Legacy Asset Management
Principal & Director of Financial Planning
BS, Business Administration, University of Colorado at Boulder
Assets Under Management:
Consolidating accounts from former employers is a great idea. This keeps costs down and is a lot easier to manage the investments. Where the money should go depends upon your overall tax picture. If you convert your 403B accounts to a Roth IRA, the total amount converted will be taxed at ordinary income rates. The company holding the 403B accounts will send you 1099s that you will have to add to your tax return. As such, you should add up all of your income and deductions from various sources to determine how much taxes will be owed on the converted amounts.
That being said - getting as much of your retirement savings into a Roth as soon as you can will be hugely beneficial to you since you are young. Because the money that goes into a Roth IRA is after tax - the deposits grow tax free so long as the account has been open 5 years and you wait to withdraw money after you attain the age of 59 and a half. Thus, consider the many years of compounded growth between now and your early 60s. You will want to invest your Roth deposits for long term growth in order to capture as much tax-exempt earnings as possible.
If you keep the money in the 403Bs, any growth over time is taxable when you draw it out of the account in retirement.
If the taxes owed on converting the full amounts to Roth this year turn out to be excessive and too expensive, you can consider converting them in smaller amounts overtime so that the tax burden is reduced. This would be a balanced way to control the tax cost while adding deposits to a vehicle with tax exempt growth.
The answer to your first question is yes!
Visit https://www.ssa.gov/planners/retire/whileworking.html - "after you reach full retirement age, we will recalculate your benefit amount to give you credit for any months in which you did not receive a benefit because of your earnings. We will send you a letter telling you about any increase in your benefit amount."
So if you turn 62 this year and decide to draw benefits while working, the earnings threshold for 2018 is $17,040. If you make $24,000, they will reduce your benefits by $3480 a year, this is as you state a $1 reduction for every $2 earned above the threshold.
You will need to earn $41,040 to see a $1000 per month reduction.
When you turn full retirement age - your benefits will be recalculated based upon the earnings you continued to accrue (if they increase your lifetime earnings average) as well as give you credit for the reduction due to those earnings withheld. There is not a calculator to figure the specific number, but you can assume the full retirement age amount will be $2000 plus credit for the amount withheld due to earnings in previous years.
The administration penalizes you for earnings under full retirement age as they are trying to encourage people to take them only when you really need them. They also penalize you with the amount - i.e. starting benefits early results in a permanent reduction and in your case $700 a month. If you are continuing to work and dont necessarily need the income, consider delaying receipt of benefits. It will make a huge difference overtime.
No it should not since you will be using your FSA funds for different expenses. The government doesnt want taxpayers double dipping by using the FSA to pay for medical expenses and then using the same expenses as justification for a reimbursement from an HSA. Use your FSA for your healthcare expenses and your wife can use her HSA for her expenses.
An even better strategy would be to maximize contributions into the HSA and not use the funds for any healthcare expenses until retirement (so long as cash flow permits this savings expense). Let the funds accumulate and grow over time. Most HSAs have the option of investing a portion into a set of mutual funds or other diversified holdings. I recommend you dont invest it all, leave some in cash to the tune of a2 years or so of deducitibles in case you have a medical emergency. As this money grows overtime in the HSA - you will create a tax free (tax exempt growth as well) bucket to draw off of in retirement for health care related expenses. You will never have too much in an HSA with the projected cost of healtcare in retirement.
Your social security statement is showing you the benefits that you have already earned, so retiring at 59.5 will not change the amount.
The benefit you see on your statement is based upon the best 35 years of work. You can see the earnings they are using on the statement itself. The administration indexes your annual earnings over time to equal todays dollars. Then it averages the best 35 years and applies a formula to this average that results in what you can expect under the current law at your full retirement age of 67.
Since the administration averages the best earnings years, retiring early and potentially not including the best earnings years, means that you could have a larger benefit at age 67 since the average would be higher.
The only way your benefits would be reduced is if you decide to begin payments sooner than your age 67. You can start retirement benefits as early as age 62, and they will be reduced permanently due to the extra payments.
On the flip side, if you decide to delay benefits beyond age 67, i.e. up to age 70, then your amount will be permanently increased by 8% simple interest.
To answer your final question - SSA will not be recording any zeros on your record, what you see on your statement now is what you can expect at 67, unless the law changes.
This is a tricky question to answer - how is your $150,000 invested? If you have it in cash and want it to last for 15 years, the answer is simple- $833 per month. This is simply assuming very little interest on your 150,000 and divide it by the number of months you are solving for - which is 180.
If the money is invested conservatively, which is recommended if this is all you have, at say 4%, then the amount you can withdraw to last 15 years increases, but not by much. At a 4% average rate of return, the math works out to roughly $1100 a month over a 15 year period. This however does not address any variation or volatility in the investment mix. And also means there is zero in your account at month 181. If market suffers or you dont earn 4%, money could run out sooner.
A better way to analyze the definition of living comfortably is to determine how much per month you actually need to be "comfortable". This will then inform you as to how you should invest the $150,000, if at all, or if you should keep in cash.
You also need to evaluate what happens after 15 years, is there another pot of money to draw from? At 64, you are young in determining sustainable retirement income, albeit supplemental over parttime work, as at some point that parttime income will end. In 15 years, you will still actually be young - only 79 - and could easily live another 15 years. Evaluation of expenses, longevity & risk tolerance all need to be addressed before making a reasonable recommendation on how much you can take out per month to live comfortably.
If you need help with these recommendations, seek out a financial planner in your area to help you. Likely someone who does personal financial planning - not just investments - and can do it for you on an hourly or fee basis.