Ready to Retire?: EDU #2643

Chris’s Summary
Jim and I use two listener emails in this EDU dialog episode to consider whether each couple may be ready to retire. The first couple weighs relocating for taxes, a pricier next home, and all-equity portfolios with RMDs looming. Longevity, inflation, and a supposed $10 million target also come up. The second email involves a Social Security claiming plan, with a closer look at how spousal benefits and the earnings test work. We also discuss their options between monthly pension payments and a lump sum, along with some considerations around Roth conversions.

Jim’s “Pithy” Summary
Chris and I take a look at a couple of retirement scenarios based on listener emails in this EDU dialog episode. The first couple, 66 and 60, is trying to figure out if they’re ready to retire, and they’d like to pull the trigger now. The couple is thinking about leaving Oregon in a year or two, haven’t picked where, and taxes seem to be driving the decision. Don’t let the tax tail wag the dog, folks! Their next home will likely cost more than their current one, and we talk about why the idea that you have to downsize in retirement isn’t always right. We also discuss what 100% equities looks like when you do the mental accounting across the whole portfolio, and why RMDs looming in six years should have them asking an important question. Then there’s the longevity and inflation worries, and how the Minimum Dignity Floor™ ties into both. The last sentence of their email made me go, “huh.” They feel they’re far from the illustrious $10 million mark. I don’t know where they got that number, but we’ve seen people with less than a million live comfortably, and people with four, five, six million projected to run out because of how they spend.

The second emailer, age 61, has a Social Security claiming plan that we dig into, and Chris adds some clarity on spousal benefits and the earnings test. He’s also choosing between monthly pension payments and a taking a lump sum. Chris pulls an income annuity quote for comparison, while I explain why pension risk transfer and the term “state guarantee fund” may change the picture. We also weigh his plan to convert about half of their traditional IRA money to a Roth in the first few years after he retires to fill the 10% or 12% tax bracket, and how charitable giving can change the picture.