[ale] Retirement musings - was Anyone out there?
JEFFREY LIGHTNER
jc.lightner at comcast.net
Wed May 3 12:13:20 EDT 2023
Having been part of what is laughingly called "The Great Resignation" I'll share my thoughts.
In Apr 2020 I got laid off after ~16 years due to the pandemic.
I dutifully found another job around Aug 2020 but due to political reasons Trump got involved and it was clearly going away. In fact in Jan 2021 they replaced my team members and I in SysAdmin moving us to an application support role. However, it was clear that was not going to last long.
Due to waiting for government security clearance I'd been hanging on thinking having the clearance in hand would be valuable for future job searches. However, after 6 months my clearance had neither been granted or denied and it was not possible even for management to request status. My own feeling was after 6 months they should have been able to grant it to me or arrest me for some unknown wrong that would make them deny it. :-)
Since my lack of clearance limited me to an advisory role (i.e. no hands on - just video sessions telling others what to do or learning how they did things there) I had a lot of free time. I used that mainly to take online training but also began tracking my retirement savings then doing research. I found out that I could retire early using my savings (not social security - see below). As it appeared the universe was telling me I shouldn't work any longer I resigned in Feb 2021 even though the agency indicated it could place me elsewhere. I later learned that the agency finally had to end all the positions at that employer in April so my timing wasn't bad..
Some of what I read/decided:
1) Although one can begin taking social security at 62 it is at a reduced monthly amount from what it would be at full retirement age (FRA) and is reduced throughout the rest of your life not just until your FRA.
2) FRA is based on you birth month and year. For me it is 66 & 8 months. From what I can see it is different by 6 months for each year (e.g. if I was born a year earlier it would be 66 & 2 months but a year later would be 67 and 4 months.
3) If you can wait until 70 (i.e. beyond your FRA) it bumps up the amount you get paid each month even further.
4) Social security earnings can be reduced before FRA by any other income you have (the average mentioned is losing $1 for every $2 in other earnings).
5) If you have homestead property in Georgia certain counties give you an exemption from school taxes in the first year after you turn 62. For me in Cobb county that was a significant reduction.
6) In the year one turns 62 there is a $35,000 exemption and in the year one turns 65 there is a $65,000 exemption from Georgia income tax on retirement earnings. In my case it surprised me because I wasn't actually retired yet but the state treats certain other income as if it were retirement so it saved me money.
7) Obamacare (Healthcare.gov) can give you insurance even in Georgia. They have varying plans but there is an offset credit you can get based on your income. I chose a "gold" plan which was more expensive monthly but has a lower annual out of pocket cost (in network of course) and the credit was fairly good (i.e. I pay less than $1k per month mentioned in an earlier post).
8) At 65 you MUST sign up for Medicare even if you are not drawing social security. The period to do this is the 3 months before your 65th birthday through the month of your birthday and 3 months after it. Otherwise there is a penalty. I gather that if you're still working (or are on a spouse's plan) you may not have to pay for Medicare but you do have to enroll. Of course you can't do Obamacare once you're eligible for Medicare. I have done my enrollment but will still be on Obamacare until my birth month. I haven't gone through all the options at Medicare yet to finalize what plan I'll do. Do NOT buy a book about this. Every insurance company on earth will send you information without you having asked for it. From what I read you have to sign up for Medicare part A (and part B) before doing any other options such as Medicare part D (drug coverage), Part C (medicare advantage) or Medigap. Medicare Advantage is when an insurance company takes it all on and it appears any payment you make is to them and they in turn pay your part A & B premium. Medigap is where you pay Part A & B then pay for another policy to an insurance company to cover the costs A & B don't pay.
Most recommendations I read about social security suggested strongly to wait until at least FRA or even better 70 if possible. The reason for reduced monthly payment below FRA and increased at 70 is they expect one to live a certain amount of years so the total payments should be about the same for your lifespan. The few contrary opinions I read essentially boiled down to take it as soon as you can because there's no guarantee Congress or budget constraints would reduce or eliminate social security. Having watched all the debate on that subject over the years I felt it was less of a risk for someone already 62 as they almost always talk about grandfathering in older folks (in fact usually 55) as they'd have no time to get alternate savings if they didn't have them. I chose to defer until FRA (and if possible 70) so have been living off my 401k since Feb 2021.
I've been encouraging people for years to max out 401k deferrals (which can be even more for "catch up" deferrals once one hits 50). The tax savings alone make it worthwhile during your working years and if there is an employer match it is free money. The downside is you have to pay tax when you begin withdrawing but only on what you withdraw each year. Be careful about this - I spoke to some folks who were advised to move their money into annuity and didn't realize they had to pay tax on the entire distribution the year they moved it into the annuity. (Annuities are a whole discussion in themselves). You can move money from your 401k into rollover IRA (non-Roth) with no tax penalty once you leave the employer.
The biggest hit to my 401k of course was stock market reverses in the last year. Luckily among the many recommendations I'd read was to move 3 years worth of expected living expenses into something non-volatile like cash. I did that (into a rollover IRA of course so I didn't have to pay taxes on it all at once) before the bottom fell out of the markets and have since told folks I felt my decisions in 2021 made me feel a bit like Nostradamus.
I've seen the reverses of the IT tech bubble burst of early 2000s, the great recession of 2008-2009 and the wild up and down of the pandemic for the past year or so. I joked that I lost more money in 2022 than I ever thought I'd have. Despite all that my 401k (and now IRA) have definitely increased since I began (belatedly) in the mid 90s so I still recommend 401k deferrals.
All the foregoing is based on my reading and decisions and experience. I am NOT a CFP, a lawyer, CPA or any other kind of tax or financial professional so be sure to do do your own reading and/or professional consultations before deciding for yourself.
> On 04/24/2023 11:57 AM Jim Kinney via Ale <ale at ale.org> wrote:
>
>
> No one ever said on their deathbed, "I wish I had spent more time at work."
>
> A major point for officially retiring for me is it makes a clear process where I'm training the next generation and then acting as oversight to verify the training worked, then acting as a guide while they implement the next version/replacement of what they inherited. I realized I don't want to keep doing this until I drop dead over my keyboard. There are other things in life to enjoy.
>
> I'm still looking for a big Belgium quad beer taste with less than 10 calories and under 1% alcohol so I can drink more of them and stop becoming rounder and sloppier.
>
>
>
> On Mon, Apr 24, 2023, 7:35 AM Solomon Peachy via Ale <ale at ale.org mailto:ale at ale.org > wrote:
>
> > > On Sun, Apr 23, 2023 at 04:12:11PM -0500, Leam Hall via Ale wrote:
> > > Really, though, why would you retire? Why not build a life you don't
> > > want to retire from? How many of us do for free at home what we get
> > > paid to do?
> >
> > A man's still gotta eat. And pay for tools/supplies.
> >
> > I never have been terribly happy with my profession in of itself, but I
> > will be the first to agree that its relatively high compensation has
> > enabled a lot of [mis-]adventures over the years.
> >
> > Work to live, not live to work, eh?
> >
> > - Solomon
> > --
> > Solomon Peachy pizza at shaftnet dot org (email&xmpp)
> > @pizza:shaftnet dot org (matrix)
> > Dowling Park, FL speachy (libra.chat)
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