Daily Money - Retirement Planning Rules? YMMV

November 9, 2021

As a personal finance writer, I like rules of thumb that help me convey tips concisely. It’s useful to be able to say, for example, that retirees can withdraw 4% of their portfolio each year as a sustainable strategy, or that you should aim to have 25 times your anticipated annual expenses saved up by the time you stop working. But these rules are just a starting point. They should come with the caveat that YMMV (your mileage may vary). In today’s edition, we look at five financial rules of thumb that you should rethink according to your circumstances.

Best wishes,
 
 
P.S. If you got this newsletter from a friend, sign up here for email delivery to make sure you don't miss the next issue.

Timely Retirement News, Insights and Advice

Make sure you tailor the advice to your situation.

The IRA limit remains unchanged.

Series I savings bonds now have a whopping yield of 7.12%.

Retire With Money Community News

What are you up to these days?

Same as before I retired, only now all my “work” is volunteering. January through mid-April, I work three days/week preparing tax returns for seniors and low-income folks for free via an AARP program. Summers we both volunteer for a couple of weeks at the ATP Tennis Tournament (ticket scanning and transportation), plus at music festivals in the area (Bunbury, Cincy Bluesfest, etc.). Since we became empty nesters, we’ve upped our concert game a bit — we’ve attended a minimum of 20 rock concerts per year for 15 years, and I hit 30 shows both years before the pandemic.  I usually get out on my motorcycle once a week for a spin.

Wow, you’re busy! Any advice you'd like to share for others about preparing for/living in retirement?

Know what you want to do before you retire, save enough so you can do that without worrying about the funding, then go out and do it! In my case it was mostly just doing more of what I was already enjoying. I “slid” into retirement by working four days per week for the last five years of my career – giving me three-day weekends every week, allowing us to visit music festivals and concert venues far from home (thanks to the Jazz Festival there, we consider New Orleans as our home-away-from-home).

What's your approach to investing?

We are fortunate enough that we’ve amassed a big enough portfolio that we are attempting to live off the dividends and interest, and letting our holdings grow with the normal market upward movement. We’ve lived on a budget since the first year we were married (45 years ago), so not much changed when I retired, except the source of the income. I bought an 8-year immediate annuity in the amount that I will receive from Social Security when I turn 70 – that is one monthly “paycheck,” and we get “paychecks” from Fidelity, Schwab and Morgan Stanley each month as well. So far, three years into retirement, all has gone according to plan. Of course, we needed to supplement those funds when we hired a contractor to do a complete bathroom makeover — that was a one-time traditional IRA withdrawal.

I put too much money in my traditional IRA when working, always trying to reduce current taxable income, and not enough (almost none) in Roths. If I do nothing, I will get stuck with large RMDs when I turn 72. So I am maxing out Roth conversions every year, careful to keep my MAGI under the Medicare “penalty” amount. I’d prefer to pay taxes on that money now and leave tax-free money (in the Roths) to my kids and grandkids.

Retirement News From Around The Web

The Truth About Those Medicare Advantage TV Commercials
Pay attention to the fine print. NEXT AVENUE

Why Aduhelm, a New Alzheimer's Treatment, Isn't Reaching Many Patients
NPR’s daily science podcast explains why so few of the roughly 6 million Alzheimer’s patients in this country are taking the drug, and what that may mean for future treatments. NPR

Remarrying? These Should Be Your Key Financial Considerations
A prenuptial agreement also can spell out how finances will be handled during the marriage. CNBC

Investing When Everything Is Expensive
It's time to revisit the precept of core and explore, a veteran fund researcher says. MORNINGSTAR

Elizabeth O'Brien is deputy editor at Money. She has covered retirement and health care for nearly a decade. A Brooklyn resident and mom of two boys, she navigates the alphabet soup of Medicare and the New York City subway system with equal ease. You can email her at elizabeth.obrien@money.com and follow her on Twitter at @elizobrien.

This newsletter is free because Money earns a commission when you click or make purchases from the links in this email and on our site. We also receive compensation for some of the products and services featured in this message. Offers may be subject to change without notice. Learn more about how we make money.

Privacy Policy • Advertise With Us • We're Hiring!

To stop receiving these emails, unsubscribe or manage your email preferences.

Copyright ©2021 Ad Practitioners, LLC. All rights reserved.

Metro Office Park Calle 1, Building 7 Suite 204, Guaynabo, Puerto Rico 00968, U.S.