Retirement strategy question

6 years ago

Hello!

I am retiring from a job I've had for 20 years. I plan to do this over 1-3 years (not sure yet) where each year is 1/2 of my normal work hours and 1/2 of my normal pay. I'm 65 and am not yet getting SS. I will need to supplement my 1/2 pay during these 1-3 years with $ from elsewhere.

My question, which would make most sense for me in terms of optimizing my retirement savings:

1. To withdraw the extra $ I need from my retirement savings? (It is not an IRA account, it is an account set up by my employer with the employer contributing a certain fixed % [up to 10%] of what I contribute from my pay check.)

2. To get the extra $ I need by contributing LESS to my retirement account (thus getting less matching $ from my employer)?

3. A combination of the two?

Thank you!

Rick

Featured Answer

User

6 years ago

last modified: 6 years ago

I don't think you should work half time. You should continue working full time until you start drawing SS. I read you can not afford to work half time now.

Optimizing your retirement savings, usually means saving, not spending before you retire.

Does your work have a Human Resources department who can explain your option?

Sort by:Oldest

Comments (7)

Elmer J Fudd
6 years ago
Why not start receiving social security? It doesn't make sense to me to draw from savings while you're working and while that source of extra income is readily available to you.

The "employer account" sounds like some kind of retirement program. Is that what it is? If yes, a double mistake to draw from that, since annual earnings in the accounts would normally be tax free until withdrawn. Meaning, faster accumulation and greater compounded returns. than funds in your own accounts outside of a tax-advantaged plan.
maifleur01
6 years ago
I have to agree with Elmer Fudd to a certain point. Since you are planning on working until full retirement be aware that until you reach Full Retirement Age for SS your SS payment may be reduced. Unless you own the company your employer may agree that you work 1/2 time for a while but then decide that that you must either work full time or retire. I have seen it happen several times where people have planned to work part time after retirement.

Your employer account may or may not continue to allow you to contribute and will not allow if you are drawing from it. If you can no longer contribute you will find that you may have the extra that you need. You also need to rethink retiring if you will have to supplement your retirement. Any pension that you have from your employer for most people will only be about 1/3 to 1/2 if lucky of your current income. Although it is common to read that once a person is retired their expenses go down if you plan on an active life after retirement they will probably go up. The expenses for things needed for work will go down but the other expenses of living will continue to go up even without changing your lifestyle. A major expense even if using a Medicare Supplement policy is health insurance as your employer may/may not continue your health insurance when you turn 65. Some employers only give a supplement payment for you to purchase health insurance rather than continuing employee insurance, husband's company gives him an extra $200 a month.
Related Discussions
Dumb Personal Finance/Retirement Question
Q
Comments (22)
jamies, if you continue to work, you may improve your benefit payout if the amount you earn in those last 11 years exceeds the lowest earnings in your early working years. So, for example, if you work an additional 11 years and make, say $30k per year, but in the first 11 years in your career you made $15k, then your benefit amount will increase because the best 35 years worth of earnings will be higher. Also, you can't collect soc sec until you reach age 62. I think it's important to understand that the calculation is a two-step process. The first is to calculate your benefit based on your best 35 years of earnings. That will give you your benefit amount. The second step is based on when you start collecting. The sooner you collect, the smaller your monthly payment will be as you will be collecting longer. If you postpone collecting, then your monthly payment will rise as you will be collecting for a shorter period of time. So, for example, suppose actuarially you are expected to live to 85 and they calculate your benefit based on that. At 65 they will expect to pay you benefits for 20 years. If you start collecting at 62, then they will expect to pay you for 23 years. If you start to collect at 70, then they will expect to pay you for 15 years. Thus, your benefit payout gets adjusted based on the estimated number of years you will be collecting. But the initial amount of benefit, prior to that adjustment, is based on your 35 years earnings.
...See More
Retirement Investments Question
Q
Comments (10)
Greetings cactus catie, The problem that many folks who invest have is that when the value goes down a little, they don't get too worried ... ... but when it's gone down quite a lot - they get scared ... and sell. Some investors set rules for themselves - when a fairly non-volatile stock goes down 10% - they sell. Once it's gone down quite a lot, if it's a quality stock, sometimes/frequently it may be a time to buy more, rather than selling. As one mutual fund manager used to tell us mutual fund sales guys/gals, some years ago - he liked to get a Dollar for 60 cents ... that is, a stock where the value he assessed, after some investigation, to be worth a dollar, that he could buy after a market drop for about 60 cents. A stock that I bought 45 years ago for $4.15 - 20 (paying about 10 - 12 cents annual dividend) had gone up, down and sideways for many years, and the dividend had usually been between 3 - 4%. In about June of '07, I could have sold it, paying annual dividend of $3.08, for $107.00 or so ... and in the summer of '07 they increased the dividend to $3.48. That bank was substantially involved in the meltsdown of the U.S. financial fiasco, and the share price dropped to about $40.00. I shoulod have been watching it closer and have sold it after a slight drop, but didn't. Didn't buy more at about $40.00, either ... and it has since recovered to about $75.00 or so ($76.84 at today's close). I've been considering buying another Canadian bank ... but haven't, yet. I'm not too enthused about mutual funds - as many of them, despite their claims of their managers' superior skill at investing, don't produce any better results than the segment of the investment systemm in which they operate. Part of the reason is that they buy and sell quite a lot, with fees payable each time ... and they charge a management fee of usually 1.5% per year, sometimes more, as long as they manage their clients' money - and in Canada, most of them charge about 2.5% (or more) a year. While I paid a commission to buy that stock, 45 years ago, I haven't paid anyone a cent to manage it, since. Big difference! Having lived in 22 places in my 80+ years, and for a number of those years having lived in accomodation provided by my employer, I've never owned a home. While I may be over 80, I feel comfortable having something like 80%, sometimes more, of my assets in common stocks of (mostly) quality companies. Part of the reason being that I feel that I should finance my retirement to age 100 ... in that they tell me that most folks would rather run out of days before they run out of money ... rather than theother way around. When I was 70, I thought that to be six blocks of five years each. And, as most of us need a larger fund for probable health care and possible retirement or nursing home accomodation, I'd probably have a greater need for money later in that period ... and inflation means thatthe pricedes of things go up, which owuld mean a larger need for money, later. So _ I'd better stretch the eating of that first five-year block to 10 years ... which would mean 5/6 (83% or so) of my assets intact after 10 years. As many advisors suggest that many well-chosen, quality stocks tend to develop growth, despite interim fluctuations, over 10-year or longer periods, I like the prospect of possible growth in the number of my invested dollars ... and when I pay tax at regular rate on only half of that growth ... andnot until I sell - I like that scenario. Much of the increase comes in theform of dividends, to keep me afloat in the meantime ... and in a number of situations, I pay a low tax rate on them, but interest income is taxed at top marginal rate. That should be enough for now - and the library closes in (now, under ) five minutes. Good wishes for increasngly skilled investing. ole joyfuelled (with a bit of help from a dollar or two,, here and there)
...See More
Fed CSRS - Voluntary Retirement Account Question
Q
Comments (8)
colorcrazy- I'm retired under CSRS, and what I can tell you is that no one can answer your question with the info you've provided. You need some planning time with a retirement counselor or a private investment planner. When you retire, what will your expenses be, and what will your income be...over the long term? In my case, my annuity is sufficient that I have not had to drawdown my TSP or any of my other investments, and I doubt that I will ever have to. I made that determination before I put in my retirement papers. Maybe that will be your case, or maybe you'll have to work another 20 years. You won't know until you: 1) do a serious budget, 2) have a reliable estimate of your annuity, and 3) have an assessment of what you can expect from other investments, as well as the VRA...if you do it. And if you have the money to fund a VRA, you have money to do other things with it that may be just as good. Investing in a VRA might be a good idea, but it won't make the difference between being able to retire now or not. The one thing I can say with certainty is that, until you have a financial plan and it shows that you can retire and stay retired without having to take a job as a Wal-Mart greeter when you're 85, you'd best hold on to your job.
...See More
"What bothers you most at your retirement home?" question
Q
Comments (3)
Thanks, will check it out, but I don't give out information unless I know who, what, when where etc!!!! This is my follow up on what Ed suggested. I typed in what was given and it would not come up. Said it was not a valid site etc. Checked it out a couple of times. Did type in monkey survey and this IS a valid sight for people (anyone) to do surveys and get information. SO--my only suggestion is to be very careful. Ed did ask for a reply and so far Nothing. Thanks Marie This post was edited by marie-ndcal on Thu, Dec 4, 14 at 16:08
...See More
jrb451
6 years ago
I'm with Jim. Why work half time if it requires you to tap into your retirement accounts.
User
6 years ago
The age at which you can collect your full social security benefit is probably not age 65. If you were born in 1960 or later, the age at which you can receive your full social security benefit if age 67. If you were born between 1943 and 1954, your full retirement age is 66. Benefits are reduced if you collect social security benefits before your full retirement age.

As has been pointed out above, you should continue to work full time until you can collect your full social security benefit. Also, if you can continue to work and defer collecting until age 70, your social security benefit will be increased for every year you defer collecting past your full retirement age.

Also consider that your employer's retirement plan may not allow partial in-service distributions. I concur with Jim Mat that you should seek out the HR rep to discuss the benefit implications of your continuing to work past age 65, both with regard to the retirement plan and any medical benefits provided by your employer.

Since you plan to retire and stop working within 3 years, you may want to consider locking in any gains in your portfolio now and invest in lower risk assets.

Regardless of which of your options you choose, you must apply for Medicare benefits upon attaining age 65 or there will be a penalty payment upon later application. Don't confuse Medicare eligibility with receipt of Social Security retirement benefits.

Earnings in your employer account are tax-deferred until withdrawn, unless they are in a 401(k) Roth. The latter benefit is tax-free even upon receipt.
Mrs Pete
6 years ago
last modified: 6 years ago
I will need to supplement my 1/2 pay during these 1-3 years with $ from elsewhere.

I understand the idea of "tapering off" your work hours. It'd be a gradual adjustment for you, and it'd allow your replacement plenty of time to question you about how you've done things.

BUT if you're going to need to supplement your income, is it the best choice? If you keep working for that one more year (three seems like a long tapering-off time), then you'd not need to tap into any retirement account.

I don't think anyone's going to be able to answer your question with a solid answer because we are missing several pieces of the puzzle: We don't know how much income needs replacing, how much you have in your retirement accounts, or how much your Social Security benefit will be ... much less how much you expect to need to maintain a comfortable lifestyle in retirement. Too many missing numbers in the equation.I mean, if you have $50,000 saved for retirement, you should not dip into that paltry amount ... on the other hand, if you're sitting on a million or more and are just looking for how to most efficiently make this happen, you should outright quit ... but none of us can give really good advice without all this missing information.

Since you are planning on working until full retirement be aware that until you reach Full Retirement Age for SS your SS payment may be reduced.

Since you're 65, I assume you were born in 1952 ... making your full retirement age 66. If you retire before 66 (and SS is a federal program; thus, the same everywhere), you will lose 6% of your SS benefit for each year you retire early. Given that you're so close, I'd say wait 'til you're 66 and collect full benefits.

You can postpone your SS benefit until you're 70, and that makes your benefit grow by 4% per year. Should you do this? Depends upon your health, how long you expect to live, and how much other income you have available to you in retirement.
joyfulguy
5 years ago
last modified: 5 years ago
Hi Rick,

If you're still considering this, I'm concerned about your thinking that you need to find more money than wages to live on while still employed.

It seems to me that it'd be wise to try to continue to contribute to your employer's pension plan, since he'll add a substantial amount that you'll lose if you stop contributing.

Probably your pensions will be lower than your Iast full-time wage level.

I think you may find that costs of living may increase faster than whatever increases may appear in your pension(s). I don't think that inflation may fade away any time soon.

I'm concerned that you may outlive your pension(s) and income from other investments. It ain't fun being broke, when one is young and able-bodied enough to develop fresh income, but when one is old and less able, as well as being less attractive to potential employers, that's not a pleasant spot to occupy. Especially so when the temperature is about zero F, as it has been around here in recent days: glad I'm not homeless after about 20 years retired!

ole joyful ... nearing 90

Retirement strategy question

User

Comments (7)

Elmer J Fudd

maifleur01

Related Discussions

jrb451

User

Mrs Pete

joyfulguy

COMPANY

BUSINESS SERVICES

GET HELP

CONNECT WITH US