10 Near-Retirement Mistakes That Can Permanently Damage Your Future

[@peterholmes2089]

Great video as always. I actually just retired yesterday:):):):) Unfortunately my employer used the opportunity to screw me over financially, so what was to be a wonderful day turned out to be completely the opposite. You would think that after 15 years of excellent service, I would get a gold watch, a party, or even just a happy retirement greeting card. But no, in his greed, my employer tried is creative best to not pay me bonuses that I was entitled to. The most ridiculous one was to deduct a signing-on bonus from 15 years prior. I was eventually able to shame him out of that one, but the other items which were financially more significant I could not do much about. Anyway, I'm defiantly not going to let this ruin the rest of my life. Merry Christmas all.

[@wilsonle61]

Been there, damaged me so badly that I have to work till 65 instead of retiring at 60 as originally planned. In my case, it was a county job, so it is not like they were saving themselves any of their own money. They just screwed me for the fun and raw power of it!

[@ld5714]

Great video, Eric, and important points for those still planning their retirement years away. I'm 12+ years into my retirement journey and can confirm all your points and important and well worth future retirees consideration. For me, an important one was to make sure I was retiring "to" something rather than "from" something. I had specific plans/goals, and they worked out very well. The next important thing for me was to be flexable and willing to make changes. Life happens and is always changing; so we must likewise change. I have done things I never thought of pre-retirement, and now, looking back, I am grateful for the changes. I have a totally different focus now as compared to when my journey began. Wishing you a very Merry Christmas!! 🎄

[@SafeguardWealthManagement]

Merry Christmas!

[@richardallen6432]

You are one of the best informational channels concerning how to use a portfolio wisely in retirement. Keep up the good work, Eric.

[@SafeguardWealthManagement]

Thank you!

[@randolphh8005]

A great comprehensive summary video! Very well balanced. In my opinion get yourself a good financial advisor! Problem is how to know which one is good? If they have similar thoughts that this summary mentions you are in good hands. And, if they give you choices, rather than sell you products. I have been mostly DIY, which I don’t recommend for most. The learning curve is incredibly steep and the hours needed to learn are literally 100’s. I went DIY mostly because of some bad past experiences with advisors. I’m also a math nerd, and love to do my own research.

[@stephaniejames4775]

I would be interested in hearing what people are doing in their early retirement. I am taking flower arranging classes, gardening, hiking and birdwatching. I love the Merlin app! I plan on kayaking around the San Juan Islands next spring, and sub in a bridge group. But I have found I watch more TV, mostly financial news so I can dwell on my investments. Love to hear how others are filling their time! Merry Christmas to you and your family! May you have many fabulous vacations planned for the New Year!

[@gg80108]

Do all those outdoor things while you can, after about 65 flower arranging will be the thing you can do everyday. We did the SanJuan islands, get with a group, them shipping channels are dangerious.

[@bluegillmich]

Great video, i have lost a few co-workers at work and shortly after retirement. We have many co-workers whom will die clinging to the controls of the machines, they are scared to retire and several are collecting full social security..66 to 75 and counting. We have a guy coming back to work ( having retired this past jan 24) and the longwinders are scared more than ever.

[@johnkumpelis1121]

Eric again excellent points and insights in this vid, you are truly wise at such a young age. Keep them coming, great value!

[@martamcclay8690]

ROTHs only became available in 1998 so for some of us boomers, we were socking away money in our 401k’s for many years before that. Knowing then what I know now, I would have only contributed to the Roth starting in 1998. The IRA RMD’s are going to be painful, especially if one spouse dies early and the second spouse has to combine the two accounts and take withdrawals as a single taxpayer.

[@swright5690]

Me too. Paying uncle Sam now for my big conversions sucks.

[@larryjones9773]

But, you would have missed out on the lucrative tax deduction, when you were in a high tax bracket.

[@jimselvy6157]

The last 5-6 years of working I maxed out my 401K Roth and backdoor Roth IRA. Yes I took the tax hit but I had plenty to live on as I had downsized. I was able to contribute my full 401K limit for $20K (or whatever the limits were at the time) into Roth not $20K minus the tax rate. So it does not match exact example. I had lots of 401K so I wanted a mix of account types. Now that I am retired with a pension, I am maxing out my current tax rate and avoid IRMAA hit by converting what I can to Roth. I will not get it all converted before RMD, but it will reduce it to a manageable level. I call my Roth my play money. I can use it for whatever but mostly for passing to heirs tax free.

[@dlg5485]

It's worth considering gifting some of those funds to heirs now instead of converting it (up to the gift tax limit). That way they get the benefit of enjoying that money now instead of having to wait until you die. Also, they will most likely have to take mandatory annual withdrawals over a 10 year period to empty that inherited Roth, at which time they will most likely reinvest it in a taxable account anyway. Of course there is tax benefit to inheriting a Roth during those first 10 years after you death, but wouldn't it be nice to see your heirs enjoying some of that money now?

[@jimselvy6157]

@@dlg5485 I have given some to them already and paid for vacations. However, it is also there for potentially any LTC. There is dementia in some of my family and it is a safeguard not to be a financial burden on my kids.

[@keithmachado-pp6fv]

Great video

[@mcsporto]

Always enjoy your videos. I have talked to several advisors and none of them seem to be able to figure out how to calculate the cost of health care into the plan with the withdrawal strategy . It is nice to see you address it. I think that is a big variable that does not get enough attention if someone is retiring early.

[@BGG5235]

Good conversation. Thanks again Eric!

[@toddwmac]

Really appreciate this vid and wish I had seen it a decade ago when I "silently" retired. In appreciation.

[@slimdawgwoof]

Happy Holidays!!!!

[@SafeguardWealthManagement]

Happy holidays!

[@keithmachado-pp6fv]

One advantage of contributing to a Roth if you are maxing out your 401k is that the limits are the same so in effect you are contributing more. For example, let’s say the max to contribute is $20k per year. If you put $20k into a Roth and are in the 25% tax bracket you gave up a $5000 tax break so in effect you invested $25k of pretax money. If you contributed to pre tax you would only be investing $20k. Let’s say they both grow to $100k over time. The Roth would be tax free and the traditional would be taxed. If still in 25% bracket that leaves you with $75k or $25k less in traditional. Of course you still would have that original $5k you saved at the beginning which if invested in the same way would grow to $25k. However, you would not have the tax deferral on that money so depending on how it is invested there could be some tax leakage over the years.

[@bruced.370]

Like to see some specific examples and not generalities

[@MichaelToub]

Great Video!

[@hollyc3838]

What is the "reported income" when you are retired, assuming you don't have a pension or social security? Don't you need this number when you apply for ACA health insurance? It's hard to calculate since you don't know exactly how much you will spend for the upcoming year.

[@Badger345]

Great channel 👍

[@kennitz8155]

Question: I just retired and want to take out $100K per year from my IRA and 401k, but I have to pay taxes on that money. Let's say I'm in the 24% tax bracket (my wife is still working). How do I caluculate how much do I have to take out from my IRA to pay the taxes on the 100k I just took out, and since I will then have to pay taxes on that amount as well, how much more?

[@ItsEverythingElse]

Look for AI to start getting involved in life expectancy predictions.

[@ItsEverythingElse]

Personally I am very concerned about adapting to being retired as far as how I will spend my time.

[@randolphh8005]

The transition is a little rough depending on what you were doing. I went from a high powered Type A job to Part Time. That was helpful, but still not like being retired. It did teach me to slow down. When I fully retired one year ago, it was still a big change. The time is not the issue for me, it is the change in Socialization. I was in a people intense job. Time just starts to slow down which is good. I no longer eat breakfast in my car on the way to work, or rush to meet my spouse at the restaurant for dinner. I now relish and enjoy the small things, like a pleasant breakfast at home that I prepare, and consume while reading or watching YT. I work out almost daily and that takes well over an hour. We share household tasks(my wife also used to work mostly FT). She cooks, I clean up. We don’t go out to eat nearly as often, which is good for the diet and the wallet. We both have a lot of interests and hobbies, including travel. I actually don’t get as much done as I used to since “slowing down” but I enjoy each task so much more as it isn’t rushed. Travel is so much more fun and cheaper with longer time frames and flexibility. Never again will we travel on peak Holidays, or take a one week trip to Europe! My hobbies are cars and boats, which can keep me busy for days on end. Sure you spend a couple hours on Social Media or “TV” that you didn’t used to, but it is enjoyable and you still have another 6-8 hours to do all the fun leisurely productive tasks. As stated the Social aspect we are still working on, as so much of our Social time was work related. We are slowly improving that with outside activites.

[@captsorghum]

Probably watching KZbin videos. At least it's free, and educational as well!

[@mims2582]

@@randolphh8005

[@davidhughes6048]

Good lord I haven’t watched television in years. Who’s got that time to waste in retirement?

[@Andres_853]

Becoming a millionaire through a Roth IRA or a 401(k) involves different strategies for maximizing profits. A Roth IRA offers tax-free withdrawals in retirement, which can be advantageous if you expect to be in a higher tax bracket later in life. On the other hand, a 401(k) provides tax-deferred growth and potential employer contributions, boosting your savings. The optimal choice depends on factors like your current and future tax situation, employer match, and investment options. Consulting a financial advisor can help tailor a strategy that aligns with your financial goals and circumstances.

[@Scott-sm9nm]

6:30 Making $140K of reported income is not going to give you $780 in ACA tax credits ... family poverty level 2023 400% $78,880

[@hm51008]

My understanding is the American Rescue Plan of 2021 expanded the tax subsidies to approximately 800% of the FPL through 2025…

[@Scott-sm9nm]

@@hm51008 Thanks for that hint. I found a related article: KFF -- Impact of Key Provisions of the American Rescue Plan Act of 2021 COVID-19 Relief on Marketplace Premiums

[@SafeguardWealthManagement]

That would actually be the cost of the ACA plan. Subsidies are larger to bring the cost to that point. But yes, John is correct that until 2026, the 400% FPL subsidy cliff has turned into more of a subsidy slope allowing retirees to show higher levels of income and still earn robust subsidies

[@audreyl4960]

I disagree with your ROTH vs Traditional IRA math - you didn't take into account that the GROWTH in a ROTH is tax free, whereas in a traditional IRA all gains are taxed at your rate at the time of withdrawal. For people starting to save early, the magic of compounding your earnings provides more than you will ever contribute from your check. That can mean the difference of thousands of dollars saved in taxes. Love the show otherwise, thanks!

[@deadcityhauntedhouse9132]

I agree with the reply on same difference. Also to consider is most likely tax increases as well as social security+pension+dividends+capital gains+RMD's+rental income+10 year inheritance withdrawal tax may put you in much higher tax brackets eventually.

[@captsorghum]

@@deadcityhauntedhouse9132 Yes I'm finding this out as well. For a single filer with 50k annual Social Security benefit, the 46.25% torpedo tax rate starts at only around 35k of non-Social Security income and doesn't go away completely until around 60k (note this is assuming 2026 tax brackets.)

[@mere_cat]

@@jnalley Really depends on how much you are putting in each. You can jam more “value” into a Roth but that means you have less to live on today because you are paying your marginal tax rate on it. All things being equal I prefer traditional because I save whatever is left over after paying for my necessities. I am avoiding higher marginal tax rates today and potentially paying a lower effective tax rate later ( but nobody knows what tax rates will be in the future).

[@randolphh8005]

I used to think that also, but, it is the wrong mindset and math. We are retired for about 3 years. We have mostly Traditional, but a bunch of HSA(very good and better than Roth), but only a little in Roth. So far our tax rates in retirement are 10-15%. LESS than while working. We were able to do ACA at quite low rates, had one year of minor IRMAA penalties. Looking forward our effective tax rate will be 8-12% at an “income” of $120,000. Worst case maybe 15%. While working our rates were always 20-30%! Some Roth is useful, if we had done all Roth our portfolio would be smaller, and for no advantage. Even HSA money which is phenomenal now, has some cost risk due to excess out of pocket cost in the past. We were fortunate not to experience that, but that is luck. We actually CONTRIBUTED to Roth over the last few years while we transitioned to PT work and were in lower brackets. Basically just moved cash to Roth in the 10-12% bracket which is a no brainer. We are also drawing down our portfolio somewhat to get large SS checks(I know some disagree with this strategy), so large RMDs won’t be a significant issue.

[@captsorghum]

@@randolphh8005 I hope you are including Social Security taxation when estimating your retirement tax rate. My post Social Security marginal rate is higher than my working rate, even during my peak years when the TCJA raised my rate to 32%. Luckily I have a few years available to do Roth conversions at 24% + 5% IRMAA, which is slightly better than both pre-retirement and post-SS. But if I was in the 24% or even 28% bracket while working, Roth contributions would have been even better. Earlier in my career, contributing to a traditional 401-k made the most sense. I was allowing for potential career setbacks, and planned for the worst case. If I happened to be broke in retirement, then pre-tax contributions would have been preferable. But the problem was I didn't revise my strategy once I reached a certain level of savings, partly because around that time the TCJA raised my marginal tax rate from 28 to 32 percent. So I stuck with pre-tax contributions all the way to retirement.