Search found 1331 matches

by Exchme
Tue Mar 26, 2024 9:54 pm
Forum: Personal Investments
Topic: I think my Mom, recently widowed, is looking at a tax bomb
Replies: 28
Views: 4789

Re: I think my Mom, recently widowed, is looking at a tax bomb

This is an extension of sorts from a thread I made earlier in the month over in 'Personal Finance': https://www.bogleheads.org/forum/viewtopic.php?t=425871&start=50 - I figured this question is specific enough to investing that it required its own thread in 'Personal Investments'; but mods please let me know otherwise. In short, I'm looking for a sanity check to assert that I'm indeed correct that a tax-bomb is waiting for my mom now that she is a widow and, if so, did I correctly cover the options available to her to that minimize impact. Some facts: Dad died last month. He was retired and would have been 70 later this year (in September) Mom, the survivor, is retired and is turning 75 later this year (in May) Mom has a managed Rollov...
by Exchme
Tue Mar 26, 2024 9:24 am
Forum: Personal Investments
Topic: Is it possible to Exchange AAPL stock for VTSAX at Vanguard?
Replies: 9
Views: 1371

Re: Is it possible to Exchange AAPL stock for VTSAX at Vanguard?

Unaware of anything but the two-step process of selling one and buying the other. It takes all of a few seconds.
by Exchme
Tue Mar 26, 2024 9:22 am
Forum: Personal Investments
Topic: Do Russian stock holders in the west have any chance of recovery?
Replies: 11
Views: 1793

Re: Do Russian stock holders in the west have any chance of recovery?

I think there is more to it than western governments not wanting you to do business in Russia. Russia doesn't want foreigners doing business in Russia and immediately put restrictions on their ability to get their money out.

Plus, many of the companies are now worthless as they are forced to work on war production at government-set prices with payoffs to government officials or the CEO will have a tragic accident falling out a window after shooting himself twice in the head. It's a lot closer to North Korea's permanent closure than to re-opening in any kind semi-free country with functioning markets. The money is long gone.
by Exchme
Mon Mar 25, 2024 9:51 pm
Forum: Personal Investments
Topic: 2026 Tax tables impact on Roth conversions! Act now?
Replies: 10
Views: 1531

Re: 2026 Tax tables impact on Roth conversions! Act now?

So... My questions are 1) Should I "bite the bullet" in 2024/2025 and convert some at 22%, knowing I will have more than 20 years ahead trying to fill the 15% bracket with conversion? 2) Has anyone seen any good modeling of Roth conversions that take the 2026 changes into account? I use New Ret and can see that their post 2026 tax tables are carrying on from the 2025 tables, albeit at the higher Rate 15% vice 12%, the "shrinking brackets" seems almost as big of a problem as the jump in rates, to me at least. Anyone got thoughts/concerns, or maybe better info? :? Pralana Gold has a good pre-2017 model, from bringing back the personal exemption to the more pervasive AMT, not just bracket changes. Note that because of the ...
by Exchme
Sun Mar 24, 2024 9:39 pm
Forum: Personal Investments
Topic: HSA limit for partial year
Replies: 6
Views: 687

Re: HSA limit for partial year

The allowed amount is the annual maximum divided by the number of months you were eligible, so just 5/12 of the total.
by Exchme
Sat Mar 23, 2024 9:47 am
Forum: Investing - Theory, News & General
Topic: It is really that simple to do it the Bogleheads way?
Replies: 87
Views: 8166

Re: It is really that simple to do it the Bogleheads way?

There are distinct advantages of the Boglehead way. It is very hard to beat the market without taking large risks. If your advisor could do it, they wouldn't be working for you!

Some advisors misbehave and put you in things that benefit them but that are a poor fit for you.

Getting rid of the advisor is also a huge cost reduction. The drag on performance caused by the advisor AUM fees and high cost investments is the most expensive thing you will buy in your lifetime. Since it will probably produce nothing for you, why buy it?
by Exchme
Fri Mar 22, 2024 2:24 pm
Forum: Personal Finance (Not Investing)
Topic: At what age to tell child about family's finances
Replies: 74
Views: 6100

Re: At what age to tell child about family's finances

A few years ago we started to give money to the kids (in their 30's and well launched) to make sure they got some of it while young enough where it made some difference in their lives. We sat down with one to gift the check and assure them that giving it won't pinch us and DW blurts out our net worth. :oops: At that point, I decided to make lemons out of lemonade and wrote up some thoughts about money, savings, Boglehead investing, asset allocations, Roth vs. traditional IRAs, insurance, etc. along with our finances. Then sat down with each and went through it all. It was well timed or even late in their lives, the one that had always done best in school had been suckered into an indexed annuity at work and had savings but no stocks and no ...
by Exchme
Wed Mar 20, 2024 11:58 am
Forum: Personal Investments
Topic: Can I Retire?
Replies: 11
Views: 2348

Re: Can I Retire?

Opensocialsecurity.com says the optimum SS claim age is for you to wait until 69 (wife 67), with $63,565 of benefits ( +/- a year doesn't make much difference). After that, you only need $37K from your portfolio for your $100K spending desire. So from a macro standpoint, you are in good shape. In the short term, you may need to think about controlling income to get ACA premium credits, but you have enough in taxable and Roth to be able to do that easily. Once that is out of the way, you may want to look at some Roth Conversions to get as much out of the IRAs while staying in the 12% (or staying below the start of the LTCG tax phase-in if there is are LTCGs being generated in taxable). Many retirees find that the financials were the easy par...
by Exchme
Wed Mar 20, 2024 7:01 am
Forum: Investing - Theory, News & General
Topic: Reset 4% withdrawal floor if portfolio increases in value?
Replies: 93
Views: 8017

Re: Reset 4% withdrawal floor if portfolio increases in value

Kitces wrote about this several years ago and found that a 50% increase in portfolio value could support a 10% increase in portfolio draw. The reason for the difference in magnitude is some bad SORR events have a boom before the big bust so you don't want to go crazy with the spending.
by Exchme
Wed Mar 20, 2024 6:40 am
Forum: Personal Finance (Not Investing)
Topic: VG Authorized Agents – How do they access and control accounts?
Replies: 12
Views: 1173

Re: VG Authorized Agents – How do they access and control accounts?

DW and I filled out the "full agent authorization" for each other's Vanguard retirement accounts. Those are ideal for paying for long term care if that was ever needed. We already had POA's in place, but Vanguard wants their own form. It required two witnesses and a notary.

The accounts now show up on the list of accounts just like our joint taxable account does.
by Exchme
Tue Mar 19, 2024 9:44 pm
Forum: Personal Finance (Not Investing)
Topic: What did you do today to increase your income? [Financial]
Replies: 64
Views: 4235

Re: What did you do today to increase your income?

Not sure what OP was expecting for answers. But all companies are dysfunctional messes held together with duct tape and used chewing gum. So look around and think about what weaknesses you see and what interests you have and go figure out a way to be useful to the boss or the team.

Most problems boil down to communication - and it's usually not hard to think of better ways to communicate - a dashboard to visualize progress, a training manual or session, a list of customers that haven't been contacted in a while, a technology your company is ignoring. Your first efforts will probably not be a home run, but you will be forced to learn a lot, you will become visible and with some persistence you will stick out for your efforts.
by Exchme
Tue Mar 19, 2024 9:59 am
Forum: Personal Finance (Not Investing)
Topic: IRA to ROTH conversion analysis
Replies: 8
Views: 926

Re: IRA to ROTH conversion analysis

It's mostly too late to make much difference with Roth Conversions. You might still be able to nibble around the edges. Tibbitts mentioned the tools most of us use to calculate things, but there may not be much meat on the bone here, so a few thoughts before you jump into trying to learn them. Working up the income scale: If less than 85% of your SS benefits are being taxed, it may not be worth it do any conversions. (If you are close to 85% being taxed and your wife's RMDs will push you into a 22+% tax bracket, then you should look into the tools tibbitts mentioned) If 85% of your SS benefits are already taxed and AGI is less than $126,350 (start of the LTCG tax phase-in), you could convert to there. If you are in the 22% bracket, you coul...
by Exchme
Mon Mar 18, 2024 9:50 pm
Forum: Personal Investments
Topic: How Much to Convert to Roth?
Replies: 53
Views: 4429

Re: How Much to Convert to Roth?

I would start by advising them to defer taking SS until age 70 to keep that out of the way as long as possible so they can do more Roth Conversions, the deferred retirement credits are roughly actuarially neutral and they need the low tax space for Roth Conversions. As others have said, there's a lot of work that goes into this. They have to think about long and short lifespans, good and bad market returns, TCJA expiring vs. not, planning for long term care (which would be deducted from taxes so tax deferred is a great source for that), deciding on any charitable giving or bequests, thinking about heirs and their tax brackets, etc. If they are not numbers folks, then finding a one-time-fee financial planner (not an advisor that charges a pe...
by Exchme
Mon Mar 18, 2024 9:06 am
Forum: Personal Finance (Not Investing)
Topic: Medicare: Getting Part A and D only
Replies: 89
Views: 4984

Re: Medicare: Getting Part A and D only

If OP is still working and has medical coverage through work (not COBRA), then deferring taking part B is OK. Insurance through work will always be primary and you may get absolutely nothing from part B except a premium to pay. When you eventually retire, losing work insurance is a qualifying event, so sign-up for part B is allowed without penalty if done within 3 months of losing coverage.
by Exchme
Sat Mar 16, 2024 9:17 pm
Forum: Personal Finance (Not Investing)
Topic: Reevaluating social security
Replies: 49
Views: 4596

Re: Reevaluating social security

It's a very well respected and well tested site, maybe you should learn about it more. Assuming that's true, something being popular doesn't sway me (in either direction) for my opinion on anything. And it's a pretty simple site with simple input/calculations; I quickly learned about all there was to learn. For examples of why I couldn't put much stock in it, I changed various parameters by checking the box at the top and it didn't change my results at all. This includes saying I was still working and entering monthly earnings ranging from $10/mo to $10,000,000/mo. Again, didn't change the results, so I have to question "well tested." To each their own though. I just did a test, telling it I was a single male, still working and i...
by Exchme
Sat Mar 16, 2024 8:15 pm
Forum: Personal Finance (Not Investing)
Topic: Did I "get away with" a 2 year IRMAA lookback?
Replies: 11
Views: 2339

Re: Did I "get away with" a 2 year IRMAA lookback?

They work on the basis of the MAGI from the tax year two years prior. They have to be ready for the folks that turn 65 on Jan. 1, but on January 1, 2024, you haven't filed your 2023 taxes yet, the latest they have is 2022. So the rule for everyone is to use 2022 MAGI for 2024 IRMAA. There are grounds for IRMAA appeals, but doing Roth Conversions isn't one of them.
by Exchme
Sat Mar 16, 2024 8:05 pm
Forum: Personal Finance (Not Investing)
Topic: Reevaluating social security
Replies: 49
Views: 4596

Re: Reevaluating social security

What it really comes down to is that there is a fairly high chance at least one of you live longer than the breakeven age of delaying but a much lower chance that you both do (particularly given the age difference) and the survivor only keeps the higher social security benefit. So hedging by taking the longevity insurance on one benefit and not on the other will generally be the optimal choice. In your case, going back to work can certainly impact that decision. +1. Think of claiming early as "short-evity" insurance. Not everyone makes 70.... Also, in your case. model how much you can earn without impacting SS. Note that you can also (I think) suspend it if you have a high earning year. Or relax, most of these choices aren't &quo...
by Exchme
Sat Mar 16, 2024 7:53 pm
Forum: Personal Finance (Not Investing)
Topic: Reevaluating social security
Replies: 49
Views: 4596

Re: Reevaluating social security

Hello everyone, I just used the opensecurity.com site and I'm confused about the advice that it is given. I bet, since that's a computer security site. :) You meant https://opensocialsecurity.com/ I assume PS you can find out your "PIA" here: https://www.ssa.gov/OACT/quickcalc/ Just don't fill out the expected retirement date and it will show up in results PS 2: anyone know why it says my SS will increase significantly in the second year? The most common reason would be the program evaluates month by month, so the first year is a partial year of benefits. Frankly after messing around with that site more, I don't put much stock in it if any...... It's a very well respected and well tested site, maybe you should learn about it more.
by Exchme
Thu Mar 14, 2024 8:52 am
Forum: Personal Investments
Topic: Roth Conversion - Source for Paying Taxes
Replies: 31
Views: 2738

Re: Roth Conversion - Source for Paying Taxes

The big question is why you have money at Edward Jones. Since this is an IRA, it is easy to get it out of that rat trap without a tax problem. Open an IRA at a good brokerage like Vanguard, Fidelity or Schwab. Then fill out the form at the new brokerage (or call them) and have them initiate the transfer to pull the money from EJ. EJ will probably have to liquidate and will squeal and try to get you to stay, but their fees are outrageous and that's robbing you blind. Remember that you can only relatively safely count of being able to withdraw 4% of your initial balance (inflation adjusted) each year, but EJ is taking 1/3 to 1/2 of that in their crazy high fees/high cost funds. Run!
by Exchme
Mon Mar 11, 2024 7:50 am
Forum: Personal Investments
Topic: New Poster financial review
Replies: 9
Views: 1429

Re: New Poster financial review

I would want to set up a special needs trust for your daughter, and since your son would not be a good choice for a trustee, you may need to use a professional trustee like a bank, which won't come cheap.

I think you should count yourself as blessed with the ability to earn enough money to help her and I would get back in the saddle and work to provide for her future. If that turns out to be unnecessary due to inheritance or some such, so be it, but it beats the alternative of needing money to help and realizing that too late.
by Exchme
Sun Mar 10, 2024 10:21 pm
Forum: Personal Finance (Not Investing)
Topic: How much Roth Conversion should I plan on?
Replies: 18
Views: 2571

Re: How much Roth Conversion should I plan on?

Roth conversions from 59-65 are almost no-brainers. 65-70 seem still good even though I'll pay IRMAA surcharges but they seem worth it if we are doing Roth conversions. IRMAA surcharges are assessed at age 65, but are always based on your MAGI two years prior, so they start based on your MAGI at age 63. IRMAA surcharges don't kick in until most of the way through the 22% bracket, so saying you should do Roth Conversions and pay IRMAA is inconsistent with staying in the 12% bracket. Note that the taxes on Long Term Capital Gains/Qualified dividends starts at an AGI essentially equal to the top of the 12% bracket, meaning any Roth Conversions above the start of the phase-in are taxed at 12% ordinary income, plus since the LTCG tax is a MAGI ...
by Exchme
Sun Mar 10, 2024 9:43 am
Forum: Personal Investments
Topic: Capital Losses: Strategy to long term capital gain with safety
Replies: 4
Views: 609

Re: Capital Losses: Strategy to long term capital gain with safety

We're all terrible stock pickers. That's why we're here, we learned that the best way forward is to buy the whole market and get the market return instead of believing we can outguess everyone else on earth and find some kind of hidden gem that no one else noticed. But that doesn't mean you shouldn't hold stocks, just not individual ones. I would just use the 3 fund portfolio (Total Stock Market, Total Bond Market, Total International Stock Market, see the wiki). As unrealized gains occur, you can harvest them by simply selling and buying right back, plus each year you write off $3000. That will use up the losses, so when you are ready to retire, you will have a portfolio with few gains in it, so it will be tax efficient when you start to d...
by Exchme
Fri Mar 08, 2024 2:28 pm
Forum: Personal Investments
Topic: 16 yr old - how can I best take on high risk?
Replies: 65
Views: 5610

Re: 16 yr old - how can I best take on high risk?

Because young people will have many possible cash crunches coming up in the next few years - college, car, house, possible marriage & children, I think it is incorrect to assume that a 16 year old really has a long time horizon. Much more likely is a cash out at an inopportune time. So I would not set the asset allocation to be super-aggressive.
by Exchme
Wed Mar 06, 2024 5:07 pm
Forum: Personal Investments
Topic: Job Goes Poof
Replies: 23
Views: 4234

Re: Job Goes Poof

Don't do it.
The amount you can contribute goes by number of months you have a high deductible plan. If you COBRA or have ACA with a qualifying high deductible plan, then you can put money in the HSA each month and it is tax deductible, just as it would have been if you did it while at work. So there is no advantage to pre-paying, but pre-paying creates a risk if you end up later in the year without an eligible plan, then you have over contributed and have to take the excess back out and pay penalties.
by Exchme
Tue Mar 05, 2024 9:58 pm
Forum: Personal Finance (Not Investing)
Topic: Can I retire?
Replies: 41
Views: 4824

Re: Can I retire?

The short answer is yes, OP can retire, but there is a lot more to retirement planning than just that one bit of knowledge. Some things for OP review: Go to SSA.gov and find out your and spouse's SS benefits. A starting point for a claiming strategy can be found at opensocialsecurity.com, that does a great job of looking at the combination of benefits, but it doesn't know about taxes, deferring to make room for Roth Conversions may be ideal. You have an urgent need to do Roth Conversions to try to get that tax deferred account under control, you may be tempted to maximize an ACA premium credit prior to going on Medicare, but I think with $3.4M in tax deferred at ages 57/58, Roth Conversions will be much bigger fish to fry even if you could ...
by Exchme
Sun Mar 03, 2024 9:44 pm
Forum: Personal Finance (Not Investing)
Topic: Retirement update
Replies: 15
Views: 2968

Re: Retirement update

This is essentially all in 401ks, so the after tax $ are lower than it seems. Make sure you account for that. You can't use average returns for a retirement readiness check, you need to look at some unpleasant sequence of return events, whether it's historical or Monte Carlo. A simple and free tool is FireCalc.com to get a feel for how your spending, income & asset allocation would have fared in various markets in the past, either cut the asset value or up the spending by some reasonable number to allow for the taxes you will owe as you withdraw the money (this tax correction doesn't have to be super-large since this exercise focuses on bad return scenarios and your taxes won't be as high in bad return scenarios.) For more options in mo...
by Exchme
Sun Mar 03, 2024 5:40 pm
Forum: Personal Investments
Topic: Portfolio Review - about to retire, he is fine right?
Replies: 20
Views: 1809

Re: Portfolio Review - about to retire, he is fine right?

SUNYalum wrote: Sun Mar 03, 2024 5:03 pm
Exchme wrote: Sun Mar 03, 2024 4:12 pm Principal is gouging him on the order of $4K investment fees/year, yuck. For someone only spending $22K on everything else, that's an emergency - [Edit-even if he were to continue to work, he should get the money out of there immediately.]
Agreed, but he plans to retire first. He can then work on a rollover to two IRA's one with the roth funds and the other with everything else.
Good, I hate to see people being taken advantage of and the cost he is currently paying is painful.
by Exchme
Sun Mar 03, 2024 4:12 pm
Forum: Personal Investments
Topic: Portfolio Review - about to retire, he is fine right?
Replies: 20
Views: 1809

Re: Portfolio Review - about to retire, he is fine right?

Principal is gouging him on the order of $4K investment fees/year, yuck. For someone only spending $22K on everything else, that's an emergency - [Edit-even if he were to continue to work, he should get the money out of there immediately.] All he has to do is open a Traditional and a Roth IRA at Fidelity or Vanguard and have that new broker initiate the transfer, there's a form or you can call. My company also uses Principal, but in addition to the high fee products from Principal, we are offered a few low fee Vanguard funds and Principal just charges an accounting fee of around $5/month, I had no idea how lucky we were. When I rolled money out to my IRA, Principal liquidated the funds and sent a paper check that went through the mail to Va...
by Exchme
Fri Mar 01, 2024 2:28 pm
Forum: Personal Investments
Topic: PlanVision vs Maxifii/NewRetirement/ProjectionLab
Replies: 30
Views: 2520

Re: PlanVision vs Maxifii/NewRetirement/ProjectionLab

My favorite is Pralana Gold, it has tremendous power and flexibility.

If I were to pass, I would recommend my wife use Mark Zoril and PlanVision to have e-Money, where she can easily see everything, and have a professional available to give an overview and help with any planning that may be needed. My understanding is the user only gets access to balances and simple reports without the advisor - the advisor does the Roth planning for instance. But if it's for my wife, she is not very interested in the intricacies anyway, so that would be just fine.
by Exchme
Wed Feb 28, 2024 8:28 pm
Forum: Personal Finance (Not Investing)
Topic: How to model inflation in Retiree Portfolio Model vs Pralana
Replies: 4
Views: 535

Re: How to model inflation in Retiree Portfolio Model vs Pralana

No, I guess I'm not clear. In RPM, I enter inflation in the spots you mentioned. In Pralana, I use the same numbers.

I'm simply saying that Pralana can show you either Future inflated $ like RPM does, or Pralana can deflate those $ back to Today's equivalent. Just cautioning you that for the comparison between programs to be meaningful, you need to select Future $ in Pralana.
by Exchme
Wed Feb 28, 2024 8:19 pm
Forum: Investing - Theory, News & General
Topic: What good is tax deferred?
Replies: 122
Views: 15670

Re: What good is tax deferred?

For most of my career, I only put enough into the 401K to get the company match, until I had enough income that I was in the 32%+ brackets, then I deferred the maximum.

Many of the earlier years, tax brackets were higher in general, so had I deferred more, it would have been at 28% or worse and that might have been even better than what I did.

I avoided tax drag in taxable for decades and have a ready store of money for long term care.

Things may get dicy for the kids however. It's frequent that parents pass while kids are in their peak earning years or first years of retirement, so the benefit you got may yet be undone by taxes they will pay.
by Exchme
Wed Feb 28, 2024 7:58 pm
Forum: Personal Finance (Not Investing)
Topic: How to model inflation in Retiree Portfolio Model vs Pralana
Replies: 4
Views: 535

Re: How to model inflation in Retiree Portfolio Model vs Pralana

Those entries sound right in RPM. Note that RPM is always nominal, in Pralana, you can switch between nominal and real. For this comparison, make sure that in Pralana you are also looking at nominal. On the Tabular Projections tab, on the left side, under the buttons for scenario selection, ensure the button reads "Future $" (for nominal), not "Today's $" (for real).
by Exchme
Tue Feb 27, 2024 8:07 pm
Forum: Personal Finance (Not Investing)
Topic: Cancer Diagnosis Hubby
Replies: 39
Views: 5810

Re: Cancer Diagnosis Hubby

Your brokerage may need a different power of attorney than the general one a lawyer will make for you. We use Vanguard and had to use their Full Agent Authorization form, have it signed in front of two witnesses, notarized and mailed to them. Make sure you know where all the important family papers are - deeds, mortgage, tax data, insurance, his social security card, etc. If he is the one that has been dealing with money management, sit down and go through that with him - how much you have, where is it, how it's allocated, how to make transactions, etc. I had a health scare a few years ago and we realized we weren't prepared. Our wills were out of date and we've since had them updated, we got medical powers of attorney made, general powers ...
by Exchme
Mon Feb 26, 2024 2:06 pm
Forum: Personal Investments
Topic: 12% Bracket-Roth vs. Traditional
Replies: 35
Views: 4258

Re: 12% Bracket-Roth vs. Traditional

wingman4uz wrote: Mon Feb 26, 2024 11:17 am At 12%, I would favor Roth. Big picture, it’s a really good tax rate and even if it isn’t perfectly “optimized” for your specifics, It won’t be a grossly wrong choice.
+1
I advised my kids to choose Roth until/unless they go above the 12% bracket. It's hard to go wrong permanently protecting your money for 12%.
by Exchme
Fri Feb 23, 2024 8:04 pm
Forum: Personal Finance (Not Investing)
Topic: Company division is being "Carved-Out"
Replies: 17
Views: 2542

Re: Company division is being "Carved-Out"

You are being carved out because the CEO thinks the division will be a loser in the long term and wants it gone. So I would expect the new venture to wither away or implode completely. Struggling or acquired companies are not fun to work for, money is tight and stress is high.

If you are close enough to the end of your career that you can not care about the long term future and high enough up to get a significant retention bonus, you might be lured into riding the storm out, but otherwise, why would you stick around?
by Exchme
Wed Feb 21, 2024 5:02 am
Forum: Personal Finance (Not Investing)
Topic: Did we miss anything?? Looking to retire next year!
Replies: 48
Views: 3606

Re: Looking to retire next year - please hard critique our plan!

Check your finances if one of you passes early - expenses may go down a little, but taxes may go up and pension/SS income may go down a lot.
by Exchme
Sun Feb 18, 2024 12:21 pm
Forum: Personal Consumer Issues
Topic: HVAC fan on constant Recirc with high ceilings?
Replies: 15
Views: 1188

Re: HVAC fan on constant Recirc with high ceilings?

In our house the vents in that room are on the downstairs furnace. On cold nights, we have to run the ceiling fan in that room or the heat from those vents will find its way to the upstairs thermostat.
If we forget, we've sometimes ended up with the downstairs furnace blasting heat all night and the upstairs unit either not running, or, once in a while, actually running the A/C! :annoyed
by Exchme
Sun Feb 18, 2024 7:36 am
Forum: Personal Finance (Not Investing)
Topic: ACA subsidies vs. Roth IRA conversions- how to decide?
Replies: 12
Views: 1404

Re: ACA subsidies vs. Roth IRA conversions- how to decide?

The Retiree Portfolio Model can do the math, though it's quite manual. My favorite is Pralana Gold (paid program), which allows you to set the FPL and gives you the subsidy (you tell it the 2nd lowest silver plan cost in your area), then with the press of a few buttons, you can set a Roth conversion to a tax bracket top, IRMAA tier top, LTCG phase-in start and see which is better. Pralana is currently an Excel sheet, but will go web based in a month or two. My understanding is that you will get the web app subscription for a year from your payment (so if you pay for the Excel version now and it takes them 2 months to issue the web version, you will get get 10 months of the web version - the Excel version will continue to work too, but won't...
by Exchme
Sat Feb 17, 2024 7:06 pm
Forum: Personal Investments
Topic: Retirement Decisions Regarding SS and Roth Conversions
Replies: 14
Views: 1987

Re: Retirement Decisions Regarding SS and Roth Conversions

Th strategy may be right, but badly explained. It may well be correct for the lower earning spouse to claim earlier than 70 as the smaller benefit stops when the first spouse passes. So that is probably the actual driving force behind the advisor's recommendation. The explanation that your wife should have her SS benefits taxed at 32% now in order to make room for a bit of extra Roth Conversion later seems like nonsense. Thanks for the notes. Wouldn't her SS be taxed at 85% of the value with no state tax (CA)? Yes, I thought about saying all that, but it wasn't my main point as in this case the same taxable percentages will apply regardless of when SS is taken. After thinking about the situation some more, I have another possible guess for...
by Exchme
Sat Feb 17, 2024 10:05 am
Forum: Personal Investments
Topic: Retirement Decisions Regarding SS and Roth Conversions
Replies: 14
Views: 1987

Re: Retirement Decisions Regarding SS and Roth Conversions

Th strategy may be right, but badly explained.

It may well be correct for the lower earning spouse to claim earlier than 70 as the smaller benefit stops when the first spouse passes. So that is probably the actual driving force behind the advisor's recommendation. The explanation that your wife should have her SS benefits taxed at 32% now in order to make room for a bit of extra Roth Conversion later seems like nonsense.
by Exchme
Mon Feb 12, 2024 11:29 am
Forum: Personal Investments
Topic: Retiring at 60. Will I go bust before 80?
Replies: 25
Views: 5386

Re: Retiring at 60. Will I go bust before 80?

OP: Go to ssa.gov and get your actual SS benefit. At your age and in the 22% bracket, it seems like it should be higher than the $1,100/month you are using in your calculations (you said your private pension is $400 and your total income was $1,500). Nobody mentioned the most obvious thing for a marginal retiree - spend down the bond portion of the portfolio to live on while waiting longer to claim SS. That increases the size of the only available lifetime, inflation-adjusted annuity. Some folks are concerned about the cash draw down, but if you die early as you fear, it won't matter and if you live a long time, you will be glad for the higher SS. I would not count on being able to securely retire this soon, but since it is at least a coupl...
by Exchme
Sun Feb 11, 2024 7:00 am
Forum: Personal Finance (Not Investing)
Topic: Roth conversions in the year before my RBD
Replies: 10
Views: 1227

Re: Roth conversions in the year before my RBD

I question whether it's a good idea to do Roth Conversions at all at this point. When I model our situation, Roth Conversions after starting RMDs are a wash at best. In fact, the only conversions the model thinks are not strongly negative are just to fill out the IRMAA tier or tax bracket, whichever is smaller. The economics get worse over time as the RMD rises, there is less time for the savings in tax drag to amount to anything and if there is a spouse, there are inherently fewer years that a surviving spouse might pay tax as a single.
by Exchme
Mon Jan 29, 2024 11:33 am
Forum: Investing - Theory, News & General
Topic: The One-Fund Portfolio as a default suggestion
Replies: 904
Views: 241933

Re: The One-Fund Portfolio as a default suggestion

Earlier in this thread, I quoted a very insightful post of forum member Exchme explaining why, mathematically, so-called "tax-efficient" asset location strategies are necessarily a mirage . And I corrected the "mirage" argument on that thread. For tax-deferred versus tax-free accounts, it is a mirage; if you will withdraw in a 22% tax bracket, then $7800 in a Roth account and $10,000 in a traditional account have the same return and risk if invested the same way. This is the "mirage" situation; putting stocks in the Roth is equivalent to holding more stocks. (There are reasons which do not enter directly into asset allocation for preferring stocks in the Roth. If you hold stocks in the traditional account, the...
by Exchme
Mon Jan 29, 2024 11:24 am
Forum: Personal Investments
Topic: Tax Efficient Strategy using Tax-deferred, Roth, and Taxable accounts
Replies: 106
Views: 12989

Re: Tax Efficient Strategy using Tax-deferred, Roth, and Taxable accounts

Here is the simplest example of non-equivalence. It also shows that either stocks or bonds in the taxable account may be better, and one of the main reasons for the difference is the time horizon: the tax deferral of stock gains becomes more valuable over a longer time period. Consider a stock which pays no dividends, so that the IRS will take 15% of all capital gains when you sell. $10,000 in a taxable account in stock thus has the same risk as $8500 in a tax-free account; the taxable account will be worth $1500 more regardless of what happens to the stock market. So we have risk-equivalent portfolios of $8500 in a tax-free account and $10,000 in a taxable account, with one in stock and one in bonds. The net gain or loss of holding bonds ...
by Exchme
Sun Jan 28, 2024 4:44 pm
Forum: Investing - Theory, News & General
Topic: The One-Fund Portfolio as a default suggestion
Replies: 904
Views: 241933

Re: The One-Fund Portfolio as a default suggestion

longinvest was one of the stalwarts giving correct advice on this issue that made me prove to myself that I had messed up. Once you see the math, you can't unsee it, but the frequency that I see people touting the idea of "tax efficient" portfolios that don't realize the extra risk is disheartening.

It's a very seductive idea that there's a free lunch somewhere, but it just isn't so.
by Exchme
Sat Jan 27, 2024 11:51 am
Forum: Personal Investments
Topic: Roth Conversion and (2nd time) double checking what an investment advisor has said
Replies: 22
Views: 2085

Re: Roth Conversion and (2nd time) double checking what an investment advisor has said

OP Do you have a spouse that does not have a large tIRA balance ? If so, do the backdoor Roth through them. This is what we did. We fully converted my wife's IRA a couple years ago, so did non-deductible contributions to it and then fully converted. I modeled doing non-deductible contributions to my IRA and then withdrawing pro-rata. The computer said that was a losing strategy, but I think the ones I did a couple decades ago may end up Ok, though it requires doing the 8606 each year. I believe the denominator in your pro rata calculation should be 707,000, the existing 700K plus the additional 7K. That's what I thought too, but since I did after-tax contributions years ago, I have to file an 8606 each year, so I went back to that form. It...
by Exchme
Sat Jan 27, 2024 10:33 am
Forum: Personal Investments
Topic: Roth Conversion and (2nd time) double checking what an investment advisor has said
Replies: 22
Views: 2085

Re: Roth Conversion and (2nd time) double checking what an investment advisor has said

Your after tax basis in $, not percents, is recalculated each year based on the contributions/withdrawals that took place during the year. So after the first year of converting 7,000 out of 700,000, you have $6930 left as the basis which carries over to the following year, since you weren't taxed on $70 that came out. States will tax you on the same number as federal taxes. Because the feds are smart and track your basis as $, there is nothing to optimize, each year that money comes out, you are not taxed on a tiny piece of it. The growth in the IRA is not taxed until it comes out, but when it comes out, it will be taxed as ordinary income, not at the more favorable capital gains rate. I think this only works out (and then only marginally) ...
by Exchme
Sat Jan 27, 2024 9:54 am
Forum: Personal Finance (Not Investing)
Topic: An unintended visit from "Aunt IRMAA"?
Replies: 41
Views: 7262

Re: An unintended visit from "Aunt IRMAA"?

Yes. And one key thing to keep in mind is that while the just released 12/2023 CPI-U of 306.746 was down about 0.1% from November's 307.051, those are unadjusted and all the reports last week had the December number being a seasonally adjusted increase of 0.3% (3.6% annual). Looking at past years, the January number (to be released 2/13) tends to be a very large increase so I wouldn't panic yet. I've waded through this thread a few times looking for a definitive date when the 2023 MFJ MAGI threshold (which determines 2025 IRMAA) will be published. Please advise. Our 2023 MAGI is currently projected to be $209,500. We can reduce this number by contributing to my wife's HSA. I'm holding off on filing our 2023 tax return to avoid the extra Me...
by Exchme
Sat Jan 27, 2024 7:55 am
Forum: Personal Investments
Topic: Roth conversions and age difference
Replies: 15
Views: 971

Re: Roth conversions and age difference

One thought is that since my RMDs will be much larger, and will begin four years earlier, then that's what I should focus on reducing. This logic makes sense to me. You want to be sure that any conversation won’t increase your Medicare premium. Your IRA is not so big that I question if you need to convert at all. Are you withdrawing from the IRA for living expenses? Yes. IRMAA will not be an issue. What does the IRA size have to do with it, though? It's mainly about tax brackets, no? Pay now vs. pay later? I'm in the 12% bracket now, and expect to stay there unless nothing is done about the tax law sunset, which would make the future bracket 15%. And even if the bracket doesn't change, I would like to have a better balance between TIRA and...
by Exchme
Fri Jan 26, 2024 11:05 am
Forum: Investing - Theory, News & General
Topic: Infinity withdrawal rate
Replies: 20
Views: 2810

Re: Infinity withdrawal rate

Check out EarlyRetirementNow for an exhaustive set of articles about safe withdrawal rates. The author is a retired economist that worked at the Fed. He even has a free spreadsheet with monthly historical returns that you can download and play with yourself. Wow a 60-part series on safe withdrawal rates. This guy is series about retirement finances. Yes, just remember that no matter how much you think about and analyze the historical data, it's impossible to know how applicable it might be to the future. I view withdrawal rates as a rough tool to gauge retirement readiness. But once you retire, I don't think very many people slavishly follow a particular withdrawal rate, not even the more realistic and sensible methods like the Variable Pe...