Retirement & Investment Checkup (Age 62) – Looking for Advice After Losing Financial Guidance
Hello everyone,
I've been reading Bogleheads for quite a while and have learned a tremendous amount. I'm hoping to get a fresh set of eyes on my retirement and investment plan.
My former employer recently discontinued the complimentary financial planning and investment management service I received through Edelman Financial Engines. Since I now need to manage my own investments, I'd appreciate any constructive criticism or suggestions. Please don't hesitate to point out flaws in my thinking.
About Us
- Me: 62 years old
- Wife: 45 years old
- Texas residents
- Both in good health
- Planning to retire in January 2030 at age 66, although I'm willing to work longer if doing so would materially improve our long-term financial security.
- In an ideal scenario, my wife would take a break from working when I retire so we can travel and spend more time together while we're both relatively young. She may choose to return to work later, but I'm not counting on that income in our retirement planning.
Current Income
- My salary: approximately $149,000
- Wife's salary: approximately $55,000
- Household gross income: approximately $204,000
We're currently in the 22% federal tax bracket.
Annual Spending
Our household spending averages approximately $130,000 per year.
Our home is completely paid off, and we have no debt.
Retirement & Investment Assets
- Traditional 401(k): approximately $723,000 (still in my former employer's 401(k) plan, even though I left the company 19 years ago)
- Traditional IRA: approximately $198,000
- Roth IRA: approximately $80,000
- 403(b): approximately $58,000
- Taxable brokerage account: approximately $227,000
- Wife's retirement accounts: approximately $149,000
- 529 plan for our oldest son: approximately $80,000
- 529 plan for our younger son's education: approximately $57,000
Overall allocation is approximately 65% stocks / 35% bonds.
One challenge is that the portfolio is spread across numerous mutual funds because Edelman Financial Engines managed it for years. I suspect much of that complexity was driven by their optimization process, but I'm no longer convinced it's necessary. One of my goals is to simplify the portfolio without increasing risk or sacrificing long-term returns.
If seeing my current fund holdings would be helpful, I'm happy to post them.
Expected Retirement Income
At retirement, I expect approximately:
- Texas state pension: about $75,000/year
- Former employer pension: about $15,700/year
- Social Security beginning at age 67: approximately $41,700/year
Neither pension includes a cost-of-living adjustment.
Both pensions offer survivor benefit options, but the income figures above assume I elect no survivor benefit. I'm still evaluating whether purchasing survivor benefits makes sense.
My wife also has approximately $149,000 in retirement accounts and will receive a modest pension. Because she's younger than I am and may continue working after I retire—or may take a break and return to work later—I've largely viewed her retirement savings and pension as additional margin of safety rather than relying on them to make our retirement plan work.
College Expenses
We have two children.
Our oldest begins college this fall. We expect to contribute approximately $55,000 per year for four years.
Current plan:
- Use the $80,000 529 plan.
- Pay at least $20,000 per year from current income.
- Use the taxable brokerage account as needed for the remaining costs.
Our younger child is 15 years old. We've already set aside approximately $57,000 for his education, and I don't anticipate needing more than that.
Healthcare
As a Texas state employee, I expect to retire with retiree health coverage. At age 65 I'll enroll in Medicare Parts A and B and transition to the state's HealthSelect Medicare Advantage plan.
Taxes & Roth Conversions
We're currently in the 22% federal tax bracket.
One concern is that if my investments continue to grow, Required Minimum Distributions could push us into the 24% bracket later in retirement.
I'm wondering whether I should begin Roth conversions before retirement, after retirement, or during the years between retirement and RMD age.
Why I'm Posting
Although I left my former employer 19 years ago, I kept my 401(k) there because the investment options were good and Edelman Financial Engines continued providing professional portfolio management and retirement planning at no cost.
That benefit ended last month.
I'm now trying to determine the best long-term approach:
- Leave the assets in the former employer's 401(k)
- Roll everything into my traditional IRA
- Simplify into a classic Bogleheads-style portfolio
- Or pursue another strategy that I haven't considered
Questions
- Based on these numbers, does retiring at age 66 appear realistic?
- Would you work longer?
- Would you leave the old 401(k) where it is or roll it into my IRA?
- How would you simplify my investments?
- Is a 65/35 allocation appropriate considering I'll have roughly $90,000 of guaranteed pension income before Social Security begins?
- Would you recommend Roth conversions? If so, when?
- How would you sequence withdrawals among taxable, traditional, and Roth accounts?
- Would you purchase survivor benefits on either pension, or rely on our investment portfolio instead?
- Are there tax planning opportunities (IRMAA, RMDs, capital gains management, etc.) that I should be considering now?
- What are the biggest weaknesses or blind spots in my overall retirement plan?
One of our primary retirement goals isn't simply to maximize our portfolio value or leave the largest possible estate. We'd like the financial flexibility for my wife to step away from work when I retire so we can travel and enjoy life together while we're both healthy. If she later decides to return to work, we'd view that as a bonus rather than something our plan depends on.
Thank you for taking the time to read this. I know it's a lengthy post, but I'm at a point where I want to simplify my financial life and make thoughtful decisions over the next few years before retirement. I sincerely appreciate any advice or observations you have.