Hello!
I am not 100% sure if I am retired but I just finished my most recent assignment so I'm taking time to think through some alternative financial strategies that I had put on hold until I had more time to pull the numbers together and then present it here for additional insights from the many experts in the community. Here are some key inputs as of this weekend that I am working from:
Household Demographics:
Me = Age 59.6 (Born 1965)
Wife = Age 46.9 (Born 1978)
Son = Age 20 (Sophomore in college)
Daughter = Age 19 (Freshman in college)
Projected Gross Income in 2025 (assuming I am now retired):
Me = $13.3k
Wife = $150.0k
Money Market Fund Interest = $8.4k
Total = $171.7k
I don't have all the final numbers for 2024 but gross income looks like it will be $460k and then maybe taxable income being $377.3k [$460k - [$30.5k + $23.0k + standard MFJ deduction of $29.2k)] with us both maxing out our retirement plan contributions in 2024.
Projected 2025 Tax Filing Status:
MFJ
Projected 2025 Pre-Tax Retirement Plan Contributions:
Wife = $23.5k
Vested Pre-Tax Retirement Plan Balances:
Me:
Plan A = 401(k) = $440.3k
Plan B = 403(b) = $420.0k
Plan C = 401(k) = $101.9k
Plan D = 401(k) = $86.8k
Plan E = 403(b) = $34.6k
Total = $1,083.6k
Wife:
Plan F = 401(k) = $103.6k
Plan G = 403(b) = $2.4k
Total = $106.0k
Vested Monthly Non-COLA Pensions (Assuming No Additional Earnings Past 2024):
Me = Starting Pension at Age 65 = $1.4k
Wife = Starting Pension at Age 60 = $0.3k
Social Security Monthly Payments (Assuming No Additional Earnings Past 2024):
Me = Starting Social Security at Age 70 = $4.6k
Wife = Starting Social Security at Age 62 = $0.7k
Emergency Savings (College / Auto Replacement / Other):
Our Joint Fidelity Brokerage Accounts (Money Market Funds) = $124.4k
Our Joint Merrill Edge Brokerage Account (Money Market Fund) = $114.4k
My I Bonds = $41.0k
My Wife's I Bonds = $41.0k
My Roth IRA = $216.3k
My Wife's Roth IRA = $108.4k
My Mega Roth Backdoor Balance = $14.1k
Total = $659.6k
Original Plan:
The original plan I had worked on was to add another $60k to our I Bonds in 2025 assuming that the fixed component was still at least 1.2% with the thought that once I turn age 65 in 2030 we could start withdrawing from the I Bonds to get us to my Age 70 when I would start my Social Security. I would also start my non-COLA pension at age 65 so it would give us additional budget wiggle room if needed. Here would be the additional monthly gross income added to my wife's income as a nurse:
My Monthly Non-COLA Pension at Age 65 = $1.4k
Monthly Draw Down of our I Bonds Starting at My Age 65 = $2.3k ($140k / 60 months)
In a stress test with a planner from Fidelity using 2024 data, my wife's net paycheck covered 93% of our average monthly budget of $7.8k so we agreed to monitor that through Q1 of 2025 for additional data points while I also build out the budget numbers for 2021, 2022 and 2023.
Alternative Plan:
After watching Mike Piper's recent BH presentation on Roth Conversions I started to wonder if still being 15 years from age 75 for RMDs and having a wife 12.75 years younger than me might instead indicate that 2025 might be a good year, assuming I am retired, to start the process of converting some of my pre-tax retirement plan balances to my Roth IRA. The thought of those dollars having such a long runway to accumulate tax-free for my wife, and potentially our two children at some point, seems very compelling. Perhaps the long-term benefits of that conversion outweigh the potential benefits of the original plan to add to the I Bonds in 2025, as we could always draw from remaining pre-tax balances if needed before my Social Security begins at age 70.
Something Else?
My wife leans towards the "do nothing" plan where we do nothing in 2025 and then revisit things in 2026, as by then we will know if I am retired and we will have another year of stress testing our budget against her net paycheck. We would still contribute to our Roth IRAs for 2025 and she would max out her 403(b) but we would not do anything else regarding Roth conversions or adding to our I Bond balances.
I am sure there are other approaches we should be considering that are not jumping out to us just yet.
I hope I have provided enough detail on the inputs that might be needed, but please let me know if any additional information would be helpful. We greatly appreciate any thoughts you might have about our situation and how to best approach things for 2025 and beyond!
Regards,
Joe
I am not 100% sure if I am retired but I just finished my most recent assignment so I'm taking time to think through some alternative financial strategies that I had put on hold until I had more time to pull the numbers together and then present it here for additional insights from the many experts in the community. Here are some key inputs as of this weekend that I am working from:
Household Demographics:
Me = Age 59.6 (Born 1965)
Wife = Age 46.9 (Born 1978)
Son = Age 20 (Sophomore in college)
Daughter = Age 19 (Freshman in college)
Projected Gross Income in 2025 (assuming I am now retired):
Me = $13.3k
Wife = $150.0k
Money Market Fund Interest = $8.4k
Total = $171.7k
I don't have all the final numbers for 2024 but gross income looks like it will be $460k and then maybe taxable income being $377.3k [$460k - [$30.5k + $23.0k + standard MFJ deduction of $29.2k)] with us both maxing out our retirement plan contributions in 2024.
Projected 2025 Tax Filing Status:
MFJ
Projected 2025 Pre-Tax Retirement Plan Contributions:
Wife = $23.5k
Vested Pre-Tax Retirement Plan Balances:
Me:
Plan A = 401(k) = $440.3k
Plan B = 403(b) = $420.0k
Plan C = 401(k) = $101.9k
Plan D = 401(k) = $86.8k
Plan E = 403(b) = $34.6k
Total = $1,083.6k
Wife:
Plan F = 401(k) = $103.6k
Plan G = 403(b) = $2.4k
Total = $106.0k
Vested Monthly Non-COLA Pensions (Assuming No Additional Earnings Past 2024):
Me = Starting Pension at Age 65 = $1.4k
Wife = Starting Pension at Age 60 = $0.3k
Social Security Monthly Payments (Assuming No Additional Earnings Past 2024):
Me = Starting Social Security at Age 70 = $4.6k
Wife = Starting Social Security at Age 62 = $0.7k
Emergency Savings (College / Auto Replacement / Other):
Our Joint Fidelity Brokerage Accounts (Money Market Funds) = $124.4k
Our Joint Merrill Edge Brokerage Account (Money Market Fund) = $114.4k
My I Bonds = $41.0k
My Wife's I Bonds = $41.0k
My Roth IRA = $216.3k
My Wife's Roth IRA = $108.4k
My Mega Roth Backdoor Balance = $14.1k
Total = $659.6k
Original Plan:
The original plan I had worked on was to add another $60k to our I Bonds in 2025 assuming that the fixed component was still at least 1.2% with the thought that once I turn age 65 in 2030 we could start withdrawing from the I Bonds to get us to my Age 70 when I would start my Social Security. I would also start my non-COLA pension at age 65 so it would give us additional budget wiggle room if needed. Here would be the additional monthly gross income added to my wife's income as a nurse:
My Monthly Non-COLA Pension at Age 65 = $1.4k
Monthly Draw Down of our I Bonds Starting at My Age 65 = $2.3k ($140k / 60 months)
In a stress test with a planner from Fidelity using 2024 data, my wife's net paycheck covered 93% of our average monthly budget of $7.8k so we agreed to monitor that through Q1 of 2025 for additional data points while I also build out the budget numbers for 2021, 2022 and 2023.
Alternative Plan:
After watching Mike Piper's recent BH presentation on Roth Conversions I started to wonder if still being 15 years from age 75 for RMDs and having a wife 12.75 years younger than me might instead indicate that 2025 might be a good year, assuming I am retired, to start the process of converting some of my pre-tax retirement plan balances to my Roth IRA. The thought of those dollars having such a long runway to accumulate tax-free for my wife, and potentially our two children at some point, seems very compelling. Perhaps the long-term benefits of that conversion outweigh the potential benefits of the original plan to add to the I Bonds in 2025, as we could always draw from remaining pre-tax balances if needed before my Social Security begins at age 70.
Something Else?
My wife leans towards the "do nothing" plan where we do nothing in 2025 and then revisit things in 2026, as by then we will know if I am retired and we will have another year of stress testing our budget against her net paycheck. We would still contribute to our Roth IRAs for 2025 and she would max out her 403(b) but we would not do anything else regarding Roth conversions or adding to our I Bond balances.
I am sure there are other approaches we should be considering that are not jumping out to us just yet.
I hope I have provided enough detail on the inputs that might be needed, but please let me know if any additional information would be helpful. We greatly appreciate any thoughts you might have about our situation and how to best approach things for 2025 and beyond!
Regards,
Joe
Statistics: Posted by careerdata — Sun Jan 26, 2025 5:27 pm — Replies 0 — Views 94
