Teachers in MA can max their pensions at 80% of their salaries, which is far in excess of what SS pays on average. So they are not hurting without SS, which they don’t pay in to anyway.
We typically buy our cars new because used cars are so expensive compared to the cost of new. Don’t know where you guys find these two year old cars at half the price of new, around here that would be 90+% of new.
We just bought a new car, getting rid of a car with 170k miles in it. My car has 160k miles, I’m hoping I get several more years at least.
There are a lot of leased luxury cars in/around Atlanta. I just did a quick look up of a 2024 Mercedes E350 4 Matic which ranged from $72k to $81k but they are also selling a certified pre-owned 2021 asking $42k with 32k miles (that’s more miles than mine had at half price). But that 3 year old car looks brand new. We have only purchased luxury cars used, our other vehicles were all purchased new. Regardless of purchase, we drive them until it’s no longer financially feasible (we do take them in for their regularly scheduled maintenance which may be why they last forever).
Actually, many teachers had or have other jobs that DO pay onto social security. The offset and windfall provisions reduce the SS benefits that they would otherwise get. This contributed to our retirement planning. In addition, while my DH will get a portion of my pension if I die first, I will get nothing based on his SS earnings. That income stream will just…stop.
I’m not complaining. I’m just stating some facts. And in our state, we do not get free health insurance for life. We pay the same Medicare premiums the rest of you pay…and also the cost of a supplement.
We are 59 and 60. Our fears are 1) to be a financial burden on our only child, 2) not being able to afford long term care; 3) not being able to afford good medical care (I have heard too many horror stories about Medicare Advantage). We do have retirement savings in qualified accounts at 7x our household income now, but my concerns are colored by my dealings with my elderly father, who has absolutely gold-plated benefits and a great pension (neither one of which we have), but it’s still gobsmackingly expensive to make it to 95, and if you live long enough you know you’re going to get sick. So we’ve run some numbers and determined that in order for my DH to retire at 64 (his wish, he will be 40 years with the same company) and me to retire by 67.5 (God willing I’ll be able to still function at a decent level in the classroom, I don’t take the ability or energy for granted), we will basically have to live on one salary and invest the other in index funds or ETFs. Our house will be paid off fairly soon but we’ve got to do some repairs and maintenance to keep it saleable. We paid full fare (25Ok between 2012-16) for D’s education. No one will underwrite DH for LTC so we have to “self-insure” him. We won’t be able to do some travel that we’d hoped to be able to do before leaving the workforce, and this makes me kind of sad, but we really need to go into hard saving mode. It’s quite similar to how we lived when daughter was in college, actually. Only this time, it’s for us.
I hope that I will get a tenure buyout on my contract at 200% of final salary for 2.5 years in my mid 60s, but it is not guaranteed. If I got that, it would be wonderful. But we have to plan as if it won’t happen. In the meantime I want my employer to believe that I will stay forever if they don’t give it to me:)
LOL - I drive a 2006 Odyssey. When we purchased it, I did think of it as a fancy cars since it was not the base model. And it was sooo much nicer than the 1997 Transport minivan that got demoted to teen drivers for the next 6 years. Which was lots nicer than the 1989 Plymouth Voyager minivan.
Fancy cars are more important to my husband. I have to admit that his Audi has been a lovely ride on our cross country trips.
I used to joke that I could retire I would just need to die in 5 years. For us retirement wasn’t an age or a number as much as a series of safety nets. SS/pensions/earnings (if we choose), savings/HSAs/Emergency funds, being debt free, investments, health insurance/long term care insurance, possible inheritance and only as a last resort our children. With these safety nets I hope to retire comfortably and as stress free as possible. We started working on these safety nets years ago and we’re getting closer to all of these being in place. I hope within the next few years to be able to retire with a good degree of certainty that we’ll be ready.
All the projections I have done have us being relatively comfortable in retirement. Now that school expenses are out of the way for the most part thanks to D23 getting a full-ride we have increased our retirement savings. There were some lean years when DW was a SAHM. DW will have a pension and SS although 3 years ago she moved to a teacher pension and I will need to understand how that will affect her SS. She has plenty of years working and having SS withheld. We are not bothering with Roth 401K savings now because we are currently at the height of our household income for our careers. There is also a solid chance that DW will increase salary significantly in the next 3-4 years. We do have some after-tax investments that will help offset in the future.
Our biggest question will be how we structure where we live in retirement. Our home will be paid off in 10-11 years. We do live in an area where the property taxes are significant enough that we might want to move. But we have great weather May-Oct where we are at. So we sometimes think about selling the house that is currently too big for 2 people and getting 2 condos one in the area we are currently at and one in a warmer climate for the winter months. But on the other hand I contemplate just staying put and renting a something Jan-March each year.
I have decided I can’t live in small-town America. We are also spoiled because we live by an airport that gets you a direct flight basically anywhere. That is important to me. Lastly we would never buy anything in FL. I was thinking NC or SC.
Consider shifting some of your 401k money into Roth IRA - and pay the taxes accordingly. The one thing we could have done better is shifting more funds over years into Roth from 401k. We have purchased annuities (with a very good financial advisor who ferreted out the best annuities) over time out of our 401k in order to lower our risk (neither DH or I have pensions), and after one year each annuity is providing us monthly no penalty withdrawals – essentially the annuity value is remaining about the same as we benefit from the value increase with ROI.
We remain in our current home because DH has activities here and we have no strong reason for us to want to move at this time. We have grandchildren, but until DD1/SIL purchase a home with stronger roots where they are, we are not making any current house changing plans.
IMHO it may be wise to ‘test out’ some areas where you might consider living during winter months, and assess if you might like to spend time at varying places while keeping primary residence.
I agree about small-town America – unless it is very close to more significant city life. But the changes going on in certain communities (as we see on our area) with city hall/city management has me looking very carefully where we go from here (we are in a suburb city in a fast-growing area) - thus the outside developers influencing city decisions. There are benefits to renting and owning, and drawback to owning a 2nd place can be losing flexibility.
I guess my question would be what is the benefit to moving 401K/IRA(Pre-tax) into a Roth/401K IRA at this point in time when as a household we are making the most money we ever have, don’t have any dependents.
I do understand that I will pay more for medicare in the future but it seems like that is around $87 per month and if I remember correctly the next jump is at $191K for married filing jointly.
I guess I am just banking on having less income in the future and therefore having a smaller tax rate. And I get tax rates could go up, but none of us have a crystal ball and could predict that with any high probability.
So I guess keeping the variable of the tax rates constant how is it beneficial to make the conversion to a roth? I really would want to know.
To me the question would be: What is my marginal tax rate now vs. the future?”
You’re currently making the most money you ever have. Will your income be higher or lower next year and subsequent years? And do you believe, as I do, that tax rates will rise in the future when we finally decide to address the deficit and accumulated debt?
We are moving funds from an IRA to a Roth and yes, we are paying taxes. BUT this also reduces the amount in that IRA and will therefore reduce the RMD we will need to take. So, we view that as an added thing too.
And IF there is money left when we die, the Roth will be an easier thing for our heirs…we are told.
That is exactly the point. We are now decreasing some money from after tax funds (moving some to Roth IRA each year) but it is for the RMD years to have more level tax picture. Any spending boost money we are doing out of 401k, but we have some after tax/non-retirement funds we can also tap into for house major expenditures (either for upgrades in current home, or to assist with down payment for DDs). We don’t mind spending out of 401k and paying the taxes - but having more of the gains be after taxes in Roth is an important consideration.
I can’t imagine my marginal tax rate in the future being larger than it is now. And when I say future I mean when I retire. I won’t be working when I retire and won’t be generating taxable income no where near the rate I am today.
I did say keeping the tax rates constant what is the advantage of moving money to a Roth from a traditional IRA.
We can speculate until the cows come home about whether the tax rates will increase. If I were a betting man I would say the won’t change drastically in the future and probably not for the majority of people.
How the Roth easier for heirs if there is money left over?
Also here on CC are the majority of you guys thinking you won’t need money from an IRA and it will have to be distributed via a RMD? Because I really don’t think that is the case for the majority of the people in the US. Usually all I hear is people won’t have enough money to fund retirement.
Some people have suggested using a QDRO while a couple is still married to delay their RMDs - for example a 73 year old with a 60 year old spouse transfers some of his/her 401k to their spouse.
I’ve never known people to actually do this (or know how effective it is) but wanted to share it in case someone was interested. I’m not an expert on this topic and people should seek professional guidance if interested.
Always have to add in the disclaimers that anything I post is not advice.
It’s tax free, so no tax impact on distributions. For example, your kid is working Big Law in NYC making bank; thus, a traditional (pre-tax) inherited IRA means that the heir will be paying ~50% of the RMD in taxes vs. your tax rate to covert today.
This. We’re in a no income tax state and our kids pay at least 10% in City and State income taxes. So any IRA money we leave to them will either be taxed at 22-24% (us) or 40+% (them).