Legacy Asset Management
Principal & Director of Financial Planning
BS, Business Administration, University of Colorado at Boulder
Assets Under Management:
Your case is indeed complicated and I see why you are reaching out for clarity.
For Disability payments question:
There are technically 2 changes that occur when you reach full retirment age in regards to your dsailbity benefits, the first is you will transition out of "disability" payments to "retirement" payments. All this really means to you is that the income comes from a different fund. The amount of your disability payment is based upon what you contributed to the program during your working years. The retirement benefit is calculated the same way, so nothing should change as far as amount or timing. The other change is you will no longer be subject to earnings limits on your benefits if you had the ability and decided to go back to work. Thats the technical answer - short answer is yes your benefits will be the same when you hit full retirement age.
Survivor benefits question:
Nothing will happen in the year that your husband would have reached his full retirement age. LIke I noted above, both disability and retirement benefits are calculated off of what was contributed into the program. Survivor benefits as well should not change for you in amount when you reach full retirement age, since you have already started them. If you were not currently receiving survivor benefits and waited until your full retirement age, they would be based upon your husbands full primary insurance amount. The benefits you are receiving now are reduced due to taking them earlier than full retirment age. The only time your survivor benefits could change is if you remarry before the age of 60.
There are resources online for helping you understand the program such as those provided by the social security adminstration - https://www.ssa.gov/planners/survivors/ifyou.html
There are also calculators that can show you scenarios that will maximize benefits that you may consider seeking out.
As you are aware - the social security adminstration reduces benefits if you are taking them under full retirement age in the following manner - $1 for every $2 earned above $17,040 for 2018. The amount in 2017 was $16,920. If you are $2000 over the limit in earned income from working - then your benefits will be reduced by $1000, spread out over 12 months. One note is that the IRS is talking about earnings from working - i.e. those subject to payroll taxes. Is the "profit sharing" check an amount from which income taxes & payroll taxes were withheld? Or is it a distribution from a profit sharing plan? If it was a distribution from a profit sharing plan, then this is not considered earnings from working, just a retirement plan distribution and as such, your benefits wont be reduced.
All that being said, if it is earnings from working, worst case is a $83 a month reduction in widows benefits.
ssa.gov has lots of good resources for you with more answers if they arise -
How work affects your benefits: https://www.ssa.gov/pubs/EN-05-10069.pdf
Details on Survivor benefits: https://www.ssa.gov/pubs/EN-05-10084.pdf
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.
The general rule of thumb for a rainy day or emergency fund is 3 to 6 months' worth of essential/fixed expenses. The range is based upon how many earners exist in the household. If it's just you or you are the sole earner for the household, the recommendation is 6 months. For a household with 2 earners, the recommendation is 3 months, as it is unlikely you will both lose a job at the same time.
You do not need to include taxes, savings and discretionary expenses, unless you want to be conservative in your estimation or you have kids at home and feel better about extra cushion. You do need to make sure to include liability payments, insurance premiums, groceries, gas, utilities and other essentials. Some people also include health insurance deductibles within this emergency fund total amount.
If you want to get a quick idea of what this number is without going thru all of your expenses, look at your net monthly income on your paycheck (i.e. gross income less fed withholding, payroll & 401K) and multiply it times 6 (if you are only earner). This number includes discretionary expenses, but at least you will get a rough idea of the amount you need in a rainy day fund.
Having a Roth IRA at 38 and contributing to it annually is a great way to save since the investments within the account grow tax exempt so long as you distribute the earnings according to the IRS rules - after age 59 1/2 and having the account open for at least 5 years. Having a REIT mutual fund in a Roth IRA is a good strategy since the income from the REIT dividends could be taxed as ordinary income (your highest personal rate) in your regular taxable account.
However, you will have to fund your Roth with cash. You cannot "rollover" the REIT into the Roth via $5500 worth of the REIT fund. You will have to sell the fund where it is, reinvest the cash into your Roth and then rebuy the fund. That could be an expensive transaction if you have gains in the REIT fund within your taxable account. You should evaluate any costs assocated with the sale of your REIT fund including the tax impact before you sell it.
If the costs to sell the REIT fund are high, you may consider making your Roth contribution and buying the target date fund as you mentioned. It is a good choice within the Roth since it will be allocated according to your age and the assumption you will use the account when you retire, thus it should grow over the long term. It is also a wise choice since it is diversified between several types of investments and you are just starting out this account.
Finally - having a dividend fund within a taxable account is a great place for it to be so long as the dividends the fund is kicking out are qualified dividends, meaning you are taxed on them at more favorable capital gains rate.