A New Chapter for David and Susan

David and Susan had always dreamed of a peaceful retirement, filled with sunny days and new adventures. After years of hard work and careful planning, they were finally ready to turn that dream into reality. With David at 67 and Susan at 62, they had accumulated a nest egg of $2 million and owned a cozy $500,000 home in New York, free of any mortgage.

The Decision to Move

One crisp autumn evening, as they sat on their porch sipping tea, they discussed their future. “David, what do you think about moving to Florida?” Susan asked, her eyes sparkling with excitement. “I’ve heard it’s a great place for retirees, and we wouldn’t have to pay state income tax.”

David nodded thoughtfully. “That sounds like a good idea. We could enjoy the warm weather and stretch our retirement savings further without the state taxes.”

Financial Planning

With their decision made, they began to review their financial situation. They had $1.2 million in a brokerage account, $600,000 in a pre-tax IRA, $200,000 in a Roth IRA, and $100,000 in cash. Their annual spending was estimated at $120,000, and they planned for a 2.5% cost of living adjustment each year.

David, ever the meticulous planner, decided to delay his Social Security benefits until age 70 to maximize his monthly payments. Susan, on the other hand, was considering whether to start her benefits at age 62 or wait until her full retirement age of 67.

Roth Conversions and Investment Diversification

One of their key strategies was to convert a portion of their pre-tax IRA to a Roth IRA each year while staying within the 24% federal tax bracket. This would help reduce future required minimum distributions (RMDs) and the associated tax burden.

Their brokerage account was well-diversified, with $800,000 in stocks, $200,000 in high-quality corporate and municipal bonds, $100,000 in Real Estate Investment Trusts (REITs), and $100,000 in cash and cash equivalents. This diversification provided a balanced portfolio to manage risk and ensure steady income.

The Move to Florida

With their financial plan in place, David and Susan made the move to Florida. They found a charming home in a friendly community, surrounded by palm trees and close to the beach. The warm weather and relaxed lifestyle were just what they had envisioned.

Adjusting to Higher Inflation

As they settled into their new life, they kept a close eye on their budget. Inflation had risen higher than expected, but they were prepared. They adjusted their spending, cut back on discretionary expenses, and continued to diversify their investments to outpace inflation.

A Comfortable Retirement

David and Susan’s careful planning paid off. They enjoyed a comfortable retirement, filled with travel, hobbies, and time spent with family and friends. Their diversified investments and strategic Roth conversions helped manage their tax burden, while their decision to move to Florida provided significant savings on state income tax.

They continued to review their financial plan regularly with their advisor, making adjustments as needed to stay on track. With a balanced approach to spending, investing, and tax planning, David and Susan were able to live their retirement dream, secure in the knowledge that their financial future was well-managed.