Portfolio review for 5 year retirement plan

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Topic Author
ROIGuy
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Joined: Sun May 08, 2016 10:10 am

Portfolio review for 5 year retirement plan

Post by ROIGuy »

Delete.
Last edited by ROIGuy on Tue Feb 08, 2022 5:37 pm, edited 1 time in total.
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David Jay
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Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: Portfolio review for 5 year retirement plan

Post by David Jay »

Top line: You will likely have about $2.4M - $2.6M at retirement and you spend less than $100,000 a year. SS + pensions is about $95,000.

1. This means that after age 70 you two will only need to withdraw from your portfolio for "extras" (travel, etc.) and an occasional "lumpy" expense (new roof, etc.).
2. You only need $500,000 to get from retirement to age 70 claiming date.

This means you end up at age 70 with a couple of million in your portfolio and you are withdrawing well under 1%.
Mr.BB wrote: Tue Jan 18, 2022 7:44 pm Questions
1) Is there any need for an annuity in the future at age 65? (Only a SPIA)
No. You will be making negligible withdrawals after age 70, so you have no need for an income stream.

2) From age 66-71 What do you think of the idea of using mostly our 401k bond funds and possibly my Trad IRA for living expenses until our SS (age 70) and Pension starts (age 70,71 or 72)?
Your funds are fungible - you can exchange them any time within your 401K. So it doesn't really matter, I would tend to spend stock funds if the market is "up". But this should not be a planning concern five years out.

3) What would our IRMAA cost be per year? Is there a cost concern with taxes?
IRMAA kicks in at $182,000 in taxable income(MAGI). As long as you are under that, no problem. It looks like about $70 per person per month up to $228,000 of income, the complete IRMAA table is shown here if you are above $228K: https://www.medicare.gov/your-medicare- ... rt-b-costs

4) SEP Conversion - Start converting SEP or Trad IRA to a Roth IRA over the next 3 years. Should we or do we need to do any more conversions since we are planning on using some of the 401k savings to live off of for about five years? Wouldn’t using up some of our 401k, SEP or Trad IRA’s act like a conversion in terms of taxes?
At your spending level, I would not make any Roth conversions while still working. Use the years between retirement and start of SS for Roth conversions.

5) DW 401k Contributions – We are currently maxing out contributions mostly to the 401k Roth. Any reason we should change this? At retirement we will rollover the Roth 401k into DW Roth account. Hopefully she will have about $200,000 (maybe a little more) in the Roth 401k by then.
I think this probably is useful as you have a "bunch" in tax-deferred.

6) Future spending budget – We are currently about $130,000 with expenses & taxes. I would like to be able to increase that to $150,000 by age 70 due to general cost of living (inflation), unknown expenses and more travel. Is that possible?
You have enough to spend $200,000 a year without depleting your portfolio in your lifetimes

7) Are we better off waiting to take the DW pension at age 70, 71 or 72.5 and spending down more of our savings (though it looks like SS will help buffer some of that cost) if necessary, although at 72 we will have to start taking RMD’s anyway.
With your level of assets, it doesn't matter in any meaningful way.

8) We have decided to self-insure LTC. Does it look like this is the correct choice based on current and possible future retirement savings?
[no useful input]
9) How do we look for achieving our goals? Any recommendations?
Retire 3-4 years earlier than planned and enjoy life.
It's not an engineering problem - Hersh Shefrin | To get the "risk premium", you really do have to take the risk - nisiprius
Topic Author
ROIGuy
Posts: 2452
Joined: Sun May 08, 2016 10:10 am

Re: Portfolio review for 5 year retirement plan

Post by ROIGuy »

David Jay wrote: Wed Jan 19, 2022 6:31 pm Top line: You will likely have about $2.4M - $2.6M at retirement and you spend less than $100,000 a year. SS + pensions is about $95,000.

1. This means that after age 70 you two will only need to withdraw from your portfolio for "extras" (travel, etc.) and an occasional "lumpy" expense (new roof, etc.).
2. You only need $500,000 to get from retirement to age 70 claiming date.

This means you end up at age 70 with a couple of million in your portfolio and you are withdrawing well under 1%.
Mr.BB wrote: Tue Jan 18, 2022 7:44 pm Questions
1) Is there any need for an annuity in the future at age 65? (Only a SPIA)
No. You will be making negligible withdrawals after age 70, so you have no need for an income stream.

2) From age 66-71 What do you think of the idea of using mostly our 401k bond funds and possibly my Trad IRA for living expenses until our SS (age 70) and Pension starts (age 70,71 or 72)?
Your funds are fungible - you can exchange them any time within your 401K. So it doesn't really matter, I would tend to spend stock funds if the market is "up". But this should not be a planning concern five years out.

3) What would our IRMAA cost be per year? Is there a cost concern with taxes?
IRMAA kicks in at $182,000 in taxable income(MAGI). As long as you are under that, no problem. It looks like about $70 per person per month up to $228,000 of income, the complete IRMAA table is shown here if you are above $228K: https://www.medicare.gov/your-medicare- ... rt-b-costs

4) SEP Conversion - Start converting SEP or Trad IRA to a Roth IRA over the next 3 years. Should we or do we need to do any more conversions since we are planning on using some of the 401k savings to live off of for about five years? Wouldn’t using up some of our 401k, SEP or Trad IRA’s act like a conversion in terms of taxes?
At your spending level, I would not make any Roth conversions while still working. Use the years between retirement and start of SS for Roth conversions.

5) DW 401k Contributions – We are currently maxing out contributions mostly to the 401k Roth. Any reason we should change this? At retirement we will rollover the Roth 401k into DW Roth account. Hopefully she will have about $200,000 (maybe a little more) in the Roth 401k by then.
I think this probably is useful as you have a "bunch" in tax-deferred.

6) Future spending budget – We are currently about $130,000 with expenses & taxes. I would like to be able to increase that to $150,000 by age 70 due to general cost of living (inflation), unknown expenses and more travel. Is that possible?
You have enough to spend $200,000 a year without depleting your portfolio in your lifetimes

7) Are we better off waiting to take the DW pension at age 70, 71 or 72.5 and spending down more of our savings (though it looks like SS will help buffer some of that cost) if necessary, although at 72 we will have to start taking RMD’s anyway.
With your level of assets, it doesn't matter in any meaningful way.

8) We have decided to self-insure LTC. Does it look like this is the correct choice based on current and possible future retirement savings?
[no useful input]
9) How do we look for achieving our goals? Any recommendations?
Retire 3-4 years earlier than planned and enjoy life.
Thank you David, your info is very helpful and appreciated.
Topic Author
ROIGuy
Posts: 2452
Joined: Sun May 08, 2016 10:10 am

Re: Portfolio review for 5 year retirement plan

Post by ROIGuy »

Would appreciate anyone else's opinion/advice.
Outer Marker
Posts: 4382
Joined: Sun Mar 08, 2009 8:01 am

Re: Portfolio review for 5 year retirement plan

Post by Outer Marker »

Mr.BB wrote: Sat Jan 22, 2022 6:07 pm Would appreciate anyone else's opinion/advice.
David Jay pretty much nailed it in terms of your specific questions.

You have a very "messy" portfolio with too many funds, small positions, and a mix of active and index funds. The overall result is close to what you want, but it is higher cost and more complex than needed. If you're up a streamlining and portfolio makeover, I'm sure the board can come up with some good suggestions.
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