Is 1M enough to retire on at 60?

BestFootForward wrote:

FRA: is Full Retirement Age. Assume Spouse A at FRA - 66-67 entitled to $3000 per month. Spouse B at FRA on OWN earnings is entitled to $1600. The fifty percent is meaningless - $1600 is more than half of spouse A. If spouse A delays to 70..... the 8% per year at age 70 is $3720-$3960. The Spouse B fifty percent will always be the FRA or $1500 and totally meaningless based on this scenario. Assume both are at FRA: Spouse A or Spouse B will upon death of other get the $3720-$3960 -- again based on year born. KEEP IN MIND: Spouse A decides to wait to 70 and passes at 68. Spouse B will not benefit in anyway to wait for deceased Spouse A's 70th but will get the 8% to the age 68 for calculation purpose. Spouse B needs to apply for deceased Spouse's benefit upon death of Spouse A.

Wrong. As long as Spouse B does not start drawing until after Spouse A they get 50% of Spouse A's age 70 benefit.

NM, I'm wrong on that. Max spousal benefit is 50% of FRA benefit as BestFoot stated.

Interestingly, it appears that social security benefits are taxed under certain circumstances, and that depends on your income, including 50% of you social security benefits.

Likewise, your 401K benefits will be taxed. So keep that in mind when you calculate how much actual money you have at your disposal in retirement.

Of course, a Roth IRA is the exception here.

Actually 85% of social security could be taxable for a couple with income over $44K. If income is low enough none of the benefit is taxable, hit the first threashold at 50%, and finally 85%. A bill has been in Congress to fix the funding of the social security program for quite some time. The proposed bill included (or did at one point) changing the income level to $100K and it would adjust each year for inflation. The 85% taxable limit has not changed since 1993! And the 50% has not changed since 1983!!! A change to 100K isn't far off inflation - its a long over due correction. No logic in taxes - well, actually they stated the 50% was the amount paid by the employer that was never taxed and the 85% made up for the "earnings" on your social security payments.

You earn it, you paid tax on everything including the social security taxes paid each pay check and when you need it most they try to tax it even more. At least with a 401(k) you were able to reduce your annual taxable income!!!!

As for ROTH vs IRA/401(k), look at your tax bracket now vs where you expect to be in retirement. If you expect to go to a lower tax bracket then take advantage of a bigger tax bracket deduction while working. More invested is better than less. A ROTH does have a place, just understand what it is to you.

The ROTH vs IRA/401K is not an easy calculation.

We have both, and in all likelihood, our tax bracket in retirement will be sizable. I wonder if I should do a huge ROTH Conversion from our 403B accounts now while we are working since the sizable accounts in all these may reasonably throw us into a higher tax bracket in retirement when we have to take RMDs, tax on our social security benefits, etc.

Also, are pension benefits taxable? That would have to be figured in as income in retirement as well, i would imagine.

Given the size of the deficit, it's always safer to assume your taxes will go up in retirement and plan accordingly.

Your pension benefits are fully taxed by the feds, for state taxes it depends on the state.

Thanks, much appreciated.

Pension is almost always taxed. I would not go rolling to a Roth unless I had a big loss from business or something to offset or in a lower bracket now than what I expect at retirement - a big IF. BUT if you see a higher bracket in retirement spread it over multiple years and aim to avoid the next bracket. Another consideration that is still available are direct contribution of RMD to charity if one is so inclined. Everyone has a situation that is different and each has a different tolerance level. I'm in the camp: if I am making a lot more, I'll be happy to pay the tax.

with $1m in cash you could probably buy two rental properties that in total would bring $4,000 per month in income after expenses, still leaving a few hundred thousand for emergency. live frugally in a small town and you're a-okay. doesn't matter how long you live as long as the rentals are occupied. and the rent can go up every few years.

BestFootForward, it sure looks like you've been through this before. Checked it out and everything you say does in fact check out and quite sound advice.

Crunched the numbers and made up my mind. It is quite involved but being well positioned with current Roths and cash makes the need to tap into the taxable IRAs less necessary.

One thing that i might consider is this: lets say one dies before they have spent all their 401K. The 401K would get passed on to the next generation, and the recipient does not pay any taxes on it besides perhaps an inheritance tax if applicable (in essence, the inherited sum becomes their new cost basis). But if instead, I were to convert the 401K into a Roth Ira, we lose that benefit and would have paid the tax on that sum when i - and the heir - could have avoided it.

That's another thing to consider.

Thanks for getting me thinking of these things- had almost no idea about what was taxed in retirement until this discussion.

This is a terrible idea.

dropit wrote:

with $1m in cash you could probably buy two rental properties that in total would bring $4,000 per month in income after expenses, still leaving a few hundred thousand for emergency. live frugally in a small town and you're a-okay. doesn't matter how long you live as long as the rentals are occupied. and the rent can go up every few years.

New law just passed limits the stretch IRA. Inherited IRA must be distributed within 10 years. I think you will see more changes like this necessary to raise revenue.

Maybe

Ghost of Igloi wrote:

New law just passed limits the stretch IRA. Inherited IRA must be distributed within 10 years. I think you will see more changes like this necessary to raise revenue.

Takes effect on 1/1/2020. IRAs inherited prior to that are grandfathered under the old rules.

Thanks, hadn't heard that about the Secure Act. Reading up on it elsewhere, i see that the RMDs won't start on IRAs until age 72, up from age 70 1/2 as is the case now.

The rest of the story wrote:

Ghost of Igloi wrote:

New law just passed limits the stretch IRA. Inherited IRA must be distributed within 10 years. I think you will see more changes like this necessary to raise revenue.

Takes effect on 1/1/2020. IRAs inherited prior to that are grandfathered under the old rules.

Ah, for everyone else three days.

Ghost of Igloi wrote:

The rest of the story wrote:

Takes effect on 1/1/2020. IRAs inherited prior to that are grandfathered under the old rules.

Ah, for everyone else three days.

No. Any inherited IRAs prior to 1/1/2020 are subject to the old rules. That’s what ‘grandfathered’ means.

Will you have enough money? Perhaps. But SHOULD you retire at 60? I wouldn’t.

Here’s the thing. I have seen this over and over again. Men who stop working lose their edge. I don’t know why this is. And maybe it’s sexist to say (I’m a female). But I noticed it in my own dad and my father in law. After a year of traveling, golf, fun things...etc...you settle into your new life on your new retirement budget. It becomes too easy to just sit around and watch TV and basically do nothing. As a result, you become more passive and you lose your edge. It ages you. You’d think all the free time and naps would keep you young, but it’s the opposite. Your world shrinks to reading the news and walking your dog. It’s actually kind of sad. There are a very few select people who are able to keep extremely active social lives and volunteering/creating after retirement, and they do ok. But most people don’t.