My two cents:

Getting to the decision should involve a financial and psychological assessment. Starting the assessment at least a year ahead of the potential retirement date is a very good idea. Doing assessments along the way is a better idea. IOW, nothing wrong with looking at where you are at five years out.

The best way of evaluating the financial aspects is to think of your paycheck in retirement and how much $$ you need. The latter requires an objective evaluation of how much money you spend now (not as easy as one thinks).

For many folks, the matter is less complicated than one might think when all is said and done. You may conclude that you have just a few sources of income in retirement, e.g., pension, SS and savings.

The simplification above is just to illustrate and I think that you should do whatever you need to do with the spreadsheets as mentioned. That will put you in position to project how things are if you retire today, next year, or 3 years from now....IF you want to retire (there is no shame in working on your clock-out day)....and that leads to the psychological assessment.

Retirement for many (most) folks is viewed as the penultimate act (often it is). We know that the final act comes next and there is a reckoning that takes place. But, retirement can also be the last, best, opportunity for a freedom that many have not experienced for many, many, years.

Preparation is very valuable on both fronts.

 

I didn't have much choice... I got RIFed (reduction in force) in my late 50's and no one local (within 60 miles I wasn't going to relocate) wanted an Old Fart process control guy. And there are numerous health issues. I was actually out on medical leave when they did it and never got the chance to qualify for my disability insurance. IE Screwed! Taught high school science at a private school for a few years until 62 just to buy beans and rice and keep me busy. Wife has her MsEd and got a nice retirement package from teacher's retirement including medical so we get by. Smartest thing I did is every time I got a raise I bumped up my 401K until I reached the company max of 12% and later 18% matching copay. Insurance is the key as I am really the "Million Dollar Man" from a 4 vertebrae fusion of my neck, prostate cancer nuking by CyberKnife and cancerous kidney removal and all the followups at the Mayo Clinic that entails, psoriatic arthritis, and liver disease. Too damn many doctors and they were threatening a liver transplant but decided I was "Too Healthy" for it. Hah! So I have limited mobility and walk with a walking stick outside the house or a rollator (hate wheelchairs and being eye-level with everyone's ass). We get up to Pittsburgh to see our oldest daughter's family especially the grandkids and fly out to Seattle to see our youngest son and daughter-in-law rarely. Wife stays busy with her Library Board meetings, Church meetings, housework, home remodeling, gardening, charity work, and chauffeuring me around to doctors. I stay busy studying electronics (when I don't have an appointment with one of my horde of doctors) and try to go out with some other Old Farts for lunch every couple of weeks or so. Between Retirement income, SSI, investment income and a bit of inheritance we get by well enough.

 

This is where you sit down like I mentioned and start doing some math. Believe me a year goes past real quick. You crunch numbers and see what works for you. I wanted to retire but I also did not want to sacrifice our lifestyle. We both had very good jobs. Paying the medical sucked but in the end was worth it. I felt for me, it was time. Do whatever works best for you! I enjoy my bike and leisure days at my rifle range.
Ron

The cool part is they pay 20% of my pay for early out, which is $830, plus they will provide the Medical at around $127 a month till I'm 67.

My two cents:

Getting to the decision should involve a financial and psychological assessment. Starting the assessment at least a year ahead of the potential retirement date is a very good idea. Doing assessments along the way is a better idea. IOW, nothing wrong with looking at where you are at five years out.

Preparation is very valuable on both fronts.

Regarding my pension, I have $1,044 a month + $830 = $1,874 - $127 till 67 = 1,747 a month, the $830 will end at 67. If I wait till 67 to collect Social Security it will be around $1,400 + $1,044 = 2,444. My house will be paid for after I sell my dads house, once I sell my house cashed out $260,000. I plan to put it in the bank and purchase something smaller, depending where we decide to live try to pickup a house in a rural area, I've seen some around$50,000 to $100,000. Should give me $160k in savings, with no house payment. My wife will collect Social Security at that time which is around $1,700 + $2,444 = $4,144. That should be doable I hope.

To calculate the amount the total of 3 highest paid years is $156,632 divided by 36 = 4,351, then times years of service 12 years by .02 or 2% = .24 times 4,351 = $1,044 a month.

There are 2 more years not calculated which didn't amount to much but it wasn't with the University, which potentially might add a little to $1,044 those years amounted to 5k and 4k or so. If they include that to 12 then it's 14 years = .28 times 4,351 = $1,218 + $1,400 = $2,618 + $1,700 = $4,318 - Taxes = Not sure how to calculate that?

kv

 

/---/ Taxes = Not sure how to calculate that?

kv

Everybody finds their own way and all that..and this is not so much advice as things that I have thought about....fwiw...

You have done a lot of thinking and calculating, but you have to take a shot at taxes because they are going to be collected. Even if you have to rough it, and if you do, rough high.

If you have not done so already, get a SS account and an estimate. This is not going to change much (it will change a bit if you keep contributing and have not completely maxed) - it's just good to know that SS and you are on the same page.

When you hit 65, you have the Medicare decision(s) to make. If you have already been paying in, then Part A (hospitalization) is done, but you have to think about whether you want part B (and others). You can get those parts at any time after 65, but you will pay 10% a year more, so you may want to calculate what this will cost and when (I believe that they go back to your Fed return two years prior to calculate which of the bands you are in).

Also, when you hit 70.5 you will have mandatory withdrawals from your "normal" 401K, if you have one. While those withdrawals are not going to have any affect on your SS payment, they can (and frequently do) increase the amount of your SS that is taxed.

There is so much of this kind of thing that it can make a lot of sense to invest in a Financial Planner for at least one evaluation after you have yours done. Others may weigh in here with more/better info, but I would look for a licensed FP who is independent and has nothing else to sell you.

Finally, pat yourself on the back and count your blessings, you are doing better than most in the world.

 

/-/ Smartest thing I did is every time I got a raise I bumped up my 401K until I reached the company max of 12% and later 18% matching copay. /--/

Really important point. Too many miss that or see it too late. I used to have a standing lecture for youngsters about that - especially the matching part.

Some of them simply could not manage the maximum and I was always.."well you should and you can max it and will not even notice", but just starting out, they want a few things and in our "monthly nut" culture, it is very easy to not "go without". The matching part, however, is another issue. If a "youngin" can not see their way to contribute enough to get all the matching funds, if they are offered, they are making a HUGE financial mistake because it is the best deal they are likely to ever get.

I will have to confess that while I was on point about the matching, I did not max at first, but did later, including the over 50 - I just decided to do it automatically. There is a lot to be said for living at or below your means and I feel bad for so many that are near retirement "age" with little savings. Then there are many good, honest, hard-working people who are just not fortunate enough (for a lot of reasons) to have much savings at all.

 

I used to accuse my mother of there being some Semitic bloodline in the family tree due to her frugality, but she insisted it was our Scottish forefathers. I've told my kids about saving but hey they already have all the answers. With 4 kids things were tight when they were growing up.

 

Taxes = Not sure how to calculate that?

I thought I had that part figured out until this year. Then the trump tax bill hit me. Been filing taxes since I was 17, now 71, and this is the first time EVER that I had to pay in. Nothing changed in my retirement money but the tax bill, had to pay $1000 and usually got back $750 before this year.

(Political speculation removed -moderator) Sorry if this sounds political, it's not meant that way just making a statement of fact. There is no other way of making the statement without naming names.

 

I thought I had that part figured out until this year. Then the trump tax bill hit me. Been filing taxes since I was 17, now 71, and this is the first time EVER that I had to pay in. Nothing changed in my retirement money but the tax bill, had to pay $1000 and usually got back $750 before this year.

I noticed that this is the first year that no one brought up taxes here on the forum, is this the reason? (political speculation removed by moderator) Sorry if this sounds political, it's not meant that way just making a statement of fact. There is no other way of making the statement without naming names.

Well Taxes are Taxes, I think it's Gov. Are you retired? I claim zero as well as my wife, together we made around 80k last year, but I got back around $2,200 plus some State around $90.

kv

 

I have money withheld every month when I draw out of my IRA. I know about what my tax rate will be and don't consult tables, which I heard is apparently why some people had problems -the withholding tables had mistakes that did not call for enough withholding for some taxpayers.

 

I have money withheld every month when I draw out of my IRA. I know about what my tax rate will be and don't consult tables, which I heard is apparently why some people had problems -the withholding tables had mistakes that did not call for enough withholding for some taxpayers.

I think I need to consult an FNA about my Taxes when I fully retire, I found out some people are making up to $17hr at Lowes, pretty much could work in almost any dept there. Thats more than I make now, like $2 an hr more, who knew? I'm going to start stuffing my pockets till I'm 67.

They offered a Job to me when I went in for Wood and Paint. I don't want to unload Trucks but willing to help people with knowledge about their projects.

kv

 

I think I need to consult an FNA about my Taxes when I fully retire,/--/

kv

For planning purposes, you can come up with a reasonable high-ball percentage. That was the point I was making earlier.

 

I claim zero as well as my wife, together we made around 80k last year, but I got back around $2,200 plus some State around $90.

Doing that means you're giving the Government an interest free loan on the money you got refunded.

When I worked, I claimed 6 dependents; though I only had 4. I did that because I had enough itemized deductions to still get back several thousand from federal and a few hundred from state (my state has high income taxes).

 

When my company sold and we were all paid for our stock options it was a large chunk of change. I went and changed things including our largest holdings to a ROTH IRA. That hurt at the time and was a gamble. Even my sister who is a financial whiz with her masters in this stuff questioned the decision. We had two years to pay all that tax. Alas things got good for us. Kathy is 71 and come Feb I turn 70. Any monies we have drawn on the ROTH was tax exempt and when I turn 70 it matters not.

Our taxes are pretty much a push/pull as we normally come out on federal breaking even and on state we normally get about $100 which my wife uses to buy a $100 gift card for my sister who does all of our tax stuff. This year we actually filed an extension simply because with Kathy's illness and her time in rehabilitation we never got the stuff together to send my sister so we have till October.

Most people I know, and I haven't read the stuff, came out ahead with the new tax codes. WE looked like just pretty much another push/pull year at a glance. Likely why an extension was no problem at all since we likely don't owe anything or get anything again.

Ron

 

When my company sold and we were all paid for our stock options it was a large chunk of change. I went and changed things including our largest holdings to a ROTH IRA. That hurt at the time and was a gamble. Even my sister who is a financial whiz with her masters in this stuff questioned the decision. We had two years to pay all that tax. Alas things got good for us. Kathy is 71 and come Feb I turn 70. Any monies we have drawn on the ROTH was tax exempt and when I turn 70 it matters not.

Our taxes are pretty much a push/pull as we normally come out on federal breaking even and on state we normally get about $100 which my wife uses to buy a $100 gift card for my sister who does all of our tax stuff. This year we actually filed an extension simply because with Kathy's illness and her time in rehabilitation we never got the stuff together to send my sister so we have till October.

Most people I know, and I haven't read the stuff, came out ahead with the new tax codes. WE looked like just pretty much another push/pull year at a glance. Likely why an extension was no problem at all since we likely don't owe anything or get anything again.

Ron

I'm going to pass on commenting on the "new" tax laws because I already see where that is going .... but for the rest of your post:

Yes, the ROTH seems like it is working out exactly as you had hoped, but even with a ROTH, withdrawing your earnings, NOT your contributions, while not taxed per se, will add to your AGI and your AGI is used to determine how much of your SS can be taxed. There are just all kinds of considerations and, yes, at some point you have to estimate/project your tax burden. If you don't make an attempt to do that (and it looks very much like you did), you are vulnerable to rude awakenings.

 

I'm going to pass on commenting on the "new" tax laws because I already see where that is going .... but for the rest of your post:

Yes, the ROTH seems like it is working out exactly as you had hoped, but even with a ROTH, withdrawing your earnings, NOT your contributions, while not taxed per se, will add to your AGI and your AGI is used to determine how much of your SS can be taxed. There are just all kinds of considerations and, yes, at some point you have to estimate/project your tax burden. If you don't make an attempt to do that (and it looks very much like you did), you are vulnerable to rude awakenings.

All of the money in the ROTH was one lump sum when my company sold and we got our stock payout so that account was like something we contributed to. The initial tax hit was a big hit spread over two years. However, it worked out well in my case. Really it was a crap shoot which went well instead of bad. Yes, what is it they say about the devil and his due?

What I wanted out of retirement was we have enough income to live just fine. This without chewing on the investments, just SS and Pensions. When we want something, like a big vacation we hit the investments, hopefully when Kathy gets well we can get back to that stuff. Lately like last year and so far this year returns are good. Then too, we stay low risk because let's face it we aren't putting anything in anymore and haven't for about six years now.

Ron

 

I went and changed things including our largest holdings to a ROTH IRA.

I wish more so called financial advisors would have understood the potential benefit of ROTH IRAs. They all harped on lowering taxable income now as opposed to having money in a ROTH that could be drawn tax free. I wish I had a ROTH so I had more control over my taxable income.

 

All of the money in the ROTH was one lump sum when my company sold and we got our stock payout so that account was like something we contributed to. The initial tax hit was a big hit spread over two years. However, it worked out well in my case. Really it was a crap shoot which went well instead of bad. Yes, what is it they say about the devil and his due?

What I wanted out of retirement was we have enough income to live just fine. This without chewing on the investments, just SS and Pensions. When we want something, like a big vacation we hit the investments, hopefully when Kathy gets well we can get back to that stuff. Lately like last year and so far this year returns are good. Then too, we stay low risk because let's face it we aren't putting anything in anymore and haven't for about six years now.

Ron

I think that is a sensible plan. You want a "paycheck" as you have been getting for your adult life and a pot to dip into when necessary. If you can live off that paycheck comfortably, then it is a big success. If you need to dip, you have the pot to dip into.

I really don't sweat the pennies, I really don't even like thinking about this stuff. My strategy is to evaluate it critically and thoroughly so I can feel like I am making an evidenced-based decision and then I get on with living, not thinking about it more than I have to - that means not thinking about it at all except for periodic re-evaluations as required.

 

I think that is a sensible plan. You want a "paycheck" as you have been getting for your adult life and a pot to dip into when necessary. If you can live off that paycheck comfortably, then it is a big success. If you need to dip, you have the pot to dip into.

I really don't sweat the pennies, I really don't even like thinking about this stuff. My strategy is to evaluate it critically and thoroughly so I can feel like I am making an evidenced-based decision and then I get on with living, not thinking about it more than I have to - that means not thinking about it at all except for periodic re-evaluations as required.

That's it. I absolutely hate this stuff but Thank God my sister and our financial planner thrive on it. Years ago, when we first began investing I took a shot at it and I still have nightmares. Our original financial planner retired, we joked how he went to Aruba with our money but before Jack retired he left us with Brenda and I swear I love that woman. Her mind works like my sister's. The world needs people like them. Hell, I need them.

Something else Kathy and I have been working on is the will stuff. The children are being skipped and things go to the grandchildren but all of that is another story.

Ron

 

Are you retired? I claim zero as well as my wife, together we made around 80k last year, but I got back around $2,200 plus some State around $90.

I am retired and have been for quite awhile( was forced into it at 58). Took SS at 66, get a small pension and SS. Going to change my withholding to the zero since what happened this year. From getting normally ~$750 -775 a year from the feds to this year paying $1000, to my simple way of thinking my taxes went up $1750.

 

I am retired and have been for quite awhile( was forced into it at 58). Took SS at 66, get a small pension and SS. Going to change my withholding to the zero since what happened this year. From getting normally ~$750 -775 a year from the feds to this year paying $1000, to my simple way of thinking my taxes went up $1750.

So OK, then we can afford to get together again at that Cracker Barrel with Gopher and we need to get Spinnaker there. Let's face it, retired people have time. We just need those other two guys.

Ron