Hello!
My parents have reached out to me to help them decide which accounts to access, and how, to set themselves up properly for their retirement years. I humbly ask this wonderful community to help me help them make the right decisions here. My dad worked night-shift for 30 years to support us, and my mom went back to school to earn two master's degrees and become a teacher after raising her three kids. They did a hell of a job, and if you can all help me repay them just a little by helping to make sure they are in a good position for their retirement years, we would all be incredible grateful. Thanks so much in advance.
My father is turning 60 in a few weeks and is semi-retired. Currently, he's earning a few thousand a month doing home repairs. He will have to stop that soon due to health issues that will require surgery and rehabilitation. Back problems. Hopefully, he'll be back at it after about a year off. Maybe longer. Maybe not at all, we'll see.
He has the following pensions and accounts:
Traditional IRA: $286,000
401(k): $37,000
Pension: $1300/mo at age 60 OR 1500/mo at age 62
Social Security: $1700/mo at age 62 OR 2300/mo at age 65
My mother is a teacher, age 58, and will continue to work for at least four more years. This will provide decent healthcare for both of them. She may work until age 65 to access Medicare. She'll have a pension coming to her, as well. She's currently making about $80,000 a year. Her pension will probably be about $3000/mo at age 62.
Debts:
Home Loan: $120,000 at 5.2%. Paying about $1000/mo
Car Loans: $17,000 @ 0%. Paying about $650/mo
My father thinks it best to take his pension now so that he has some cash coming in to cover loan payments for the time that he will be laid up after surgery.
My thoughts align with his. He should take the $1300/mo pension payment at age 60, hope to rehabilitate and continue working (he loves it) and then take SS at age 65. Thoughts? Concerns?
My main uncertainties surround their debt and what to do with my dad's IRA and 401(k).
--I'd like him to roll his accounts over to Vanguard at 50/50 stocks and bonds, from his current 'financial advisor'.
--At age 65, he'll have roughly $4,000 of income a month (less taxes) without touching his accounts, not counting my mother's pension. I feel as though they should be comfortable withdrawing more than 4% a year from the accounts to supplement their income (if they even need it) without worrying too much about the future. Am I missing something big here?
--It would be nice to get rid of that debt once and for all, but withdrawing an amount to cover it would bump them up a tax bracket or two. Should we pay this off in a few yearly lump sums that keep them in a lower tax bracket? Keep paying it monthly for the next however many years? Anything I am missing here, or magical ways to use retirement accounts to pay off debts?
If these where your parents, what would you advise them to do?
Again, thanks!
