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A little background - I will turn 60 in a couple of months. My husband is 66 and retired. He began drawing SS at FRA just recently. We had that planned very differently until they changed the SS laws.
Because my husband is older and does have some health issues, I want to retire as soon as I can, so that we have a better chance of some good years together in retirement. Right now I can't see doing that until 63 at the earliest.
Our mortgage is paid and we have no debt other than a car loan under 10K. We have about $450K in IRA's and 401K's. I am currently contributing to my 401K at the maximum rate of 24K a year.
I work for a medium sized private company. A few years ago, when the owner of the company was moving out of the day to day business and into a retirement, an ESOP was created and the company is now employee owned. At my seniority I was immediately 100% vested.
The first year, my shares were valued at $80K. Then we began some rapid growth, and the following year valued at $150K. We have continued to grow, and this year's valuation might be as high as $300k.
When I reach 65 and retire, or when I am with the company 20 years and retire (age 63), the money will be distributed in 5 increments over a 5 year period. However, the valuation at retirement is not static, it can change over the distribution period.
All that said, how do I evaluate the risk of that income in retirement planning? With regard to my goal of retiring as soon as I can, we cannot live on his SS alone, and I would like to delay taking mine, which is the larger amount. In case my husband does survive me, I want him to have the larger check. Therefore to retire by 63 or so, we will need to supplement our income with part of the ESOP distributions and investment income.
Am I dreaming if I plan to retire at 63? Thanks for any feedback.
Theoretically, it would be good to be able to take your ESOP funds (shares) and diversify at least some. If I read your post right, you don't really have any option other than to take your 5 incremental payments over the first 5 years after you retire. You say you will need to spend some of this money on living expenses.
I guess all I can suggest is that you train your replacement well, and if you are called back from retirement, go in and give it all you got, because you really do own part of the company.
Does DH have any pension? Is he already drawing SS?
I wouldn't count it until you see the money. Single-company risk is too high. In the past I've had large (larger than the amounts you mentioned) amounts of unvested stock that ended up being not worth very much, and I've known people with even multiple 7-figures "on paper" that had to watch their wealth dwindle down to very little.
Theoretically, it would be good to be able to take your ESOP funds (shares) and diversify at least some. If I read your post right, you don't really have any option other than to take your 5 incremental payments over the first 5 years after you retire. You say you will need to spend some of this money on living expenses.
I guess all I can suggest is that you train your replacement well, and if you are called back from retirement, go in and give it all you got, because you really do own part of the company.
Does DH have any pension? Is he already drawing SS?
I do have an option to roll some of the ESOP into a private IRA, but not yet. The rules state the ESOP must have been in place for 10 years before this option is available, and I am hoping to retire before then. I am going to review the ESOP documents again to make sure I have this correct.
Husband has no pension, and is drawing SS now at FRA. This is only about $1800 a month. My SS estimate at FRA is $2500, but that is based on me continuing to earn until then. I have not found a calculator to take into account no earnings after age 63, so it will actually be a bit less than that, I think. My estimate waiting until 70 to start SS is $3300 or thereabouts.
I should add that since we don't really need hubby's SS right now, it will be put into very conservative investments in a taxable account for at least the next 3 years. That will give us some additional cushion of around $65k to draw on and reduce the need for the ESOP distributions until I start to draw SS.
I do have an option to roll some of the ESOP into a private IRA, but not yet. The rules state the ESOP must have been in place for 10 years before this option is available, and I am hoping to retire before then. I am going to review the ESOP documents again to make sure I have this correct.
Husband has no pension, and is drawing SS now at FRA. This is only about $1800 a month. My SS estimate at FRA is $2500, but that is based on me continuing to earn until then. I have not found a calculator to take into account no earnings after age 63, so it will actually be a bit less than that, I think. My estimate waiting until 70 to start SS is $3300 or thereabouts.
You could try the SSA's online calc at https://www.ssa.gov/planners/retire/AnypiaApplet.html
You input past actual earnings from your most recent Earnings Statement, and then you can put in whatever future earnings , or zeros, you expect in future years.
Also, with $450K in IRAs, and now that your past 59 1/2, a good strategy is to begin withdrawals from the IRA now . This not only gives you cash to spend and/or invest, it reduces the amount of eventual RMDs, which can have the effect of raising the percentage of your SS benefits that become subject to annual income taxes.
There are many threads in this Forum that talk about the "tax torpedo"
You could try the SSA's online calc at https://www.ssa.gov/planners/retire/AnypiaApplet.html
You input past actual earnings from your most recent Earnings Statement, and then you can put in whatever future earnings , or zeros, you expect in future years.
Also, with $450K in IRAs, and now that your past 59 1/2, a good strategy is to begin withdrawals from the IRA now . This not only gives you cash to spend and/or invest, it reduces the amount of eventual RMDs, which can have the effect of raising the percentage of your SS benefits that become subject to annual income taxes.
There are many threads in this Forum that talk about the "tax torpedo"
Good Luck in your planning.....
Thank you. I was able to get much more accurate figures. Affects the estimate by about $100 a month if I stop earning at 63.
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