Ed Slott's new book NEW RETIREMENT SAVINGS TIME BOMB
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Ed Slott's new book NEW RETIREMENT SAVINGS TIME BOMB
I'm reading the newest version of Ed Slott's book about retirement savings time bomb, meaning traditional IRA accounts. I have viewed him on PBS and thought he talked quite a bit and could be more succinct. Now I'm trying to get through the book and having great difficulty as the verbiage is so profuse. He writes with even more words than he talks. It literally takes him many pages to get to a thought. I'm reading this book digitally, as I borrowed it from the library. So other than wait a few weeks in a queue to get the book, it's free to read. My personal opinion is that I'm fortunate I did not purchase the book as I would be a very disappointed Boglehead.
The people on this forum provide as much (sometimes more) pertinent information than reading the book. Have others looked at his newest version of the book and your opinions?
The people on this forum provide as much (sometimes more) pertinent information than reading the book. Have others looked at his newest version of the book and your opinions?
Re: Ed Slott's new book NEW RETIREMENT SAVINGS TIME BOMB
Succinct is good
It's not an engineering problem - Hersh Shefrin | To get the "risk premium", you really do have to take the risk - nisiprius
Re: Ed Slott's new book NEW RETIREMENT SAVINGS TIME BOMB
Never read the book. Heard him on a podcast - he sounded like a long winded infomercial salesman - I turned it off.
Bogleheads has the best discussion on Trad vs. Roth I've seen anywhere.
Bogleheads has the best discussion on Trad vs. Roth I've seen anywhere.
Re: Ed Slott's new book NEW RETIREMENT SAVINGS TIME BOMB
This is not a “time Bomb” or “tax torpedo”. It is simply the possibility to have some of your income taxed at a higher bracket. Most people in this country would love this problem. The title seems aimed at those people who consider taxes a sin.
Re: Ed Slott's new book NEW RETIREMENT SAVINGS TIME BOMB
Long time listener. Most of what he says makes sense. For those who is dismissive - well, we all have opinions.
"The fund industry doesn't have a lot of heroes, but he (Bogle) is one of them," Russ Kinnel
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Re: Ed Slott's new book NEW RETIREMENT SAVINGS TIME BOMB
In spite of PBS, Ed Slott is actually one of the leading experts on IRAs, so I approach his writings with respect.
I think he is more apt to recommend insurance-based retirement solutions than most Bogleheads are comfortable with. But I haven't read his latest book yet.
I think he is more apt to recommend insurance-based retirement solutions than most Bogleheads are comfortable with. But I haven't read his latest book yet.
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Re: Ed Slott's new book NEW RETIREMENT SAVINGS TIME BOMB
He needs an editor. I find this with a lot of financial books.Phil DeMuth wrote: ↑Sat Apr 10, 2021 11:28 am In spite of PBS, Ed Slott is actually one of the leading experts on IRAs, so I approach his writings with respect.
I think he is more apt to recommend insurance-based retirement solutions than most Bogleheads are comfortable with. But I haven't read his latest book yet.
An important key to investing is having a well-calibrated sense of your future regret.
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Re: Ed Slott's new book NEW RETIREMENT SAVINGS TIME BOMB
Haven't read it, but I've seen his argument elsewhere. While unpopular with bogleheads, i err on the side of Roth with its a 50-50 split decision... Ed might say you should err even more on that side. The argument is that it helps take the risk of future tax rates out of the plan. (and phantom taxes out of the plan.. ACA / IRMMA /FAFSA /etc)EagertoLearnMore wrote: ↑Sat Apr 10, 2021 8:52 am I'm reading the newest version of Ed Slott's book about retirement savings time bomb, meaning traditional IRA accounts. I have viewed him on PBS and thought he talked quite a bit and could be more succinct. Now I'm trying to get through the book and having great difficulty as the verbiage is so profuse. He writes with even more words than he talks. It literally takes him many pages to get to a thought. I'm reading this book digitally, as I borrowed it from the library. So other than wait a few weeks in a queue to get the book, it's free to read. My personal opinion is that I'm fortunate I did not purchase the book as I would be a very disappointed Boglehead.
The people on this forum provide as much (sometimes more) pertinent information than reading the book. Have others looked at his newest version of the book and your opinions?
Paula Pant interviewed him: https://affordanything.com/307-the-tax- ... -ed-slott/
Last edited by Soon2BXProgrammer on Sat Apr 10, 2021 11:35 am, edited 4 times in total.
Earned 43 (and counting) credit hours of financial planning related education from a regionally accredited university, but I am not your advisor.
Re: Ed Slott's new book NEW RETIREMENT SAVINGS TIME BOMB
You can, of course, avoid the "time bomb" [egads!!!] by choosing to forego contributions to a traditional IRA. That would typically be a huge mistake. But a TIME BOMB...oh no...run for cover!!!
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Re: Ed Slott's new book NEW RETIREMENT SAVINGS TIME BOMB
It's going to be especially unpopular here (from what I glean of the central thesis as expressed in this thread) as the forum rules specifically advance the thought that considering the possibility of future tax law changes is a bad idea.Soon2BXProgrammer wrote: ↑Sat Apr 10, 2021 11:34 amHaven't read it, but I've seen his argument elsewhere. While unpopular with bogleheads, i err on the side of Roth with its a 50-50 split decision... Ed might say you should err even more on that side. The argument is that it helps take the risk of future tax rates out of the plan. (and phantom taxes out of the plan.. ACA / IRMMA /FAFSA /etc)EagertoLearnMore wrote: ↑Sat Apr 10, 2021 8:52 am I'm reading the newest version of Ed Slott's book about retirement savings time bomb, meaning traditional IRA accounts. I have viewed him on PBS and thought he talked quite a bit and could be more succinct. Now I'm trying to get through the book and having great difficulty as the verbiage is so profuse. He writes with even more words than he talks. It literally takes him many pages to get to a thought. I'm reading this book digitally, as I borrowed it from the library. So other than wait a few weeks in a queue to get the book, it's free to read. My personal opinion is that I'm fortunate I did not purchase the book as I would be a very disappointed Boglehead.
The people on this forum provide as much (sometimes more) pertinent information than reading the book. Have others looked at his newest version of the book and your opinions?
Paula Pant interviewed him: https://affordanything.com/307-the-tax- ... -ed-slott/
Re: Ed Slott's new book NEW RETIREMENT SAVINGS TIME BOMB
The forum rules only prohibit speculating about what those changes might be. I have never seen anyone claim one should not consider the possibility, just not discuss potential details on here
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Re: Ed Slott's new book NEW RETIREMENT SAVINGS TIME BOMB
In addition to PBS viewer-contribution specials, Ed Slott is also a regular on Morningstar's podcasts. In a recent one he covered CARES Act implications on retirement account inheritances (traditional and Roth IRA). He also mentioned that whole life insurance would work as beneficial for some people, but not all, with respect to taxes, size of legacy, and flexibility for those inheriting.
Personally, I'm happy with my "tax time bomb" IRA/401k holdings. If needed for long term care they'll probably come out pretty much tax free anyway. And if not needed for LTC I'll be very happy.
Here's a link to the Ed Slott interview - - if I recall Ed Slott's portion of the podcast is around the last third:
https://www.morningstar.com/podcasts/in ... sights/110
Personally, I'm happy with my "tax time bomb" IRA/401k holdings. If needed for long term care they'll probably come out pretty much tax free anyway. And if not needed for LTC I'll be very happy.
Here's a link to the Ed Slott interview - - if I recall Ed Slott's portion of the podcast is around the last third:
https://www.morningstar.com/podcasts/in ... sights/110
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Re: Ed Slott's new book NEW RETIREMENT SAVINGS TIME BOMB
State taxes matter also.
If you're are in a high-income tax state like CA or NY, and move to a no tax state like TX or NV in retirement, a large tax-deferred account is a blessing because it avoids paying state income taxes. OTOH, if you earn money in a no-tax state and defer the income, then retire in a high tax state, you shoot yourself in the foot because now you owe state taxes on income that you didn't owe before.
Rick Ferri
If you're are in a high-income tax state like CA or NY, and move to a no tax state like TX or NV in retirement, a large tax-deferred account is a blessing because it avoids paying state income taxes. OTOH, if you earn money in a no-tax state and defer the income, then retire in a high tax state, you shoot yourself in the foot because now you owe state taxes on income that you didn't owe before.
Rick Ferri
The Education of an Index Investor: born in darkness, finds indexing enlightenment, overcomplicates everything, embraces simplicity.
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Re: Ed Slott's new book NEW RETIREMENT SAVINGS TIME BOMB
We can't discuss a given legislative proposal... That is different then talk about "future tax rates as a whole". (or that's my understanding)AnEngineer wrote: ↑Sat Apr 10, 2021 12:16 pmIt's going to be especially unpopular here (from what I glean of the central thesis as expressed in this thread) as the forum rules specifically advance the thought that considering the possibility of future tax law changes is a bad idea.Soon2BXProgrammer wrote: ↑Sat Apr 10, 2021 11:34 amHaven't read it, but I've seen his argument elsewhere. While unpopular with bogleheads, i err on the side of Roth with its a 50-50 split decision... Ed might say you should err even more on that side. The argument is that it helps take the risk of future tax rates out of the plan. (and phantom taxes out of the plan.. ACA / IRMMA /FAFSA /etc)EagertoLearnMore wrote: ↑Sat Apr 10, 2021 8:52 am I'm reading the newest version of Ed Slott's book about retirement savings time bomb, meaning traditional IRA accounts. I have viewed him on PBS and thought he talked quite a bit and could be more succinct. Now I'm trying to get through the book and having great difficulty as the verbiage is so profuse. He writes with even more words than he talks. It literally takes him many pages to get to a thought. I'm reading this book digitally, as I borrowed it from the library. So other than wait a few weeks in a queue to get the book, it's free to read. My personal opinion is that I'm fortunate I did not purchase the book as I would be a very disappointed Boglehead.
The people on this forum provide as much (sometimes more) pertinent information than reading the book. Have others looked at his newest version of the book and your opinions?
Paula Pant interviewed him: https://affordanything.com/307-the-tax- ... -ed-slott/
However:
https://www.bogleheads.org/wiki/Traditional_versus_Roth
even talks about general future tax rate changes.But if you have strong feelings that taxes will go up or down in the future, you could make adjustments to these numbers.
It is a fact that rates are near all time lows (depending on what tax bracket your in..).and having the flexibility to control your taxable income to some degree might allow you to better optimize around future tax laws.
Even under current law, taxes are scheduled to go up when the TCJA expires.
Earned 43 (and counting) credit hours of financial planning related education from a regionally accredited university, but I am not your advisor.
Re: Ed Slott's new book NEW RETIREMENT SAVINGS TIME BOMB
I haven't read this latest edition, but the "time bomb"/"tax torpedo" didn't just refer to RMDs. He had a good example where the IRA owner either forgets to designate a beneficiary or designates their estate which triggered the five year rule (not sure how much the SECURE Act changes this). Also, the federal estate tax exemption, and the state estate tax exemption in states that have an estate tax, were both lower when the previous edition was written. So he had an example in New York where after death, if there were no source to pay the estate tax other than a traditional IRA, the vast majority of the IRA was lost to taxes due to a lack of proper planning (thus the time bomb or tax torpedo).
Re: Ed Slott's new book NEW RETIREMENT SAVINGS TIME BOMB
And in NY you can take 20k/yr state tax free once 59.5Rick Ferri wrote: ↑Sat Apr 10, 2021 1:50 pm State taxes matter also.
If you're are in a high-income tax state like CA or NY, and move to a no tax state like TX or NV in retirement, a large tax-deferred account is a blessing because it avoids paying state income taxes. OTOH, if you earn money in a no-tax state and defer the income, then retire in a high tax state, you shoot yourself in the foot because now you owe state taxes on income that you didn't owe before.
Rick Ferri
So you defer then avoid NYS taxes on some distributions.
Re: Ed Slott's new book NEW RETIREMENT SAVINGS TIME BOMB
I don't think this is possible. Wouldn't you still need to pay tax on it, even if used for healthcare. I think only the HSA can be used for healthcare tax-free.
superstition: belief that market will one day come around to your concept of fair value
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Re: Ed Slott's new book NEW RETIREMENT SAVINGS TIME BOMB
Maybe they pay him per page. Has led to lower quality fiction in recent years imo.EagertoLearnMore wrote: ↑Sat Apr 10, 2021 8:52 am I'm reading the newest version of Ed Slott's book about retirement savings time bomb, meaning traditional IRA accounts. I have viewed him on PBS and thought he talked quite a bit and could be more succinct. Now I'm trying to get through the book and having great difficulty as the verbiage is so profuse. He writes with even more words than he talks. It literally takes him many pages to get to a thought. I'm reading this book digitally, as I borrowed it from the library. So other than wait a few weeks in a queue to get the book, it's free to read. My personal opinion is that I'm fortunate I did not purchase the book as I would be a very disappointed Boglehead.
The people on this forum provide as much (sometimes more) pertinent information than reading the book. Have others looked at his newest version of the book and your opinions?
Re: Ed Slott's new book NEW RETIREMENT SAVINGS TIME BOMB
I know Ed well. We've been on seminar panels together, and I've written for his newsletter. He's very knowledgeable. However, he's not a lawyer, and he markets his seminars to insurance agents, stockbrokers and the like: https://www.irahelp.com/instant-success ... ation/1252.
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Re: Ed Slott's new book NEW RETIREMENT SAVINGS TIME BOMB
Medical expenses exceeding 7.5% of your AGI are fully deductible (i.e., you can withdraw the amount from a tax-deferred account with no tax liability).
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Re: Ed Slott's new book NEW RETIREMENT SAVINGS TIME BOMB
While I haven't read Ed's new book, I have seen him speak on PBS. IMO, I'd like to call his proposal simply a plan of tax arbitrage. The only difference here is when you choose to pay the piper - now or later. It's a personal decision for every individual.
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Re: Ed Slott's new book NEW RETIREMENT SAVINGS TIME BOMB
For the most part, only a small minority of retirees will be in a higher tax bracket than when they were working (unless they move to a state with higher taxes). And I don't feel sorry for those who are because it will nearly always (apart from the potentially lost child tax credit) mean that they are earning even more money and, consequently, have to pay more in taxes. That's a grade A first-world 'problem'.
And RMDs are not the bugaboo that many try to make them out to be. If you need to withdraw less than your RMDs, then you saved more than you needed to, and you're in good financial shape. Tax-deferred accounts are called that with good reason.
And RMDs are not the bugaboo that many try to make them out to be. If you need to withdraw less than your RMDs, then you saved more than you needed to, and you're in good financial shape. Tax-deferred accounts are called that with good reason.
The Sensible Steward
Re: Ed Slott's new book NEW RETIREMENT SAVINGS TIME BOMB
I like his Roth IRA approach. I started contributing to Roth since day one of my investment history. I remember when I argued with my CPA about it , she was always been telling me that she doesn’t believe that we may have higher taxes . I respectfully disagreed. Maybe yes or maybe not . But somehow I knew in my personal situation I will be in higher tax bracket when I will retire due to my high savings habits .
"The fund industry doesn't have a lot of heroes, but he (Bogle) is one of them," Russ Kinnel
Re: Ed Slott's new book NEW RETIREMENT SAVINGS TIME BOMB
Hmm. I understand it's deductible, but not really tax free. The actual tax impact would depend on a lot of factors that we can't really foresee. Not to mention you would lose on the standard deduction in addition to the 7.5 % which is not deductible.willthrill81 wrote: ↑Sat Apr 10, 2021 10:07 pmMedical expenses exceeding 7.5% of your AGI are fully deductible (i.e., you can withdraw the amount from a tax-deferred account with no tax liability).
Still a good strategy to know about, just not something that should drive the decision between pre-tax vs Roth.
superstition: belief that market will one day come around to your concept of fair value
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Re: Ed Slott's new book NEW RETIREMENT SAVINGS TIME BOMB
Yes, it's true that it can be quite a hurdle to overcome the comparatively high (compared to history) standard deduction now in place, and it's not tax-free, but those with big medical expenses, including pricey LTC, can use it to get a break. It's not uncommon for a single individual needing intensive LTC, such as in a nursing home, to spend $100k annually for it.SB1234 wrote: ↑Sat Apr 10, 2021 10:31 pmHmm. I understand it's deductible, but not really tax free. The actual tax impact would depend on a lot of factors that we can't really foresee. Not to mention you would lose on the standard deduction in addition to the 7.5 % which is not deductible.willthrill81 wrote: ↑Sat Apr 10, 2021 10:07 pmMedical expenses exceeding 7.5% of your AGI are fully deductible (i.e., you can withdraw the amount from a tax-deferred account with no tax liability).
Still a good strategy to know about, just not something that should drive the decision between pre-tax vs Roth.
How much this provision should impact the tax-deferred or Roth question is debatable. Personally, it would lead me to leave a bit more in tax-deferred than I probably would otherwise, especially if the opportunity for tax arbitrage is minimal.
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Re: Ed Slott's new book NEW RETIREMENT SAVINGS TIME BOMB
Wouldn't this only be if you are otherwise itemizing?willthrill81 wrote: ↑Sat Apr 10, 2021 10:07 pmMedical expenses exceeding 7.5% of your AGI are fully deductible (i.e., you can withdraw the amount from a tax-deferred account with no tax liability).
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Re: Ed Slott's new book NEW RETIREMENT SAVINGS TIME BOMB
Not at all. Other itemized deductions would certainly benefit you, and you have to overcome the standard deduction for this to be worthwhile, but those needing LTC can all too often do that with ease due to the high price of such care.tj wrote: ↑Sat Apr 10, 2021 10:46 pmWouldn't this only be if you are otherwise itemizing?willthrill81 wrote: ↑Sat Apr 10, 2021 10:07 pmMedical expenses exceeding 7.5% of your AGI are fully deductible (i.e., you can withdraw the amount from a tax-deferred account with no tax liability).
The Sensible Steward
Re: Ed Slott's new book NEW RETIREMENT SAVINGS TIME BOMB
Well, by otherwise itemizing, I meant you need to have Sch A deductions that add up to over the standard deduction.willthrill81 wrote: ↑Sat Apr 10, 2021 10:48 pmNot at all. Other itemized deductions would certainly benefit you, and you have to overcome the standard deduction for this to be worthwhile, but those needing LTC can all too often do that with ease due to the high price of such care.tj wrote: ↑Sat Apr 10, 2021 10:46 pmWouldn't this only be if you are otherwise itemizing?willthrill81 wrote: ↑Sat Apr 10, 2021 10:07 pmMedical expenses exceeding 7.5% of your AGI are fully deductible (i.e., you can withdraw the amount from a tax-deferred account with no tax liability).
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Re: Ed Slott's new book NEW RETIREMENT SAVINGS TIME BOMB
Roth contributions are earned income and are taxed at your marginal rate during working years. It also would be suboptimal to use Roth withdrawals for tax-deductible expenses such as medical or long-term care expenses. The tax rate on future trad IRA withdrawals is a random variable. Having it taxed at a higher rate than your marginal rate when the contribution was made because tax rates went up is just one outcome of the random variable/event. Does the author discuss outcomes where Roth contributions were taxed too high?
Re: Ed Slott's new book NEW RETIREMENT SAVINGS TIME BOMB
Based on me, and the recent thread on how much are you living on in retirement, there are lots out there like me, so there are a lot of us minorities.willthrill81 wrote: ↑Sat Apr 10, 2021 10:13 pm For the most part, only a small minority of retirees will be in a higher tax bracket than when they were working (unless they move to a state with higher taxes). And I don't feel sorry for those who are because it will nearly always (apart from the potentially lost child tax credit) mean that they are earning even more money and, consequently, have to pay more in taxes. That's a grade A first-world 'problem'.
And RMDs are not the bugaboo that many try to make them out to be. If you need to withdraw less than your RMDs, then you saved more than you needed to, and you're in good financial shape. Tax-deferred accounts are called that with good reason.
Before I retired, we were within the 15% bracket, towards the top end.
Cold hard fact I found now that I am retired: With our $50K in SS, anything past approx $25K additional ($75K gross) puts us into the current 22% bracket. So every $ I convert to my Roth, I pay 22% as Fed Taxes. As a comparison, 22% normally starts around $115K gross for working folks.
Back in the 80's, congress decided to tax SS, but only for the rich. That break-point is not inflation adjusted, but was at what seemed at the time that only the uber rich would get snared. Congress adjust this once in the early nineties. However after years and years of inflation, today Joe average is caught by this stealth tax, and well Joe is just average, not uber rich.
Those of us caught by this, find that the 15% saved by tax deferring, but withdrawn today, are now costing us 22% to withdraw those differed $.
And it just gets worse when one spouse dies. My modeling said as single some of our RMD $ was going to be at 38%.
So bye bye that dangled concept that you will be at a lower tax rate in retirement when you withdraw. Why do you think author's like Ed Slott keep making money writing about the retirement tax bomb. They do so because it's real. And it's dinging a lot of people.
I've read that if this SS break-point had been inflation adjusted, it today would be around $95K of additional income before one's SS got taxed.
On the plus side, although CA taxes are generally thought of as grievous, CA does not tax SS, so we are ahead on state taxes.
Re: Ed Slott's new book NEW RETIREMENT SAVINGS TIME BOMB
For those still in the accumulation phase, the best strategy is to defer as much as possible is pre tax accounts now, and then open to opportunistically convert to ROTH during early retirement.willthrill81 wrote: ↑Sat Apr 10, 2021 10:48 pmNot at all. Other itemized deductions would certainly benefit you, and you have to overcome the standard deduction for this to be worthwhile, but those needing LTC can all too often do that with ease due to the high price of such care.tj wrote: ↑Sat Apr 10, 2021 10:46 pmWouldn't this only be if you are otherwise itemizing?willthrill81 wrote: ↑Sat Apr 10, 2021 10:07 pmMedical expenses exceeding 7.5% of your AGI are fully deductible (i.e., you can withdraw the amount from a tax-deferred account with no tax liability).
This Rick Ferri podcast with Phil DeMuth discusses a lot of that in detail and also the complications of estimating taxes on retirement.
https://www.bogleheads/forum/viewtopic.php?t=345162
But still the possibility to use pre tax funds for LTC probably eliminates the need for LTC insurance if you can so self insure.
superstition: belief that market will one day come around to your concept of fair value
Re: Ed Slott's new book NEW RETIREMENT SAVINGS TIME BOMB
For those still in the accumulation phase, the best strategy is to defer as much as possible is pre tax accounts now, and then open to opportunistically convert to ROTH during early retirement.willthrill81 wrote: ↑Sat Apr 10, 2021 10:48 pmNot at all. Other itemized deductions would certainly benefit you, and you have to overcome the standard deduction for this to be worthwhile, but those needing LTC can all too often do that with ease due to the high price of such care.tj wrote: ↑Sat Apr 10, 2021 10:46 pmWouldn't this only be if you are otherwise itemizing?willthrill81 wrote: ↑Sat Apr 10, 2021 10:07 pmMedical expenses exceeding 7.5% of your AGI are fully deductible (i.e., you can withdraw the amount from a tax-deferred account with no tax liability).
Thus Rick Ferri podcast with Phil DeMuth discusses a lot of that in detail and also the complications of estimating taxes on retirement.
viewtopic.php?t=345162
But still the possibility to use pre tax funds for LTC probably eliminates the need for LTC insurance if you can so self insure.
superstition: belief that market will one day come around to your concept of fair value
Re: Ed Slott's new book NEW RETIREMENT SAVINGS TIME BOMB
“No”
It's not an engineering problem - Hersh Shefrin | To get the "risk premium", you really do have to take the risk - nisiprius
Re: Ed Slott's new book NEW RETIREMENT SAVINGS TIME BOMB
In his PBS TV specials he seemed to say convert all your TIRA to Roth IRA which seems too simplistic. I was forced to retire at age 60 and wanted to delay SS until 70. Like most Bogleheads I had saved/invested a decent amount and had mostly appreciated equities in my taxable account and had a large TIRA.
So, faced with 30 year (or more) retirement funding I needed to fund yearly expenses, convert some TIRA to Roth, and pay the taxes on the conversion (from taxable equity withdrawals? that would also be taxed). I did some Roth conversions but not a major percentage of my TIRA and all of my wife's modest TIRA.
Now at age 73 my TIRA is large, my SS and pension almost equal our normal expenses so my RMD is essentially not needed -- now. I take it early in the year with a large Fed and State withholding. I gift most of the net RMD to our children and starting to fund our grandkids 529 plans. I don't seem to need to file estimated taxes. So, in retrospect I really have little regrets. I'm sure I'm paying higher Medicare premiums -- but I can afford it. I don't have LTC insurance so the "not needed" future RMDs might help address that possible large expense. My investment portfolio has never been higher (some of it due to taxes never paid to do more conversions and the gain on those assets). After 4 years of RMD my TIRA is just a bit less than 4 years ago.
My point is some Roth conversions certainly make sense but if you choose not to convert all your TIRA - life can still be good despite higher taxes.
So, faced with 30 year (or more) retirement funding I needed to fund yearly expenses, convert some TIRA to Roth, and pay the taxes on the conversion (from taxable equity withdrawals? that would also be taxed). I did some Roth conversions but not a major percentage of my TIRA and all of my wife's modest TIRA.
Now at age 73 my TIRA is large, my SS and pension almost equal our normal expenses so my RMD is essentially not needed -- now. I take it early in the year with a large Fed and State withholding. I gift most of the net RMD to our children and starting to fund our grandkids 529 plans. I don't seem to need to file estimated taxes. So, in retrospect I really have little regrets. I'm sure I'm paying higher Medicare premiums -- but I can afford it. I don't have LTC insurance so the "not needed" future RMDs might help address that possible large expense. My investment portfolio has never been higher (some of it due to taxes never paid to do more conversions and the gain on those assets). After 4 years of RMD my TIRA is just a bit less than 4 years ago.
My point is some Roth conversions certainly make sense but if you choose not to convert all your TIRA - life can still be good despite higher taxes.
Re: Ed Slott's new book NEW RETIREMENT SAVINGS TIME BOMB
I read I think an older version of the book borrowed from the library and found it uninformative. I think its audience was for folks with a few million dollars in IRAs and not really for the regular Janes. The main idea I got was to make sure that one had current beneficiaries listed on one's IRAs and not old boyfriends as the beneficiary.
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Re: Ed Slott's new book NEW RETIREMENT SAVINGS TIME BOMB
Most people don't realize your social security becomes taxed if you have too much taxable income in retirement. This can mean tens of thousands in extra taxes. Roth is a guaranteed tax savings, while traditional can go either way.
Re: Ed Slott's new book NEW RETIREMENT SAVINGS TIME BOMB
Absolutely! That is why Roth IRA has such low limits to contribute compare 401k’s and other tax deferred plan’s Buy if you were still maximizing contributions you still can be way ahead in paying less taxes in your retirement if you were maximizing 401k plus avoiding any other headaches when it comes to beneficiary inheritanceBlueOrange10 wrote: ↑Sun Apr 11, 2021 8:10 am Most people don't realize your social security becomes taxed if you have too much taxable income in retirement. This can mean tens of thousands in extra taxes. Roth is a guaranteed tax savings, while traditional can go either way.
Last edited by Ed 2 on Sun Apr 11, 2021 8:23 am, edited 1 time in total.
"The fund industry doesn't have a lot of heroes, but he (Bogle) is one of them," Russ Kinnel
Re: Ed Slott's new book NEW RETIREMENT SAVINGS TIME BOMB
Looking forward to my bomb
Using permanent insurance in retirement has been discussed multiple times. One needs to use assumptions that greatly favor insurance such as high investment costs.
One also has to believe they will be of the 15% that keep it in force until death and they get illustrated results which hasn’t happened in the last 30 years bc dividends continue to fall.
Using permanent insurance in retirement has been discussed multiple times. One needs to use assumptions that greatly favor insurance such as high investment costs.
One also has to believe they will be of the 15% that keep it in force until death and they get illustrated results which hasn’t happened in the last 30 years bc dividends continue to fall.
Re: Ed Slott's new book NEW RETIREMENT SAVINGS TIME BOMB
Sure "tens of thousands" over many years, but not every year. At least not for us.BlueOrange10 wrote: ↑Sun Apr 11, 2021 8:10 am Most people don't realize your social security becomes taxed if you have too much taxable income in retirement. This can mean tens of thousands in extra taxes. Roth is a guaranteed tax savings, while traditional can go either way.
Re: Ed Slott's new book NEW RETIREMENT SAVINGS TIME BOMB
Disagree, mine Roth IRA will be in a seven digit number by the time I retire. Every situation is unique , yes . But we talking about bogleheadish levels of retirementlivesoft wrote: ↑Sun Apr 11, 2021 8:22 amSure "tens of thousands" over many years, but not every year. At least not for us.BlueOrange10 wrote: ↑Sun Apr 11, 2021 8:10 am Most people don't realize your social security becomes taxed if you have too much taxable income in retirement. This can mean tens of thousands in extra taxes. Roth is a guaranteed tax savings, while traditional can go either way.
Last edited by Ed 2 on Sun Apr 11, 2021 8:25 am, edited 1 time in total.
"The fund industry doesn't have a lot of heroes, but he (Bogle) is one of them," Russ Kinnel
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Re: Ed Slott's new book NEW RETIREMENT SAVINGS TIME BOMB
The "standard deduction" for social security is actually not indexed to inflation, so more people will pay taxes on their social security each year. It's like how more people are being affected by the alternative minimum tax (AMT) each year. The stealth tax increases will get ya in the end
Re: Ed Slott's new book NEW RETIREMENT SAVINGS TIME BOMB
So if one is making $40K from SS benefits, "tens of thousands" would be at least $20K of taxes on it. OK.BlueOrange10 wrote: ↑Sun Apr 11, 2021 8:24 amThe "standard deduction" for social security is actually not indexed to inflation, so more people will pay taxes on their social security each year.
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Re: Ed Slott's new book NEW RETIREMENT SAVINGS TIME BOMB
I would hope social security benefits will be much higher for future retireeslivesoft wrote: ↑Sun Apr 11, 2021 8:29 amSo if one is making $40K from SS benefits, "tens of thousands" would be at least $20K of taxes on it. OK.BlueOrange10 wrote: ↑Sun Apr 11, 2021 8:24 amThe "standard deduction" for social security is actually not indexed to inflation, so more people will pay taxes on their social security each year.
Re: Ed Slott's new book NEW RETIREMENT SAVINGS TIME BOMB
Don’t forget about state taxes. Many will be living in other states like Cali. Want it or notlivesoft wrote: ↑Sun Apr 11, 2021 8:29 amSo if one is making $40K from SS benefits, "tens of thousands" would be at least $20K of taxes on it. OK.BlueOrange10 wrote: ↑Sun Apr 11, 2021 8:24 amThe "standard deduction" for social security is actually not indexed to inflation, so more people will pay taxes on their social security each year.
"The fund industry doesn't have a lot of heroes, but he (Bogle) is one of them," Russ Kinnel
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Re: Ed Slott's new book NEW RETIREMENT SAVINGS TIME BOMB
Near the end of my parent's life, they had ~50K$/yr medical expenses (assisted living). Skilled nursing would have been even more. Huge Schedule A deductions.tj wrote: ↑Sat Apr 10, 2021 10:55 pmWell, by otherwise itemizing, I meant you need to have Sch A deductions that add up to over the standard deduction.willthrill81 wrote: ↑Sat Apr 10, 2021 10:48 pmNot at all. Other itemized deductions would certainly benefit you, and you have to overcome the standard deduction for this to be worthwhile, but those needing LTC can all too often do that with ease due to the high price of such care.tj wrote: ↑Sat Apr 10, 2021 10:46 pmWouldn't this only be if you are otherwise itemizing?willthrill81 wrote: ↑Sat Apr 10, 2021 10:07 pmMedical expenses exceeding 7.5% of your AGI are fully deductible (i.e., you can withdraw the amount from a tax-deferred account with no tax liability).
Last edited by backpacker61 on Sun Apr 11, 2021 8:42 am, edited 1 time in total.
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Re: Ed Slott's new book NEW RETIREMENT SAVINGS TIME BOMB
I find the dismissive “grade A first-world problem” characterization interesting on a site that has threads discussing basis point differences in expense ratios.willthrill81 wrote: ↑Sat Apr 10, 2021 10:13 pm For the most part, only a small minority of retirees will be in a higher tax bracket than when they were working (unless they move to a state with higher taxes). And I don't feel sorry for those who are because it will nearly always (apart from the potentially lost child tax credit) mean that they are earning even more money and, consequently, have to pay more in taxes. That's a grade A first-world 'problem'.
I fully expect that many BHs will be surprised by their Federal marginal tax bracket in retirement. The various things that can lead to this (tax changes, becoming single, etc) have been discussed elsewhere.
I get the FI part but not the RE part of FIRE.
Re: Ed Slott's new book NEW RETIREMENT SAVINGS TIME BOMB
Good point. With Social Security, RMDs, pensions, the scheduled restoration of the pre-2018 brackets in 2026, the scheduled restoration of the narrower width of some of the joint return brackets in 2026, the death of a spouse, etc., many people are in about as high a bracket in retirement as they had been.RetiredAL wrote: ↑Sat Apr 10, 2021 11:31 pmBased on me, and the recent thread on how much are you living on in retirement, there are lots out there like me, so there are a lot of us minorities.willthrill81 wrote: ↑Sat Apr 10, 2021 10:13 pm For the most part, only a small minority of retirees will be in a higher tax bracket than when they were working (unless they move to a state with higher taxes). And I don't feel sorry for those who are because it will nearly always (apart from the potentially lost child tax credit) mean that they are earning even more money and, consequently, have to pay more in taxes. That's a grade A first-world 'problem'.
And RMDs are not the bugaboo that many try to make them out to be. If you need to withdraw less than your RMDs, then you saved more than you needed to, and you're in good financial shape. Tax-deferred accounts are called that with good reason.
Before I retired, we were within the 15% bracket, towards the top end.
Cold hard fact I found now that I am retired: With our $50K in SS, anything past approx $25K additional ($75K gross) puts us into the current 22% bracket. So every $ I convert to my Roth, I pay 22% as Fed Taxes. As a comparison, 22% normally starts around $115K gross for working folks.
Back in the 80's, congress decided to tax SS, but only for the rich. That break-point is not inflation adjusted, but was at what seemed at the time that only the uber rich would get snared. Congress adjust this once in the early nineties. However after years and years of inflation, today Joe average is caught by this stealth tax, and well Joe is just average, not uber rich.
Those of us caught by this, find that the 15% saved by tax deferring, but withdrawn today, are now costing us 22% to withdraw those differed $.
And it just gets worse when one spouse dies. My modeling said as single some of our RMD $ was going to be at 38%.
So bye bye that dangled concept that you will be at a lower tax rate in retirement when you withdraw. Why do you think author's like Ed Slott keep making money writing about the retirement tax bomb. They do so because it's real. And it's dinging a lot of people.
I've read that if this SS break-point had been inflation adjusted, it today would be around $95K of additional income before one's SS got taxed.
On the plus side, although CA taxes are generally thought of as grievous, CA does not tax SS, so we are ahead on state taxes.
While Roth conversions aren't appropriate in every case, and where conversions are indicated it's often better to convert some each year than all at once, too few rather than too many IRA owners do them. Most accountants don't understand them. In this regard, Ed is more knowledgeable than most.
Many people have a window between retirement and when RMDs and Social Security begin when they're in lower brackets.
There are factors other than comparing tax brackets now to tax brackets to consider.
See my articles on this in the April 2013, https://www.kkwc.com/wp-content/uploads ... r_ATRA.pdf, and the June 2018, https://www.kkwc.com/wp-content/uploads ... ations.pdf, issue of Trusts & Estates.
Ed' misses these points on life insurance. Obviously the present value of the premiums has to exceed the present value of the death benefits (for policyholders and their beneficiaries in the aggregate) by the cost of running the insurance company. Perhaps this is because insurance agents are one of the principal groups to which he markets his seminars.Rex66 wrote: ↑Sun Apr 11, 2021 8:22 am ...
Using permanent insurance in retirement has been discussed multiple times. One needs to use assumptions that greatly favor insurance such as high investment costs.
One also has to believe they will be of the 15% that keep it in force until death and they get illustrated results which hasn’t happened in the last 30 years bc dividends continue to fall.
Indeed, under the SECURE Act, the opportunity cost of having to tap the IRA to pay the estate tax is generally less than it was before, since in most cases the IRA has to be distributed within 10 years of death.
Of course, with the current level of the estate tax exclusion amount, there are very few taxable estates that don't have enough non-IRA assets to pay the estate tax.
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Re: Ed Slott's new book NEW RETIREMENT SAVINGS TIME BOMB
Yep, I shake my head at people with million dollar HSAs. Wait until they find out medicare covers all of their medical expenses and they have to pay income taxes instead of long term captain gains on millions of dollars.TomatoTomahto wrote: ↑Sun Apr 11, 2021 8:41 am I fully expect that many BHs will be surprised by their Federal marginal tax bracket in retirement. The various things that can lead to this (tax changes, becoming single, etc) have been discussed elsewhere.
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Re: Ed Slott's new book NEW RETIREMENT SAVINGS TIME BOMB
You're correct that most of what is discussed on the forum can rightly be called first-world problems. I've just seen so many posts about people simply ranting about having to eventually pay taxes on tax-deferred funds, as if they forgot that tax-deferred does not mean 'never pay taxes', that I'm quite jaded about this specific issue.TomatoTomahto wrote: ↑Sun Apr 11, 2021 8:41 amI find the dismissive “grade A first-world problem” characterization interesting on a site that has threads discussing basis point differences in expense ratios.willthrill81 wrote: ↑Sat Apr 10, 2021 10:13 pm For the most part, only a small minority of retirees will be in a higher tax bracket than when they were working (unless they move to a state with higher taxes). And I don't feel sorry for those who are because it will nearly always (apart from the potentially lost child tax credit) mean that they are earning even more money and, consequently, have to pay more in taxes. That's a grade A first-world 'problem'.
I fully expect that many BHs will be surprised by their Federal marginal tax bracket in retirement. The various things that can lead to this (tax changes, becoming single, etc) have been discussed elsewhere.
I think that the crazy taxation of SS benefits will be the primary source of surprise when it comes to most retirees' effective tax rate in retirement.
You're correct that the 'surviving spouse is thrust into a higher bracket due to RMDs' issue is meaningful, and I too have tried to point this out in many threads. Primarily for this issue, I would generally favor Roth contributions unless the expected tax arbitrage in the brackets is greater than 2% (the expected 'penalty' for Roth contributions is greater than 2%).
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