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I’m seeking advice and suggestions from the people I trust and value, each of you.
My wife and I recently retired. Our two S.S. accounts and three pensions cover not only all of us current expenses. We are transferring some excess money from our miscellaneous savings account into our car account and vacation account (buckets of sorts) biweekly. But we still have a couple of thousand dollars left over.
Would you recommend we continue to fund our Roth accounts or our taxable investment account or simply build our savings in our high yield savings account? It maybe something I haven’t mentioned. All thoughts, ideas, and suggestions would be appreciated.
Sounds like you’ve saved and planned well – Congrats! You’ve got a great source of fixed income, car account, vacation account, Roth/Traditional accounts (2/3, 1/3), taxable investment account, high yield savings account/emergency fund. I’m guessing you have funds to handle pretty much anything life brings your way. Here’s a few things I considered in our retirement planning…
-Aging in place (wider hallways, grab bars, walk-in shower, higher vanity, etc.)
-Home services as we age (mechanical maintenance, gutter/window cleaning, repairs, house cleaning, lawn/landscape maintenance, in-home care, etc.)
-Home contingencies (appliance replacement, HVAC replacement, roof, exterior/interior painting, driveway, etc.)
-Car fund (number of cars over retirement)
-Income tax on Roth conversions (filling up 12% bracket). If the tax laws are changed such that SS isn’t taxable, then filling up the 12% bracket is even more doable.
-Inflation, especially health care premiums/costs and LTC costs.
-loss of spouse (not something we want to think about). Will the surviving spouse be okay with one SS check and pension? Some choose to purchase a plain deferred annuity for a future date that can also help with inflation.
-Fun projects, vacations, charitable donations, legacy, estate plan.
“-loss of spouse (not something we want to think about). Will the surviving spouse be okay with one SS check and pension? Some choose to purchase a plain deferred annuity for a future date that can also help with inflation.”
There is even a specific Annuity built for this purpose, The Qualified Longevity Annuity Contract, or QLAC. It is funded with IRAs dollars and allows continued Tax Free growth, and also shields the amount in the QLAC from RMDs. You can stretch it out to begin paying as late as age 85.
Alternatively, You could also purchase a ladder of MYGAs..starting at 2 years or 3 years out. Example. $100,000 in 5 $20,000 MYGAs, each maturing 2 years apart. 3…5…7…9…11. This provided protection from market volatility, market risk, longevity risk, inflation risk, etc. As each MYGA matures, you can take the principle and interest, or roll it over, avoiding taxes and providing extended tax free growth.
One great alternative is to buy MYGAs, and as they mature, convert them to SPIA, guaranteeing lifetime income for single person or a couple.
Isn’t it great to have options?
I’m in a similar situation (retiring in July)and have been asking myself this question. Our emergency cash savings are in two high-yield savings accounts, but the bulk of our savings are in tax-deferred accounts (rollover IRAs and 401K/403B from our current jobs). If you can use the excess for Roth conversions without pushing yourself into a higher tax bracket, that’s what I’d do. Or put it into a taxable investment account.
Thank you for commenting. I’m thinking that if what we’ll do with some of it