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I’m 58 years old and I have $ 700,000 in 401 (k) s and IRS. I do not have credit card debt, automatic loan payments and student loans. I sold my home in California and paid cash for the house in Texas so I don’t have a mortgage. I have retired military and I bring about $ 2200 a month after tax. My livelihood costs are $ 3,000 a month, including property taxes. How can I pay all the cost of living while working in my situation? I will not see social security for seven years.
– Derick
It seems to me that you have done a fantastic job to save and give you the opportunity to maintain your needs throughout your pension, even before social security. However, since you are not yet entitled to terminate penalties without penalties from your pension accounts, you will need to think about the best way to meet your monthly cash flow needs until you are 59.5 years old. (And if you need more help for a pension plan, consider talking to a financial advisor.)
Your monthly salary from the military ($ 2200) and your monthly subsistence costs ($ 3,000) mean that you have $ 800 a month deficit that you have to cover with savings and eventually social security. It leaves up to $ 9,600 a year.
So far, let’s not pay attention to social security because you haven’t collected it for several years. However, we will return to it later.
The 4% rule says that you can withdraw a 4% balanced pension portfolio every year with little risk that you will ever run out of money. In fact, you may have more money than you have started if depending on how your investment works.
If we apply a 4% rule of $ 700,000 you have in your pension accounts, it is said that you can safely withdraw $ 28,000 in the first year of pension. This rule also urges you to adjust the subsequent inflation withdrawals each year.
Now it is important to note that the 4% rule is just a rule of thumb. There are many reasons why it can make sense to adjust your withdrawal percentage up or down, taking into account your specific situation.
However, in this case, the amount of $ 28,000 a safe withdrawal is much higher than you need $ 9,600 to feel very safe if I were. As long as you follow a reasonable and consistent investment plan, and your annual withdrawals are usually between $ 9,600 and $ 28,000, you should have more than enough money to meet your needs. (And if you need help in making a pension withdrawal plan for the future, consider coordinating with a financial advisor.)
The man reviews his 401 (K) and Ira to determine which account he should withdraw from.
The only complex part is that you are 58 years old and you are not allowed to qualify for withdrawal from your pension account until you have 59.5. This means that your withdrawal may be subject to an additional 10% punishment from now until then.
If we think you have just been 58 years old, you have 18 months before you are 59.5 years old. At $ 800 a month, this is a total of $ 14,400, which you will need without military income to withdraw fines without fines.
So how can you cover that $ 1400? You have several options.
First, you may have enough inspection and savings account to pass the next 18 months or at least part of the road. That’s where I would start.
Second, if you have a Roth Ira, you can withdraw to the amount that at any time and for any reason without taxes or fines, up to 59.5 years of age. This is the next best choice for the next 18 months.
Finally, you could always just take money from your 401 (K) or traditional IRA and pay a fine of 10%. This is not ideal, but we are talking about a fine of about $ 1,500-2,000, depending on how much you need to withdraw to cover your taxes, and over your $ 14,400 fines. Of course, it is better not to pay that amount, but given your position does not seem to have a great impact on your ability to meet your retirement needs. (A financial advisor can help you continue to evaluate the potential of pensions.)
The man calculates how much his social security benefits will be if he claims he is 62 compared to the age of retirement age.
In a few years, you will also be able to collect social security, and this will make it even more for your benefit.
With the use of a SSA fast spreadsheet, I entered in 1965. October 1 Date of birth, 2023 October Retirement month and $ 40,000 in the current year. With these variables, your expected monthly benefit at the age of 62 would be $ 959 in today’s dollars ($ 1,127 in inflation valued).
That $ 959 would probably be enough to cover your full $ 800 deficit, although it depends on the specifics of your tax position. In any case, it seems like the likelihood is that as soon as you start collecting social security, you do not even need to regularly withdraw from your pension accounts for RMDs.
Of course, you can postpone social security while your retirement age is 67 years or even up to 70 years, which would increase your monthly benefits. You really have pension funds to make any of them, so it would be just a question of how to run the number and decide which route you like best. (If you need more help in planning social security, consider talking to a financial advisor.)
The point is that you are in very good shape. You have more than enough retirement assets to meet your needs, even without social security. When social security accelerates, you may need to use the property of those pensions at all.
The worst case scenario I see is the option of paying 10% of your early 401 (K) or traditional IRA withdrawal to meet your needs before you are 59.5 years old. However, this should not even be much more than a minor inconvenience.
Finding a financial advisor should not be difficult. The SmartSet free tool matches you up to three proven financial advisers who serve your field and you can freely enter a call with your advisers match to decide which one you think is right for you. If you are ready to find an advisor who can help you achieve your financial goals, start now.
Consider a few advisers before you settle for one. It is important to make sure you find someone you trust to manage your money. When you take into account your capabilities, these are the questions you should ask an advisor to ensure the right choice.
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Follow the emergency fund if you encountered unexpected costs. The emergency fund should be liquid – in an account that does not have significant fluctuations such as the stock market. The compromise is that the value of liquid cash can be deleted due to inflation. However, at the expense of high interest rates allows you to earn compound interest. Compare the savings accounts of these banks.
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Matt Becker, CFP®, is a SmartSet financial planning journalist and answers the reader’s personal finances and tax topics. You have a question you would like to answer? E -mail By email askanadvisor@smartaset.com and your question can be answered in the future column.
Remember that Matt is not a participant of the Smartset AMP platform, nor is he an employee of Smartset and has been compensated for this article.
The entry asks the advisor: How to cover $ 3,000 for monthly living costs? I am 58 years old when I save $ 700,000, but I will not collect social security for 7 years, the first time Smartreads appeared.
