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Always a leap of faith to put particulars out there. I am 57. Plan to retire in 1 - 2 years. I will have $400k in a 403b and am currently maxing it out with age catch-ups. I will have 2 pensions. One will pay ~$30k when I turn 65, the other I will take upon retiring. That has a lump sum option which will be $1.7M (subject to variation based upon interest rates at time of retirement). I can roll that into my 403b at 3.5% fixed (old grandfathered rate that used to be awful, and now is great). BTW, absolutely no debt, two homes paid for, cars older and paid for etc. I've worked really hard to get all my ducks lined up.
So, I am currently building taxable savings at a pretty significant rate and intend to have about $400k by the time I retire - in two separate FDIC insured accounts - currently earning 1,20%. I know I can make more, but I enjoy the liquidity and easy access.
My "crazy plan" is to roll the lump sum when I get it into the 3.5% fixed 403b account and let it sit (maybe put some to work depending on the markets at the time), and spend down my taxable savings over five years to pay my bills which will be around $75k per year. I can pull some from my 403b to supplement as needed after 59.5 yoa. One of my crazy ideas is should the ACA still be around, instead of 18 months of Cobra - I may go into the marketplace and get health care with federal subsidies, and as I will be showing very little income, health care under the ACA as it exists today, would be nearly no cost. I know there is an internal ethics bell that goes off here, as asset wise I'm a dreaded 1%'er - but I've certainly paid my dues over the years and would be following the "rules".
Bridging my proposed retirement age of 59 or 60 to age 65 is the challenge and health care is the biggest thorn. I do have an HSA and am building that at the max - and not using unless absolutely necessary, so will have about $50k in that when I retire as well, which will help with Cobra premiums should I need to go that route.
Also SS which - should I wait until 70 - will be in the mid $60's with my wife taking half of mine. So I sort of have my own built in laddering plan here.
Your thoughts on large cash bucket as a spend down pot to pay for my time to Medicare? Also, showing nearly zero income for 5 years, and buying an ACA health plan with subsidies even though I'm not "poor". Interested in your thoughts on that.
Thanks
Last edited by canoesmith; 09-07-2017 at 09:04 AM..
As you already know, you are well situated for retirement ... and somewhat justified in bragging a little. Good job! The fact that you are looking for Federal subsidies (other than Medicare) to manage your healthcare needs may be a bit optimistic. Income is not the only consideration when it comes to qualifying for Medicaid, etc.. Likewise, as you pointed out, withdrawing taxable savings counts as income.
Relative to rolling $1.7M into a 3.5-percent 403B/IRA, that may have been a good strategy coming out of the 2008 economic downturn. But, the economy is rolling now and you may want to get more aggressive in your investments. At the 3.5-percent rate, the pension option or even an annuity might better suit your lifestyle.
A $75K per year drawdown will only reduce your taxable income by about $750K prior to your RMD's kicking-in at 70-1/2. Many have used a Roth conversion strategy to further increase their taxable income now (within tax bracket levels) - and reduce their RMD hit later (I wish I had done a better job of that!).
Income is not the only consideration when it comes to qualifying for Medicaid, etc..
I would never want to qualify for Medicaid - but for ACA subsidies I thought, very possibly erroneously, that income was the measure, and that assets were not considered. Am I wrong?
no you are correct , but if income is to low you are not given an aca plan . you are automatically given medicaid . medicaid for health insurance may be recoverable in your state . each state is different .
Always a leap of faith to put particulars out there. I am 57. Plan to retire in 1 - 2 years. I will have $400k in a 403b and am currently maxing it out with age catch-ups. I will have 2 pensions. One will pay ~$30k when I turn 65, the other I will take upon retiring. That has a lump sum option which will be $1.7M (subject to variation based upon interest rates at time of retirement). I can roll that into my 403b at 3.5% fixed (old grandfathered rate that used to be awful, and now is great). BTW, absolutely no debt, two homes paid for, cars older and paid for etc. I've worked really hard to get all my ducks lined up.
So, I am currently building taxable savings at a pretty significant rate and intend to have about $400k by the time I retire - in two separate FDIC insured accounts - currently earning 1,20%. I know I can make more, but I enjoy the liquidity and easy access.
My "crazy plan" is to roll the lump sum when I get it into the 3.5% fixed 403b account and let it sit (maybe put some to work depending on the markets at the time), and spend down my taxable savings over five years to pay my bills which will be around $75k per year. I can pull some from my 403b to supplement as needed after 59.5 yoa. One of my crazy ideas is should the ACA still be around, instead of 18 months of Cobra - I may go into the marketplace and get health care with federal subsidies, and as I will be showing very little income, health care under the ACA as it exists today, would be nearly no cost. I know there is an internal ethics bell that goes off here, as asset wise I'm a dreaded 1%'er - but I've certainly paid my dues over the years and would be following the "rules".
Bridging my proposed retirement age of 59 or 60 to age 65 is the challenge and health care is the biggest thorn. I do have an HSA and am building that at the max - and not using unless absolutely necessary, so will have about $50k in that when I retire as well, which will help with Cobra premiums should I need to go that route.
Also SS which - should I wait until 70 - will be in the mid $60's with my wife taking half of mine. So I sort of have my own built in laddering plan here.
Your thoughts on large cash bucket as a spend down pot to pay for my time to Medicare? Also, showing nearly zero income for 5 years, and buying an ACA health plan with subsidies even though I'm not "poor". Interested in your thoughts on that.
Thanks
With respect to the ACA, why not? You are playing by the rules. If you position yourself well ahead of time in equities, you might be able to manage realized capital gains such that you show no income for many years.
I've employed that strategy, but my income needs, given I'm single, are only about 35k a year average since ACA came in 2014. Btw, this doesn't mean you have to "sit" entirely in given positions. Use the retirement accounts wisely, and you'll be able to maneuver quite well without driving up AGI - i.e., spread positions between taxable and non taxable acts so you never feel you are stuck holding a loser.
As you already know, you are well situated for retirement ... and somewhat justified in bragging a little. Good job! The fact that you are looking for Federal subsidies (other than Medicare) to manage your healthcare needs may be a bit optimistic. Income is not the only consideration when it comes to qualifying for Medicaid, etc.. Likewise, as you pointed out, withdrawing taxable savings counts as income.
Relative to rolling $1.7M into a 3.5-percent 403B/IRA, that may have been a good strategy coming out of the 2008 economic downturn. But, the economy is rolling now and you may want to get more aggressive in your investments. At the 3.5-percent rate, the pension option or even an annuity might better suit your lifestyle.
A $75K per year drawdown will only reduce your taxable income by about $750K prior to your RMD's kicking-in at 70-1/2. Many have used a Roth conversion strategy to further increase their taxable income now (within tax bracket levels) - and reduce their RMD hit later (I wish I had done a better job of that!).
Jg, be careful here, income is the only consideration....there is no asset test under ACA and expanded Medicaid. And "withdrawing" funds is not always a taxable event....accruing interest is the taxable event, which will happen regardless of withdrawals.
That's why, for the sums of money involved, equities might be the only option (liquid option, to be more precise).
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