Retirement & taxes
Hello Terry,
First off, I would like to say thank you! Years ago, I read an article you wrote about paying for college, and prepaying through College Illinois or another 529 plan. We chose College Illinois, and it worked beautifully. Between that, academic scholarships, and the kids working part-time, it made college affordable.
I have a question with retirement nearing for me and my wife. We are 58 years young, and plan on working until 65? Saving throughout our careers, we have amassed roughly $1.1 million in our 401K’s. We have $100K in savings made up of cash, CD’s, and a couple of I Bonds. We have a separate IRA valued at $250K. We also have a Roth valued at $10K. Our home is paid for, and valued at $320K. We do not have any debt! Between my wife and I, we currently contribute $40K to our 401K ‘s.
I am thinking about the tax repercussions when we become of age to start making withdrawals. The only passive income we will have after retirement will be our Social Security, $4K a month and, $500.00 a month pension.
Would it be wise to back off on the contributions, and divert it elsewhere? If so, where? Should we build more cash reserves to initially live off when we retire? We are thinking of continuing to contribute to the Roth we currently have, and buying I-Bonds. Is there a better alternative I am missing? Any advice you could give would be greatly appreciated.
Thank you, you’re the best!
Terry Says
Well, first, you made my day! I’ve been doing this a long time, and when people contact me and say “it worked” it really makes me smile! Second, congratulations on getting yourselves into such great shape for retirement. Your email proves it can be done.
You are at the prefect point to spend some time with a fiduciary fee-only financial advisor — someone who is NOT trying to sell you anything and puts your interests first. That’s why I created a link to Wealthramp.com on the top right corner of my website. It’s a matching system created by my friend and podcast co-contributor Pam Krueger. She reviews each authorized financial planner, and makes sure they fit the criteria of being a true FIDUCIARY. After you go through the matching process — lots of fund and makes you think — she will set up a meeting. Your name does not go on a list nor do you get calls.
Although I’m delighted you have followed my general advice successfully, this is the time to discuss the overall plan for retirement. A planner will discuss things like estate planning, long term care insurance (which might be your next best investment in combination with a life insurance policy) and longevity. It’s a big and very personal topic and this is the time to do it! Please write back and let me know about your experience.
