Bridging the gap to social security

Like a lot of people who retire sort of early (before 65) one concern is bridging the gap from retirement to when you collect social security (and here lets assume no changes to social security). Some are lucky to have a large pension, most don’t.

I’m lucky with a job I could keep for life but I plan to retire completely, or retire to another job for a year or retire and go part time. Retire for me means getting a smaller pension (COLA) and my health insurance.

If we wait until 66/70 to collect social security, that plus pensions will likely cover all of our current expenses. The lazy way is to get either a life annuity or a 10 year annuity. The life one sounds easy but would require locking up more money in the annuity and possibly providing us too much money once social security is being received and force us to pay taxes on money we may not need (depending on medical issues).

I’ve also been looking at the treasury rates and at 4%+, I could see buying some 2 yr, 5yr and 10 yr treasuries. Taking say $400K or 500K and buying up treasuries is a bit more complicated path but might be smarter. TIPs are another path but I’m still not sold on them.

I keep generating spreadsheets of data since we really have one pension that could start as early as late this year and 2 smaller ones (nonCOLA) at 65.

For those younger and still healthy I would strongly recommend looking into term life insurance policies sooner than later. My only need/interest for one is because my pension drops when I pass away and obviously once I’m gone, my wife will only be receiving 1 social security payment. I was trying to fill that gap in income.

For me I applied for a policy but the underwriting has been going on for weeks since I have a few medical issues. Nothing terminal, or really affects my life but obviously stuff that requires them to request medical records, etc. I’m curious what a 10 yr policy will run for me. I’m somewhat lucky in that I could keep my current work policy until 65 if the term one is too expensive.

Just pondering thoughts out loud.

I’ve kept near term IRA withdrawals in CD’s, earning very little interest,but the money is there when needed. Going to switch over to buying T-notes instead of CD’s. In a couple of years, there is a decent chance that the Fed will have to start dropping interest rates, in which case the value of the T-note goes up. Not going to get rich doing this, but there is some upside possible.

My wife and I are 60 and both retired. Old enough to take distributions, but too young for Social Security and too young for Medicare. Thankfully, we have a nice little nest egg in a taxable account and a pretty good stash in IRA and Roth accounts, though less than it was a year ago. This gives us a lot of flexibility. So, the plan has been and will continue to be to take retirement distributions and realize taxable investment income up to something where we still receive a decent ACA subsidy for health insurance premiums, until we hit 65. We can supplement our spending money when needed by using up some savings as well, which doesn’t affect our Modified Adjusted Gross Income. Once I reach 62, as the lower earning spouse, I will begin to collect Social Security. We will adjust our retirement distributions to offset the increased income. Once we hit 65, we don’t have to consider the ACA subsidy income levels any more and can adjust our income to more closely track our spending, with consideration of tax brackets and IRMAA limits. My wife will begin social security closer to age 70. We’ll run the numbers probably after she hits 65 or 66. We will consider realizing capital gains (or losses) and Roth conversions on an annual basis to determine what makes sense from a tax and ACA subsidy basis. Required Minimum distributions will eventually be a concern (and I have looked at it) but nothing I need to be too concerned with just yet. For now, it is the ACA subsidy that mostly drives the strategy.

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When you retire pre-Social Security and Medicare, health insurance can be a major hurdle. Spend down your IRA to reduce RMDs later. And take advantage of low income years to do Roth conversions.

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Fortunately I will have health care from my federal career (about 2/3 was in the government). Far from free but at least not something I have to worry about.

I’m guessing my lowest income years will be from retirement to 65 and then from 65 to whenever we do social security. So I will be looking into how to move money around and when to transition money inherited from Roth and 401K type plans into regular accounts (have a 10 yr window on that).

This is the worst time to do your own investing. I don’t care to look at the account balances when the year has been so bad and I was far from 100% invested in the market. Need to do some tax loss harvesting and organize my treasury buying which has been rather haphazard along with 2 MYGAs coming due (rollover them over to defer the taxes or just use the money early in retirement).

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