When to start spending your retirement savings
For many years, the government has published statistics on Americans’ age and employment. A version of that data is shown in the chart below. My sense is that these figures are the basis for much of the conventional wisdom on the age at which people retire, as well as for whatever general notions people have about when they’ll start to need “replacement income.”
Source: Purcell, Patrick. “Income and Poverty Among Older Americans in 2008,” Congressional Research Service. October 2, 2009. Figure 17, page 23.
According to these numbers, less than half of the population is working at ages 62–64, and less than one-third is employed between ages 65 and 69. This implies that there are a lot of youngish retirees out there with a need to “replace their paychecks” in their mid-to-early 60s.
Given these numbers, and that need for income, you might logically expect that many people would start to draw down their IRAs in their mid-60s. But in fact, we don’t typically see that at Vanguard. What’s more, the Investment Company Institute recently issued a report looking at IRA ownership and withdrawals and found that 81% of IRA-owning households ages 59–69 did not take a withdrawal in 2009.
So what’s going on? How are IRA owners ages 65–69, a large fraction of whom are not working, making ends meet?
No doubt Social Security checks play a big role, as do traditional pensions for those who have them. But I suspect it’s something simpler: There is a big difference between individuals and households, and I’d argue that retirement, for many, is a household phenomenon. You can see this difference in a set of figures from the government’s report that look at the incidence of earnings for households (not employment per se, but rather the fraction of individuals or households who report receiving earnings from work).
Source: Purcell, Patrick. “Income and Poverty Among Older Americans in 2008,” Congressional Research Service. October 2, 2009. Table 1, page 4, and Table 2, page 5. Households categorized by age of the older of the householder or householder’s spouse.
The data show something that may be surprising: The numbers for individuals appear to track the employment numbers above pretty well, but nearly three-fifths of households where the older householder or the householder’s spouse/partner is aged 65–69 are still receiving some income in the form of earnings. Over a third of households in the age 70–79 category are receiving some earnings from work.
Though it’s true that IRAs are individually owned, I’d suspect that a large part of what we see in terms of withdrawal behavior reflects at least a reasonable degree of coordination among household members in managing finances and making decisions about withdrawals. If there is still one member of a couple working, perhaps between that and Social Security, many families feel like they earn enough to get by without spending their savings. Even if some spending from savings is needed, tax planning is likely a consideration. In many cases it can make sense to put off spending IRA assets as long as possible in favor of using other sources.
But this is a lot of extrapolation/speculation/fantasy, based on some aggregate stats. So, let me ask you out there in the real world: Among those of you who are retired, when did you start taking money out of your IRAs? Did you coordinate with a spouse or partner? How did things change once you hit 70½ and then had a requirement to take money out of your retirement accounts?
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We took significant money out my IRA at age 59-1/2 to pay cash for retirement real estate even though we continued to work full time.
My wife and I will continue to work full time until I am 65 in two years (she will be 60) at which time we will begin monthly withdrawals from our IRAs.
Social Security and traditional pensions will make up 40% of our monthly income, qualifed dividends will be about 14%, and IRA withdrawals will make up the other 46%.
Hi:
I’m 71 and have been retired for 20 years. My wife did not work outside the home. We will take our first distributions from our IRA’s this year, the RMD. The amount of the RMD is about equal to the amount I have been receiving from a Def. Comp Plan which is expiring. While I retired at 51 I always planned to retire at 55 so our financial planning took that into account. We have had a good 20 years so far and anticipate no financial problems down the road.
I am 60 years old an I retired 3 years ago. My wife still works part time and between her salary, rental property income and my retirement check we have not had to touch our IRA’s or 401k funds. Our intent once she stops next year is to use our non-retirement saving and social security for 5 years and then take start to use ret. funds. This will allow continued growth in our ret. acct. and benefit us tax wise by using after tax dollars.
I retired from the Federal Government at ago 63 1/2 after 30 years of service. I was a FERS employee which means I collect SS and a reduced government pension. I was at the top of Civil Service for 11 years before retirement. My wife has been fully retired since 55 on a very small pension. I consult in nuclear energy. I work about 1/4 time, travel extensively for pleasure and contribute to an IRA and a SEP IRA. I usually work from home and rely heavily on the internet. I work with other nuclear consultants who are in their 70’s. I have to take minimum distributions from my IRA’s and my Federal Thrift Plan (GVT Employee 401(k) equivalent) in about 3 years. Most of this will be reinvested in Vanguard funds. I plan on working at about 20% as long as people keep offering me work.
I was forced to take the required distribution from my IRA at age 72. Without this distribution, we would not have need the IRA until age 75. Currently my wife and I bank the distribution and live off savings, social security and pensions.
I’m 68 and still working in my manufacturer’s rep business with my son. I continue to take less from the business leaving him more but without him I couldn’t keep it up so we both win. I’m on vacation with my wife in Florida this week and know that I’m not ready to do this for three or four months yet. We started taking our bond dividends out of our Vanguard IRA but nothing from our stock portion. If business doesn’t pick up in Michigan more than seems likely we will probably have to start taking more disbursements.
My husband is 77 and I am 69. We sold our business and retired 3 years ago. Our sales proceeds are spread over 4 years so we have income plus Social Security. We have not yet tapped into our 401(k) profit sharing plan or retirement savings except for the RMDs.
Wasn’t the RMD rule suspended for 2009? Many retirees who had been withdrawing in previous years may have skipped last year to help their portfolios recover, causing a one year blip in the withdrawal data.
My husband is a Civil Service retiree and I still work. Between my job and his retirement income, we are still adding to both his IRA and mine. We are 9 1/2 years apart in age — so we mess up your statistics in several ways.
We each retired at 60 with a federal pension, no other dependents and the house and cars paid off.
I receive a small beer money bit from social security and we strategize as a unit. This year is my first for RMD and she will do the same next year. We hope to use that money for grandchildren in college for four years and then, then! we will spend it to supplement our style of life maintain our health or save as needs occur
Your speculation is right on in my case. My wife and I are both 66 years old. I have a military pension, and we just started drawing Social Security. She runs a little business, which I help her with. We have found, so far, that we don’t need to make withdrawals from our retirement funds. One motivation we have that you might have missed is that much of our retirement nest egg is in mutual funds, which are starting to recover recent loses. We will hold out on cashing them in until we believe the recovery is over.
My husband, age 67, is retired; I, at age 64, am still working.
My husband does not have to withdraw money from his IRAs while I am still working
My wife and I have been fully retired (no earned income) for 8 and 10 years, respectively. In addition to my Social Security we both have moderate pension income from earlier employment. With that and spending down some taxable stocks and mutual funds we hold, we are making our first IRA withdrawal this year (RMD for my age). Barring unexpected expenses or major changes in the tax rules, we expect to continue with only RMD withdrawals.
My wife is 62 and I am 70. We both collect Social Security and both work at home. We have adequate income from work, rentals and S.S. to maintain our standard of living, travel, and still contribute the maximum to each of our IRA’s. We have both been making maximum contributions to S.S. for over 30 years. I will be taking RMD starting next year but I do not have any plans to discontinue my business at home. We do, however, plan to step up our travel and start taking our grandchildren with us when we can.
I retired @ age 65 and had a stock option with my company..the first 3 years we lived off that and social security… this year I DID NOT HAVE TO PAY ANY TAXES.. for the first time ever
to Uncle Sam because our only income was social security…I celebrated on that one…Next year
I will start supplementing our social security with my RMD…If I have it figured out right, we should be able to live off our IRA RMD and social security for the next 25 years….If we live longer I will do a reverse mortgage on my house to supplement our social security…life is good
I retired in 2004 at age 62 1/2. I have continued to do some consulting, which is used to fund our travels or goes into savings. This income can vary substantially. We have two social securities and my pension through a state government. My wife also has a small pension. At present, we do not need to touch our IRAs or 403(b) until age 72.
I retired in March 2006 at age 67. I receive Social Security and a company pension. My wife, age 65, continues to work part time and began to receive early distributions from her social security. With these four sources of income we are able to manage quite comfortably without having to touch retirement savings. This is the first year that I begin to take RMD’s. This money is going into a money market account where we will probably start to withdraw from it once my wife fully retires.
My wife and I both retired in 2000 at ages 64 and 62. So far we have lived comfortably on our combined Social Security income and my retirement account from the state university where we worked. We re-invest our minimum required deductions from IRAs (with Vanguard, of course). So far we haven’t had to use my 403B, my wife’s retirement IRA, or our other savings. We enjoy our retired lifestyle, which includes travel, exercise, wine and good health (thank goodness), but we still find that it is hard to get out of the habit of saving. We’re children of the depression.
My husband is 75, I am 67. We both retired in 2005. Even with SS, a state pension, and little debt, we were amazed at the amount we needed from our IRA’s. I always worked a little, but in 2008 he went back to work part time. We still need some from our IRA’s, but were amazed at how much our taxes were last year. We wonder if it really pays us to work. I think the tax to use our own money will only become a greater concern in the years to come.
I am age 66, retired at age 60, my wife was a stay at home mother. I have been taking distributions from my IRA since retirement. I receive a company pension and social security. I decided to enjoy some of what I worked hard for before someone else gets to enjoy it. Also, the more you have in your IRA the higher your RMD and the more taxes you end up paying, better to spread out the distributions so you can keep more of your money instead of giving to Uncle Sam.
John: You ask a question but you did not answer the question.
When should I start spending my IRA? I say this because many of us old Turkeys save, save, save and forget that it is OK to spend. We were the generation that believed we must support ourselves in old age.
My husband is 81 years old so has been taking RMD for years. We bank this distribution each year. I will take my 1st RMD in 2010 due to
grace period in 2009. I will bank this money as we can live without
to meet our needs. Economy dictates scaling down as best we can to
conserve for future years. We are okay financially at this point but
are frightened by what the future may bring. So life in retirement isn’t what it is cracked up to be. Can’t chance taking a vacation
when the dollars spent may be needed to keep us solvent with ability
to pay income taxes & property taxes. IF YOU ARE NOT RETIRED today
postpone it for as long as possible so you may enjoy an reasonable
nice few years once you are out of the workforce.
My wife and I are both 66. She retired at 61 and I retired at 63. She and I both have pension income that meets about 70% of our relatively modest needs for income. The rest comes from after tax savings. Our house was paid off years ago. We had aggressively saved for retirement, so have not had to touch our IRAs since retirment, except to make annual rollovers into a Roth IRA. We do not plan to take Socual Security until age 70 to maximize our benefits. We probably won’t need to tap our IRAs until about the time we have to take Required Minimum Distributions. With us, it has always been about living a little below our means,
Hi, I’m 53, and my husband of 24 years is 79. My salary is about twice his Civil Service pension. Since turning 70 1/2, he’s taken required minimum distro’s from his IRA’s. Neither of us paid into Social Security, so we don’t get any SS benefits.
To prepare for my eventual retirement, big drop in our income, possible long-term-care expenses etc., we live below our means. We share one car and rarely eat out (we like our own cooking). We spend a lot of $$ on our home and property, since he spends 99% of his time there and I spend 99% of my free time there.
We retired in 2004 at Full Retirement Age and began taking Social Security. With SS, a small pension, and earnings from our taxable savings accounts we had no need to tap our IRAs. Began RMDs this year (2010) so we are now withdrawing from our IRA accounts.
My wife (73) and I (75) both retired 15 years ago. I started SS at 62 and she started at 65. With my pension after 38 years and hers after 10 years plus SS and earnings from substantial taxable savings, we have not tapped our IRAs for living expense. Both RMDs are reinvested with Vanguard. We have been debt-free and first paid our home off in the late ’60s and now live in a much newer home. We enjoy our retirement and are able to assist our two children from time-to-time when we see something we can do for them that we feel they deserve. When we see something we want or a trip we want to take we usually do it. As an earlier reader expressed ‘life is good’ and so far our health has been pretty good as well. When we married 55 years ago we started out with $57 and change.
I will retire in 1 month at age 58. My wife loves her job and will continue to work for a few more years. I will collect a pension and hope to work part time. House is paid off but haven’t gotten my two sons out of the house yet. When the wife finally retires I hope to move to a more retirement friendly state and downsize the house. We will both collect SS when we reach age 62. At that time we will have a better idea as to whether we will continue to work part time or start drawing from our IRAs/401k, or both. Too many variables at this point to look too far into the future…
I am 41 years old, wife who doesn’t work, 2 kids (4 and 8). Have worked abroad for 15 years and could probably retire in 2-3 years to cover 105K/year in expenses/donations to charity with bond income (mostly Vanguard 42K) and rental income (30K/year) on second home owned free and clear. Total net assets 1.8M.
I just transferred 50K in after tax 401k funds to a Roth and 70K mix of before and after tax to a Roth. I am planning to add 20-30K/year in after tax funds to my Roth via the 401K this year and next if the tax law allows it.
Has anyone tried to retire with young children in California? Would 100K/year be enough to live on in Southern CA? Is this advisable?
I know I can’t use the 400K I have in 401k/retirement for a good 14-19 years but intend to let it grow.
You need less to live on than you think. If you are debt and mortgage free, and live a simply life style. A good emergency fund in savings, social security and tiny pension should cover expenses including a small budgeted amount for “fun” (vacation, meals out). I like the idea of living off the RMD when that time comes. Then SS, RMD and the tiny pension should do.
I just retired this month at age 63, had life planned out and then spouse died at age 58 and everything changed. I am living off SS, a small amout from two pensions I worked. The trick is to go into retirement debt free, live below your means, and I don’t plan to use any of my ira, hope to leave it for the kids, who have none of the same benefits I had while working. So don’t spend more than you need and live smart.
well said! You can live off your retirement savings if you are not foolish.
General comment: the effect you are seeing may be partly due to the type of people with IRAs- generally more affluent and financially savvy- so they are waiting until age 70 to start withdrawal- don’t need the money now.
Data point: I am retired at age 62. Since I am well off, I won’t take SS or withdraw IRA funds until age 70. My wife works, but her small wage hardly matters.
I notice that no one mentions ROTH. I was widowed in 1986, and retired in 1991, using both my spouse’s and my own IRA’s to roll over in a ROTH, seeing that I would not need the amount RMD when I tuurned 71 1/2 in 1998. As this was the time ROTH taxes could be spread over 5 years, I used the sale of my house to pay the taxes. Have been able to live on my state pension and SS, and the ROTH has grown tax free for the past 12 years, so at 81 expect I can tap ROTH if needed, but also pass it on to heirs if I don’t live to 101 as my mother.
I retired a year ago, at age 64; my wife retired 3 years ago, at age 59. We have not begun withdrawing from IRAs. Our income is coming from our 2 pensions, my social security, and some withdrawals from non-retirement savings.
Well, of course the percentage who withdrew IRA funds in 2009 was low. We were given a one-year moratorium on required distributions, so one would expect 2009 to be relatively low. How did 2009 compare to 2008 and earlier years?
We retired in our 40s, but had saved for that period until 59-1/2 outside of IRAs/401(k)s. Just now reaching the magic age this fall, and will begin to withdraw some living expenses, but once SS and pensions appear in our 60s withdrawals will fall back again. We’re rolling some over every year to Roths, to reduce the RMD amounts later on.
I did not start withdrawing retirement funds because we did not need the money. Both continued employment and other income and savings are adequate for our needs. After 70.5 years I took minimum required withdrawl to avoid penalty, either in cash or by charitable transfer. I expect to continue this pattern while resources permit.
I am now 73.
People defer withdrawing from IRS’s because they are afraid the fund will run out before they do. A simple but effctive solution would be to take part of the fund and buy a SPIA, a check a month forever. Can’t be beat. I even take my RMD’s in a SPIA and I love it. Can’t lose.
I didn’t “retire” until after age 70, and didn’t start Social Security until age 70. We have taken the required RMD since 70-1/2 but skipped 2009 as allowed. We both have social security, plus I have a pension, and we have interest and dividend income.
Delaying IRA distribution is really a fairly simple decision, in our case. No debt including no mortgage payment significantly eases cash flow. A combination of Social Security, pension plans, and investment income are satisfactory now. Delay IRA distributions until the RMD kicks in … gains are compounded until that time. The IRA is backed up by an Annuity (no minimum distribution requirement) for further down the road. Spend non tax deferred first, spend compounding IRA when required minimum distribution rears it’s head, and spend the compounding Annuity last.
In our case, my wife of 63 still works fulltime and does not draw SS. I’m retired and my income includes SS + a pension. Thus our income covers 100% of our normal expenses. However, we do have to draw from our investments to cover our travel expenses.
Not sure how it will be when we are both retired in 3 more years.
I find these “real life” responses from readers very interesting. I would suggest doing more of them-it’s like setting around a table with friends.
Maybe the large number of people who did not take ira distributions in 2009 was BECAUSE THEY WERE NOT REQUIRED TO DO SO that year. I suspect that will change in 2010 because they will now have to take their minimum distributuion or pay a penaty
nice ’stat’ article BUT.. you never answered the question.. “When to start spending your retirement savings” … you turned it around and asked us…
you’re supposed to be the expert not us.. so give us your take
I created a set of spread sheets to plan my retirement. One of them projected my resources and needs, taking into account the impact of inflation on both needs and Social Security. “Resources” combined my retirement savings with my wife’s. When the spreadsheet indicated that I could afford to retire, I did so (just short of age 62).
However, my wife (a year younger than I) continued to work, primarily to provide us with her group health insurance until I neared age 65 and Medicare. When my spread sheets indicated we could afford the cost of the COBRA extension of the health insurance until she was on Medicare, my wife retired (not yet age 64).
With a small pension and my wife’s wages, I was able to delay Social Security until almost age 65. This was possible because (1) the mortgage on our house was already paid off, (2) we learned to live frugally when I was laid-off in the 1990s, and (3) we had some non-retirement investments that we slowly liquidated (not yet done).
Today (ages 69 for me and 68 for my wife), we live quite comfortably. We travel occasionally. We entertain. We have active lives.
We still have not yet started withdrawing from our IRAs, but we have been shifting funds from our traditional IRAs into Roth IRAs.
You are exactly right in our case. I retired due to health in 2009 at 61 and I receive Social Security Disability. My husband is still working…probably for 5 years. We have always lived beneath our means and will continue to do so so we continue to put away a substantial amount. We may not take withdrawals until my 70 1/2 RMD with good fortune. Some positive moves in the market will help. Thanks Vanguard for the education and the opportunity to invest with low expenses. Neither of us have a pension of any kind.
I don’t think 2009 is a good measure, since there was no RMD that year. What was the number for the year before?
My age is 77, and wife a year younger. I retired age 66, wife at 73. We have lived comfortably since my retirement on both our SS, my pension and her salary. Now she is retired and drawing her pension we have a small “deficit”. All the money I HAD to draw from RMD went to taxes (!!) and the remainder into her (taxable) account, as my IRA makes me the richer of us two.
The fact we have had to spend so little of my IRA is because
WE WERE SO LUCKY TO LIVE AT A TIME WHERE I EARNED MY PENSION - AND - WAS ABLE TO PUT AWAY 13% OF MY SALARY (3% from my employer) FOR MANY YEARS WHILE THE STOCK MARKET WAS DOING WELL.
(What are we going to do with all this money?)
I retired at age 58 and withdrew my nontaxable money out of my Ira at that time. I lived on my pension and wifes social security until I was 65. I have lived on my Pension and Social Security since I was 65. By not withdrawing my IRA I saved on not paying taxes on my Social Security.
Than when I was 68 I decided I better withdraw because my long term taxes were going to be worse than paying them now..
Currently taking more than the RMD to save long term taxes and putting what I do not need into other investments.
I am a single female who retired at age 60, with a company pension. At that time, about half of my investments was in non-retirement accounts. I used my non-retirement money to pay off my house at age 62. I have used my non-retirement accounts to pay taxes on IRA-to-Roth conversions. I continue to use my non-retirement accounts to pay for major purchases such as a car, appliances, etc., as needed. After 5 yrs., my non-retirement accounts are about 2/3 the value of my retirement accounts, which I’ve not tapped.
I project that I will have to start tapping my retirement money around age 76, at my current spend rate.
My pension is still sufficient to cover my normal household budget. I project that I can delay collecting social security until age 70. Note that I have no outstanding debt, except monthly charges that are paid in full when the credit card statements come in. I live modestly and comfortably, not as a miser. I do stick to a budget, both yearly and long-range.
My current plan is to have all or most of my IRA converted to Roth by age 70 (I am currently 65), balancing taxes against effects of income on Medicare premiums.
Barring catastrophe, I should have enough to live comfortably until age 100 (ha!). Hey, I’m optimistic!
I worked until I was 75 with a reasonable income and when I had to with draw from my IRA it was transfered to other savings. My husband has just turned 70+ and will start withdrawing from his IRA this year.
Between our SSI and interest earned on other savings we are living without stres but being rather frugal with our spending. We remain concerned about needs for health care costs later in life even though
presently we remain in good health.
Not yet retired, but I plan to hold my IRA & 401k as long as possible, due to tax advantages. I put my fixed income into those tax deferred accts, and as one gets older, you usually want to reduce equity, not fixed income exposure. Let the bonds grow tax deferred and sell the equity funds in taxable accounts to fund earlier retirement years. Hopefully by the time I am 70, I’ll only have to take those RMD, and not really drain the tax deferred accounts until after 80. That’s my plan.
I started taking money out of my IRA at 70 1/2
This article did not explain what the title indicated it was going to explain. When should one start draws from their IRA to avoid taxation to their heirs?
Like many on this list, my wife and I seem to have a comfortable retirement. But where will we be in 10 or more years? Health care is still a big question mark and will we be able to afford it. We’re also concerned about the economy and the rocky road we’ve all traveled the past three years. As one person mentioned, you didn’t tell us when we should be taking money out of our IRA. And, on a final note, many of us lost 40 percent of our money with the recent crash. Is Vanguard going to protect us, or should we expect the BP approach?
I am 77, wife 74, no pensions. We take only the RMD from our retirement accounts. That is addition to Social Security is enough for most of daily living expenses. We tap other investments as needed for special circumstances.
We live fairly simply, but do not do without anything we really want.
I am 70 and my wife is 67. We retired 10 years ago. I immediately began withdrawing IRA funds and used my post-tax accounts for special needs(travel), capital needs(cars, etc); in order to maintain no higher than a 15% tax bracket. If we used all our post-tax accounts first we would have been below the 15% tax bracket for several years, and at this time probably up into the 25% tax bracket. I do not understand why finiancial advisors always suggest spending down post-tax funds beore tapping into IRA’s and 401’s. Can you enlighten me? It seems that for tax purposes saving post-tax $ for special needs makes more sense.
I am 60 and just retired. I have $400,000 in after-tax savings, so I do not expect to need pre-tax retirement savings or social security until I am at least 68. Until then, I plan to withdraw IRA money or recharacterize it as Roth IRA only to the extent that it is not taxed above the 15% federal rate.
I don’t understand waiting. (It must be pointed out that I am a finacial (among other things) idiot.) When I figure the amount of money that can be collected by starting withdrawls as soon as possible against the increased amount that will come at a later age, it always takes 12-15 years to catch up to the money not taken while waiting.
My husband retired from the military in 1968 and from industrial management in California in 1986 at age 60 and we built our home in Virginia. He took SS as did I at age 62 and that along with our pension sufficed except for big items like cars that we took money from Vanguard, we did not splurge, we did what we liked in moderation. How many times I asked him, do you want ANYTHING? Do you want to go anywhere the answer being it is enough being here with you. In 2007 he developed incurable duodenal cancer and left me. I sold the house and moved to PA near children. No mortgage, no car payment, a 50M income from SS and pensions. I have not touched my IRA except for mandatory withdrawels I reinvest in mutual funds. For all the people above who have replied I ask you, if you have adequate funds to live on, do the things you want, trust me, it is no fun alone, it is scary and lonely.
what in the world will you do with that extra money to enjoy life in 10,20, or 30 years?
Do it now, do it now.
I have been retired for nine years now and have yet to tap my IRA. With a good pension, social security and an income stream from individual tax-exempt bonds and stocks with growing dividend streams, our cash flow is more than ample. Planning for retirement in our 40s was the key. I will have to tap my IRA soon and have to reallocate the proceeds from maturing bonds and sell some stocks to reinvestment into growth stocks that do not pay dividends. This is to avoid paying higher tax rates on income I don’t need yet.
The last 5 years before I retired, I was living on my retirement pension to determine if it was comfortable. I put the maximum 14% in the company 401K plan, at the time I could put in 25% in the company stock option plan, and of course was paying 8% SS taxes in addition to the typical work costs. After 30 years with the company, the pension is about 45% my last salary. So I need just a fraction of my SS to make up the difference.
I plan to convert my stock in the 401K to a Roth 401K as I see no present need for it and expect the stock to rise at least with inflation.
You hit the nail on the head. My wife has retired, I still work. She receives Social Security and a pension check and we have not touched her IRA, which was funded by her 401k. Dont really plan on touching it until she is 70 1/2
Wow, it is good to hear that so many savers like me are able to retire comfortably with a good long term plan that they implemented very early in their lives! I dont like the RMD as it sounds like just another way the government dictates your earning capacity and supports the tax base well after we all have contributed, (extensively) during our working years.
Currently at age 49 w 1.8M Net Worth. Small mortgage(140k), we are shooting for 10 more years of working and targeting a Net Worth of 3.5-4M. Considering Ex-Pat to Costa Rica to avoid these RMDs and what has been happening in DC..
I’m almost 63, still working full time; husband 66 is retired. No debts, house paid off. He gets a pension & SS; I will too once I retire, which I’m contemplating. According to numerous articles, we need well over $1M to live in retirement comfort. So I’m afraid to take the “big step”. I save everything I make and we live off his income, but we don’t have $1M. I don’t want to wind up at Wal Mart when I’m 70 because we miscalculated.
I retired at 61 with a small company pension and my wife is still working. We plan on using our non IRA accounts to fund us until such time as we need to tap our IRA’s. We do not plan on using SS until we are 66 and then between our company pensions and Social Security we will have enough to live on. Its clear that we need less than we thought to live on since we are debt and mortgage free.
Having retired at age 58 (spouse retired at 55), I have no intention of withdrawing from our IRA’s prior to age 70.5. I think our household is similar to many households who have invested in IRA’s. We did so because we could, not because we had to. I think most money in IRA’s belong to people that would have invested in retirement savings even without an IRA. For the most part (81%?), IRA’s haven’t encouraged more retirement savings. The “cost” of IRA’s to the government in the form of tax deferments and exemptions was wasted on the people who did not need it.
Wife & I both 80 this Yr.Rmd was put into another Vang. Acct. after we had Van pay our qtrly taxes .
This yr we will keep the excess over tax needs.
We are a part of those in 70s with earned income but only because the annuity ? value of my pension that my wife will
get should I die is reported on a W2 .Could this skew the stats for our bracket?
My husband and I are age 79. I retired at age 64 with a 7 year severance package. He retired at age 65. We both have Social Security but no pension. I did convert some of my TIAA CREF to an annuity and took 10% on one account for travel. We did not tap our Keough/IRA accounts until required. I converted my IRA to a ROTH IRA when the four year tax benefit was offered. Although we take the required distributions we would use non tax deferred savings for expenses if allowed.
Our expenses are high because we moved to a Continuing Care Retirement Community. The monthly fee is partially offset by a large tax deduction for the amount calculated for long-term care insurance. This way we have peace of mind that both of us will have assisted living and/or long term care for an unlimited time at no extra cost except for personal expenses should we need it. If we had chosen to “age in place” we could not afforded such care for more than a few years at most. Our children will inherit 75% of our entry fee and we enjoy an excellent standard of living meanwhile.
We do our financial planning on living to age 98 and should be OK with 4-5% withdrawal rate.
My experience as a health care professional is that seniors wait too long to down size or prepare for costs of assisted living/long term care. Long term care insurance is very expensive and benefits are limited.Home health care is over rated; professional services are very expensive; family care is physically and emotionally…
A serious consideration is have you paid off everything? and another, upon retirement should you move to a ‘tax friendly’ state? There are many resources on the net that help you decide where to move, everything from climate, resources, taxes, tax breaks, non tax states, health care, proximity to airports, and amenities. Staying in the same place may not be the right move, esp. if it is an expensive city/or state.
We are 10 years different in age. I still work at age 67 and may work 1-2 more years. My husband may work 5-7 more years, or not. We will both be eligible for state pensions and I am delaying applying for soc. sec.and the biggest plus is that we are debt free. We have a large nest egg, and don’t foresee needing it, but one thought is… use your 401 or 403 money after you retire for a few years, pay tax on it, and LATER at age 70 apply for Soc. Sec. THen you’ll pay tax on the former at one rate, and less tax later on , bec Soc. sec. income is taxed at a different rate.This means you have the same income but lower taxes. You will always pay the tax on your RMD or distrib. I think some people do this and their over all fed. tax is lower. Before we get there, we’ll research further, talk w/ an accountant, etc.. Also, Vanguard, thanks for answering questions from all of us.
This is the age group that will also be receiving inheritances from their parents. This is an extra source of income that needs to be considered.
What strikes me in reading these comments is how many of the folks here are able to retire because of a pension in addition to social security. I’m wondering how many of them give a thought to today’s workers [their children and grandchildren] who won’t be so fortunate — both because of the lack of jobs with pensions and because of the attacks by companies on pensions they’re currently paying.
Get ready too for recommendations by the “Cat Food Commission,” headed by libertarian multi-billionaire Pete Peterson, about reducing social security and medicare. If not for you, surely for your kids.
Finally, what has been the effect of the recession on these 401(k)s you’re withdrawing from? I’m eligible for withdrawals, but not forced to take them for a few years. My accounts — again, with Vanguard — took huge hits and are only now getting back to the level they were at two years ago. How on earth can one be confident that he/she will have funds for retirement when there’s this huge a fluctuation in your basic asset?
I am female, age 66, retired at age 57 and live alone. I have not yet taken any money from my IRA. When I started working, women had a hard time earning more than minimum wage, even with more education. I also had children and other family financial obligations so I always worked two, sometimes three, jobs but did not earn enough to save much. My savings did not start until the kids were grown, I’d gotten a night school college degree and got into a job that had a real career ladder and lots of mandatory overtime. I started filling my IRA every year and eventually my employer also offered a version of 401k. After 53 years of working (I started at age 4), I retired with very good health coverage and pensions and found I did not really need to withdraw anything. I rolled my 401k into IRA and began a program of converting the IRA to Roth IRA. Since my savings are not nearly as great as I’d like, I’m saving that for care when I become less able to care for myself. This is very important to me because my mother was in a nursing home 8 years andI may be too. I don’t want to burden my kids as they have already taken care of elderly in-laws.
Your scenarios usually involve people with larger savings than most people I know. For many of us, the IRA is all we’ve got so we are thrifty of it.
I am 67, wife 61. I retired completely last year. She still works part time. State pension, small construction pension with very small SS is working for us at the present time. Am rolling my deferred comp into Vanguard IRA. I may start using some of IRA for vacations and such within the next year or two. When my wife retires, our monthly income will drop, so IRA will come in handy. We also have 2 Roths, that we don’t plan on touching for at least 15 years. If inflation doesn’t eat our savings, we should be OK. We have long term care insurance, but it won’t cover everything, so we may need the proceeds from our home ( when sold) to help cover that difference. Good luck to you all
I didn’t retire until age 68. Used Soc.Sec.+ Savings. My wife retired at age 62. We did not
tap IRA’s until my age 70 1/2 at RMD time.
Mr & Mrs. Typical ??