How Much Do You think You Need to Retire? What Age Will You/Spouse Retire? General Retirement Issues (Part 2)

depends on your age and planned start date. If you are within 30 days of turning 65, they process in about 10 business days assuming that all of your employment records, name & SSN all line up in their system. If you are 3+ months out, it will likely sit for at least 30 days.

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Sure, but you could make less, or lose principal.

Perhaps she wants the security of a fixed income stream.

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Same here @busdriver11 I sent a PM with more info. We’ve been searching for about 2 years, and haven’t found it yet. Finally left our AUM fiduciary advisor. They were ‘ok’, but as our savings grew, so did the fee, and as our savings grew, they progressively did less for us. Cost/Benefit no longer working.

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Mine took maybe a week to get approved (just did it a couple weeks ago). It takes a bit longer to get the Medicare number assigned, but I received it pretty quickly.

I just double checked. I applied for Medicare on SSA September 5. I was approved around September 12. I had my Medicare number soon afterward, and I am now set with Part G and Part D. It helps that I went through this with H last year.

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Yes, but you could also lose money. It’s a gamble. We chose to take the lump sum and invest it. Other people we know took the pension, which is guaranteed for life (as long as the company handling the pension doesn’t go under). If anyone who retired when H did took their lump sum and put it into an annuity, I don’t know about it, but it could make sense. Their pension was structured in an odd way 
 it was reduced at 62, no cost of living adjustment, and severely reduced amount if a spousal pension upon former employee’s death was chosen. For us, it made sense to invest it ourselves. Others either needed a guaranteed income stream or were uncomfortable not having a guaranteed income stream. Everyone has different needs and comfort levels.

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@Youdon_tsay It probably various by company / plan. It would be good for her to research. And if undecided, some plans let you do half pension, half payout (that was what my husband did at a layoff).

By the time I retired, my company had switched to a new, significantly less generous “cash plan”. But it did offer choice of lump sum (about 15 months of salary, after a 36 year career) OR a pension/annuity option. I opted for pension (about 10% of salary), with 50% survivor benefit. Two different FA / retirement planning class instructors reviewed my retirement estimate paperwork from employer. Both of them thought the pension was a decent deal
. they said none of the products that they marketed could turn my lump sum into a more appealing income stream. If I were single, perhaps I would have opted for lump sum. But probably not since I like the idea of an income that lasts as long as I live (mom lived to age 89, Dad is 97 and pretty healthy), without concern about the market.

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What is really frustrating is that I just tried to roll over my 401K to a rollover IRA/Roth (to get far more investment options), and they said that none of my funds will directly roll over, they will all be sold. And then I get access to my money 3-5 days later. I know my luck, the market will soar during that time, and I’ll have to repurchase funds at a much higher price. Now I don’t know if I even want to do it. :face_with_diagonal_mouth:

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does your 401k offer any standard options, or are they all proprietary funds? Could you exchange a proprietary fund for a more standard transferable fund inside the 401k first, and then transfer that out to a rollover IRA/Roth?

For example, Fidelity’s zero fee funds are proprietary, and non-transferable. Fido also has similar investment funds (total stock, S&P 500
) which aren’t zero fee, but are transferable.

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Gosh, it really depends on how her company’s pension choices are. MIL was with a Teacher’s Pension and had very few choices - but I got her thinking about taking better care of her health so she could have her longer annuity choice situation work out, and it did. She lived to be 92.

Have you asked your sister what her choices are, and do you believe she can make a good selection with her pension choice?

I believe you will need to roll it first into a IRA and the IRA to Roth IRA. We did this with DD’s state retirement money (if you work less than 10 years for the state, have to do something with that retirement money). She set up a TD Ameritrade (now Schwab) IRA, and then moved it internally/electronically to Roth IRA and then set up investments.

Yes, the first piece is sell and move - but you can choose exactly what you want to sell. IMHO it is pointless to be concerned about up or down in the market during the movement. Being a good long time investor, you will be fine.

I would have done the same!

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I can ask the advisor that, but I worked for a large company, and most of them are Vanguard institutional funds that don’t even have a ticker symbol. They’re held by Fidelity, so maybe that’s the issue. I have a feeling I’ll leave most of them in the 401K, and transfer a little bit at a time, so I don’t get hit by a huge whammy. I transferred some years ago and it definitely was a loss.

In my case, some of it is in a 401K, and some in a 401K Roth, so it would directly go into a rollover IRA and Roth in the appropriate amounts without tax consequences. Long term investor or not, I sometimes have extraordinarily bad timing.

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@Youdon_tsay If you do a direct rollover (as in the check is made out to your IRA to another financial institution), you can move it without tax impact. When you begin withdrawing it, it’s taxable as regular income – it doesn’t get taxed at capital gains rates. If you don’t need to pull it out for monthly expenses, you can let it grow (at least til RMDs kick in) and potentially use it for big-ticket items that would mess with your regular cash flow/income stream.

Your spouse would need to sign off to waive survivor benefits on the pension.

If you annuity is paying out $180k off a a $150k lump sum, someone’s making a ton of money off your lump sum – and it’s not you. Current 5% rate on $150k is $7500/year. The $180k equals $1000/mo, or $12,000. $12,000-7500 interest = $4500 principal out each year. Even on a declining balance, you are still way ahead sticking it in a Vanguard money market account. This assumes you’re not looking for no or little market risk.

This is just back-of-the envelope math, but gives you an idea of how the annuity wouldn’t necessarily work well for you in a fixed period 15-year distribution.

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Thanks. I can’t remember the exact numbers she gave me, but those are close.

I am more use to pension annuities being lifetime and not a 15-year limit.
I believe their annuity plan they are proposing as a 15 year payout annuity is to pay out X per month, and your annuity will get spent down and have no value after 15 years – also unsure if you die after a few years, does your estate get the rest of the value of the annuity or is annuity only active with monthly payout with living?

The annuities DH and I have purchased are a contract that pretty much keeps the invested value; based on the contract, after one year we are able to draw off a maximum amount w/o penalty (which we pay taxes on as any distribution) - and due to the returns guaranteed in the contract, pretty much maintain the value of what was invested. We have various ones, with investments ranging from $93,000 - $250,000 - with contract terms of 6 years up to 12 years. We currently have 5 annuities which has about 28% of our portfolio. Some of these annuities we have purchased off the gains of DH’s 401k (which are in stock funds - always have chosen the best performing for long term and also have held up on downturns - losing less on market downturns than other stock groups) - I get nervous about our risk when we have too much in stocks. About 33% of our portfolio is in 401K and 11% in Roth IRAs. I wish more had been converted to Roth IRA, but we were not in tune to that early enough to do so (a word for those early enough and in the tax bracket to slowly do so over time).

I don’t remember the numbers from my MIL’s teacher retirement choices - one was lump sum, one was a 3-year period payout, and one was a lifetime annuity (that is how I got her to take better care of herself in choosing the lifetime annuity). She out-survived her husband, but I believe her pension was just for her and not with survivor benefit – I know you have to get the spouse to sign off on that, and I am sure he did so because of the way he was as mister independent.

The lifetime annuity has their numbers based on actuarial information. I know the state I live in has a very healthy Teacher Retirement Fund, and I cannot imagine a state which has a bankrupted teacher retirement fund.

One does have to be disciplined enough with taking a lump sum (via rollover) into an IRA, and then making the choices for having it earn reasonable returns.

DH’s aunt, when she sold her farm (after being widowed) lived off of social security and the gains from her investment - never touching the principle. She had a very tight budget and lived independently or with one of her daughters to her upper 80’s (she had a series of heart attacks).

On the conversion of one of the companies DH was part of (changed hands several times), he has a small annuity, about $100/month (for lifetime, I doubt it has survivor benefit) - that was after cash and some stock payout. The company that manages that has changed hands too - but we consistently receive the payment electronically into our checking account.

DW had the same issue when she decided to take a distribution of company stock inside her 401(k). The distribution is a taxable event but the appreciation will be taxed as LTCG. Strange loophole that only applies to employer stock in a 401(k).

But the catch was that taking the distribution necessitated rolling the rest of the 401(k) into an IRA or taking a distribution of that too.

So she said “sure, roll the remaining 401(k) into an IRA”. But just as with @busdriver11, this was a proprietary fund with Merrill Lynch that needed be liquidated in order to be transferred, even into a Merrill IRA, and with a 3 or 4 day delay.

First world problems, but annoying.

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Yes, annoying. Something that I thought was a retirement no brainer now needs to be reconsidered. Hope the numbers worked out for your wife. I’m thinking I’ll just do it in small portions, so I don’t feel like it’s one big mistake if things don’t go my way, less painful.

@busdriver11 - I am guessing that the 401K —> IRA process is what is needed to get the right tax paperwork for the conversion(?) Annoying though
 and good point to ponder for my eventual conversion. Wondering if perhaps partial conversions over time might make sense, better dollar cost averaging.

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If you have your IRA set up, then it is paperwork only for moving from 401K to IRA (and the money should move from one to the other) - but you may have certain steps to do with the 401k first (converting to cash for moving). Our 401k through employer charges a fee for each transaction out (so we did transaction out accordingly), so you might want to make sure how you want to do it, partial over a certain length of time so not getting hit up with those transaction fees. Our fee was $50, but we just were conscious of this fee being there. To us, more important was about any tax impact - for conversion to Roth IRA.

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