Planning for a Long and Secure Retirement
As a 63-year-old single woman with no children, I’m preparing for a long retirement, assuming I’ll live to 100. With a combined portfolio of $200,000 in a 5% money market and $1.4 million in stocks in a 401(k) and Roth, I’ve recently purchased a $200,000 annuity for security. I still have a $125,000 mortgage and will need a new car soon. My salary is $135,000 per year, and I hope to continue working, but I’m not taking it for granted.
Retirement Expenses and Income
I expect my expenses to be around $100,000 a year in retirement. To ensure a worry-free retirement, I’m considering converting some of my savings into a Roth and taking the tax hit now. A Roth conversion strategy could be valuable, but it’s essential to spread the conversion out over several years to minimize the tax impact.
Assumptions and Projections
To assess my retirement readiness, I’ve made some assumptions about my investments, Social Security benefits, and annuity payouts. Based on these assumptions, a Monte Carlo analysis suggests I could retire in my late 60s. However, with more precise planning, I could potentially retire earlier.
Customizing My Retirement Plan
To improve my projection, I should consider how my expenses might change over time. Instead of assuming they’ll increase with inflation, I could plan for them to drop in real terms as I age. By creating a substantial “income floor” of guaranteed money, I can reduce the risk of running out of money. Delaying Social Security until age 70 and pairing it with my annuity payments could provide a comfortable retirement income.
Flexibility and Tax Efficiency
Being flexible with my expenses and spending less during market downturns can also help me retire earlier. Additionally, doing Roth conversions can improve my retirement outcome by paying taxes on that money while I’m in a lower bracket. Coupling this with delaying Social Security could be especially tax-efficient.
Next Steps
To optimize my retirement plan, I should consider seeking the help of a financial advisor to build a tailored income plan. I should also plan for required minimum distributions (RMDs) from my tax-deferred accounts and keep an emergency fund on hand for unexpected expenses.
By carefully planning my retirement income and spreading out my Roth conversions, I can put myself in a better position to enjoy a long and secure retirement.
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