Advice needed re: retirement and large cash savings (federal, married, wife)
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Thanks for the feedback - I have considered both the tax implications of the sale (we do meet the 2 of the last 5 years rule) and also having taxable income which will cause SSI earnings to be taxed.
One question though - Aren't there limits to what we can contribute to Roth since hubby isn't working?
My point was, if you're working and were planning on maxing out tax-deferred accounts - make some of those deposits into a Roth, instead. You give up the tax break now, but gain later. Doubtful your tax bracket will be lower in retirement.
One further comment on this, when I worked, my employer offered both Roth and tax-deferred 401ks. Another way of getting more money into a Roth - beyond the IRA limit - is if you, too, have that option - i.e., a Roth 401k.
Moonlady has 200k cash - not bonds - and is wondering how to deploy this cash. She doesn't mention bonds anywhere that I can see in either of her two posts (unless I missed something) - but does talk about increased deposits to tax-deferred vehicles - no mention of bonds.
The term "investment portfolio" suggested that some bonds are included, but maybe there aren't any - it could be 100% stock I suppose.
Quote:
Originally Posted by Ariadne22
Gotta be careful of withdrawals from tax-deferred vehicles - all kinds of tax consequences.
As long as you don't do too much in any single year and are over age 59 1/2, it should be fine.
See, that's the situation! The tax benefit is only a small portion of the benefit of keeping the mortgage. Think about the liquidity and the inflation hedge AND the extra money! Spend some of it! No prize for prepaying your living expense for the next 100 years when you're only gonna be around 15-20!
Maybe I should start a separate thread for this, but... WHAT do I do with $300k sitting in the bank earning less than one percent interest if I plan to use that money in the next 2-5 years to purchase oceanfront property and therefore need to keep it liquid? I was hoping that question would be answered here...
Maybe I should start a separate thread for this, but... WHAT do I do with $300k sitting in the bank earning less than one percent interest if I plan to use that money in the next 2-5 years to purchase oceanfront property and therefore need to keep it liquid? I was hoping that question would be answered here...
Any reason why you couldn't purchase the property now and rent it out?
I've spent two years trying to decide on a location and haven't been able to. Everyone tells me it would be NUTS to purchase long-distance, without visiting and preferably spending time there first, but I cannot travel until I retire in a couple of years. Hence, my plan is to spend a year or two RVing along the coast looking for just the right property. I've also heard that vacation homes - strictly as an investment - aren't all that (too many expenses involved), but of course it would also at that time become my primary residence. I would continue to rent it out during peak season, traveling to other locations during that time, to supplement my retirement income.
Maybe I should start a separate thread for this, but... WHAT do I do with $300k sitting in the bank earning less than one percent interest if I plan to use that money in the next 2-5 years to purchase oceanfront property and therefore need to keep it liquid? I was hoping that question would be answered here...
Quote:
Originally Posted by Vic Romano
Any reason why you couldn't purchase the property now and rent it out?
Ditto especially if you are paying outright with little or no mortgage.
Yes, and that was my plan; maybe I should continue looking. Especially if there's no other viable option other than letting the money stagnate in the bank.
As long as you don't do too much in any single year and are over age 59 1/2, it should be fine.
Moonlady is talking about paying off a mortgage - which would be a 'large' cash withdrawal which will negatively impact taxation of SS benefits which hubby is (now age 65) or will soon be withdrawing - which is why my recommendation was to keep that money in an account where there would be no tax consequences should they decide to pay off the mortgage.
Generally, with two income people, one of whom is still working (or not) and one on SS, or dual pensions and dual SS, additional withdrawals from tax-deferred accounts can result in 85% of SS benefits being taxable - possibly kick one into an even higher tax bracket and/or trigger the AMT - depending on overall income. It doesn't take much add'l income for SS benefits to become 85% taxable. A six figure taxable withdrawal would do it, for sure - not to mention bracket creep/AMT - which is why many people embark on Roth conversions after retirement.
Or, best said, here:
Quote:
Originally Posted by TuborgP
Once you retire you really have no retirement account just bigger savings and investments. The only real issue is tax rates etc.
Last edited by Ariadne22; 04-23-2015 at 12:29 PM..
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