\u201cI also have a health-savings account through work with $300,000 to help us with medical expenses.\u201d (Photo subjects are models.) – Getty Images\/iStockphoto <\/p>\n
I\u2019m 64 and my wife is 65. We have $1.5 million in 401(k)s and IRAs and $90,000 in a Roth IRA. We are looking to retire next year. I will receive $3,000 in a monthly pension that my wife will inherit upon my death. She will receive $2,600 in Social Security, and I am thinking of waiting until 67 when I would get $3,800.<\/p>\n
Our current salary combined is $210,000. We have 2 homes with a primary mortgage of $500,000 at 2.75%. Our other home has a mortgage of $300,000 at 2.75% with a positive cash flow rent of $800 after paying our mortgage payment. We have two challenges: tax optimization and ensuring our money lasts.<\/p>\n
I also have a health-savings account through work with $300,000 to help us with medical expenses. I\u2019m not looking to leave any money to the kids other than at least one of the homes. The properties are worth about $1 million each. What advice can you provide about our plan to retire in 2026?<\/p>\n
Now I\u2019m 64<\/p>\n
Related: 2025 has been one hell of a year. Consumers should expect more \u2018silent pain\u2019 in 2026.<\/a><\/p>\n Congratulations on not leaving any money to your kids! (Aside from one or both of your homes, which is a considerable and generous inheritance.) I\u2019ve said it before and I\u2019ll say it again: Your assets are not your children\u2019s inheritance unless they eventually wind up in their bank account upon your death. Until that happens, it\u2019s your money.<\/p>\n Given your properties, rental income, future Social Security benefits, pension and more than $1.5 million in retirement funds, you are in a very nice place. In fact, between your Social Security and pension, you have an income of $112,800 per year guaranteed for life. And that\u2019s before you dip into your IRA or your annual $9,600 profit on your rental.<\/p>\n If you took 4% a year from your IRA \u2014 and you are clearly more than able to take far less than that \u2014 you will have another $63,600 a year, bringing your grand total to $176,400. If your withdrawals are controlled, taken with the advice of an accountant, and you avoid withdrawals during a market downturn, then you won\u2019t need to adhere to the 4% rule.<\/p>\n In your favor: (1.) You are not required to rely solely on your IRA. (2.) You have a large HSA with $300,000 to cover decades of healthcare tax-free. (3.) You have rental income that more or less offsets the cost of your housing. (4.) You can increase your cashflow by selling one of your homes. (5.) And you don\u2019t need to worry about leaving money behind.<\/p>\n Your required minimum distributions (RMDs) should be your focus. You are now on track, if you\u2019re not careful, to glide into the 24% and\/or 32% tax brackets, which might even be higher than you had during your working years. You also open yourself up to potential Medicare income-related monthly adjustment amount (IRMAA) surcharges.<\/p>\n Your mission, if you choose to accept it, is to avoid falling off that tax cliff into the 32% bracket, and one way of doing that is to start your Roth conversions ASAP (if\/when your financial adviser greenlights such a strategy). A typical Roth conversion window is when you retire and before you claim your Social Security.<\/p>\n You do have a rather nice feather in your cap: Your $300,000 Health Savings Account, which you can use strategically during your retirement years. The best part about HSA accounts? Withdrawals are tax-free and don\u2019t impact your Medicare IRMAA, your Social Security tax rate or your other taxable income.<\/p>\n And there is a wind in that feather, working in your favor: time. Under the SECURE Act 2.0: your first RMD for you and your wife will be at age 75. These apply to traditional IRAs and 401(k)s and do not apply to Roth accounts, which were funded with after-tax dollars. At 75, your RMD is that age divided by 24.6, equating to 4.07% of your tax-deferred balance.<\/p>\n Other jobs for your \u201cto-do\u201d list: Estimate your monthly expenditure in retirement and stress test that against your income. Decide whether to claim your Social Security at 67 or wait until you\u2019re 70 (and get roughly 8% a year more). Create a \u201ctax map\u201d with your accountant to estimate your brackets before and after your Social Security and RMDs.<\/p>\n Go forth and retire, and keep your accountant on speed dial.<\/p>\n Don\u2019t miss: \u2018It\u2019s heartbreaking\u2019: My cousin died and her estranged husband has taken possession of her home. Can we evict him?<\/a><\/p>\n Previous columns by Quentin Fottrell:<\/p>\n \u2018He never asks for anything\u2019: I\u2019m 61 with a $1.5 million 401(k). My girlfriend says I do too much for my son, 28. Is she right?<\/a><\/p>\n Between your Social Security and pension, you have an income of $112,800 per year guaranteed for life. – MarketWatch illustration <\/p>\n