .
    in my case we were kinda set from the get go . running family farm . and buying land . early on i would buy large tracts of land and then clear cut and basically pay for the land.
    that and my dad invested well and i did not have to share with siblings .

    from your read i would talk to a planner or 2 . or maybe 4 / dunno if that helps but thats my suggestion .
     
  4. ChuteTheMall

    ChuteTheMall Wallbuilder and Weapon Bearer

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    First, max out the employer match 401k because it's free money.
    Second, max out the Roth IRA because it will be tax-free money.

    Third, keep enough emergency savings available to keep you from raiding your retirement savings every time you declare an emergency. Needing new tires for your car is not an emergency, it's a predictable expense and part of the budget.

    I pity anyone who put their investments into something other than the stock market, assuming an appropriate series of diversified index funds. See a professional.
     
  5. ede

    ede

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    I'm planning to retire early. I'm 58 now and figure if I keep going at the rate I am now I can quit work when I'm 70 or so.
     
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  6. OGW

    OGW SAF

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    If you consult a financial advisor (you should), see one who sells nothing but his/her time and advice, not someone who's affiliated with a brokerage or sells mutual funds. They'll spend a fair amount of time with you analyzing your current situation, goals, risk tolerance, etc. and formulate a plan specifically for you. You will need to find someone you feel comfortable with and who preferably comes with good recommendations from people you trust.
     
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  7. Jonesee

    Jonesee

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    Very well thought out. You have hit all the key items.
    You don't say how old you are. The most important part of planning to retire early is to begin saving young, in your early 20s (the miracle of compounding!) if you can and save more than you think you can consistently until you retire.

    The other thing you left out is supporting yourself in the gap between an early retirement and when you decide or can begin to tap retirement funds.

    You will need cash and investments to pay for your living expenses and healthcare during that gap. So, budget and invest for those years using after tax dollars and regular savings and investment accounts, however long it will be.

    Finally, set a goal and work toward it every time you get paid or have a windfall. Also, work on it daily. You will need to educate yourself on the investing. I've done it for decades and am still learning. I work on my investments and retirement every single morning without exception. That doesn't mean I move money constantly, actually I rarely do. But I know exactly what I have, I know exactly what my returns are and if I am better or worse than my expectations, and I have a spread sheet that compiles all the data so annually I know if I am on target and how much better or worse than target each account is for the year and long term effect.

    What gets measured, gets accomplished.

    Be calm and calculating about your investing. I am currently sitting on way too much cash, and it kills me not to have it in the market. But it appears the market is very overpriced and a correction and bear market are past due, so I will continue to sit on my hands until it happens.

    Best of luck to you.
     
    Last edited: Apr 28, 2017
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  8. canis latrans

    canis latrans

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    good post, Jonesee.

    question, though...

    if republicans get off their azz and reduce taxes and over-bearing regulations, won't that set our economy on fire and raise the stock market?
     
  9. OGW

    OGW SAF

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    I'd give that about the same odds as the attempt at health care reform. I know, I'm too damned cynical.
     
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  10. Jonesee

    Jonesee

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    Actually, the markets have performed substantially better during Democrat presidencies that Republican.

    I don't look at politics when investing. Money is green not R or D. No president is completely to blame for a market downturn and no president can take credit for a market upturn.

    If you want to go really deep into the conservative vs. the liberal politics impact on the investment markets, we would be looking at economic models that reach far beyond what we could discuss here.

    Specifically on taxation you are talking about the Laffer Curve (and Supply Side Economics). There has been quite a bit of research on it. Overall I think that theory has fallen out of favor. But I really haven't given it much thought since the Ford-Reagan and post-Reagan era.
     
    Last edited: Apr 28, 2017
  11. Deltic

    Deltic

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    With the Republicans I always worry that they won't do what they say they will. With the democrats I am afraid they really mean it. :brickwall:
     
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  12. LEO/Dad

    LEO/Dad Navy Veteran

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    We retired in 2012, age 65. It looks like you have given this a lot of thought. Most planners advise you not to have any debt when you retire. This is not always possibly. We saved our entire lives, while helping put all three of our sons through college. I do pay an investment broker 1% to manage our portfolio, and feel this is money well spent. We live comfortably and are on a budget. We do go south in January for a winter break. Good luck to you. Retirement is the best job I ever had. Be sure to cover all your bases when it comes to health insurance in retirement. With our Medicare deduction and supplement we are spending $8,000.00/annually.
     
  13. walkinguf61

    walkinguf61

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    Early retirement is my plan. After 20 years as an LEO, I was entitled to a pension but by staying to 25 years my pension will be significantly higher. I will take home more money retired from my pension than I do working.

    The problem is inflation. My pension does not have COLA increases. I have been saving in tax deffered accounts for inflation, emergency spending, the kids college education( some 529 and some to come out of my 457.
    I will eventually get a part time job so I can save that income to an IRA.

    I will be semi- retired before 50.
     
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  14. TheDreadnought

    TheDreadnought

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    Normal retirement age to get a full pension at our company is 62. I'm hoping for an early buy-out at 58. We'll see how it goes.

    As far as the 401k/Roth issue goes, you already got the conventional advice on how to handle it above. (Get the free money in the 401k, then max out Roth). I'll push back on that approach.

    - First, you might have a lower tax bracket when you retire than you do right now. So saving taxes now, and investing those savings, then paying a lower rate on them later, is superior to paying taxes up front, losing all that investment income, and withdrawing tax free later. You'll have to see what your personal situation looks like.

    That said, Roth funds can be useful in managing your tax liability from year to year, so it's important to do both if you can.

    - Secondly, and more importantly. . . By investing in a Roth, you're gambling that the government isn't going to come along and tax those earnings later. I don't know about you, but when it comes to the government, I'd rather have a tax bird in the hand now, rather than later.

    True, they could change the law for 401ks. . . but they are far more prevalent and popular than Roth IRAs. So I see it as harder politically for them to screw up 401ks than it is to slap a tax of some kind of Roth distributions for all those "rich fat cats evading taxes when poor people need more welfare." YMMV.

    - Third, investing strategy for your 401k is key. Target date funds are too conservative. Assuming a retirement age of 65, you should be in the market, full bore, pedal to the metal until at least 50. If you want to start altering your portfolio balance at that age to make it a little more conservative, fine. But until 50 (and perhaps beyond, maybe even 55 if your risk-tolerance is high or your retirement date is flexible) you have plenty of time to ride out the swings in the stock market. You'll be much better off in the long run, by being very aggressive in the accumulation phase. You just gotta learn not to sweat it.

    - Finally, you never know what is going to happen. You could have a stroke or heart attack at 60. You got get hit by a bus crossing the street. Some idiot at the range could ND and shoot you in the head. Space debris might fall out of the sky and turn you and your house into a smoking crater. You might have an undetected brain aneurism lurking, waiting to burst a few years from now and kill you instantly. The country could collapse into chaos and civil war and all investments might be seized or become worthless. Super-AI might wipe out all human life in the near future. The whole planet might get incinerated by a gamma ray burst (alright, this one is fairly unlikely).

    The point is. . . your dreams of retirement might turn to ash. So yes, save and plan for the future. But do it in a balanced way. If you're not living and enjoying life right now, you need to make some changes.
     
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  15. DoubleWide

    DoubleWide

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    I know Bank of America does, but the rates aren't going to make you money. They're lower than savings interest rates.
     
  16. greg vanstralen

    greg vanstralen

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    I turn 67 this month and work for the Feds. I get Medicare A and have deferred getting Social Security. I have Blue Cross through work. I make a good salary (GS-12). Have 17+ years in and am in the process of "buying back" my military time. Started with the Feds at age 50 with NO retirement savings (Cashed in my previous 401K to go back to school). I will get a small pension, SSAN and my 401K when I retire (at age 70 in a couple of years). Plan on working/volunteering or maybe (wife's choice) getting my PhD. Wife is 60 and works with no retirement.

    We have 1) maxed 401K contributions; 2) pay an extra $100 per pay period ($200/Mo) into the 401; 3) invested the 401K in "safe stocks=grows about$2000 per week (knock on wood); 4) Cars are or will be paid off,; 5) new roof and siding will come out of 401K at retirement; 6) paying off credit card debt (beginning to snowball); 7) doing needed repairs and remodels now; 8) liquidating my gun accumulation (which was its intent) to pay for remodels.

    By the time my wife retires, we will: 1) have house paid; 2) both cars will be paid;3) House will be in tip-top shape; 4) Medical will be covered (We keep BlueCross/Blue Shield into retirement at the same rate); 5) SS will be maxed, 6) My Federal pension goes up after 20 years service;7) My student debts will be forgiven (20 years public service).

    Won't be rich but doable....I had some real worries a while back. You just gotta buckle down and do it!
     
  17. jilverthor

    jilverthor

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    Technically speaking, there are Roth and Traditional 401(k)s as well as Roth and Traditional IRAs. A nice advantage of the ROTH 401(k) is that it does not have an income limit. Additionally, if you want to go for something other than the stock market, a self directed IRA would let you do real estate, precious metals, just about anything really. The key thing here is they take more paperwork to set up and keep as retirement funds (meaning getting the tax breaks).

    I think that brings up another point, the one you didn't discuss is a taxable account. It is really just another version of the emergency fund that was talked about earlier in my mind. Something that can be used for the really large unexpected expenses without causing a penalty.

    Finally, as was mentioned, a big factor is time. If you start early, the compounding means that the majority of the money is earnings, not contributions. As such, the ROTH is often a better choice, but a common plan is to diversify the types as well to be covered as tax law changes. (And because I don't think you can have a company match with Roth dollars).
     
  18. jilverthor

    jilverthor

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    Missed it the first time, but I think you are trying to say the money is tax deferred and then not taxed if used for medical expenses which is correct. And yes, there is generally a minimum account value before you can invest. In my case I think it was only 1k, but maybe I am wrong and it was 10k. That last part is not by law and is driven by the HSA provider.
     
  19. gamboolman

    gamboolman

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    I am almost 58 and planning to go to pasture at 60. By then I will have been working the oilfields for near 43 years.....the oil patch has been a good living for us, but it is a all consuming job. Especially oversea's as we have been for many years.

    Key number for us was to figure out what our annual expenses will be in retirement....and being honest about it. And be sure to include the taxes.
    Our number seems high to us, but we would rather go into retirement based on a very conservative expense estimate.

    We have monies invested in 4 Index Funds at Vanguard, Wellington, Total Stock Market, Total International Stock and Total Bond.

    We also have a account and funds with a managed service that has been taking care of many fellow employee's of my Megaoil Corp - they have a good record. But you do pay a fee for their services.

    And finally, we have company savings and stock plan. We will be eligible for a non cost of living adjusted pension or Lump Sum at retirement. We are seesawing on whether to take the pension or the Lump Sum....great problem to have !

    We are planning on waiting for me to take Social Security at age 67 and Ms. gamboolgal will claim the 1/2 Spousal benefit based on my earnings when she turns 67.
    We only use 75% of the estimated Social Security benefit.

    These are two very good sites for you take a look at IMHO.
    http://www.early-retirement.org/forums/
    https://www.bogleheads.org/forum/index.php

    This is a popular retirement calculator. There are others available from Fidelity, etc
    http://www.firecalc.com

    The internet is great for you as you search and study up on your own.

    I am counting the days...and I am 2-1/2 years out....Can't wait to be able to harass Ms. gamboolgal full-time and not be tied to the dam cell phone, pooter 24/7.
    All the best ! :waving:
     
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  20. walkinguf61

    walkinguf61

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    I can honestly admit my investment mistakes. My latest one was to invest too conservatively.

    The mix of stock investments I have have had a low return and I missed the boom times. But I'm still okay and will be a little more risky but not crazy in the future. I didn't do bad overall. If I didn't have small kids, I wouldn't need that part time job in the future.

    Planning, even if not perfect, makes a huge difference.
     
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