Investing - Retirement Money Tips

Investing - Retirement Money Tips

Also see Investing, Investing - More Fun with Investing, Investing - How to Choose a Mutual Fund, Investing - Things I Have Learned in Retirement, and Investing - The Basics of US Income Taxes.

Health Savings Accounts are a great deal (only allowed if you have high deductible health insurance). You put money in, tax exempt, let it grow (optional), then pay for healthcare (not insurance) without ever paying taxes on it. BUT you cannot add any money to it if you are on Medicare. But you can still use the HSA until it runs out. So max it out before you go on Medicare (there are yearly contribution limits). I missed out on using this to full advantage - you must start on it far in advance of going on Medicare.

19 May 2023 - HSAs can be used for Medicare premiums but not Medicare supplemental plan premiums.

After listening to much retirement advice, I have moved my retirement investment thinking toward income instead of total return (income plus asset growth).

I moved a lot of my assets into SCHD and VYM. These are high dividend indexed stock ETFs. Corporate dividends, in general, are qualified so capital gains level taxes. The dividends will be tied to corporate profits, which are tied to the economy. If you buy and hold, you keep getting dividends regardless of the stock price. And you should get dividend growth as the economy and inflation grow.

The best 40/60 (stock/bond) fund for income appears to me to be VWINX (or VWIAX if you can get it - Admiral shares). The stocks are from the same index that VYM uses.

SCHD, VYM, VWINX are down 8-10% for the year (July 2022). Disappointing, but much better than the major indexes. And these are buy, hold, and take the dividend funds so not much point in worrying about asset price fluctuations.

US Treasury inflation adjusted bonds (I Bonds) look like a very good deal. There is a $10,000 per year limit on purchase. You buy them via www.treasurydirect.gov. But the web site reviews are so terrible that I'm afraid to invest in them. The reviews suggest lost accounts and multiple hour phone wait time when trying to address account problems.

BUT (2022-07-28) - at some point you may find that with Social Security, IRA required minimum distributions, maybe a pension, that you need an investment for a tax un-advantaged account that does not add to your taxes. I think that what is best for this is a growth ETF. These two look good - MGK, VUG. They are Vanguard indexed growth funds for huge, large corporations. They have dividends about half the dividends of an S&P 500 ETF. As the investment grows, you will not pay much in taxes. But the percent cost basis keeps shrinking, so when you sell, you will pay. If you never sell, your heirs will get a free cost basis reset! (That's under current tax law.)

There are a number of reasons to start Social Security payments early or late -

  • You need money now.
  • If you live past 85 you will get more money by delaying.
  • You will get more money by taking it before Social Security becomes insolvent (2035?).
  • By delaying you get some low income years that are useful for converting IRA assets to a Roth IRA.
  • Take the money now while you are in good health and can use it effectively.
  • 2024-01-24 - Is this point is WRONG?

And one more that I haven't heard, but I think is important. Unlike typical pension or annuity payments or bond interest, Social Security income is inflation adjusted. And the increase is a percentage of the payment, so higher payments give higher dollar adjustments. Delay your Social Security payments for as long as you can to take advantage of this.

2024-01-24 - The cost of living adjustment is not a percentage of your Social Security benefit. It is a percentage of your PIA - primary insurance amount - the benefit that you would be receiving if you started taking benefits at the full retirement age. Your benefit is derived from your PIA and your retirement age - I cannot find documentation of the formula. Is it a constant offset? Yes - then my point is wrong. Is it a percentage offset?  Yes - then my point is correct. Read https://www.ssa.gov/OACT/COLA/colaapplic.html and see if you can figure it out. I have one confirmation that my original statement is correct.


Convert your IRA (pre-tax money) to a Roth IRA (tax exempt money) in steps that keep your taxes manageable. Do this while you can control your income tax - before you start Social Security payments (age 62-70), before you start IRA required minimum distributions (currently age 72). Do it during stock market dips so that you pay less income tax on the transfer. Do it in chunks that keep you in a low tax bracket - transfers are taxed as ordinary income. Do it by IRA to Roth transfer within a brokerage so that you don't accidentally break a transfer rule. You can transfer assets in kind so that you are never out of the market and there will be no buy or sell fees. Roth transfers do NOT count toward required minimum distributions.

1 comment:

  1. Lots of great point here. My experience with Treasury direct has been great for decades. I've purchased a variety of bonds and tips and ibonds, but lately only ibonds there, as it's so easy to trade and keep the other Treasuries at Schwab or Fidelity. Treasury direct is a little quirky in terms of website menus and stuff, but it has never caused me any problems. They tend to have stronger security measures than commercial firms. I have had ibonds set on auto pilot for a number of years. Each person in a couple can buy the max once per year. You can schedule the yearly purchases years ahead in their website. You can title the ibonds jointly or in one person's name.