Preparing for Retirement

[Neb]

Yes. My main point is, invest in something before you retire.
Market up or down doesn't make much difference in the long run *.
Doing nothing however, will guarantee that it is what you'll have.
And buying the latest&greatest skiboat will not help you much after you retire.
Sometimes paying off bills is the best investment because it vaporizes them from being income you will need in retirement years...forever.
*Unless people are 5 years from retirement and the country plunges into a recession.

We are mostly in cash then gold and few other things. We are down about 5% from our high but flat for the last 365 days.

Gold is supposed to be our hedge for inflation but it is a mystery why it is not moving up with inflation. Could it be due to Russia's move to fold backed?

This the price of gold in Ruble for the last year.

This the price of gold in dollars for the year.

Those charts first show the volatility of the dollar compared to the ruble. It also shows the price of gold in dollars is up while it is down in rubles.

So compared to the ruble the dollar is down. Weird because it is almost like the ruble in the face of inflation in the US is acting like one expect gold as the standard!

There be some normalcy bias with the gold market in dollars refusing to accept reality. If true eventually the truth should come to light and the price of gold should jump in dollars. And if it does prove to be the hedge if inflation it has been in the past.

We don't like having a large position in cash because inflation eats away at the value.

We are putting together on paper portfolios that are intended to perform well in at least 3 scenarios.

1
The economy recovers from the hit from the shutdowns. Older demographics etc.

2
We are in a recession now but it is not official yet.

3
We are headed into a depression and some companies will fail and other companies that provide required goods and services will survive and possibly thrive.

How well the fed reserve manages to reduce inflation and how high interest rates have to go to pull back all of the extra dollars in the system will determine what is ahead. Technically it has never been done previously.

Well that is how I see what is coming on the topic of preparing for retirement in the coming future.

Your thoughts?

Ben

 

[LadyLocust]

We are mostly in cash then gold and few other things. We are down about 5% from our high but flat for the last 365 days.

Gold is supposed to be our hedge for inflation but it is a mystery why it is not moving up with inflation. Could it be due to Russia's move to fold backed?

This the price of gold in Ruble for the last year.

View attachment 88873

This the price of gold in dollars for the year.

View attachment 88874

Those charts first show the volatility of the dollar compared to the ruble. It also shows the price of gold in dollars is up while it is down in rubles.

So compared to the ruble the dollar is down. Weird because it is almost like the ruble in the face of inflation in the US is acting like one expect gold as the standard!

There be some normalcy bias with the gold market in dollars refusing to accept reality. If true eventually the truth should come to light and the price of gold should jump in dollars. And if it does prove to be the hedge if inflation it has been in the past.

We don't like having a large position in cash because inflation eats away at the value.

We are putting together on paper portfolios that are intended to perform well in at least 3 scenarios.

1
The economy recovers from the hit from the shutdowns. Older demographics etc.

2
We are in a recession now but it is not official yet.

3
We are headed into a depression and some companies will fail and other companies that provide required goods and services will survive and possibly thrive.

How well the fed reserve manages to reduce inflation and how high interest rates have to go to pull back all of the extra dollars in the system will determine what is ahead. Technically it has never been done previously.

Well that is how I see what is coming on the topic of preparing for retirement in the coming future.

Your thoughts?

Ben

I think 2 & 3 are true. (My opinion, no data, but I have eyes.)

 

[Supervisor42]

I currently have a call in to our CPA to find out how much we can pull from retirement either by Roth conversion or just out without changing the big picture on our taxes. It's maddening since we are still contributing and would like to retire some day.

Depending on how much you pull out, it will likely make little difference in the percentage you pay in taxes, you will just have to pay that percentage on more money.
It usually takes a bunch to bump someone into a higher tax bracket.
The good news is, when you stop working (retire) and your salary income goes away, you drop by a lot in the tax brackets.
Ours went from about 22% to less than 12% .
Rough scale 2021 taxes:

Doya think I'm worried about pulling some from my IRA and paying 11% on it instead of 22%?
(And just ignore that 'effective tax rate' tax thing or Joe will pee his diaper)

 

[Neb]

Depending on how much you pull out, it will likely make little difference in the percentage you pay in taxes, you will just have to pay that percentage on more money.
It usually takes a bunch to bump someone into a higher tax bracket.
The good news is, when you stop working (retire) and your salary income goes away, you drop by a lot in the tax brackets.
Ours went from about 22% to less than 12% .
Rough scale 2021 taxes:
View attachment 88876
Doya think I'm worried about pulling some from my IRA and paying 11% on it instead of 22%?
(And just ignore that 'effective tax rate' tax thing or Joe will pee his diaper)

Yes but the current tax brackets are temporary. They go away in 2025?

My guy said he never saw a conversation to a Roth was worth it. Particularly if you are still working.

If you have the option put everything in a Roth to begin with. There is no telling what taxes will be like in the future when baby boomers become a smaller voting block.

Ben

 

[Supervisor42]

Yes but the current tax brackets are temporary. They go away in 2025?

They are counting on inflation causing wages to rise, booting the 'working people' into a higher percentage tax-bracket.
They won't have to raise taxes because they will be collecting a higher percentage of their income.
Canya see now why the guvment ain't very concerned about runaway inflation?
Sorry, I got off topic.
Preparing for retirement: Hide as much as you can from the tax vultures.

 

[Neb]

They are counting on inflation causing wages to rise, booting the 'working people' into a higher percentage tax-bracket.
They won't have to raise taxes because they will be collecting a higher percentage of their income.
Canya see now why the guvment ain't very concerned about runaway inflation?
Sorry, I got off topic.
Preparing for retirement: Hide as much as you can from the tax vultures.

Still off topic that is estate planning.

Ben

 

[Supervisor42]

Still off topic that is estate planning.

Ben

...I was talking about contributing as much as you can into 401K's/IRA's in preparing for retirement.

 

[Neb]

...I was talking about contributing as much as you can into 401K's/IRA's in preparing for retirement.

There is no hiding that rather it is a declaration.

Alternatives are gold silver lead tools preps... How would that be taxed if protected in a trust of some type ?

Ben

 

[UrbanHunter]

So, if you are working full time and above 59 1/2 is it logical to take a withdrawal to pay off bills while still making contributions to your 401K?

Here is my logic, if I am getting employer matching, say 5% and I contribute close to the maximum (lets say $25,000) but take a withdraw of $25,000 to pay off some bills, then I have to pay tax on the $25,000 I took out but the $25,000 I put in is tax differed (They are a wash), but I still get to keep the 5% employer matching that went into in the account. And my end of year taxes look like I didn't make a contribution. If the bills I am paying off are at a higher interest rate than what the 401K is returning it is a win.

Then again, if you can take out a loan against the account you have to pay yourself back with interest but you don't have the tax liability.
Playing these games can become important if you are rapidly approaching retirement and still have a few large bills hanging over your head.

 

[Supervisor42]

Still off topic that is estate planning.

Alternatives are gold silver lead tools preps... How would that be taxed if protected in a trust of some type ?

...I thought putting stuff into a "trust" was Estate Planning?
Maybe it's a Hunter Biden trust... I dunno.

 

[UrbanHunter]

So, if you are working full time and above 59 1/2 is it logical to take a withdrawal to pay off bills while still making contributions to your 401K?

Here is my logic, if I am getting employer matching, say 5% and I contribute close to the maximum (lets say $25,000) but take a withdraw of $25,000 to pay off some bills, then I have to pay tax on the $25,000 I took out but the $25,000 I put in is tax differed (They are a wash), but I still get to keep the 5% employer matching that went into in the account. And my end of year taxes look like I didn't make a contribution. If the bills I am paying off are at a higher interest rate than what the 401K is returning it is a win.

Then again, if you can take out a loan against the account you have to pay yourself back with interest but you don't have the tax liability.
Playing these games can become important if you are rapidly approaching retirement and still have a few large bills hanging over your head.

So here is the math on this line of thinking

You are making $75,000 per year and your normal tax burden would be $13,500, this assumes Federal of 12% and State at 6%, so you took home $61,500

Now assume that you contribute $25,000 pre-tax to the 401K and you took a $25,000 withdraw paying state and federal tax on that, so you end up taking home $61,500 but your employer paid $3,750 into your 401K as matching.
Now this does not account for lost interest or the opportunity costs but it does make your pre-tax income look more like $78,750 and if you use your money wisely, you will be closer to being debt free....

If you are 60 or older, the maximum you could do this for is about $27,000 per year before you start depleting your 401K. But if your 401K is close to where you want it to be, you can take the money out in January, pay it back in pre-tax contributions over the year, get the employer matching, and you would not be paying the higher interest on the debt your paid off during that time. Now for full disclosure you would only be getting about $21,600 of the $27,000 because Uncle Sam wants his 2 bits at the start, and you need to adjust your state withholding to pay the extra state tax as part of your payroll deductions.

 

[Plainflatlander]

Yes but the current tax brackets are temporary. They go away in 2025?

My guy said he never saw a conversation to a Roth was worth it. Particularly if you are still working.

If you have the option put everything in a Roth to begin with. There is no telling what taxes will be like in the future when baby boomers become a smaller voting block.

Ben

The possibility is there that Roths will have a different tax liability in the future. But prudent advise as of now.

 

[Supervisor42]

Priceless advice!
Pot-stocks were the perfect 'get-rich-quick thing' that they yapped about nonstop a few years ago.
Even today, none of the 3 main companys stock is above $10.
Compare that to the lame Hershey stock that DW has.
It pays such a small dividend, I would never own it.
Today, it has a higher per-share price than any stock in my portfolio:
View attachment 85713
Lame.
Ever buy a Hershey bar? I don't think anybody in this country hasn't.
*Not investment advice...but similar to beer.

Yep, Hershey's is a lame company:

NEW YORK, May 14, 2024 /PRNewswire/ -- The Hershey Company (NYSE: HSY) took the number one spot on the 2024 Fair360 Top 50 Companies list, which was announced live at The Glasshouse in New York City last night. Rounding out this year's Top 10 companies are Medtronic, Dow, Toyota North America, KPMG, Humana, The Cigna Group, Moody's, The Boeing Company, Cox Communications.

(Another thread that needs to be moved to the Financial section ).

 

[LadyLocust]

We are mostly in cash then gold and few other things. We are down about 5% from our high but flat for the last 365 days.

Gold is supposed to be our hedge for inflation but it is a mystery why it is not moving up with inflation. Could it be due to Russia's move to fold backed?

This the price of gold in Ruble for the last year.

View attachment 88873

This the price of gold in dollars for the year.

View attachment 88874

Those charts first show the volatility of the dollar compared to the ruble. It also shows the price of gold in dollars is up while it is down in rubles.

So compared to the ruble the dollar is down. Weird because it is almost like the ruble in the face of inflation in the US is acting like one expect gold as the standard!

There be some normalcy bias with the gold market in dollars refusing to accept reality. If true eventually the truth should come to light and the price of gold should jump in dollars. And if it does prove to be the hedge if inflation it has been in the past.

We don't like having a large position in cash because inflation eats away at the value.

We are putting together on paper portfolios that are intended to perform well in at least 3 scenarios.

1
The economy recovers from the hit from the shutdowns. Older demographics etc.

2
We are in a recession now but it is not official yet.

3
We are headed into a depression and some companies will fail and other companies that provide required goods and services will survive and possibly thrive.

How well the fed reserve manages to reduce inflation and how high interest rates have to go to pull back all of the extra dollars in the system will determine what is ahead. Technically it has never been done previously.

Well that is how I see what is coming on the topic of preparing for retirement in the coming future.

Your thoughts?

Ben

Hey Ben - de ja vu ? This was just 2 years ago. Look at it now.

 

[Neb]

Hey Ben - de ja vu ? This was just 2 years ago. Look at it now.

You got that right. We are riding this stagflation train as best we can. PMs seem like the obvious alternative ( not investing advise!).

Get back to me in 2 years on that.

Ben

 

[UrbanHunter]

My personal retirement program seems to be bumping into the walls of a golden cage. My pension is based on my 3 years highest earnings, but I keep getting raises so if I want to have them impact my pension I need to work 3 more years... It does give me more time to pad my retirement fund and pay off debts, but I am nearing a point of diminishing returns and I'm not getting any younger.

This year I reached full retirement age for Social Security(SSI), I decided to take it know because I don't know if I'll be alive to take it in another 5 years, and I want to get all I can before it goes into the red.... My logic is, I'm working full time, so calculate what the additional taxes (state and federal) will be and have that taken out of my regular pay, each year my earning record will increase so my SSI check will increase too. Finally, the wife is older than I, but she can't collect off my SSI unless I am drawing it (FYI, I cover her tax burden out of my regular work pay too). Plus, we have really good medical insurance and it would cost me an arm and a leg to pay for it if I stopped working, so it makes financial sense to keep working as long as the wife is alive and needs the medical care.

Anyway that's where I'm at now, I plan to continue to pay off my debts using my regular pay and SSI, while contributing the max to my retirement fund. At this point, I don't want to touch that money until I reach the minimum distribution requirement age, that way it has more time to grow.

Now for the fuzzy part... If I were to continue to work full time and draw SSI after all my debts are paid off and I had sufficient cash to cover a year's worth of living expenses in the bank, would it make sense to start giving my surplus directly to the kids? The logic would be it would help them in ways I never had and it would give me a reason to keep on working...

The math would look like this {.9*[(Income+SSI)-(tithing, 401K contributions, taxes, insurances, monthly expenses, and toys)]}= contributions to the kids;

The only down side would be that my experience has taught me that we (I) have an infinite capacity to spend money on junk and I don't want the kids to live above their means or become dependent on me for anything.

I may be overthinking this, but is anyone else bumping up against these questions?

 

[Morgan101]

I would be very careful about giving money to your children. Call me paranoid, but you never know when you may run into a major expense, and need the money yourself; a significant home or car repair; a major medical expense?

We have everything set up in trusts for our children, so when we go they will get it all.

 

[Proud Prepper]

I'd be careful about voluntary retirement, you will likely work harder than you ever have.

 

[Morgan101]

I'd be careful about voluntary retirement, you will likely work harder than you ever have.

Very true. I have a very good friend who swears he didn't retire. When he thought he was retiring he actually became self-employed . He is as busy now as he was when he was working full time.

 

[12icemaker]

Trusts are a Complicated thing, the Trust street is filled with potholes.

You need a lawyer who specializes in them and a broker who has a lot of them.

I have a Friend that has hundreds of sections of timberland, and a business or two he is also a Former Judge, Prosecutor, Public Defender, and corporate lawyer he will be drafting Our trust very soon,

I also one that has a Trucking company and Cattle Business,

They both have family trust with a board made up of Matriarchal and Patriarchal members that are generationally balanced from the original members.

I am just now getting the wife on board with setting up a trust for our kids.

The costs of not having one when you get over 6 figures is enormous.

I just hope she has not fought me on this too long with the coming tax changes it could be disastrous.

We have tons of assets in the markets and real estate, not much in Gold and Silver.

 

[Haertig]

Now for the fuzzy part... If I were to continue to work full time and draw SSI after all my debts are paid off and I had sufficient cash to cover a year's worth of living expenses in the bank, would it make sense to start giving my surplus directly to the kids? The logic would be it would help them in ways I never had and it would give me a reason to keep on working...

You are limited in how much money you can earn working when you are drawing SS. "Continue to work full time and draw SSI" is not going to be an option.

"I had sufficient cash to cover a year's worth of living expenses" - you're not talking about your sum total retirement savings here are you? You're going to want a lot more than "one year's living expenses" available to you. I'm assuming you have a lot more than that in retirement savings and are just talking about "fluid cash" here.

As @Morgan101 just mentioned, don't forget about unexpected medical expenses. Depending on what level of medical insurance you now have at work, once you are on Medicare your can probably plan on getting "less for more" than what you are currently getting. That of course depends on your current medical insurance. If you do not have "long term care" insurance, or even if you do and it's not that great, think about what would happen to your savings if you develop dementia and have to enter a memory care place. You can easily pay ten grand a month there. And depending on your age, you could linger around for ten years. These numbers are probably worse case planning, but that is indeed something that needs to be considered.

If you have significant funds in your savings and even considering the above you have quite a bit of excess, do look into a trust for the kids. Wouldn't you hate it if you left a couple million to the kids, one of them was in a car accident and was sued, and then all your hard earned money went away in a settlement? Trusts can keep your money available to your kids but protected from lawsuits like this (if the trust is done properly by a good lawyer). Or say you prefer your money left to the kids be used to buy a house or pay for college education, but not be used for day to day living expenses? Or if you want your money to stay "in your blood family" - e.g., if your kid unfortunately dies and you want the money to go to your grandchildren and not your kid's surviving spouse? You can do all this stuff in a trust. You do have to pay for that type of setup though. Expect a trust like this to run a couple thousand for a lawyer to set it up.

We are fortunate to have excess, so I give money to our kids all the time. But not just a wad of cash. I do it for specific things that they have a need for. This varies from things like a security camera, a car, a wetsuit, some swords for fencing, a trip, training and certifications, etc. A house down payment (or more than that) appears to be on the near horizon. This is not me being controlling. This is me teaching them that they have to earn their own way and manage their own money and not expect to be bailed out of situations. But also teaching them to be generous to others when they are financially able to do so. The money comes to them as unexpected gifts out of the blue, not as a monthly income supplement.

That's the way we do it in our family. And of course every family falls under different circumstances and will have different needs. You have to pick what works for you financially and fits with your needs and follows your family traditions if you have any of those. An example of a "tradition" I am talking about is in our family, the parents have paid for the kids college. Not to spoil them, but to give them a fighting chance financially. I paid for my kids college. My parents paid for my college. I would hope that my kids are financially able to pay for their kids college. By paying for my college, my parents enabled me to earn and invest money so that I had enough money to pay for my kids college. So I passed that on. Now my kids have no college debt, that money was all paid out of pocket with no loans required. Nowadays, Biden will pay off your college loans to gain a vote from you, but our family tradition is for the parents to pay for the kids college and then the kids pass that on to their kids, who pass it on to.....

 

[Haertig]

I'd be careful about voluntary retirement, you will likely work harder than you ever have.

This depends on how/where you retire. If you retire as a homesteader, yeah, probably true. If you retire as a suburbanite, you'll probably have enough free time for a vacation-a-day and still have enough left over to make your own coal.

 

[UrbanHunter]

You are limited in how much money you can earn working when you are drawing SS. "Continue to work full time and draw SSI" is not going to be an option.

Once you hit the Full Retirement Age the the limits are removed. For me the Full Retirement Age was 66 1/2, which I turned this year Before that I could claim SSI, but I could not collect anything (note, I did have to pay Medicare) because I earned too much, but once you hit that golden age (it's a personal thing based on when you were born) there is no longer any penalty (other than income taxes on it and shifting your tax bracket up). FYI, I am already doing both... no penalty, just taxes.

But your are correct, if you try to collect SSI at the Minimum Retirement Age, say 62 and work you will be penalized up to the full amount you could collect.

 

[UrbanHunter]

@Haertig, yes the living expenses were just CASH on hand, not retirement funds. I don't have a lot of real cash, property, or assets per say, but my thinking is IF I had and extra 2 grand a month, it would be nice help pay off some of the kids debts as long as I could keep working. My parents both died at 55 with no insurance only debts (that I inherited), so I have spent my whole life playing catch up. I have only had a little breathing room after I passed 65, but I can see a light at the end of the tunnel and would like to help the kids now as we couldn't afford to help them when they were younger.

A couple grand a month across a couple of kids isn't a lot, but it would be more than I had.....

 

[GeorgiaPeachie]

My personal retirement program seems to be bumping into the walls of a golden cage. My pension is based on my 3 years highest earnings, but I keep getting raises so if I want to have them impact my pension I need to work 3 more years... It does give me more time to pad my retirement fund and pay off debts, but I am nearing a point of diminishing returns and I'm not getting any younger.

This year I reached full retirement age for Social Security(SSI), I decided to take it know because I don't know if I'll be alive to take it in another 5 years, and I want to get all I can before it goes into the red.... My logic is, I'm working full time, so calculate what the additional taxes (state and federal) will be and have that taken out of my regular pay, each year my earning record will increase so my SSI check will increase too. Finally, the wife is older than I, but she can't collect off my SSI unless I am drawing it (FYI, I cover her tax burden out of my regular work pay too). Plus, we have really good medical insurance and it would cost me an arm and a leg to pay for it if I stopped working, so it makes financial sense to keep working as long as the wife is alive and needs the medical care.

Anyway that's where I'm at now, I plan to continue to pay off my debts using my regular pay and SSI, while contributing the max to my retirement fund. At this point, I don't want to touch that money until I reach the minimum distribution requirement age, that way it has more time to grow.

Now for the fuzzy part... If I were to continue to work full time and draw SSI after all my debts are paid off and I had sufficient cash to cover a year's worth of living expenses in the bank, would it make sense to start giving my surplus directly to the kids? The logic would be it would help them in ways I never had and it would give me a reason to keep on working...

The math would look like this {.9*[(Income+SSI)-(tithing, 401K contributions, taxes, insurances, monthly expenses, and toys)]}= contributions to the kids;

The only down side would be that my experience has taught me that we (I) have an infinite capacity to spend money on junk and I don't want the kids to live above their means or become dependent on me for anything.

I may be overthinking this, but is anyone else bumping up against these questions?

No easy and quick answers on this Urban. Medical expenses weigh heavily because as one ages, you never know what might happen. Just make sure to factor in those unforeseen expenses. We are blessed that my husband retired from a medical corporation because they pay all our healthcare expenses for life. Most folks don’t have that and I’ve met more than a few who have been shocked by surgery costs. Even healthy people end up with surgery. Take me, I am on zero meds, at a healthy weight, walk and garden daily…but still ended up with 2 surgeries in the past couple of years. Pelvic prolapse being the first and the second for GERD. This problem runs in my family. Doctor said pelvic prolapse was because I had large babies naturally.

 

[Morgan101]

You are limited in how much money you can earn working when you are drawing SS. "Continue to work full time and draw SSI" is not going to be an option.

That would depnd on what age you retire, and when you start to draw Social Security. It would depend on the year you are born. For me at 62 I could start receiving SS, but my outside income was limited to $14,000 per year. If you earned more than the allowable limit, your SS was reduced. At 66 I could receive full SS, which was more than at 62, and my outside income was unlimited, and my SS was not reduced. At 70 you could receive the maximum SS, which was higher than at 66, and still have unlimited outside income.

I chose the 66 option, and double dipped for four years working full time and collecting SS until I was 70. I would check with the local Social Security office to get a definite answer on all your options.

 

[Haertig]

Once you hit the Full Retirement Age the the limits are removed.

Oh, I missed that. You even stated it very clearly in your post as I look back now, yet I still missed it. Guess I started typing without thinking. This is why I should not post before 7:00am, and certainly not before coffee (which I now have in my hand!) Sorry about that! You are 100% correct.

 

[Haertig]

A couple grand a month across a couple of kids isn't a lot

That sounds like a lot to me! Very generous.

 

[DrHenley]

Pay off your house no matter how painful it is. Then think about retirement.

 

[old tex]

I love finance posts! My best advise (if you have a low income) is do not live in debt. Cut out those little things that bleed your money off. Cell phones & cable are huge pits to throw money in. Don't pay interest on anything except a car & a house & you pay those off early, pay "something" extra on them even if it's not much. (Don't think interest rates are important, go to any bank & look around. Do they look poor? They got rich on just a small interest rate & that will make you poor). Oh & know where your money goes, sounds dumb but a lot of people don't have a clue where it goes. Invest in the stock market as soon as you can (retirement account) & for as long as you can. Don't try to outsmart the market, I tried 3 times & lost on 2 of them. Stay fully invested even when your losing money. Apply logic to the money you spend, is it a want or a need?

We did all the above for 30 or so years. We aren't rich & probably not even wealthy BUT I sure feel wealthy when there's nothing that I want that I can't afford. A few years back I got to looking at the dodge hellcat. My wife noticed & said "You never buy anything for you so why don't you get one"? I got CLOSE & then applied logic, old geezer, fast flashy car, why am I trying to do here? I bought a Toyota Highlander instead. Thinking logically is good even if it bites you in the butt & I love my Highlander.