PBS Frontline : The Retirement Gamble, sorta Must See (3 Viewers)

[George Jefferson Airplane]

If the goal is to maximize the amount you collect, waiting is probably the right answer but I think there are quality of life issues on both sides of the argument.  If the extra monthly income at 62 allows you to travel and do all the things you want to do while healthy enough to do them, I think taking SS early may be the right decision. If you have the wherewithal to live the retirement you want while delaying benefits until 70 then that is probably the right answer.

I feel like my 60's will be the prime time to travel and do things so I'm not sure I would give that up so I can have more income in my 80's and 90's. 

Yeah absolutely, I think it's a very case-by-case basis with no real right answer.  I have no idea where I will be or what kind of shape I'll be in at 62, but if I'm not working anymore I'm likely to take it at 62.  If I'm still working, I'll wait.  Time will tell. 

 

[NutterButter]

Exactly.  Like if someone wants to live it up in their 40's and 50's and not save as much for their 60's and 70's.   

 

[Sand]

Yeah absolutely, I think it's a very case-by-case basis with no real right answer.  I have no idea where I will be or what kind of shape I'll be in at 62, but if I'm not working anymore I'm likely to take it at 62.  If I'm still working, I'll wait.  Time will tell. 

You're better off figuring out how long your saved funds will last at 62 rather than if you're working or not.  The difference between the payments at 62 and, say, 66 are very noticeable.  Assuming good health - that one is the real variable.

 

[Jayrod]

Yeah absolutely, I think it's a very case-by-case basis with no real right answer.  I have no idea where I will be or what kind of shape I'll be in at 62, but if I'm not working anymore I'm likely to take it at 62.  If I'm still working, I'll wait.  Time will tell. 

My dad is 64 and still working full time and will be for several more years.  He is still putting money away and won't start "retirement" any time soon.

My MIL is 67 and has been retired for several years.  She is ready to travel and enjoy herself and is taking money out of her retirement accounts to do what she wants now.  Of course, she also has a guaranteed lifetime pension with COLA, so she will always have something no matter how long she lives.  (MO State Public School Retirement System)

 

[Wooderson]

Something I just thought of set me straight if needed 

I stay at home with my kids and earn no income. I have an old 401k worth about 50k from an old job. Anyway I could roll this into a Roth IRA. 

I'm guessing since we file jointly this won't work. Would it benefit us not to file jointly and pull something like this off? 

Trying to take advantage of having no income for a few years  

 

[NutterButter]

Something I just thought of set me straight if needed 

I stay at home with my kids and earn no income. I have an old 401k worth about 50k from an old job. Anyway I could roll this into a Roth IRA. 

I'm guessing since we file jointly this won't work. Would it benefit us not to file jointly and pull something like this off? 

Trying to take advantage of having no income for a few years  

I believe that the 50k counts as income so you'll be paying some taxes.    If you do it in 6k increments per year over 8 years, you can avoid taxes b/c you'll get the standard deduction.

 

[Wooderson]

I believe that the 50k counts as income so you'll be paying some taxes.    If you do it in 6k increments per year over 8 years, you can avoid taxes b/c you'll get the standard deduction.

Really cool. Does it effect us negativily if we don't file jointly?

 

[netnalp]

Really cool. Does it effect us negativily if we don't file jointly?

Roth IRA limits

The way I read it, if you file jointly and your combined income is less than $183,000 then you can put $5,500 into a Roth IRA each year. ($6,500 if over 50 years old)

So in that case you'd need to figure out what to do with the $44,500 till you can put more in. 

From the discussions on here, if your wife's employer matches, then maybe contributing to a Roth IRA with your wife's pay would be better. Then put the $50k into index funds.

 

[Wooderson]

My wife makes to much to use a Roth. We already max out her 401k at 18k no match and contribute 20k to a profit sharing deal she has at work which is just another 401k 

 

[netnalp]

My wife makes to much to use a Roth. We already max out her 401k at 18k no match and contribute 20k to a profit sharing deal she has at work which is just another 401k 

If you file separately and your income is 0$ then you could still do a Roth. $1- $9,999 it looks like the amount you can put in one decreases. 

 

[steelerfeever]

You're better off figuring out how long your saved funds will last at 62 rather than if you're working or not.  The difference between the payments at 62 and, say, 66 are very noticeable.  Assuming good health - that one is the real variable.

For most of us that have 67 as the normal retirement age, electing early at age 62 reduces the benefit by 30%.  Delaying until age 70 increases it 8% annually.  A vast majority elect at Age 62 for reasons previously discussed.  And some should (think health reasons).  However, a good majority are making a mathematical mistake.  A healthy person electing early is ruining both their income in later years, AND their spouses should they pass away.  The flip side is delaying as long as possible (it makes no sense to delay past age 70 because you don't get an increased benefit), helps not only you BUT it also helps your spouse since they can take the greater of their benefit or yours.  For example.  My 68 year old mother retired in 2015.  Her SSI is whatever.  My step-father turned 66 a few months ago and promptly retired.  They don't have much income, or assets, but they also don't have debt.  He elected to defer his SSI because he gets an 8% raise every year.  What asset will give you a guaranteed 8% raise in perpetuity?  And not only for yourself, but your spouse should you pass away?  If something changes in month 10, 18, 23, etc... he can simply walk in and tell SSI he wants to stop deferring.  But he wants to give himself and his wife as much income as possible in his 70's and beyond.

 

[Steve Tasker]

So if I have most my retirement in a tradition company 401k - I am 45.   Would you roll it over and take the tax hit?

Are you still employed by this company / still contributing to the 401k?  If so, there are likely rules disallowing you from taking withdrawals, including taking the funds out via rollover.  Most plans have policies in place to prevent in-service withdrawals, save for things like loans, hardships, and reaching retirement age but still working.

 

[matuski]

For most of us that have 67 as the normal retirement age, electing early at age 62 reduces the benefit by 30%.  Delaying until age 70 increases it 8% annually.  A vast majority elect at Age 62 for reasons previously discussed.  And some should (think health reasons).  However, a good majority are making a mathematical mistake.  A healthy person electing early is ruining both their income in later years, AND their spouses should they pass away.  The flip side is delaying as long as possible (it makes no sense to delay past age 70 because you don't get an increased benefit), helps not only you BUT it also helps your spouse since they can take the greater of their benefit or yours.  For example.  My 68 year old mother retired in 2015.  Her SSI is whatever.  My step-father turned 66 a few months ago and promptly retired.  They don't have much income, or assets, but they also don't have debt.  He elected to defer his SSI because he gets an 8% raise every year.  What asset will give you a guaranteed 8% raise in perpetuity?  And not only for yourself, but your spouse should you pass away?  If something changes in month 10, 18, 23, etc... he can simply walk in and tell SSI he wants to stop deferring.  But he wants to give himself and his wife as much income as possible in his 70's and beyond.

What is the break even point versus taking and saving/investing the 2 years of SS income?

 

[DexterDew]

Plan designs for 401K's vary greatly, some allow in service rollovers and/or self directing.

My general advice to clients (have Series 7 and 66 plus licensed for Annuities/Life) with 401Ks is to contribute at least up to the match. Maxing out early is usually ok because the cliché is "time in the market, not timing the market", plus tax deferred compounding is the 8th wonder of the world. Now if the 401K does not offer a match or a profit sharing, I generally advise to do a Roth IRA instead unless you are planning on setting aside more than $5,500... and even then, I would say max the Roth, do a smaller 401K contribution.

Also, it is critical to establish a non-retirement investment account and an emergency fund at your local bank (6-12 months of expenses).

The goal is to have several different assets to access during retirement. If every penny is in a 401K, it is all taxable when you take it out during retirement. If you have a Roth and a non-retirement account, you can have flexibility and arbitrage your taxes during retirement.

My favorite books to help simplify building wealth "The Behavior Gap" and "The One Page Financial Plan" by Carl Richards.

If you want to read a pro market book, Nick Murray's "Simple Wealth, Inevitable Wealth"

 

[Wooderson]

Great advice but not everyone can do a Roth 

 

[kutta]

Great advice but not everyone can do a Roth 

I'm surprised any FBG can qualify. 

 

[Wooderson]

I'm surprised any FBG can qualify. 

Truth 

 

[NutterButter]

Great advice but not everyone can do a Roth 

Yes they can.   Google backdoor roth. 

 

[Tom Hagen]

Something I just thought of set me straight if needed 

I stay at home with my kids and earn no income. I have an old 401k worth about 50k from an old job. Anyway I could roll this into a Roth IRA. 

I'm guessing since we file jointly this won't work. Would it benefit us not to file jointly and pull something like this off? 

Trying to take advantage of having no income for a few years  

It could work but the problem is that by filing separate your wife's income will probably be taxed at a higher rate because the threshold for her to move into the next bracket will be half of a married joint return.  You also could lose some other credits or deductions disallowed on a separate return.

 

[Tom Hagen]

Yes they can.   Google backdoor roth. 

Not everyone can do a backdoor Roth without causing a tax problem.

 

[NutterButter]

Not everyone can do a backdoor Roth without causing a tax problem.

But technically anyone can do it.  I don't believe he was referring to any tax issues.   I'm going out on a limb that he's under the impression that he's disqualified due to income limits.

 

[Doctor Detroit]

The average life expectancy for a male in 2016 is 76 and that is about the same age you catch up if you started taking SS at 66 instead of 62. 

If you figure life expectancy goes up proportional to the past 40 years, those of us in our early 40s can expect to live until about 81.  If you choose to wait until 70 versus taking it at 67, it would take you until about 81 to catch up.  I say spend in your 60s and #### the rest, I know people in their 80s and they aren't all that happy or in good shape.  Unless leaving a bunch of money to your heirs is important to you, I'm in the camp of taking the SS early.  I'll almost certainly take it at 62 with the caveat that if I'm still working, I won't because of the reduced benefits above earnings of $15k. 

Now if I'm the average American then yeah, I'm waiting as long as I can.  But I don't plan to have those problems and should have money outside pension/SS well into my 80s if I live that long.  If I'm retired at 62, and I better be, then I see little reason not to draw. 

 

[Binky The Doormat]

The average life expectancy for a male in 2016 is 76 and that is about the same age you catch up if you started taking SS at 66 instead of 62. 

If you figure life expectancy goes up proportional to the past 40 years, those of us in our early 40s can expect to live until about 81.  If you choose to wait until 70 versus taking it at 67, it would take you until about 81 to catch up.  I say spend in your 60s and #### the rest, I know people in their 80s and they aren't all that happy or in good shape.  Unless leaving a bunch of money to your heirs is important to you, I'm in the camp of taking the SS early.  I'll almost certainly take it at 62 with the caveat that if I'm still working, I won't because of the reduced benefits above earnings of $15k. 

Now if I'm the average American then yeah, I'm waiting as long as I can.  But I don't plan to have those problems and should have money outside pension/SS well into my 80s if I live that long.  If I'm retired at 62, and I better be, then I see little reason not to draw. 




 

Yeah, I'm going draw at 62.  I did a raw (non-TVM) breakeven and it comes out at a little over 81 years of age.  

 

[Doctor Detroit]

The average life expectancy for a male in 2016 is 76 and that is about the same age you catch up if you started taking SS at 66 instead of 62. 

If you figure life expectancy goes up proportional to the past 40 years, those of us in our early 40s can expect to live until about 81.  If you choose to wait until 70 versus taking it at 67, it would take you until about 81 to catch up.  I say spend in your 60s and #### the rest, I know people in their 80s and they aren't all that happy or in good shape.  Unless leaving a bunch of money to your heirs is important to you, I'm in the camp of taking the SS early.  I'll almost certainly take it at 62 with the caveat that if I'm still working, I won't because of the reduced benefits above earnings of $15k. 

Now if I'm the average American then yeah, I'm waiting as long as I can.  But I don't plan to have those problems and should have money outside pension/SS well into my 80s if I live that long.  If I'm retired at 62, and I better be, then I see little reason not to draw. 





 

Yeah, I'm going draw at 62.  I did a raw (non-TVM) breakeven and it comes out at a little over 81 years of age.

My minor league baseball job should only produce a salary of about $10k in today's money so I'll only be able to run one "up north" hooker to stay under $15k/yr.  I plan to pimp well into my 70s. 

 

[Binky The Doormat]

Lots of other factors - but this schwab site is one of the better ones I have seen on when to take SS.

 

[NutterButter]

I plan on blowing the average life expectancy away.  I take vitamins.

 

[IC FBGCav]

Are you still employed by this company / still contributing to the 401k?  If so, there are likely rules disallowing you from taking withdrawals, including taking the funds out via rollover.  Most plans have policies in place to prevent in-service withdrawals, save for things like loans, hardships, and reaching retirement age but still working.

Yes, still with same company, thanks.

 

[matuski]

I plan on blowing the average life expectancy away.  I take vitamins.

I eat potatoes.

 

[Steve Tasker]

Really cool. Does it effect us negativily if we don't file jointly?

It is impossible to answer this without knowing your entire tax situation.  Generally it is significantly better for taxpayers to file jointly when one taxpayer makes significantly more than the other.  If your wife's income alone puts you above the Roth IRA threshold, and you earn $0 income, it is most likely much better for you to file jointly.  It may not be beneficial to you in terms of rolling over a 401k, but it's likely much more beneficial for you to file jointly regardless.

Married-filing-separate taxpayers have certain limits that married-filing-jointly taxpayers do not.  It is impossible to tell you whether you would be better off filing separately in terms of rolling over the 401k.  I encourage you to seek a professional opinion.

 

[Dentist]

The average life expectancy for a male in 2016 is 76 and that is about the same age you catch up if you started taking SS at 66 instead of 62. 

If you figure life expectancy goes up proportional to the past 40 years, those of us in our early 40s can expect to live until about 81.  If you choose to wait until 70 versus taking it at 67, it would take you until about 81 to catch up.  I say spend in your 60s and #### the rest, I know people in their 80s and they aren't all that happy or in good shape.  Unless leaving a bunch of money to your heirs is important to you, I'm in the camp of taking the SS early.  I'll almost certainly take it at 62 with the caveat that if I'm still working, I won't because of the reduced benefits above earnings of $15k. 

Now if I'm the average American then yeah, I'm waiting as long as I can.  But I don't plan to have those problems and should have money outside pension/SS well into my 80s if I live that long.  If I'm retired at 62, and I better be, then I see little reason not to draw. 

My grandfather is in his late 80's...  he hardly spends anything..  wife is dead,  difficulty moving around.

shoot to retire mid-to late 50's... spending binge from then to 70...  after that it will probably drop off precipitously.  

 

[Judge Smails]

My grandfather is in his late 80's...  he hardly spends anything..  wife is dead,  difficulty moving around.

shoot to retire mid-to late 50's... spending binge from then to 70...  after that it will probably drop off precipitously.  

The last paragraph is spot on for me when you talk about discretionary spending.  I'll enjoy when I'm healthy enough travel, then slow down. That being said - I know to expect anything, especially as it relates to healthcare, long term care expenses for myself or loved ones. Seen Alzheimer's etc wreck a lot of best laid plans. 

 

[Slapdash]

My grandfather is in his late 80's...  he hardly spends anything..  wife is dead,  difficulty moving around.

shoot to retire mid-to late 50's... spending binge from then to 70...  after that it will probably drop off precipitously.  

I'm always amazed a guy with your habits has such a late retirement date

 

[Doctor Detroit]

My grandfather is in his late 80's...  he hardly spends anything..  wife is dead,  difficulty moving around.

shoot to retire mid-to late 50's... spending binge from then to 70...  after that it will probably drop off precipitously.  

The last paragraph is spot on for me when you talk about discretionary spending.  I'll enjoy when I'm healthy enough travel, then slow down. That being said - I know to expect anything, especially as it relates to healthcare, long term care expenses for myself or loved ones. Seen Alzheimer's etc wreck a lot of best laid plans. 

Yeah I agree with you guys, I'm gonna retire at 57 and I'm going to spend the bulk of my 401k prior to 70 I'd guess.  I have real estate that I'd be able to fall back on as well, but I'd rather leave those to my surviving spouse/heirs.  I plan to sell the house I live in now and maybe buy a condo in Texas or Alabama in my mid 60s, prior to that I'll live the summers in Michigan and the winters in Italy.  But all that ####### travel will suck, and unless they make some serious changes to air travel, I want to be mostly done with long travel in my mid 60s.  It's possible I could stay in Italy after 65, but I love my Michigan place so much I don't see that happening.

 

[Slapdash]

Yeah I agree with you guys, I'm gonna retire at 57 and I'm going to spend the bulk of my 401k prior to 70 I'd guess.  I have real estate that I'd be able to fall back on as well, but I'd rather leave those to my surviving spouse/heirs.  I plan to sell the house I live in now and maybe buy a condo in Texas or Alabama in my mid 60s, prior to that I'll live the summers in Michigan and the winters in Italy.  But all that ####### travel will suck, and unless they make some serious changes to air travel, I want to be mostly done with long travel in my mid 60s.  It's possible I could stay in Italy after 65, but I love my Michigan place so much I don't see that happening.

You just need to have the money to charter private flights

 

[Doctor Detroit]

Yeah I agree with you guys, I'm gonna retire at 57 and I'm going to spend the bulk of my 401k prior to 70 I'd guess.  I have real estate that I'd be able to fall back on as well, but I'd rather leave those to my surviving spouse/heirs.  I plan to sell the house I live in now and maybe buy a condo in Texas or Alabama in my mid 60s, prior to that I'll live the summers in Michigan and the winters in Italy.  But all that ####### travel will suck, and unless they make some serious changes to air travel, I want to be mostly done with long travel in my mid 60s.  It's possible I could stay in Italy after 65, but I love my Michigan place so much I don't see that happening.

You just need to have the money to charter private flights

More like a private tug boat charter.  

 

[Wooderson]

Yes they can.   Google backdoor roth. 

Yeah I've head of that. I guess it's time to do some looking into it. thanks

 

[Wooderson]

It is impossible to answer this without knowing your entire tax situation.  Generally it is significantly better for taxpayers to file jointly when one taxpayer makes significantly more than the other.  If your wife's income alone puts you above the Roth IRA threshold, and you earn $0 income, it is most likely much better for you to file jointly.  It may not be beneficial to you in terms of rolling over a 401k, but it's likely much more beneficial for you to file jointly regardless.

Married-filing-separate taxpayers have certain limits that married-filing-jointly taxpayers do not.  It is impossible to tell you whether you would be better off filing separately in terms of rolling over the 401k.  I encourage you to seek a professional opinion.

Thanks I have a tax guy I can talk to. I'll see what he says. 

 

[Wooderson]

But technically anyone can do it.  I don't believe he was referring to any tax issues.   I'm going out on a limb that he's under the impression that he's disqualified due to income limits.

True I was only thinking I was disqualified due to income limits. But tax issues would be another reason not to do it. I'm going to look into it. 

 

[James Daulton]

You spend it now guys are going to be sorry when anit-aging gene therapy is perfected and we all live to 120+ with lifestyles of today's current 60 yr olds.  Don't come to me for money, deadbeats.

And I plan to catch Tim's current post count around that time, so I have that to keep me going. 

 

[FUBAR]

You spend it now guys are going to be sorry when anit-aging gene therapy is perfected and we all live to 120+ with lifestyles of today's current 60 yr olds.  Don't come to me for money, deadbeats.

And I plan to catch Tim's current post count around that time, so I have that to keep me going. 

SS is absolutely doomed if that happens. 

I do think people often living active lifestyles into the 100s is going to happen in our lifetime, but SS reform has to happen by then. 

 

[Dentist]

I'm always amazed a guy with your habits has such a late retirement date

The stock market hasn't exactly been awesome for me since I started investing in 02.

Also through sheer youth and ignorance I didn't make much money doing my job relative to what I could have the first 5 years.

Then really didn't hit full gear until the last 2 to 3, and I can feel I'm getting ready to make another leap soon with my skill set.

That set me behind.  I've always played good defense, but my offense has had issues.

I have hated dentistry many times in my life, I'm in a pretty good place here lately.

 

[James Daulton]

The stock market hasn't exactly been awesome for me since I started investing in 02.

Also through sheer youth and ignorance I didn't make much money doing my job relative to what I could have the first 5 years.

Then really didn't hit full gear until the last 2 to 3, and I can feel I'm getting ready to make another leap soon with my skill set.

That set me behind.  I've always played good defense, but my offense has had issues.

I have hated dentistry many times in my life, I'm in a pretty good place here lately.

Ah, so you've finally joined the dark side of unnecessary procedures and over-charging your patients I see.

Well you do have a yacht to pay for.

 

[NutterButter]

SS is absolutely doomed if that happens. 

I do think people often living active lifestyles into the 100s is going to happen in our lifetime, but SS reform has to happen by then. 

Between robots and AI taking most jobs away and people living well into their hundreds, some huge changes are coming down the pike.   

 

[eoMMan]

You spend it now guys are going to be sorry when anit-aging gene therapy is perfected and we all live to 120+ with lifestyles of today's current 60 yr olds.  Don't come to me for money, deadbeats.

And I plan to catch Tim's current post count around that time, so I have that to keep me going. 

How do retirement accounts work with cryogenetics?

Do all of these cryogenetic "frozen" people wake up broke?

 

[Sand]

What is the break even point versus taking and saving/investing the 2 years of SS income?

I guess the real question is will you (or anyone) really invest it?  Most people spend these income streams.

Just like reverse mortgages - they are advertised to provide an income stream.  Fact is 80+% of the time people take the lump sum and spend it almost immediately.

 

[wilked]

I think most of you 'get what's mine' / 'don't leave money on the table' / 'spend it while I am young' guys filing at 62 are making a mistake.  I don't expect to change your minds, but I do think it's a mistake.  

If you haven't looked at the cost of a retirement home, take a few minutes and look it up.  It's not cheap.

If you haven't compared what a nice retiremement home looks like vs an inexpensive one, you should take a look.  There is a stark difference, not only in facility, personnel, but ultimately in the condition of the retirees / elderly.  These inexepnsive homes are filled with old zombies staring at a television, while the nice ones have people socializing, listening to musicians who come in, organizing outings, etc.  Some of that is selection bias, but not all of it.  

My point is, it is not about having money to travel / see the world / etc while you're young.  It's the reality of choosing between a crappy end-of-life and a comfortable one.  If you aren't financially planning to live into your 90s you are making a mistake in my opinion

Edit to add: Many in here have discussed pros/cons of buying long-term-care-insurance (LTCI).  There is no better 'insurance' than simply delaying SS til 70, you won't get a better price.

 

[matuski]

I guess the real question is will you (or anyone) really invest it?  Most people spend these income streams.

Just like reverse mortgages - they are advertised to provide an income stream.  Fact is 80+% of the time people take the lump sum and spend it almost immediately.

Same difference then right.. spend it all now and later or spend it all later?

 

[Sand]

Same difference then right.. spend it all or spend it all later?

Sure.  Exactly the same.  

 

[NutterButter]

I think most of you 'get what's mine' / 'don't leave money on the table' / 'spend it while I am young' guys filing at 62 are making a mistake.  I don't expect to change your minds, but I do think it's a mistake.  

If you haven't looked at the cost of a retirement home, take a few minutes and look it up.  It's not cheap.

If you haven't compared what a nice retiremement home looks like vs an inexpensive one, you should take a look.  There is a stark difference, not only in facility, personnel, but ultimately in the condition of the retirees / elderly.  These inexepnsive homes are filled with old zombies staring at a television, while the nice ones have people socializing, listening to musicians who come in, organizing outings, etc.  Some of that is selection bias, but not all of it.  

My point is, it is not about having money to travel / see the world / etc while you're young.  It's the reality of choosing between a crappy end-of-life and a comfortable one.  If you aren't financially planning to live into your 90s you are making a mistake in my opinion

Edit to add: Many in here have discussed pros/cons of buying long-term-care-insurance (LTCI).  There is no better 'insurance' than simply delaying SS til 70, you won't get a better price.

Excellent points.    Just a point, the amount of time spent in a full blown retirement home is usually pretty short which was actually a surprise to me.  We're talking less than 5 years.   There's a few stages prior to that such as in home care and an assisted living facility.   While not cheap, they're a lot cheaper than a full care facility.   

 

[wilked]

Right, full care is very expensive, like $100k/year expensive.  Assisted living might be half that (maybe a little less).  Still, not cheap.