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tnewin

AXA 403b Rollover and Mass Mutual 457b Questions

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The most important thing to do once you transfer all your money over to Vanguard is establish a primary and secondary beneficiary. That way that person or persons or charity will have rights to the money. This designation I believe acts like a will for your accounts and supersedes any written will. So this is extremely important to do. It can be done online and it can be changed online. Vanguard has an information packed website unlike any I have ever seen. You would be good to get familiar with it. It talks about every possible issue.

I believe upon your death the beneficiary can claim the account and transfer it over to themselves. At that point they pretty much take over the tax liabilities involved. This might help as different accounts may have differences in procedures and requirements. P-1625576    

I can't speak about about a California teachers pension but here in Virginia, once you retire you must declare if you want your pension transferable to another person upon your death. If you don't, you get a larger  monthly payout and if you want a transfer  upon your death the payout is lower. You will have to read the specifics of your plan. I took the non transferable payout as it was significantly more money . When I die it stops. My wife has her own pension and we have a healthy nest egg so she will be fine.

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10 hours ago, tnewin said:

I'm not sure how much I expect to spend in retirement.  These are things I should think about and start planning for.  As of now, I save about $1k a month cash (I know it can do better than just sit in a bank account earning minimal interest, but this is my emergency money and money to help my mom out.  I am looking into retiring at 56 and expect to receive about $2500 a month from my pension. 

You’ll definitely want to begin tracking your spending. Without doing that, you can only guess what your retirement needs will be and there is already enough forced uncertainty in that equation. Plus the longer you track expenses, the more accurate you’ll be when it comes to estimating irregular or easily overlooked expenses.

I’m confused what you mean by “saving” is that in addition to “investing”? If you only have 12k left over each year after taxes and spending then you won’t be building up a very big portfolio.

If you will in fact receive a 30k pension (adjusted for cost of living?) then you are in great shape. Depending on your assumptions, that’s the equivalent of having a $750,000-$1,000,000 portfolio.

Combine that with a modest portfolio and a medium/low cost of living retirement destination and it looks like you’re in great shape.

10 hours ago, tnewin said:

my understanding is that my beneficiaries can inherit my Roth IRA when I pass and allow it to grow tax-free, is that correct?

I assume we’re talking about non-spouse beneficiaries...

You’re not exactly right, google the “life expectancy method” and the “5 year method”.

Bottom line: the beneficiary has to take withdrawals from the account (either spread across five years or their expected lifetime). As long as the money remains in the Roth IRA it won’t be taxed. As long as they follow the rules, it won’t be taxed when they pull it out. However, once the money is out of the Roth IRA (and presumably reinvested somewhere) it’ll be subject to taxation as any other money would be.

10 hours ago, tnewin said:

the CalSTRS benefits specialist gave me a number to call to get assistance with getting a  better 457b vendor added to my district. 

Keep in mind that the CalSTRS2 Pension is a reasonable 457b to invest in even if you can’t get Fidelity added. 

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35 minutes ago, EdLaFave said:

If you will in fact receive a 30k pension (adjusted for cost of living?) then you are in great shape. Depending on your assumptions, that’s the equivalent of having a $750,000-$1,000,000 portfolio.

 

Dang, if those figures are accurate than I am doing better financially than I thought. Those guaranteed pensions are a gold mine. Problem is statistics show most teachers don't stay in the profession long enough to collect a substantial pension. If you can stand it, staying in teaching  25-30 years can pay-off. But since most teachers don't retirement supplementation through a 403b-457b-IRA makes sense. I always count on Ed for my numbers. I hope you are as good with math as you seem. 

Yes cost of living adjustments are included in most teacher pension plans. I just got notice of a 4.44 % increase starting in a few months.

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I thought I read half of teachers quit within 5 years.

With respect to the 30k/1M numbers, that just speaks to the reality that you need enormous capital to safely support modest annual withdrawals.

4% withdrawals are pretty safe for somebody at normal retirement age. 4% of $750,000 is $30,000.

3% withdrawals are pretty safe if you want your portfolio to last forever. 3% of $1,000,000 is $30,000.

The OCPS (FL) pension does NOT come with cost of living adjustments. I suspect most employees don’t realize that...they may learn about inflation in real time as it eats them alive. 

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I get a flat $72.00 per month increase every October. The calculation is 2% times your first benefit payment, and it's fixed forever. 

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4 hours ago, sschullo said:

I get a flat $72.00 per month increase every October. The calculation is 2% times your first benefit payment, and it's fixed forever. 

That's much more impressive than my once in a blue moon cost of living increase. 

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On 6/18/2019 at 12:01 PM, EdLaFave said:

However, once the money is out of the Roth IRA (and presumably reinvested somewhere) it’ll be subject to taxation as any other money would be.

Yea, you should spend anything you pull out of a Roth IRA  on retirement or you start the tax process all over again unless you just leave it in a checking account that pays no interest.

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It’s my understanding that Roth IRA’s have no RMD to you or your heirs whereas traditional IRA’s do, of course. Additionally, heirs can no longer stretch them over their lifetime. IRS wants the taxes sooner.

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9 hours ago, MoeMoney said:

It’s my understanding that Roth IRA’s have no RMD to you or your heirs

If you inherit an IRA from somebody other than your spouse then you have to setup a plan to withdraw money from the account.

https://www.schwab.com/public/schwab/investing/retirement_and_planning/understanding_iras/inherited_ira/withdrawal_rules

9 hours ago, MoeMoney said:

heirs can no longer stretch them over their lifetime. IRS wants the taxes sooner.

The link above indicates the lifetime expectancy option still exists. I think you’re referring to legislation that may or may not pass and whose differences between the House and Senate has yet to be rectified.

I believe the House is trying to do away with the lifetime expectancy for non-spouses and you’d have 10 years to deplete the account. I believe the Senate is allowing the first 400k to be handled via lifetime expectancy and the rest has to be depleted in 5 years.

I understand this passed with overwhelming support in the House, but I’m not ready to bet that it becomes law. Keep watching it, we’ll see.

https://www.forbes.com/sites/leonlabrecque/2019/04/23/new-proposed-stretch-ira-rules-will-have-a-big-effect-on-iras-and-it-could-cost-your-kids-thousands/

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That’s right, it was proposed and not passed yet. Thanks Ed.

the Roth IRA rmd makes no sense to me. Why does it matter if the taxes have been paid?  I wonder what Alexander Hamilton would think of our system today?!

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It’s true that the income taxes are being paid, but as long as the money remains in the Roth account, the heir isn’t paying taxes on distributions.

I’m fully in support of any policy that prevents generational wealth and dynasties. 

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