You and Your IRA and 401k: An Owners Manual for the Newly Retired

Category: Financial and taxes in retirement

October 27, 2013 — Through all those years of faithful contributions to your 401k or IRA, you probably never really thought too much about the day those savings would be used. But either now or soon in the future, that money has to come out of your account, most likely as a key component of your retirement financial picture. This article will review some of the issues you are likely to face with your 401k, IRA, or similar retirement account. Tax laws are tricky and we have attempted to paint a broad picture, there will always be exceptions to some of the general principles discussed here. We are not tax or investment experts – check with a qualified professional for an expert opinion.

401ks – A Review
First, a few facts. 401ks are a relatively new part of the retirement picture. They are defined contribution plans (a promise of how much will be contributed to the plan), and they were largely designed to replace defined benefit pension plans (the old days, a promise of how you much you would get in retirement). There are some variants of 401k plans, such as 403b and 457b plans. IRAs are treated somewhat similarly for tax purposes, and their variants include SEP and SARSEP plans.

With a 401k plan you contributed a certain percentage of your gross pay, and your employer probably matched a portion of that. The amount from both sources that went into your plan was not counted as part of your taxable income for that year, which was one of the key incentives to help people save. Smart workers contributed as much as they could for multiple reasons: for the employer match, to keep their tax bill down, and to help insure a comfortable retirement.

The tax part of the equation comes into play when you retire. Although your contributions were not counted as part of your income when they went in, they will, along with all accrued earnings, be taxed as ordinary income when they come out of your plan.

The Investment Company Institute (ICI) reported recently that the average American 401(k) account with consistent participation had $94,482 at the end of 2011. That’s way up from just a few years before; the average balance was $50,000 in 2008. The average 401k contribution was 6% of salary. Older Americans have saved even more: Fidelity Investments reported that the average 401k balance for its customers over 55 years of age who had worked for their current employer for a while was $255,000.

Issues to consider
How to invest your 401k
Once you retire you might have the option to keep your 401k managed by your previous employer. That is often the easiest and best idea, since your employer is required to offer a variety of investment options. You should investigate, however, to make sure the fees are reasonable.

If you have to roll the money to another provider and start managing it yourself you might consider hiring a financial advisor. The best way to do that is probably worth several articles by itself. But for general principles: Check out several advisors, get references and performance history, verify certifications, get all fees clearly established. Or, if you are committed to learning about financial matters and being a disciplined investor, you can manage the money yourself through mutual funds like those from Vanguard and Fidelity.

Fees
Be aware of how much different funds charge. There are very big differences among them, and those can mean thousands of dollars over time. Try to stay away from funds that charge entrance or exit fees. If you hire a financial adviser, find out if he or she charges a fee for service or a fee based on % of assets (either approach might be best for your situation). Find out if your adviser charges commissions, which are usually considered a conflict of interest.

When to take the money
This is one of most important areas you need to be on top of. If you take the money out of your 401k or IRA before age 59.5 you will usually have to pay a penalty – avoid that if you possibly can. (See IRS regulations on early withdrawals. There is also an exception for substantially equal periodic payments). The year you turn 70.5 you must start taking required minimum distributions (RMDs), although you can delay that first withdrawal until April 1 of the following year (in all other years they must be taken by Dec. 31). The distribution amount is based on your remaining life expectancy – the required distribution percentage starts at 3.65% at age 70 and goes to 15.87% at age 100. The IRS has tables telling you how much to take, depending on your age.

If you are like most people, you probably have IRAs and a 401k, which makes the withdrawal requirement a little trickier.You can calculate how much you have to withdraw from all your IRAs and then take it out of one or more of them. But for multiple 401ks, you have to take the required amount from each account. See the IRS FAQs on Required Minimum Distributions for details.


The annuity option
The usual route is to take the required distributions every year. However, many financial experts recommend that you explore converting your 401k to an annuity. That way you are guaranteed a fixed amount of money for the rest of your life (or some fixed period). An annuity removes the investment risk. If you and/or your spouse are not interested in managing money, it simplifies things for you. Some people don’t like the idea of an annuity because they can affect your plans to leave an inheritance, or you might feel you could get a better return on your own. If you do buy an annuity, do your homework, they are not all the same.

Inheritances
When your heirs inherit your IRA, 401k, or Roth account, a number of complex rules apply. We do not have the space or expertise to adequately discuss all of those here. For example, your spouse usually has the option to roll your IRA or 401k into his own account, which is fairly simple. Other heirs usually have fewer options, especially if you were 70.5 and already taking mandatory distributions. Check with your tax advisor for detailed advice. How your beneficiaries are listed on these accounts is very important, so it is worth checking on this with your advisor.

Withdrawal Strategy: Social Security vs. 410k
Lets say you are retired at 65, which is old enough to qualify for Social Security and take a penalty-free withdrawal from your IRA or 401k. Assuming you don’t have any other savings to use to live on, which money would be better to live on until age 70.5 – taking Social Security or withdrawing from your 401k or IRA? The answer is a personal decision, but here are some factors to consider. Finding your best answer might involve running what-ifs for your situation in the state in which you reside.
– If you wait to claim Social Security until you are age 70, your payout will be 8% higher for each year you wait beyond 66.
– You won’t have to pay a penalty for withdrawing 401k money (the penalty goes away after age 59.5). But, the money you take out is gone forever, and stops growing tax free.
– Depending on your income, you will probably have to pay federal tax on either the Social Security income or 401k/IRA distribution (and possibly state income tax too).
– What do you think your life expectancy is? If short, Social Security might be the better option.

401k withdrawal vs. Social Security vs. General Savings
Once again assuming you are 65 and that you have the option to live on one source of income (401k, Social Security, or your general savings) – which is the best one to choose until age 70.5? Although the choice is personal, we think most advisors would recommend living off of general savings. That option allows your Social Security payments to increase to the maximum at age 70. It also permits your IRA and 401k to continue to grow tax free – and to delay paying ordinary income taxes on what you take out of those accounts.
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Taxes
401k and IRA distributions are treated as ordinary income for federal purposes, but their treatment can vary by state. If you are going to receive significant distributions, and you thinking about moving anyway, you might consider choosing a low tax state or one that doesn’t tax these distributions. People who are planning significant gifts to charities might investigate giving some of these distributions directly to charity, rather than taking it as ordinary income and giving with after tax dollars. A professional is needed on this issue to do it correctly.

What not to do
The worst possible thing to do is take out all of your 401k and/or IRA money at once. If you blow it on a new kitchen or trip around the world, the money is gone. This is the money you have to live on for the rest of your life. Don’t be afraid to spend it, just make sure it is there for when you might need it.

Don’t make big money decisions without knowing the consequences. One thing to do is get good advice from a professional, or carefully research it yourself.

Think twice about so called Self Directed Investment Accounts. Many of these turn out to be scams (see end of article).

Never, ever, put all your eggs in one basket. Your retirement is too important to put it at risk.

Don’t stop working before you have to. Most people won’t have enough money for a happy retirement. The longer you can contribute to your retirement plans (and delay taking it out), the more you’ll have to enjoy.

A note about Roth plans
You generally have the option to convert your IRA into a Roth IRA, which has some advantages. But you will have to pay taxes at the time of the conversion. See Further Reading below for more about Roth plans.

Comments:
What are your plans for your 401k? Do you plan to tap it before you have to take RMDs at age 70.5? What is your strategy before age 70.5 – will you take Social Security, tap your retirement accounts, work, or try to live on your general savings? Have you had experience with a financial adviser? Please share your thoughts in the Comments section below.

For further reading
Guide to Inheriting a 401k
5 Reasons to Convert to a Roth IRA
How to Buy an Annuity from Social Security
Not So Much: $1 Million for Retirement
Scammers Targeting IRA’s

Disclaimer: This website is definitely not giving any financial advice. This article is meant as a discussion of some of the issues involved with IRAs. Before you make any important financial decision we recommend getting professional advice.

Posted by Admin on October 25th, 2013

33 Comments »

  1. One additional item I was always advised to do is to roll over your 401k into an IRA whenever you can. Usually this is when you leave a company or retire. There are many more options for investment in an IRA vs a 401K. It also gives you the control of the money vs your employer.

    by Bill — October 26, 2013

  2. The tax code is a complicated animal, and sometimes actually in our favor. I AM NOT A TAX PRO, but this is what I have learned over the years while investigating the potential to retire early.

    1. “If you take the money out of your 401k or IRA before age 59.5 you will pay a hefty penalty.”

    If you have a 401K with your company, and you quit after age 55, you may be able to take the funds out without penalty. See http://www.taxalmanac.org/index.php/Internal_Revenue_Code:Sec._72._Annuities;_certain_proceeds_of_endowment_and_life_insurance_contracts, specifically Ā§72(t)(2)(A)(v). I believe this only applies to 401Ks with your last employer, (and you can sometimes roll your 401K from an existing employer into the 401K at your new employer,) with the benefit disappearing if you roll it over into an IRA. I don’t know if you have to take out the full amount, that might also depend on your employer, and you will be taxed on the full amount you take out. For this reason, desiring to avoid a large tax bill on the full amount, we will use Substantially Equal Periodic Payments for withdrawals before 59 1/2: http://www.investopedia.com/terms/s/sepp.asp. “With substantially equal periodic payments, the funds are placed into an SEPP plan that pays the individual annual distributions for five years or until he or she turns 59.5, whichever comes last.” No penalty.

    2. Regarding inherited retirement accounts, decisions need to be made about keeping it as an inherited account or rolling over when the spouses are different ages. If the living spouse is too young to take penalty free distributions, then having an inherited account may be best so that they can take money penalty free from the account. You can draw out the whole account at any time without penalty if it is an inherited account, though you are still taxed, and are subject to RMDs. Or to avoid the RMDs, the surviving spouse could roll it over into their account and IIRC not be subject to the RMD. I believe you can also split the funds, some going to your own IRA, some remaining inherited, though I am not sure.

    3. Roth Conversions: Converting your traditional IRA to a Roth will trigger taxes, as will taking funds out of a traditional IRA. Retirees are often surprised at how high their tax bill can be when RMDs start to be required and they have no control over how much they take out of their account. For this reason we will be converting our traditional IRAs to Roth in a planned approach, converting only the amount at the end of the year that will still keep us under a low tax bracket. No RMDs are required on Roth accounts during the life of the owner, or in the case of the spouse when the inherited Roth is converted to their own Roth. If our kids wind up inheriting the Roths, they will have to take RMDs, but will do so tax free.

    I know you intentionally left some of these details out to keep the article manageable, but I think they are important enough tools for tax control to raise.

    Editor’s comment: Thanks Julie for the helpful clarifications. We have made some tweaks to the original article based on your comments, especially a link to the IRS sources on early withdrawals and Substantially equal periodic payments. The latter is a strategy we were not aware of. You are right, this is complicated stuff. There is always a danger in giving an overview that the exception will come along – everyone here should view that as a caution to research any decision carefully before acting.

    by Julie — October 26, 2013

  3. Don’t know why my comment got truncated in that way. I guess it is the moderator’s way of telling me I was being too verbose. šŸ˜‰

    Hopefully you can fill in the blanks. If not, feel free to question.

    by Julie — October 26, 2013

  4. I would like to know some good resources on fee based financial advisorsā€¦especially ā€œfee for servicesā€ vs ā€œfees as a % of assetsā€. Both are fee-based, but you indicate that one is good and the other ā€œnot so muchā€. I have read some articles on financial advisors and fee based is always recommended but which and why? Most of the articles define fee-based as a % of assets. Any good resources folks? Many seem to be written by financial advisors and slanted to their view.

    What is your definition of self-directed IRAs? I transferred one of my IRAs to what I consider a self-directed IRA back in the mid 90s. I used a discount brokerage account and traded in stocks and an occasional bond. I did not use mutual funds, but would like to reduce my time in managing my account so may move toward that. PS. This is obviously self-directed and NOT a scam. So what are the warning signs of these scams to which you refer? I know they exist, but not what to look for.

    Editor’s comment: Thanks for the interesting questions. We don’t have an opinion on what is better as an investment advisor fee – a fee for service or a fee as a % of assets. It is a personal decision and the style of the advisor (for example, if your assets are very small no one will want to manage them for the usual %). The self-directed IRAs we were referring to were discussed in the Marketwatch article listed in the “Further Reading” section. That article refers to “a self-directed IRA is an IRA held by a trustee or custodian that permits investment in a broader set of assets than is permitted by most IRA custodians.”
    The scammers there try to put people into unusual assets that are usually not appropriate for the average investor.

    by Elaine — October 26, 2013

  5. Elaine,

    We found our financial adviser by a recommendation from friends. He came to the house, took all our information, then came back with an investment plan and analyzed our ability to retire when we wanted. The returns he reports is net of fees, and though we pay him 1% of investments, there are no charges for trades or loads on mutual funds. I suspect this is because of his affiliation with a large company that can negotiate these benefits for their clients. We took his track record and compared it to market benchmarks, which is also what we do to make sure he continues to satisfy our needs.

    It has been wonderful to surrender all that work, lower our risk by diversifying into investments I didn’t have enough knowledge to invest in, and still make an excellent after fee return. One benefit is also that our FP will also help our kids navigate handling our estate if something happens to us, and we keep a file of all our accounts/life insurance policies/assets updated with him for this hit by a bus possibility. He considers this part of his current fee, and no doubt views it as a way to capture the next generation’s investments when we pass. Having recently dealt with my Dad’s estate, I welcome this help for our kids.

    That said, not all FPs are created equal. Ask around. A personal referral from someone who has been using an FP for an extended term is gold. And we started slowly with him, giving him only so much of our assets to invest until he proved himself with us. It’s worth looking into.

    by Julie — October 27, 2013

  6. Try NAPFA.org for a list of fee-based financial advisors.

    I’d suggest they be Certified Financial Planners.

    by Jan Cullinane — October 27, 2013

  7. Hello friends..we are seeking information on Condo retirement locations near beach area NC/SC..and wonder if any suggestions..maybe a website or publication etc..always good feedback here in site..so maybe someone can assist..we had planned a single family home in retirement community and age creepin up so we thought to take a look at a condo..give us more time to relax / travel etc..sure would like it not to be too small and maybe a garage..so lets see ‘what we can find’..Thanks to a great information source..

    by robbie — October 28, 2013

  8. Hi Robbie, I do am looking at those state. You may find some good ideas on the topretirement’s blog titled Dueling Carolinas. Those states often come up on some of the other blogs. Here is that link http://www.topretirements.com/blog/great-towns/dueling-carolinas-north-carolina-vs-south-carolina-as-the-best-retirement-state.html/

    by Elaine — October 29, 2013

  9. Our friend Robert Powell, editor of Retirement Weekly, just published an article, “Beware of conflicts with fee-only advisor” on the new USA Today “Retirement” Feature. Although many people suggest fee only is better than fee from commissions, there are potential conflicts. Mainly, that the advisor might not tell a client about a better strategy if that meant that if the assets under management (AUM), and thus their fees, were lower.

    by Admin — October 29, 2013

  10. Robbie, have you checked out this thread of the blog for NC/SC info? http://www.topretirements.com/blog/great-towns/dueling-carolinas-north-carolina-vs-south-carolina-as-the-best-retirement-state.html/?awt_l=5WyIo&awt_m=3j5nxvYG2MlyIA4#comment-99384

    by Julie — October 30, 2013

  11. Julie, thank you for your wonderful insight on this topic. My wife and I are also converting conventional IRA accounts to Roth IRAs along the same lines as you are. Income tax rates will be going up in the future and better to lock the lower rates in now before that happens.

    by LarryD — October 30, 2013

  12. I had also heard that delaying Social Security benefits would increase the later payments by 8%. So I went to the SS Administration and tried to repay the few months of benefits that I had already collected and become eligible for the future 8% increases. The staff explained that the 8% increase assumed that I continued to work. As I was retired and not working, they said I would not see 8% increases by waiting. So Now I am wondering what the real story is. Can anyone explain?

    by Ed — October 30, 2013

  13. My understanding is that if you leave the job at 55 or over you won’t have a 10% penalty to withdraw 401k money.

    by MH — October 30, 2013

  14. You should never invest more than $300 K in total in an annuity. You should never invest more than $100K with any one company. In other words, if you want to invest $300K in annuities, buy three $100K insurance contracts from three different companies. This is because state guarantee funds place limits on how much they will pay if the insurance company goes bankrupt.
    http://www.annuityadvantage.com/stateguarantee.htm

    Distributions from annuities don’t satisfy your RMD requirements for money left in an IRA or 401 plan.

    You should never put more than 50% of your money into an annuity.

    by booch221 — October 30, 2013

  15. After using both an “advisor” whom I carefully shopped, and directing my own decisions on my rolled over 401-K through Vanguard, where my wife and I have our own ROTH’s in addition. After 18 months, I found the performance was similar, except for his FEES. He charges 1% of account balance per annum, while my choices of mostly Vanguard’s INDEX funds were less than half that amount.
    Some say it is only money, but when we are talking several hundred thousand dollars it is a fair amount of “only money” and it recurs every year!
    I am a fairly seasoned self-taught investor, so will-probably- handle the inevitable market dips, and soaring without the emotional bad decision making. Humans always should remember to never say never.

    by roy stacey — October 30, 2013

  16. Ed,

    Here’s the information that I got from my financial advisor. By the way, some of the most inaccurate information I got came from SSA personnel and the people in my employer’s HR department. Go figure!

    Your social security benefit is calculated on your 35 highest years of earnings, so your average doesn’t drop when you have $0 earning years as long as you have at least 35 years of earnings. This is the benefit you get at your full retirement age, which is 66 for most people right now.

    If you delay taking SS benefits after your full retirement age, the benefit does increase by 8% every year delay. This increase maxes out at age 70, at which point you will get 32% more than your basic benefit. This increase is actually calculated on a month by month basis, so if you delay taking benefits for 6 months, the increase in your basic benefit would be 4% (6 months * 2/3% per month = 4%).

    In short, your benefit does increase the longer you delay taking SS, but there is nothing to be gained by waiting past age 70.

    I hope this helps.

    by Gary — October 30, 2013

  17. Ed: ” So I went to the SS Administration and tried to repay the few months of benefits that I had already collected and become eligible for the future 8% increases. ”

    I believe this stopped being an option a couple of years ago.

    by Julie — October 31, 2013

  18. Here is a counter argument on delaying taking Social Security payments until age 70. Assume a monthly benefit of $2,000 per month at age 66. This increases by 32% of 640/month at age 70.

    If you started taking the $2,000 per month at age 66, you would have accumulated $96,000 by the time you reached age 70.

    Divding the $96,000 you are ahead by not waiting, by the incremental $640 you gained by waiting, determines you need 150 periods or 12.5 years before you breakeven. And that assumes to did not invest any of the $96,000.

    Which would you rather have – $2,000/month to enjoy life now vs waiting until you 82 and a half before you are ahead.

    I decided $2,000 now was worth a lot more to me now than a benefit that is 16.5 years into the future.

    by Norman Wirtz — October 31, 2013

  19. Gary, If I understand you correctly, if I retire in 2016 at 67, and don’t take my SS benefits until I am 70, there will be no penalty for not having worked for the 3 years between 67 & 70 if I have worked continuously (or had earnings) for 35 years? I had thought the earnings were calculated for only the last 5 or so years which made me believe my benefits would be affected by not working the 3 years prior to taking SS.

    by veloris — October 31, 2013

  20. Some great questions here. We also received a very good one that we’ve include below about Spousal Claiming Strategies.

    Many, if not most, of the questions in this thread are addressed in our “What You Don’t Know About Social Security Might Hurt You Series”, which was in 3 parts. Part 1, for example, explains the formula for how your benefit is calculated, which several people have wondered about, and everyone should understand. Part 2 discusses spousal claiming strategies.
    http://www.topretirements.com/blog/financial/what-you-think-you-know-about-social-security-could-hurt-you-part-1.html/
    At the end of Part 1 you will find many links that will answer more questions. Social Security claiming is a very complex subject, and unfortunately, there is widespread confusion and misunderstanding on it. If you read these articles you will get a better sense of how it all works.

    The question from a Member:
    Can a woman who is the lower wage earner file and collect Social Security at age 62, then convert to her husband’s Social Security when he files for Social Security at age 66 or 70? Where is this info listed in actual Social Security documents. I am afraid if I file and collect at my age 62, then I may not be able to convert to my husband’s amount when he files years from now. This is a major problem with people not knowing how to safely file and be able to get a husband’s higher amount for their lifetime. Thank you.

    by Admin — October 31, 2013

  21. Thanks Julie and Jan for the info on financial advisors. I know it is extremely unlikely that I will remain in Virginia and wonder if it would help to use someone in my new location (I just do not know where that will be yet). I know they do not necessarily do taxes, but they will more likely know of things that will help in my new location and expected tax changes coming down the pike.

    I had asked some people, but got no recommendations. I had also looked at the site of NAPFA and a few other sites. Also found some interesting articles in the Washingtonian http://www.washingtonian.com/articles/work-education/they-know-money-2012-fee-only-advisers/ with some top financial advisors in the VA, DC and Maryland area (the 2013 list was recently published, but I havenā€™t looked at it yet. But I just do not like the idea of the fact that their first year pay is basically a percent of my hard work of many years (for % of assets fee which seems to be the great majority of firms. I have done all my own investment work, but am very heavy into equities since I know stocks best. I want to reduce risk while still getting a reasonable returnā€¦do not want aggressive approach now. And I think it is getting harder for the individual investor since many of the firms that I liked and followed have been privatized.

    I did meet with one group that I liked from phone conversation and decided to have them do a financial planā€¦they just finished a few days ago and I will meet with them next week and see how I feel about further work with them. The firm sounds much like the description of the firm you mentioned Julie. Also they will want to consolidate my assets in one placeā€¦not necessarily a problem ā€¦most firms want that from my research. Yet ā€œ% of assetsā€ seems to be the method of more highly regarded (record of financial success for clients) firms.

    by Elaine — November 4, 2013

  22. Elaine,

    If you don’t know anyone who can recommend a FP, (financial planner,) at least get them to give you references that you can check. I view paying a percent of assets as an inducement to the FP to increase my assets since that way he gets more money, but that doesn’t necessarily work. My mother in law’s returns with her FP has been pitiful, way too exposed to stocks at her age. We are having our FP look at her accounts for possible transfer. She lives in a different state, but he travels all over the US.

    One thing to watch out for with the 1% fee is what it is applied towards. Ours won’t take a fee from things that require no balancing or participation on his part, such as money market accounts or stocks I transferred in. He also suggested we set up an account for me to trade stocks in, (without any kinds of fees, even trade charges,) if I felt the need to keep my hand in playing with stocks. And of course they want all your assets, but don’t feel the need to give it to them, unless that suits your needs. We started out with only a portion of our funds, and he still doesn’t have them all, but he has earned most of our business. And I have earned the break from the daily grind of self-management. Our FP is affiliated with UBS, which has a level of checks and balances that may not be available with a smaller firm or independent FP. Because their name is on the line if fraud happens, they make sure it doesn’t happen. Emails are monitored, mail is opened by a mail room before being forwarded to the FP. Regarding taxes, my experience has been that they won’t go there other than to recommend a tax pro. Specifically ask about any angle you consider important.

    After being so hands on, it was a bit scary handing over the investment reigns to a relative stranger, but our experience has been a good one.

    by Julie — November 5, 2013

  23. Great information from all…But, retiring at age 67.5, I am looking to guestimate just how much money I can withdraw from any of my IRA/401 and not have to pay any taxes??? Any help????

    by Louisville DrBill — November 5, 2013

  24. Julie, Thanks for the thoughtful information. I have met three times and have had several phone conversation with the group that I am considering and liked them. When I mention all assets in one place…I mean just investment assests and they do understand one asset that I have an emotional attachment and would not push for that or bank accounts. But I think they would like all the investment assets consolidated. They also gave me, upon request, actual detailed performance on a portfolio that would be similar to what they would recommend for me. They gave me two different time frames for that portfolio…very interesting, the one had a classic risk/return profile and the other risk/return profile was a reflection of the times! And they were two 5 year time frames…and very recent. I do get annoyed with some places that use old data…so no big complaints there.If you feel comfortable. If you would be comfortable giving me the name of your finanical planner at easper@umw.edu I would appreciate it. I like looking at the web sites and looked at several from the Washingtonian article…they can be educational. I do not think that I would contact your advisor, but I would not if you did not want me to.

    As far as state taxes, I was thinking more of knowing the rumblings of big tax reforms before they are fully in the works. for example, NC made some potentially significant changes to their tax system recently. And that is why I do not worry too much state taxes…they can change quickly, the federal taxes have a slower comparing a speed boat to the Queen Mary. The Queen Mary cannot turn on a dime.

    I will wait until the next meeting (next week) to see how I feel about the financial plan (product based fee) before making any decisions.

    by Elaine — November 5, 2013

  25. Louiville DrBill,

    You tax preparer can run a pretty fair estimate for you. If you do taxes yourself, you can rerun the program for 2012 with estimates of income for 2013, interest, dividends, rental property, capital gains, etc. or whatever you have. You can then adjust the results for the 2013 tax tables
    http://www.themoneyalert.com/Tax-Tables.html or IRS.gov. The 2013 stand deductions are also published. If the number is zero on the income that you earn, increase the retirement income by varying amounts…but sure to leave a cushion. Remember that you may have to take taxes out of the distruibution and depending on the state, you may or may not have to take taxes out as well. Best if you use you tax preparer if you have one.

    by Elaine — November 5, 2013

  26. Has anyone watched ED Slott’s program on PBS regarding retirement strategy (I forgot the title)? Has anyone used his approach? Any comments?

    by Raman — November 6, 2013

  27. We’ve invested in a beachfront condo on Jaco Beach in Costa Rica. This is a rental investment until we retire and beyond hopefully. The building is almost complete called Breakwater Condos, Jaco, Costa Rica. I believe there are still a couple available for sale. We’re glad to have a second home in a beautiful country.

    by Meena — November 9, 2013

  28. Meena,

    What has your after expenses/fees return on equity invested been on your investment? We looked at doing something similar here in the US, but after fees and expenses it was about a break even proposition, IF I assumed no return on capital otherwise invested. When I looked at the cash I would need to put in to buy and furnish the property, and what I could make by investing that money in the market, it was clear that just the investment returns on those funds would pay for a responsibility free vacation rental for about 2.5 months out of the year.

    We decided that the flexibility of going to different places without the headache or expense of maintaining a second home was what we wanted. We could have saved on the fees by managing the property ourselves, but that is a part time job in itself. We also have the flexibility of simply staying home in a year where the investment return has not been good enough to pay for our warmer weather, or even tapping the equity invested in case of emergency. Because we are retiring early, that flexibility is an important tool to counter the uncertain future.

    by Julie — November 10, 2013

  29. […] For further reading: Newly Retired Owner’s Manual for Your 401k and IRA […]

    by » Does Your Financial Advisor Have a Conflict When It Comes to Annuities? Topretirements — February 18, 2014

  30. […] a variety of other distribution approaches along with permutations on the ones explained here: You and Your IRA and 401(k) – An Owner’s Manual Not So Much – A Million Dollars for Retirement? Goodbye 4% Retirement Spending Rule Eclipsed […]

    by » How Much to Take from Your Retirement Funds? Some See RMD as Guideline - Topretirements — October 12, 2014

  31. […] For further reading: How Much Should You Take from Your Retirement Funds Each Year You and Your IRA and 401(k): An Owners Manual […]

    by » Rival Theories to The 4% Withdrawal Rule Under Debate - Topretirements — May 29, 2015

  32. I have an odd ball question. Maybe some of you are in the same boat as me. My Hub and I receive around 6 statements each month for various investments. It has gotten out of control with paperwork coming to the house! I want to get rid of the statements. The Senior Center is having a free paper shredding event in May and I would like to get rid of as many statements that make sense. What do you all do with your statements? Do you save a years worth then get rid of the rest? Is there a rule of thumb that people should follow? I am at my wits end with so much junk accumulating!

    by Louise — March 30, 2016

  33. If you have scanner (preferably with ADF for multipage scanning) start scanning a little at a time with ones you need most first. Save to cloud or flash drive. Make sure to copy in more than one place. Do an online search for what documents to keep and adjust for your own needs.

    by elaine — March 31, 2016

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