Retirement Planning Thread

[dreamcastrocks]

I haven't purchased it yet but I have been doing my research, I may be disqualified from a lot of policies due to the history of dementia in my family. It's going to take some shopping around but to me the benefit outweighs the cost in the end.

Let me know your experience with it. I am curious to see how it goes for you.

 

[Zeno]

Let me know your experience with it. I am curious to see how it goes for you.

My employer (Federal Gov't) offers a plan through John Hancock Insurance but I plan to shop around for more competitive rates (again if possible with my family history).

What I have really done is research what is and isn't covered, different types of coverage and a general idea of costs. I turn 49 in a few months and don't really plan to purchase until right about the time my wife retires (which will be 2025--I have to wait another 3-4 years after her before I retire)--the plan is my dividend paying stocks annual income will more than cover the premium amount in retirement, at least I hope it will.

This link has some good basic info...

âUnderstanding Long-Term Care Insuranceâ

Basics about coverage, premiums and policy options

www.aarp.org

It's a few years old but a good start.

Here is another one...

Long-Term Care Insurance Explained - NerdWallet

Chances are you’ll need some help taking care of yourself later in life. The big question is: How will you pay for it? Enter: long-term care insurance.

www.nerdwallet.com

 

[Zeno]

Here's who would benefit from proposed changes to 401(k) 'catch-up' contributions

Under a provision included in both Senate and House retirement bills, so-called "catch-up contributions" would be expanded.

www.cnbc.com

As for the specifics of the congressional proposals, the House bill would allow catch-up contributions of $10,000 to 401(k) plans for anyone age 62, 63 or 64.

At the same time, however, the House bill also would eliminate the pre-tax aspect of catch-ups by requiring that they be made on an after-tax basis — i.e., as a Roth contribution. In that case, there would be no upfront tax benefit but qualified withdrawals would be entirely tax-free.

Won't benefit me as I will be at least 5 years in to retirement before I turn 62 but good for those that plan to work longer (if they can afford it). 2022 is the first year I can do catch-up contributions, I really wish they'd raise the legal limit on IRA catch ups from $1000, I had heard there was some talk of raising that limit but with it somehow being tied to inflation but it's been quiet lately.

 

[Ouchie-Z-Clown]

Here's who would benefit from proposed changes to 401(k) 'catch-up' contributions

Under a provision included in both Senate and House retirement bills, so-called "catch-up contributions" would be expanded.

www.cnbc.com

As for the specifics of the congressional proposals, the House bill would allow catch-up contributions of $10,000 to 401(k) plans for anyone age 62, 63 or 64.

At the same time, however, the House bill also would eliminate the pre-tax aspect of catch-ups by requiring that they be made on an after-tax basis — i.e., as a Roth contribution. In that case, there would be no upfront tax benefit but qualified withdrawals would be entirely tax-free.

Won't benefit me as I will be at least 5 years in to retirement before I turn 62 but good for those that plan to work longer (if they can afford it). 2022 is the first year I can do catch-up contributions, I really wish they'd raise the legal limit on IRA catch ups from $1000, I had heard there was some talk of raising that limit but with it somehow being tied to inflation but it's been quiet lately.

The IRA limits in general never made sense to me. Who can save effectively at those rates?

 

[Jersey Girl]

Hadn't thought about the HSA contributions, so thanks for bringing that up, Ouchie!

 

[Zeno]

The IRA limits in general never made sense to me. Who can save effectively at those rates?

I agree, they preach all the time about saving for retirement and there is very little offered outside of employers sponsored plans and those have a ridiculously low cap amount for contributions.

The Roth income limits never made much sense to me either. If there is a contribution limit why bother with an income limit? It makes even less sense when you can backdoor a Roth legally.

 

[Zeno]

This isn't an official gov't site or anything but I have followed this guy for some years now and he is super accurate in his predictions. He just updated his 2022 projections last week.

2024 2025 401k 403b 457 IRA FSA HSA Contribution Limits

The contribution and income limits for workplace retirement plans, Traditional and Roth IRA, FSA, and HSA will go up in 2025 to adjust for inflation.

thefinancebuff.com

He is predicting the 401K limits to go up to $20,500 from the current $19,500 and he is predicting no increase to catch up contributions.

He also predicts the IRA limits do not change at all next year.

 

[Ouchie-Z-Clown]

This isn't an official gov't site or anything but I have followed this guy for some years now and he is super accurate in his predictions. He just updated his 2022 projections last week.

2024 2025 401k 403b 457 IRA FSA HSA Contribution Limits

The contribution and income limits for workplace retirement plans, Traditional and Roth IRA, FSA, and HSA will go up in 2025 to adjust for inflation.

thefinancebuff.com

He is predicting the 401K limits to go up to $20,500 from the current $19,500 and he is predicting no increase to catch up contributions.

He also predicts the IRA limits do not change at all next year.

We’ll know in about two months. IRS COLAs announced in October.

 

[jf-08]

I agree, they preach all the time about saving for retirement and there is very little offered outside of employers sponsored plans and those have a ridiculously low cap amount for contributions.

The Roth income limits never made much sense to me either. If there is a contribution limit why bother with an income limit? It makes even less sense when you can backdoor a Roth legally.

My understanding is that because if there were no cap, the rich would gain the most benefit while the non-rich would only have a small benefit. In other words, if the Roth limit was $100K per year, some would throw $100K into it, having it grow without paying capital gains.

 

[Zeno]

My understanding is that because if there were no cap, the rich would gain the most benefit while the non-rich would only have a small benefit. In other words, if the Roth limit was $100K per year, some would throw $100K into it, having it grow without paying capital gains.

I can understand that but why is it set at a paltry $6000 ($7k for 50+)? $15-20K seems more reasonable and is more in line with a 401K but without the benefit of matching employer contributions.

 

[BigRedRage]

yeah...the middle class and/or upper middle class is left out when making the rich do pushups.

 

[Zeno]

3 Things Dave Ramsey Gets Really Wrong About Retirement Savings | The Motley Fool

Don't listen to the finance guru about these three issues when planning retirement.

www.fool.com

1. You should choose mutual funds over ETFs or stocks​

2. You can earn a 12% average annual return​

3. You should pay off all non-mortgage debt before investing for retirement​

This article was pretty solid IMO, it follows my way of thinking at least. I do like some of Dave Ramsey's stuff, the debt snowball is a great tool for paying off debt but he has some flaws to his some of his thinking when it comes to saving for retirement. I lean more towards ETFs (although I own both ETFs and MF's in my IRA), I use a very conservative 6-7% when I do retirement calculators (even though I expect better returns) and while I can understand point 3 I honestly think you should contribute at least up to your employer match on the 401K while still paying down debt--it's like turning away free money.

 

[Ouchie-Z-Clown]

I can understand that but why is it set at a paltry $6000 ($7k for 50+)? $15-20K seems more reasonable and is more in line with a 401K but without the benefit of matching employer contributions.

The public policy is that if you could set up an IRA that could equate 401(k) levels the owners of companies would just do the IRA and not set up 401(k)s for their employees. If they set up 401(k) and max out they have to get their employees to a certain savings rate so they can max out. So there is a legit reason the IRAs don’t match qualified plan limits.

 

[elindholm]

This article was pretty solid IMO, it follows my way of thinking at least.

I agree. Usually Fool resists presenting any real information, but they managed to divulge some solid advice this time.

By the way, for those of you familiar with the Rule of 72, here's a cool nuance: An investment growing by 8.5% annually will double in 8.5 years.

 

[Zeno]

The public policy is that if you could set up an IRA that could equate 401(k) levels the owners of companies would just do the IRA and not set up 401(k)s for their employees. If they set up 401(k) and max out they have to get their employees to a certain savings rate so they can max out. So there is a legit reason the IRAs don’t match qualified plan limits.

Ok well that make some sense but still $6000 is too low, maybe set it to statutorily be 50% of the max of a 401K or something.

Is there an incentive for companies to set up 401K's aside from recruiting and retention purposes? Do they get some kind of tax break?

 

[Folster]

Ok well that make some sense but still $6000 is too low, maybe set it to statutorily be 50% of the max of a 401K or something.

Is there an incentive for companies to set up 401K's aside from recruiting and retention purposes? Do they get some kind of tax break?

People who do not have employer sponsored plans are severely disadvantaged when it comes to saving for retirement. I think the IRS should increase IRA contributions limits to 401K levels for those not covered by a employer plan. They have SEP IRAs which allow self-employed people to potentially contribute beyond 401K levels. Something is needed for those who don't have access to employer plans yet don't own their own business.

 

[Devilmaycare]

People who do not have employer sponsored plans are severely disadvantaged when it comes to saving for retirement. I think the IRS should increase IRA contributions limits to 401K levels for those not covered by a employer plan. They have SEP IRAs which allow self-employed people to potentially contribute beyond 401K levels. Something is needed for those who don't have access to employer plans yet don't own their own business.

I wish the rules were better too for IRAs if you do have an employer 401k. I'd love to have it where I do my 401k up to my employer's match then have the reset of my paycheck's contribution go into an IRA where I have more control/better fund options. The funds in my 401k are really limited.

 

[Russ Smith]

I wish the rules were better too for IRAs if you do have an employer 401k. I'd love to have it where I do my 401k up to my employer's match then have the reset of my paycheck's contribution go into an IRA where I have more control/better fund options. The funds in my 401k are really limited.

That's true. I've always funded my 401K first because of the match and because it's easy. It's actually been years since i've consistently funded my IRA because I've been focused on the 401K and the ESPP plan. In general the ESPP plan is better because if you sell right away you are guaranteed 15% at worst profit and in the last 18 months we've been averaging about 40% because of the stock price. Yes you get taxed on that but it's still pretty hard to beat that return and it goes into my money market for cash.

I tend to only fund the IRA year end to reduce my taxable income and often not then. My IRA just grows off investments but my 401K is of course growing MUCH faster because I'm funding it.

I've been pretty disciplined if I get a raise, I increase my 401k %, if I get a bonus or tax return it goes into savings.

 

[Zeno]

That's true. I've always funded my 401K first because of the match and because it's easy. It's actually been years since i've consistently funded my IRA because I've been focused on the 401K and the ESPP plan. In general the ESPP plan is better because if you sell right away you are guaranteed 15% at worst profit and in the last 18 months we've been averaging about 40% because of the stock price. Yes you get taxed on that but it's still pretty hard to beat that return and it goes into my money market for cash.

I tend to only fund the IRA year end to reduce my taxable income and often not then. My IRA just grows off investments but my 401K is of course growing MUCH faster because I'm funding it.

I've been pretty disciplined if I get a raise, I increase my 401k %, if I get a bonus or tax return it goes into savings.

I had to look up ESPP because I wasn't sure what that was--sounds like a good deal, I don't have that option but if I did I would sure take advantage of something like that.

I used to contribute 10-15% of my income to my 401k but about 5 years ago I changed to a fixed dollar amount ($750 X 26 pay periods takes me to the max). I make payments monthly to my IRA--$500 a month, which takes me to the max there as well (and contribute what extra $$ I can to my brokerage account). Next year I can start the catch up contributions so I will adjust those numbers accordingly. I guess I am considered a "super saver" but I want to try to guarantee myself a good retirement.

I have read some articles recently about "oversaving" but I don't think I fall in to that category, I have very little debt outside my mortgage and my wife and I still take good vacations (at least in non-pandemic times). I do have some concern about RMD's and taxes but hopefully they raise the age to at least 75 before I get there since they just raised it to 72.

 

[Russ Smith]

I had to look up ESPP because I wasn't sure what that was--sounds like a good deal, I don't have that option but if I did I would sure take advantage of something like that.

I used to contribute 10-15% of my income to my 401k but about 5 years ago I changed to a fixed dollar amount ($750 X 26 pay periods takes me to the max). I make payments monthly to my IRA--$500 a month, which takes me to the max there as well (and contribute what extra $$ I can to my brokerage account). Next year I can start the catch up contributions so I will adjust those numbers accordingly. I guess I am considered a "super saver" but I want to try to guarantee myself a good retirement.

I have read some articles recently about "oversaving" but I don't think I fall in to that category, I have very little debt outside my mortgage and my wife and I still take good vacations (at least in non-pandemic times). I do have some concern about RMD's and taxes but hopefully they raise the age to at least 75 before I get there since they just raised it to 72.

I'm not saving to the max in my 401K and not even close in my IRA. I'm about 70 percent of the max in my 401K not 100% sure on that. I probably should without kids my primary excuse is California is expensive but in the last few years it's shifted to I want to have more in cash savings so I'm focusing on that over IRA while still contributing to the 401K.

Yes Employee Stock Purchase Plans are great. I tend to sell right away and lock in the profits, my GF holds hers. Her stock has gone way up(VICR) so it's worked really well and when she does sell, it's long term capital gains.

I'm not overly concerned about taxes and RMD's at the end of the day I'm saving now so I can enjoy my retirement. I don't have kids, there are people I would leave money too but I'm not having to worry about leaving a significant amount to kids so that makes it easier for me to plan on spending it.

My main concern right now is I want to retire June 22 at 56 1/2 so I have to figure out how to bridge that gap to 59 1/2 when I can start withdrawing from my IRA without penalty, and I have to figure out how to bridge the gaps to social security and to medicare. That's largely why I'm really focusing on cash savings right now, some in money market some in stocks so I will have readily available cash to spend during the bridge years.

 

[Zeno]

I'm not overly concerned about taxes and RMD's at the end of the day I'm saving now so I can enjoy my retirement. I don't have kids, there are people I would leave money too but I'm not having to worry about leaving a significant amount to kids so that makes it easier for me to plan on spending it.

My main concern right now is I want to retire June 22 at 56 1/2 so I have to figure out how to bridge that gap to 59 1/2 when I can start withdrawing from my IRA without penalty, and I have to figure out how to bridge the gaps to social security and to medicare. That's largely why I'm really focusing on cash savings right now, some in money market some in stocks so I will have readily available cash to spend during the bridge years.

We don't have kids either, I am hoping to stay on the "Die with Zero" plan and not have much left to leave to anyone (aside from my spouse). I will be retired at 55 1/2 at the earliest or 57 at the latest, luckily I have both a pension and we get a social security supplement that stops at 62 whether I claim SS then or not (it equates to about 75% of my SS earnings at 62--but there is no COLA so once I claim it then is stays that amount until I am 62).

I enjoy the planning stuff even if I sometimes tend to overthink or overanalyze things. Its nice to have a realistic goal, my wife is less enthusiastic than me--so I just do most of the calculations just based on my savings not hers. I know exactly what she contributes to her IRA and her current balance as our accounts are linked but I just have an idea of her balance when it comes to her 401K. We go over things once a year though.

 

[Russ Smith]

We don't have kids either, I am hoping to stay on the "Die with Zero" plan and not have much left to leave to anyone (aside from my spouse). I will be retired at 55 1/2 at the earliest or 57 at the latest, luckily I have both a pension and we get a social security supplement that stops at 62 whether I claim SS then or not (it equates to about 75% of my SS earnings at 62--but there is no COLA so once I claim it then is stays that amount until I am 62).

I enjoy the planning stuff even if I sometimes tend to overthink or overanalyze things. Its nice to have a realistic goal, my wife is less enthusiastic than me--so I just do most of the calculations just based on my savings not hers. I know exactly what she contributes to her IRA and her current balance as our accounts are linked but I just have an idea of her balance when it comes to her 401K. We go over things once a year though.

Yeah the pension would be nice I won't have one. My sister retired at 56 with a pension from the county. She's actually twice since gone back and worked for a few months at her old place. She worked for County Registrar of voters so they needed help including just recently with the California recall. So she got both her pension, and paid for 40 hours a week when she helped.

I mentioned in another board I have a friend who worked as a counselor for the County who retired at 55, she moved to Florida although it sounds like they want to move already.

I wanted to retire at 55, I probably could do so now but I'm trying to be really careful I don't want to end up short.

I have both Fidelity and Wells Fargo managing money for me and both of my managers have told me repeatedly now you can get rid of that spreadsheet. No way I have this spreadsheet that has just about everything in one sheet and I record it on the last day of every month, all my balances. it helps me stay focused, if i spend too much one month I will see it in the balances.

 

[Devilmaycare]

That's true. I've always funded my 401K first because of the match and because it's easy. It's actually been years since i've consistently funded my IRA because I've been focused on the 401K and the ESPP plan. In general the ESPP plan is better because if you sell right away you are guaranteed 15% at worst profit and in the last 18 months we've been averaging about 40% because of the stock price. Yes you get taxed on that but it's still pretty hard to beat that return and it goes into my money market for cash.

I tend to only fund the IRA year end to reduce my taxable income and often not then. My IRA just grows off investments but my 401K is of course growing MUCH faster because I'm funding it.

I've been pretty disciplined if I get a raise, I increase my 401k %, if I get a bonus or tax return it goes into savings.

I wish I had an ESPP option but we're private and not offered one. The company I work for is fully owned by Hearst and they're also private. I was actually surprised by that. I keep hoping that maybe Hearst will start offering shares to employees and then go public one day.

On the IRA front I'm stuck a bit on it and was going to see what my tax return this winter looks like before touching it. A traditional IRA is out since I have the 401k. For a Roth I'm right about at the income cap right now so it really comes down to how much I make trading stocks and what I have for additional deductions. Like I've been thinking of selling some of the TSLA I bought last year to take some profits and put them into other stuff. That'll throw me over the income cap unless I can offset it. I hate the uncertainty of it.

I don't get why they discourage saving and investing with the caps either. $125k isn't a crazy income level, especially if you're in someplace like NY, LA, Bay area, etc. Letting people that make over that save only $6k with after tax money really seems arbitrary and not based on anything solid.

 

[Zeno]

I wish I had an ESPP option but we're private and not offered one. The company I work for is fully owned by Hearst and they're also private. I was actually surprised by that. I keep hoping that maybe Hearst will start offering shares to employees and then go public one day.

On the IRA front I'm stuck a bit on it and was going to see what my tax return this winter looks like before touching it. A traditional IRA is out since I have the 401k. For a Roth I'm right about at the income cap right now so it really comes down to how much I make trading stocks and what I have for additional deductions. Like I've been thinking of selling some of the TSLA I bought last year to take some profits and put them into other stuff. That'll throw me over the income cap unless I can offset it. I hate the uncertainty of it.

I don't get why they discourage saving and investing with the caps either. $125k isn't a crazy income level, especially if you're in someplace like NY, LA, Bay area, etc. Letting people that make over that save only $6k with after tax money really seems arbitrary and not based on anything solid.

Have you looked in to the backdoor Roth method? It's what my wife and I use to get around the income limit. It isn't like the gov't discourages it either, it's mentioned on some IRS pamphlets.

 

[Devilmaycare]

Have you looked in to the backdoor Roth method? It's what my wife and I use to get around the income limit. It isn't like the gov't discourages it either, it's mentioned on some IRS pamphlets.

No, I haven't. I'll have to look into it. Any tips or pointers to info?

edit: and if the IRS is giving backdoors and info on them then they should just change the rules. More bureaucratic nonsense from our government.