Retirement tip

[Brown too long]

Are you thinking of retiring in the near future? This is a for what its worth suggestion. Think it over and do whats in your best interests.
When you file your papers you must decide whether or not to have $450 a month deducted from your check so your wife can recieve half of your monthly check if you die. It has to be signed by both you and spouse, then by a notary public. That is $5400 a year. Instead consider term life insurance. I have a $250,000 policy and it costs less than $100 a month. That is about $1200 per year. That is $4200 savings yearly. It is a 20 yr. policy. If you live to the policy expires you save $84,000 and if you die before 20 years your wife gets $250,000. For my case this is clearly a better choice than going with the CS $450 checkoff.
I do not have the CS specifics in hand now but I believe that your wife would recieve your full retirement check for 5 years no matter which way you decide to go. So under CS upon your death 5 years full check, then half that amount for the rest of her life. Under the Term Life Policy $250,000 immediately and also the 5 years full benefit check from CS.

[1timepu]

Originally Posted by Brown too long

Are you thinking of retiring in the near future? This is a for what its worth suggestion. Think it over and do whats in your best interests.
When you file your papers you must decide whether or not to have $450 a month deducted from your check so your wife can recieve half of your monthly check if you die. It has to be signed by both you and spouse, then by a notary public. That is $5400 a year. Instead consider term life insurance. I have a $250,000 policy and it costs less than $100 a month. That is about $1200 per year. That is $4200 savings yearly. It is a 20 yr. policy. If you live to the policy expires you save $84,000 and if you die before 20 years your wife gets $250,000. For my case this is clearly a better choice than going with the CS $450 checkoff.
I do not have the CS specifics in hand now but I believe that your wife would recieve your full retirement check for 5 years no matter which way you decide to go. So under CS upon your death 5 years full check, then half that amount for the rest of her life. Under the Term Life Policy $250,000 immediately and also the 5 years full benefit check from CS.

Copy that

[1980]

But the 250K will not replace the full value of your pension.You will need something north of 500K maybe 750k. Plus what's the game plan if you die in year 21 after your retirement? But you are thinking and thats a good thing!!!!

[helenofcalifornia]

Any other tips?

[Leftinbuilding]

I intend to buy $250,000 20 year term and $250,000 Universal. So if I outlive the term, she will still get 250K when I check out. This will run roughly $300.00 a month.

[Brown too long]

Yours are all valid points. As I said this may not be for you. Everyone has to weigh all factors and make the best decision for their situation.
The 250K invested and with only a 6% return would be 15K. For me half my pension for the wife would not be a great lot more. As to the plan after year 21 our 401K, Social Security, and 21 years of good investments will fill the gap I hope. We have a 100 acre farm that is paid for and have been able to save enough to make up any difference in the half pension my wife would recieve and the earnings off the 250k.
One other point that I am factoring in is CS underfunding. The buyout will only kick the can a few more years down the road. One day CS is going to have to pay the piper and the money is not there now and I have my doubts it will ever be solvent. With UPS gone I see CS slowly sliding down.
I looked at the pension plan and I was wrong about the 5 Year full check garantee. Your wife would get it but only for 5 years after your retirement date. Not 5 years after your death.

[satellitedriver]

Originally Posted by Leftinbuilding

I intend to buy $250,000 20 year term and $250,000 Universal. So if I outlive the term, she will still get 250K when I check out. This will run roughly $300.00 a month.

The universal part bothers me. It is late and I can't crunch the numbers right now, but my first thought is that you will be paying an insurance company to get a smaller return over time.
If you just pay for a $500,000 20 year term and invest the difference from $300 a month in a solid long term investment(ie, bonds, mutual funds ect..) for the same 20 yrs, maybe your wife would come out ahead.
Do the numbers, universal typically is loaning the insurance company money and getting a small interest payback.
Univeral insurance is a blend of term and whole life. It is sold as building cash value.
It does, but at the cost of your own money.
PAX

[tunemixer]

Please keep these tips coming.I am also retiring in mid or late 2009 . The thought of just throwing away 25% of my pension so my wife can get the remainder doesn't apeal to me.

[beatupbrown]

The variable universal life policy (VUL) is the latest version of a cash-value life insurance plan. It’s a mutual fund snuggled next to an annual renewable term life policy (ART). ARTs go up every year based on your age, which means it is one of the most expensive ways to buy term insurance.

When you’re paying for both a mutual fund and the ART at the same time your insurance is too expensive and the money that’s supposed to go to your investment goes through the insurance company first. This means you’re paying tons of unnecessary fees.

It’s an expensive, high-fee way to invest. Just buy the mutual fund instead.

[beatupbrown]

Buy term !
Worse yet, with whole life and universal life, the savings you finally build up after being ripped off for years don't go to your family upon your death. The only benefit paid to your family is the face value of the policy, the $125,000 in our example.
The truth is that you would be better off to get the $7 term policy and and put the extra $93 in a cookie jar! At least after 3 years you would have $3,000, and when you died your family would get your savings.

[helenofcalifornia]

Maybe we should start a thread here with retirement tips. Those that have already retired know what worked and what didn't. Like, how much weight have you really gained? How's the health benefits working out? What do you wish you had done before you retired that you didn't? Etc., etc., etc.

[satellitedriver]

Something I am going to investigate is the long term tax implications of over investing in your 401k.
When you withdraw money from your 401k it will be taxed at the earned income rate, I am cool with that since, the pre-tax dollars accumulated alot of growth through the years.
The sticky point is will this withdrawal from your 401k count as "earned income" apply to the restrictions when you receive Social Security?
There are set amounts you can earn(by working) before a deduction of SS benefits kick in.
Basically, your SS will be lessened by $1.00 for every $2.00 you earn over the set limit.
A 50% tax rate on a tax you already paid, but that is a different thread topic.
Back to my point, it maybe to ones advantage to take the tax hit now and invest in investments than will only be taxed as capital gains in the future.
I will look into this.
If any one can shed some light on this subject, please post.
PAX

[Just Lurking]

SatelliteDriver

The SS penalty only applies for the time period between early and full retirement ages for SS.

My dad started pulling SS at age 62. Once he earned ~$12k he lost $1 for $2 that you mentioned. SS told him that once he turns 65 that the penalty will go away.
For us younger guys, I know that my full retirement age for SS is 67. It depends on your birth year.

Separately, you have to withdraw a mandated amount from your 401(k) once you reach 70 1/2 depending on life expectancy.

[satellitedriver]

Originally Posted by Just Lurking

SatelliteDriver

The SS penalty only applies for the time period between early and full retirement ages for SS.

My dad started pulling SS at age 62. Once he earned ~$12k he lost $1 for $2 that you mentioned. SS told him that once he turns 65 that the penalty will go away.
For us younger guys, I know that my full retirement age for SS is 67. It depends on your birth year.

Separately, you have to withdraw a mandated amount from your 401(k) once you reach 70 1/2 depending on life expectancy.

Thanks, laws keep changing so I will keep an eye out.
The real question I need to investigate is will the money I pull out of my 401k at the age of 59 be treated the same way as if I earned $12,000.00 as a WalMart greeter.
PAX

[UPS Lifer]

Insurance is a good way to go to cover your spouse. The problem is getting your spouse to agree! There are a lot of packages out there so really look at your options. If you die and the insurance pays off there is no tax involved.

Besides the rules you have for each pension plan, you need to look at the state you are in also...OR the state you are going to spend your retirement in.

God help you, if you are from California like me!

In CA - If your spouse does not sign off - the default is 1/2 of your retirement at the going pension reduction rate.

If you have a trust and move out of CA and die - anything you own in the other state will have to go into probate and is not placed into the trust that was initiated in CA.

So, make sure you have your trust updated by a Trust Attorney in the state you are transitioning to.

I highly recommend that you get professional financial expert to help you with your estate planning which includes your pension. Start approx. 5 years prior to your estimated retirement to analyze your options. This makes an assumption that you already have a trust and some sort of insurance protection established. Continue to update your trust on a yearly basis. Laws and situations as well as your financial status change way to quickly and you need to continue to assess where you stand.

[beatupbrown]

Unless they you assets over $500,000, you do not need to do a revocable living trust. A well-done revocable living trust will cost about $5,000 and all assets have to be re-titled with an attorney. The transfer of assets will go more quickly and you avoid the local probate tax. You also have more control over the trust because, in most cases, it cannot be contested.

Just remember, to do it right is very expensive and very cumbersome. You cannot buy or sell anything within the trust again without going through the trust or probate.

[Leftinbuilding]

Re living trusts, mine didn't cost me a penny. It is one our our union benefits. Check it out.

Originally Posted by Brown too long

Are you thinking of retiring in the near future? This is a for what its worth suggestion. Think it over and do whats in your best interests.
When you file your papers you must decide whether or not to have $450 a month deducted from your check so your wife can recieve half of your monthly check if you die. It has to be signed by both you and spouse, then by a notary public. That is $5400 a year. Instead consider term life insurance. I have a $250,000 policy and it costs less than $100 a month. That is about $1200 per year. That is $4200 savings yearly. It is a 20 yr. policy. If you live to the policy expires you save $84,000 and if you die before 20 years your wife gets $250,000. For my case this is clearly a better choice than going with the CS $450 checkoff.
I do not have the CS specifics in hand now but I believe that your wife would recieve your full retirement check for 5 years no matter which way you decide to go. So under CS upon your death 5 years full check, then half that amount for the rest of her life. Under the Term Life Policy $250,000 immediately and also the 5 years full benefit check from CS.

Remember...one must qualify for life insurance by passing a health examination.

[JohnnyPension]

Has anyone else looked into this whole age 59 1/2 thing. Normal thinking is if you withdraw before this you have to pay the 10 percent penalty. But...at IRS.GOV under "Distributions from 401k Plan" it says:

Tax on Early Distributions

Exceptions. The 10% tax will not apply if distributions before age 59½ are made in any of the following circumstances.



Made to an employee after separation from service if the separation occurred during or after the calendar year in which the employee reached age 55.

When I retired I called up the IRS (on hold for about an hour) and was told that yes, when you are 55 and retire from your company there is NO 10 PERCENT PENALTY. The only tax you pay upfront is the mandatory 20 percent.

I have not taken this money out. I have taken my union annuity and UPS stock (both considered retirement funds in my case) and have not had to pay the penalty.

I would be interested to know if anyone has taken their 401k money before age 59 1/2.

[satellitedriver]

Originally Posted by JohnnyPension

Has anyone else looked into this whole age 59 1/2 thing. Normal thinking is if you withdraw before this you have to pay the 10 percent penalty. But...at IRS.GOV under "Distributions from 401k Plan" it says:

Tax on Early Distributions

Exceptions. The 10% tax will not apply if distributions before age 59½ are made in any of the following circumstances.



Made to an employee after separation from service if the separation occurred during or after the calendar year in which the employee reached age 55.

When I retired I called up the IRS (on hold for about an hour) and was told that yes, when you are 55 and retire from your company there is NO 10 PERCENT PENALTY. The only tax you pay upfront is the mandatory 20 percent.

I have not taken this money out. I have taken my union annuity and UPS stock (both considered retirement funds in my case) and have not had to pay the penalty.

I would be interested to know if anyone has taken their 401k money before age 59 1/2.

The good news is the type of 401k we have is not subject to the penalty of 10% if you are classified as retired and have reached the age of 55. I cannot recall the exact suffix to our 401k, but it is a 401ka, 401kb,401kc ect....
I checked into it several years back. The money drawn out will be taxed at standard earned income rate based on your total income for the year. I do not remember a mandatory 20% tax.
If you are correct with the 20%, that is too high of a tax rate.
PAX

[Tackleberry]

I'd also recommend looking into some Long Term Care insurance from a reputable company. Medicare doesn't cover nursing home care except for 21 days in the hospital and at a reduced amount up to 90 days a year, or something like that.

Be sure that you check out the policy carefully, they vary greatly in what is covered- at home care, lifetime caps, etc. We were able to purchase 250,000 policy for both of us for about a hundred a month. A nursing home can easily cost 80,000 or more a year.

[JohnnyPension]

You are right about the mandatory 20 percent. That was considered a "safe" amount by my tax consultant to avoid having tax time woes at tax time.