Retiresoon - I agree with ott. In my opinion, retirement planning is not a do it yourself project. This is serious business and you don't want to make a mistake. Go to www.napfa.org to find a fee only planner who can help you.
Retire soon, consider using your extra funds to pay off all your bills as soon as possible.
LEP, let me ask you this: will you need to spend the RMD to cover living expenses, or are you just going to turn around and save it in a taxable account?
Lep - You are smart to be doing some tax planning. I would run the numbers or better yet have a professional run them for you. Sometimes we can get so obsessed with taxes, we overlook other things. For example will the Roth conversions cost you more that the increased Medicare premium? I don't know. You need to have someone analyze your individual situation.
JTS: Defined benefit plans aren't as common today, but they can be a valuable source of retirement income. I would make sure you understand the criteria to ensure that your wife qualifies for the maximum benefit. The benefit would be modeled into your retirement plan as a source of income. One important question would be if the benefit adjusts for inflation.
JTS, defined benefit plans are rare these days. Look in the documents to see how long she needs to work to be vested in the plan. This may be 1 to 5 to 10 years. So you may not want to include any benefit until she's vested. Also, some companies that have offered a DB plan are stopping them due to the cost.
JTS, go to FINRA sources of retirement income, under the smart investing tab, look at "Defined benefit Plans".
JoeS: It sounds like you need to work with a CFP in order to discuss what each of your worries are and if your decisions are adequately addressing them. A formalized plan to address certain scenarios should relieve some of these worries.
Joe S - Your question is a classic and it comes up all of the time. Two people looking at the same information and drawing different conclusions. The answer is usually a compromise. I think you would both feel better if you had somebody prepare a financial plan for you. There are advisors who will do that. After you see, the numbers, you will both have a much better idea of where you stand.
Average Jean - Don't leave that agency match on the table. contribute your 5% and then attack that loan like it was your worst enemy. When you get rid of it, gradually increase your TSP contributions until you reach the max.
tt: I would like to give you a simple answer, but there are other considerations like how much you have and what your retirement needs might be?
The investment portfolio should address your needs and goals according to your personal appetite for risk.
Samantha - that's great question. The answer is no.
DIY'ing: No, it is not a bad idea to saving in a Roth 401k. This will give your flexibility when drawing upon your funds in retirement. You could also fund a taxable investment account, but setting up an automatic transfer each month.
Joe S, This is a key question because it's important balancing spending today with ensuring you have enough for your life. It sounds like the question is how much can I withdraw from our savings? There's software programs that help figure this out. David Blanchett with Morningstar has done some research on this. consider going to www.davidblanchett.com/tools. This is a free excel spreadsheet. It is tied to an article that he wrote which you'll see on the spread sheet. The % that you get is multiplied by your outstanding retirement balance. This % is not firm, you need to include your unique situation. There is a concept called sequence of returns risk that you should know about. Consider googling Wade Pfau, a professor, and looking at blogs by him.
DIY- You said you are both maxing out so I think you are pretty good savers despite what you said. You are in a high tax bracket right now and that may not change when you retire. The answer is not crystal clear but a little tax diversification may help you down the road. I would consider the Roth option for part of my contributions.
Rita, here's a link to an overview of Medicare eligilibility:
bj: You should be fine, considering the fact that your pension will cover the majority of your retirement expenses. I would optimize where you draw your retirement income from based on your tax situation. I would put together a formal financial plan to chart out your resources. This will help you in making the long-term care decision.
bj - you are doing really well. off the top of my head, I think you will be fine but if it would make you feel better, you might seek out a fee only financial planner to run the numbers for you. As far as to what to withdraw first., the general idea is to draw your taxable account first and let the tax deferred money continue to grow. As far a LTC insurance goes, you appear to be able to afford it. The benefit would be that you would have greater choices as to where you would go if you needed to enter a facility. On the other hand, you have no heirs, so you should be able to self insure and not worry about financially harming someone else like a spouse. The LTC is a personal decision. I believe you will be fie either way.
DIY'ing, at around $260k per year you may be in the 33%marginal tax bracket for 2015. You'll want to do tax projections out through retirement and look at your marginal tax rates then. In this income range, clients do longer term tax projections. You'll be pulling tax deferred funds, possibly social security, possibly taxable, tax exempt funds. What are your marginal tax rates when you're retired? For 1 or 2 years, with taxable and tax exempt funds many times we can get clients into the lower tax brackets-15%, 25%, 28%. So may be a good time to consider a conversion of your tax deferred funds to Roth funds, which at that time would have a lower cost than your 33% marginal tax cost now. Other savings options--fill up your IRA's 50+ for 2 people allows $13,000. Tax exempt savings and Taxable savings using stock Index funds may be helpful.
Maxwell: A traditional IRA contribution would save you taxes now, but these funds would be taxed when withdrawn at retirement. The question is when you will be in a higher tax bracket?
Maxwell: okay that makes sense. Basically, Roth contribution has no impact on current tax return, deductible IRA contribution reduces tax on current return. So....lots of things to consider here. Having funds in a Roth is great, as if you meet the requirements, all earnings come out tax free, for you and/or your heirs. And funds in a Roth are protected from any future increases in tax rates. On the other hand, the IRA deduction is a current, known benefit -- a bird in the hand. If you have no funds in the Roths and can fully fund either one, the scales just might be tipping toward the Roth simply for tax-diversification purposes. That being said, if you're in a high tax bracket now due to high earnings and are likely to be in a lower bracket in retirement, the bird in the hand looks much better...
BJ, You need to do some analysis here. You'll want to get some good software or get to a Financial Advisor. Typically you would pull funds from taxable accounts before your tax deferred 457 funds so they have more time to grow. The Roth can be used last or for income smoothing in retirement to manage your tax bracket and keep you out of the next marginal tax bracket. But these rules are not fixed. You need to do annual tax projections to determine the taxes on your sources of income. Also, before retirement many clients work to maximize their investments based on the way they're taxed. For example, there's ways to determine the efficiency of your funds based on how they're taxed.
Murph - it really won't make a difference. Do what is easiest for your personal budget.
Murph: You might save on transaction costs by investing once a month, if the funds are automatically invested. There could be a small benefit in dollar-cost averaging by investing twice a month.
BJ, an example of this is when you do your projections, at 70.5 when you must pull your RMD, are they more funds then what you need? If they are, consider ways to reduce your tax deferred balances over several years to smooth out your income. You'll be managing your taxes within your marginal tax brackets.