Learned a LOT today

[RSKY]

I have learned a lot today.

Just got back from talking to a tax/financial advisor. I have never used one before preferring to figure my own taxes. He is the one that my in-laws use and has the reputation for being one of the best advisors in our area. We showed him our spreadsheets calculating our retirement and without touching a calculator he told me I was probably working for less than minimum wage. What he meant was compared to what I make and what I could draw.

One of the main things he said, and people have stated this wrong in my two earlier posts, is that you don't have to be 59 1/2 to start drawing out your 401K.

If you are 55 years of age and separate from your employer you can draw from the 401K that you had with that employer with no penalties. They will hold 20% for taxes but no penalty.

I worked for CGT for 33 years and separated at age 52. Since I am 56 I can draw from my CGT 401K without penalty. My GY 401K is unavailable without penalty since I am still working for them. My wife is 56 and retired last year so she can draw from her 401K.

If you are under 55 there will be a 10% penalty. If you are still employed by the company providing the 401K there will be a 10% penalty. I am assuming that if you are under 55 and still employed you will pay a 20% penalty but we didn't really discuss that one.

He said one of the mistakes people make is to roll a 401K into an IRA. If I were to do this then I could NOT touch it until age 59 1/2 without a big penalty.

Some of the guys who left CGT when it closed rolled their money to IRAs. None that I have talked to have been happy with the results. Some gave their money to various "financial advisors" who invest in the same funds the 401Ks do but take a percentage cut for managing the account. Nobody who did that has done as well as I have.

Maybe I was just too lazy to go to the trouble of moving my money.

The advisor was not a fan of annuities.

He was impressed with our spreadsheets. Not so much that we were computer gurus or anything but with the fact that we had taken the time to do them. He said a lot of people were simply too lazy to take the time to figure things out. Many would not keep up with their tax information or failed to bring him all the information they had. Some would come in asking about retirement and not know how much was in their 401k or other accounts.

He calmed my nerves quite a bit.

He also talked about some expenses we have now that will go away when I retire. There won't be any 401K contributions coming out of my checks. I won't have $240 a month for gas to drive to and from work. He mentioned some other things we hadn't thought about.

I am not rich by any means but I am better off than I thought I was.

 

[NativeSon]

Good for you!!! Just keep a positive attitude. It's always darkest before the dawn.

Good luck.

Charlie

 

[JDgreen227]

I have learned a lot today.

Just got back from talking to a tax/financial advisor. I have never used one before preferring to figure my own taxes. He is the one that my in-laws use and has the reputation for being one of the best advisors in our area. We showed him our spreadsheets calculating our retirement and without touching a calculator he told me I was probably working for less than minimum wage. What he meant was compared to what I make and what I could draw.

One of the main things he said, and people have stated this wrong in my two earlier posts, is that you don't have to be 59 1/2 to start drawing out your 401K.

If you are 55 years of age and separate from your employer you can draw from the 401K that you had with that employer with no penalties. They will hold 20% for taxes but no penalty.

I worked for CGT for 33 years and separated at age 52. Since I am 56 I can draw from my CGT 401K without penalty. My GY 401K is unavailable without penalty since I am still working for them. My wife is 56 and retired last year so she can draw from her 401K.

If you are under 55 there will be a 10% penalty. If you are still employed by the company providing the 401K there will be a 10% penalty. I am assuming that if you are under 55 and still employed you will pay a 20% penalty but we didn't really discuss that one.

He said one of the mistakes people make is to roll a 401K into an IRA. If I were to do this then I could NOT touch it until age 59 1/2 without a big penalty.

Some of the guys who left CGT when it closed rolled their money to IRAs. None that I have talked to have been happy with the results. Some gave their money to various "financial advisors" who invest in the same funds the 401Ks do but take a percentage cut for managing the account. Nobody who did that has done as well as I have.

Maybe I was just too lazy to go to the trouble of moving my money.

The advisor was not a fan of annuities.

He was impressed with our spreadsheets. Not so much that we were computer gurus or anything but with the fact that we had taken the time to do them. He said a lot of people were simply too lazy to take the time to figure things out. Many would not keep up with their tax information or failed to bring him all the information they had. Some would come in asking about retirement and not know how much was in their 401k or other accounts.

He calmed my nerves quite a bit.

He also talked about some expenses we have now that will go away when I retire. There won't be any 401K contributions coming out of my checks. I won't have $240 a month for gas to drive to and from work. He mentioned some other things we hadn't thought about.

I am not rich by any means but I am better off than I thought I was.

Your vehicle insurance may go down because you no longer commute to work...and do you currently pay for parking, and/or union dues? Those are expenses you will no longer have. And a lot of people are surprised that I could begin withdrawals from a 457 plan at age 51 with no penalties. You will no longer pay Social Security or FICA, it is amazing how many expenses one has working that are not part of retiring. I worked for a large state agency for 31 years, my rate of pay when I retired was $19.78. When I retired with a bonus incentive, after not having to pay city and state tax, union dues, SS and FICA, parking, work gas, etc. and all the other things taken out of my paycheck while working, had I kept my former job I would have been earning $120 net for 40 hours of work. I liked my job and I was good at it, but even the dullest tool on the rack would see the idiocy of working for $3.00 AN HOUR instead of retiring. Granted my case may be an exception but for me it was a no brainer to take an early retirement.

 

[dmccarty]

RSKY,

I am glad you started these two discussions. These TBN discussions usually provoke thought in those beside the person who started the thread. :thumbsup:

Some very good ideas and information have popped out of the discussion. As usual.

Thanks,
Dan

 

[RSKY]

I learned a lot also. I think this is one of the best forums to find what 'real people' think. Also the posters here seem to really want to help. There were comments made that have me thinking about problems I had not anticipated. There were also comments that made me realize work isn't everything.

 

[Haoleguy]

RSKY - With regards to 401Ks and IRAs the reason I chose to move my 401K to an IRA following early retirement was that I could put it into an institution where I have many more quality choices on investment. My company 401K had 10 choices to differentiate investment sectors whereas now I have more instruments(bonds, mutual funds, stocks, ETFs, etc) & sectors to choose from. On annuities in many ways it depends who you get it through and your situation. When I was offered a retirement annuity or lump sum from my employer I took the later as it was a way to make sure that the funds can grow(in IRA) with investments of my choosing and could move to my benefactors should I unexpectedly croak. This would not have been the case with my employer's plan. You're kicking off some good discussions...Thanks , Gary

 

[Haoleguy]

RSKY - By the way trusted advisors are a good thing and can help you navigate unfamiliar waters when they come up.....Gary

 

[jinman]

RSKY, I found that my attire changed to much more affordable when I retired. Instead of suits, ties, and polished shoes, my daily wardrobe most often consists of sneakers, jeans, and a pocket t-shirt with ballcap. Eating lunch at home is also a big, big savings. I used to take garden veggies in the summer, but fall, winter, and early spring I was often eating in our company dining room instead of brown bagging. Since I lived 70 miles 1-way from my work, transportation has been the biggest savings, but those other little things add up too. The biggest thrill for me is being able to do things with my wife. She's fun to go shopping with and a great helper when we are working on projects.:thumbsup:

 

[RSKY]

RSKY - With regards to 401Ks and IRAs the reason I chose to move my 401K to an IRA following early retirement was that I could put it into an institution where I have many more quality choices on investment. My company 401K had 10 choices to differentiate investment sectors whereas now I have more instruments(bonds, mutual funds, stocks, ETFs, etc) & sectors to choose from. On annuities in many ways it depends who you get it through and your situation. When I was offered a retirement annuity or lump sum from my employer I took the later as it was a way to make sure that the funds can grow(in IRA) with investments of my choosing and could move to my benefactors should I unexpectedly croak. This would not have been the case with my employer's plan. You're kicking off some good discussions...Thanks , Gary

Gary, my wife and I have three 401Ks. Mine with CGT is handled by Fidelity and I have twenty choices of mutual funds. There are large, mid, and small cap growth and value funds. Also some International and bond funds, and short term investment funds. They also offer the blended target funds that invest in a different mix of growth, value, and international funds, and bonds and vary the mixture based on your projected retirement date. I am very happy with the selection but I understand why you would do what you did. The advisor said that rolling into an IRA was much, much better for your heirs tax wise if spouse was gone.

Everyones situation is different.

My GT fund is with J.P. Morgan and is much more limited. My wife's is with Kentucky DCP and has a selection between my two.

I am keeping the GT 401K one for one very good reason. They offer company stock. Twice in the last ten to fifteen years the stock has gone to singe digits then rebounded very high. Back in early 2010 (may have timeframe wrong) it ended a long fall from $40 to below $4. One of the Tech Support people, 30 plus years, moved his entire 401K into company stock. He made over half million in a few months.

That takes big ones.

Others have rode it down from 40 to 4. Know of a couple that did that.

There are several millionaires, on paper, walking around the plant. They got that way by paying attention to the stock market and becoming experts on that one item.

That 401K is the smallest of our three by a great amount and I intend to play it a little after retirement.

We are both in good health and so it stays in the 401K's.

 

[tallyho8]

And always plan a little extra for retirement because the unexpected ALWAYS happens.

I am glad that I had planned for a lot extra when I made my early retirement at 62 because suddenly Social Security decided not give raises for the first time not just for one year but for two years in a row so far. Maybe three, next year.

My income coming from my savings in certificates of deposit at 6% dropped to 3 % cutting that income in half.

Katrina took a large bite out of the savings.

My home insurance went up 800%.

Thankfully, I was well prepared but it just shows how important it is to plan a little extra.