Debt: Mortgage ($98K @ 3.875%, ~21 years to go)
Tax Filing Status: Married Filing Jointly
Tax Rate: 2019: 10% Federal, 6% State
2020: 10-12% Federal, 6% State
State of Residence: Missouri
Age: 58 (wife is 62)
Desired Asset allocation: Currently 70% stocks / 30% bonds but probably should shift to 60/40 or even lower
Desired International allocation: 30% of stocks; 20% of bonds
Retirement Portfolio as of 3/15/20 ~$604K (Including mine & wife's)
Traditional IRA & 401Ks (all in my name)
Vanguard Total Bond 25.7% (part in a fund that is extremely similar to Vanguard Total Bond; even the ER is the same)
Vanguard Total International Bond 6.3%
Vanguard Total Stock 45.8%
Vanguard Total International Stock 19.2%
Vanguard Prime Money Market 1.6%
Roth IRA (all in wife's name) (we meet all the requirements to take out all of it)
Vanguard Prime Money Market 1.6%
Pension
I'll get about $3K/year starting about 2024. No COLA adjustments. We haven't factored it into the following plan, so it provides a little cushion.
Other Assets (not included above)
Whole Life Insurance Policy
Face value $25K+
Cash value about $14,500
My parents bought this when I was very young. I have an inexpensive level-premium term policy that I can keep for about another 10 years, so I don't think I really need this for insurance.
Health Savings Account
$13K in some kind of money market-like account (we have about $2K in medical expenses that we haven't gotten reimbursed yet)
Notes:
1. I'm retired. We hadn't planned for me to retire quite so early, so we don't have everything lined up as we'd like them to be. We'd appreciate suggestions about how we can get where we should be.
2. Our 401Ks are not eligible for a Rule of 55 distribution.
3. We're not eligible to take a corona virus-related early distribution from our traditional retirement assets.
4. We live in a low cost of living area. We expect to need about $50K/year.
5. 2020 & early 2021:
- 1. We need about $53K to live on from now until May 2021, when I'll turn 59.5.
- 2. We would especially appreciate advice about what we should do during this time period.
- 3. We could take two distributions (for 2020 & 2021) of a series of substantially equal periodic payments (SEPP) from our traditional retirement assets and avoid the usual 10% penalty on early distributions. IRS dictates we would have to segregate part of these assets & use that part only for SEPP for five years. Of the amount that we segregate, IRS would let us take about 5% annually. So, segregating about $300K would provide $30K ($15K each year) before May 2021.
- 1. We'll need about $135K to live on for this time period.
- 2. We plan to start taking penalty-free distributions from our traditional retirement assets in May 2021 to provide for our needs.
- 1. Social Security says we should get at least $37K/year starting in 2024.
- 2. $350K in our traditional retirement assets at the beginning of 2024 will provide the remaining $13K/year (3.7% distribution rate).
1. We need about $53K between now and May 2021. What should we do? Which of these options provide tax breaks, etc. that we should try to save for later?
- 1. Distribution from our HSA (up to $2K)
- 2. Distribution from our Roth IRA (up to $9K)
- 3. Cash out my whole life insurance policy (up to $14K)
- 4. SEPP distributions from our traditional retirement assets (probably up to $30K; please see note 5.3 above)
- 5. Early distribution(s) from our traditional retirement assets (10% penalty) (up to $53K)
- 6. Loan from HELOC to be repaid in May 2021 (up to $40K)
- 7. Use a credit card w/ 0% introductory APR & pay it off in May 2021 (up to $20K, if we could get that credit line; that's about what we normally spend w/ credit cards, and pay off monthly, in a year)
- 8. Work
- 9. Other suggestions?
3. How should we get to that/those AA(s)? Switch some amount each month until we get to our goal percentage(s)? Go all at once right away?
We will appreciate whatever help you can give us!
Brad