Nicky, if you plan to get a mortgage on the new house, it would be better to find it and finance BEFORE you retire. Indeed, I have a client with several million dollars who just purchased and he wanted to use a mortgage for part of the financing. He is waiting until age 70 for social security (his parents lived a very long time) and his portfolio is invested largely for growth. So his "income" as shown on his tax return is relatively low. Well, the mortgage brokers did not want to give him as much as he wanted to borrow because of the income issue. Now if you are paying cash, it could easily be better to sell before the move so the proceeds from the house sale are available for the new home. When clients move to a location, I suggest that they consider renting for a year to make it easier to be more thoughtful about what location they really want for the new home.
JJs, More important than how your investments are doing, is how to approach the use of your retirement funds. Whatever money you need within the next 2 years (after social security and pensions) should be in cash, CD's and money market. Whatever you need in 3 to 5 years should be in short term bonds or short term bond index funds, whatever you need within 5 to 10 years should be in intermediate bonds and intermediate term bond index funds, and whatever you do not need for at least 10 years should be in stock indexed mutual funds. As you take out cash to live off, replenish the void in your cash bucket from your bond bucket. Whatever you take from your bond bucket should be replenished from your stock bucket.
Wa, this is a little outside of my expertise and I would recommend that you speak with an insurance consultant or agent. At 62, I fear you might be in a bit of a tight spot. Major hospital can be covered with private insurance and medicare at 65 but medicare does not cover true LTC, which is different from skilled nursing or rehab. Most states Is you have
accumulated savings or a life insurance
Larry, it the retirement account money that you have the only money or do you have savings in taxable accounts as well?
....Most states have a State Health Insurance Assistance Program (SHIP in New Jersey) and they might be worth a call. If you have accumulated savings or a life insurance policy with cash value, there are some hybrid life insurance policies that also offer LTC benefits. These can be complicated but they might be worth exploring with a trusted life insurance agent
Hi RRW - It would be good to model it out including taxes, as it depends on your tax bracket in full retirement and the few years when just your wife is working. Seems like you could delay social security until 70 but then again that can be modeled too. If you are in a high bracket, consider leaving retirement assets alone as long as possible for the tax deferral. If you are in a low bracket, consider taking some money from the IRA but be sure you wait until 60 so you won't pay penalties.
Paul you may want to take a look at Life Strategy type funds available from Vanguard or Fidelity. As long as you continue to withdraw 3% per year from your IRA you should be fine with a 60/40 stock/bond indexed fund.
Just me - There is no clear answer as it depends on where you might stay, the cost of the house, and how much you need to live on. If your pensions and SS meet most your living expenses and you will have some of the cash left over after purchasing, it could make sense to consider buying. The key is to leave yourself enough of a cushion for the inevitable unexpected expenses. You cannot accelerate your pension or SS payments so you want t be careful to avoid being caught so liquid assets to meet a need or desire. Also keep in mind that real estate transactions are expensive. I would not buy a home unless you hoped to keep it for at least 5-8 years.
Larry, since I didn't hear back from you just let me speak generally. I like for clients in retirement to have 3 years of expenses available in cash. For example let's say a client needs 60K per year to live on and pay taxes. They get social security of 20K and a pension of 22K. That means they will need to draw 18K from other sources every year to fund their need. In this case I would like to have 18 x 3 = $54K in cash but it could be in any account. At the end of year one, if the market is up, we sell and replace the cash spent in the current year to maintain the amount needed for 3 years. If the market is down, we wait knowing we still have two years of cash needs covered. Then when the market rebounds we replenish the cash. That said, dollar cost averaging out of positions is not a bad idea, not bad at all.
Hi Nathan - it depends on your tax bracket now an in the future. You should try to model these to get an idea of what might be best. That being said, it can make sense to start taking distributions earlier than needed, but not if you take so much to get pushed into another bracket. Check with your tax preparer.
Hello dac - It depends on your spending of course, but continue to save for retirement or pay down the other debt if the interest rate is not super low.
moeman, I think a 6% withdrawal rate is fairly aggressive and, depending on how much you have and how much you will need annually, a 6% return may be more or less than you need. In this case, I strongly suggest at least a short planning engagement to review a goal funding plan. That way, you will have a very good idea of what to expect and what you need to do.
moeman, as for retiring in Florida, I say welcome. I just moved back (north Florida is "home") and no state income tax is a joy.
Tom D. There has been a lot of research lately on the benefits of indexed funds vs managed funds. Managed funds have higher annual fees because it is managed by a fund manager who is attempting to consistently beat the market. To compensate for fees, the fund manager would have to beat the S&P 500 by 1% each year on average. People smarter than me agree, indexed funds are the way to go. WARREN BUFFET LETTER TO SHAREHOLDERS-02/28/2014: "My advice to the trustee couldn't be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard's.) I believe the trust's long-term results from this policy will be superior to those attained by most investors — whether pension funds, institutions or individuals — who employ high-fee managers."
Hi again Trecia - Given the details you laid out, I think you have a good strategy - pay down the mortgage and then try to refi, but when you refi try to do so with very little cost.
Hello Molly - Hopefully the annuities are structured or flexible enough to provide such income to the 79 year old. If they are tax-deferred, much of any withdrawal will be taxed and all the more if he starts gifting to grandchildren to repay student loans. Sadly it doesn't look like he has much financial flexibility in the annuities.
Beachbound, if you have the temperament to be a landlord, rental property is wonderful (unless you own 20 properties in a small town which could make selling a problem at some point in the future). Indeed, rents increase with inflation which is very attractive. So thumbs up on the rentals. That said, it is great to have money in separate "buckets": traditional retirement accounts, taxable accounts, roths, and in this case rental properties. This provides increased flexibility which is desirable. Now for the back door Roth strategy, see my post to Pres at the 2:45PM mark. CAUTION, if you have money in a traditional IRA already that WAS deductible, this can be problematic for this strategy. ALSO IF YOU ARE ALREADY FUNDING YOUR ROTHS, you cannot also make non deductible contributions to a traditional IRA. You know, given current tax rates, I suggest that you consider saving the additional money in taxable accounts. You can put part of it in muni bonds but I would keep the maturity at no longer than 7 years given current interest rates. Put the remainder in tax favored investments: those whose return is largely capital gains or qualified dividends.
Just me, you could put your $600k money in a stock and bond mutual indexed fund. With a 60%/40% mix of stocks/bonds respectively, you could withdraw 4% each year with a high probability you would not run out of money for 30 years. That said, you could withdraw approximately $2,000 per month from your account in addition to your $5,000 in pension would provide you with roughly $7,000 per month of pension and investment income.
Maria, I suspect Kiplinger included a link to the NAPFA.org web site which would work. mUnroe.