@busdriver11, I don’t want to go into detail but I appreciate the anecdote.
Hopefully everything will work out.
The IRS “observes” people?
I was planning on retiring January 4th when I qualified for company profit sharing. However since it doesn’t come out until the end of February, it turns out that I actually will pay less in taxes by working until then. In the meantime, I plan on taking 3 weeks vacation. I still haven’t figured out how to handle medicare (turning 65 in February) which is on my action item list for those three weeks.
I’m on my wife’s high deductible plan and it isn’t clear if I need to sign up for medicare or will still be covered. Do I sign up for medicare part A or A and B? Since my wife will retire in August from her school system, I don’t know if we can max out on the tax deferred amount or its prorated?
The recent market drop is unnerving especially at the beginning of retirement where it has the most impact going forward. The 12% drop isn’t so much the issue but more the speed of the drop and concern going forward that it may presage a much larger drop. On the positive side, I do have 5 years of living expenses covered with savings not including ss, pensions etc.
5 years of living expenses is awesome ^. A goal to work for. Our 401k we felt is right on the mark for now and healthy. When DH was reading in December that we were at the top of the market in like 7 or 8 years, he seriously felt we should take 50% out and put to bonds and leave the rest. We invest in mutual stocks, but aggressive. He didn’t and now could just kick himself. He’s not set to retire for another 10 years anyway.mmi just told hi, when we rebound, We need to then diversify.
Our company puts our 401K into some target fund, meaning that the percentage of exposure to stock is decided by the person’s age. If I remember it correctly, the percentage for me is either 40% or even 35%. So if the loss in stock has been 12%, my loss could be less than 5% at this moment.
I have the 401K from my PREVIOUS company rolled over into a tIRA, and in cash now. (I categorize it as pretax saving account, meaning that a part of it really belongs to Uncle Sam.)
We do not have 5 years of living expenses in an after-tax cash (or equivalent) saving account. Suppose we need merely 50K a year as our living expenses. This is equivalent to 50K times 5 = 250K in after-tax money. It is awfully a lot in our standard.
IRS audits are actually way down in the wake of budget cuts in the aftermath of various scandals. I think the vast majority of communications are automatically generated by computer when their programs find an inconsistency or problem. These are pretty easy to resolve in my experience.
We keep very little in cash, but have a HE line we can tap in an emergency.
@notrichenough I find it hard to believe. 10% penalty is less than the tax you would have owed if you kept the “gift”. People would gift as much as you can and get it back, pay the penalty and save on the tax at 30-40%.
About IRS audit; Yes, I think IRS watches certain tax payers. I think we are on their watch list. One year we left out the first page in the return. It was a stupid mistake on my part. Since then, we had two audits. We were never audited until then. Both were resolved without much issue but the reasons for audit were stupid. We were never audited until then. The first time they said our expenses deduction was too low. The second one was because we filed 1040X after our brokerage firm sent out corrections. Our 1040X included the corrections. All they had to do was look.
@Iglooo - if the earnings in a 529 plan aren’t used for qualified education expenses, you have to pay taxes on the earnings. And I think there is a limit on how much you can put in.
Ah haha. I know, long road before you make money. 9 years until I can make something. I was thinking marrying someone younger than me so I could hold off and save for another 2-3 years before they want kids:p
I want to pay off debt as fast as possible and live on as little as possible for as long as possible. Med school is like 500k of debt on the worst case scenario. after residency and if I land a good job, Pay it off in 2-3 years. at this point ill be like 31 or so. Hopefully I can save for 3 years in large sums and do some investing in the stock exchange.
How well one does in med school determines what specialties they are ‘invited’ to go into. @SeniorStruggling it is true that one adjusts their expenditures to pay off school loans as quickly as possible. Most do not continue to ‘live like a student’ and jump into more debt right out of school. How many people do you know that ‘rewarded’ themselves with a new car (with a car note), or rush into buying a house.
I do know a MD and his wife who are still paying on his school loans. They don’t seem to realize that they are paying for years of interest. W keeps saying “we are paying for his brain”. They don’t hold back on spending, or paying for 3 kids’ schooling (their youngest is same grade as my youngest, who is a sophomore in college). He tried to get into a higher paid specialty with Army paying, but they cut that program.
Yikes, I realized I needed to ‘rebalance’ our 401k with the small amounts remaining in two investment we just need to be out of. A lot of drop just on Friday. However shifting $$ from a low to a low is OK. We were able to move a good chunk out with H at age 59.5 in Dec, which is earning a stable return through our financial guy. He uses a program which you enter info and it determined your risk comfort zone, and then the investments are geared to getting good returns at your risk level.
Even the 401k money says we are in good shape with $ per month expenditure just out of that account.
At this point, our emergency fund is some cash value life insurance and 401k. Look for an income boost if and when I can return to the paid work force.
Haha yes it is very selective, I do have some help form people I’ve met through my life. I know 5 practicing surgeons and play tennis with them often. They all give me tips and help me with planning.
I know that most don’t want to live like students. I will probably have to get a car, though I want to make sure I get my moneys worth by not paying 200k of interest.
I want to invest a lot early as well like you pointed out. Start high-high and as I age go low-low risk and reward. I have a friend who’s father is a financial advisor and he has given me very basic tips and overview in investing.
Med school if you go straight from grade school- no break- very few do- then you will get out of residency at about 32 yr old. there is no reason that you cannot save and continue to live like a student.Very few make a lot right out of residency. If you make a lot the cost of living is high -period. if you make less you are living in an undesirable but inexpensive area. taxes are very high when you make more. we always lived well below our means but our school loans were very little as tuition in a state school was low then. then there was kids college…
dstark- the way I solved the movie star kid issue was to call the 800 number on the monthly $65,000 late fees statement. I got tired of writing them and ironically on a whim I called them and they answered and solved it immediately.
doct- H and I are retiring in one month. H will also be 65 in April. He will need to sign up for part A and B (costly) because it just looks like that is better because there are many things secondary does not cover and part B does. there was a comparison on the website for BC/BS to help us decide, but he does not need to get part D. I carry the health insurance that I will continue to carry- it will be his secondary and it will be my primary until I am 65. from what I read- if you do not sign up for medicare our BC/BS will only pay for H at medicare rates anyway. also we decided not to max out the savings at the end due to the mistakes that the work place did in the past- just not worth it. this has been a learning curve and really not easy. I did recently get a chance unfortunately to look at my mothers age 92 and FIL age 95 bills. they both have A,B,and secondary. the secondary is paying a lot of the gaps in rehab, etc.
@SeniorStruggling, I think you have a good plan to go towards, however not all of it may be realistic. But it’s a good thing to strive for. The specialty that makes the most money, and after you graduate and get your job, living like you did as a student, and paying off your debts. If you can do that for as long as possible, you will be far ahead of most people. Good old Dave Ramsey would love your plan. And if you don’t have this plan in mind, it probably would never happen. I really encourage you to go for it, and stick to it as long as you can. Who knows how far you can go?
The problem is, as older people, we can see how life gets in the way. You end up not marrying that person who had the perfect profile that you’d planned, you end up marrying the person that you love. Maybe earlier than you’d expected. Maybe you end up with kids earlier than planned. Perhaps your wife is more of a spendthrift than you’d thought, perhaps she has to quit her fantastic job because of health problems. Life happens. And then you feel like you need to pay for private schools for your kids, you have a kid with a learning disability, so you pay more for school…you think, why should I live on nothing and deprive my family? Just so my kids can inherit many millions when I die (and they’re 60)? Maybe I should spend a little more and allow my kids to travel, go to great schools, live in a nice neighborhood.
The plan of paying off med school and saving money as long as possible by living low is a great plan. However, living that way for the rest of your life so your kids (who may be ungrateful, or successful on their own) can inherit many millions by you living like the janitor at your hospital, I don’t think, is the best plan. At some point, you should consider that you might want to enjoy the fruits of your labor, after so many years of work. However, starting out by saving as much and paying off as much as possible, is great. It is hard to cut back on your lifestyle, but easier to stay at the same level.
Best of luck, @rockymtnhigh.
@SeniorStruggling, I think @busdriver11’s basic argument above is sensible. The only thing I would add is that if you look at the trends, medicine including surgery has been getting less attractive over time, both from a work standpoint (older doctors complain about how insurance is changing the practice of medicine) and financially (younger specialists are not making what older specialists did). The trend will continue as our society will not be able to pay an increasing share of GDP for health care. This is a political as well as economic choice – the US already pays significantly more than other developed countries (we also pay more for drugs because Congress, under the influence of drug companies, won’t let Medicare use its bargaining power with them and administration (as dealing with 180 insurers all with different rules costs a substantial amount). As we cut back, that will impact what we pay doctors who make more than doctors in other developed countries.
To make that work, we may have to change how we finance medical education, but you can rest assured that we Americans will fix the financing of medical education long after we’ve reduced doctors’ incomes only when there is a drop off in people applying to medical school.
This thread swayed off topic and some posts were deleted; please keep it on topic if you wish it to remain open. Discussions of what physician earns would be its own thread.
This is a fabulously helpful thread about retirement. Thank you, mods, for cleaning it up, keeping it open and on track. It’s had thousands of posts with many active participants.
The recent bear market reminds me of one article I read again. The author of that article thinks it is better to invest your nest eggs more conservatively early in your retirement, and more aggressively in later years.
How do you think of this strategy?
For most people that strategy sounds wrong to me.
@mcat2, would you post a link?
Boggleheads and John Bogle suggest the opposite–in the beginning aggressive as you have longest time frame and increasingly conservative as you get closer to needing to draw down funds–you age in bond index funds and the rest (up to 100%) in stock index funds.