staythecourse wrote:If you want the safest approach to investing in retirement it is pretty easy. Just divide your portfoio in 2 buckets. Bucket 1 should be the amount you need for 10 yrs. of living expenses. That should be in cash, MM, rolling CD's, annuities, SS, and pension income. Bucket 2 should be an asset allocation that you feel comfortable with. In its purest form should be 100% stocks.
Retirement planning does not have to be difficult. Folks make it MUCH more difficult trying to figure out the ultimate variable which is returns from different asset allocations. Just make it easy and make 2 separate portfolios. One for income for the next 10 yr. and the other for growth.
texasgal47 wrote:I just received my preliminary portfolio recommendations back from the Vanguard CFP on line last night. Even with a 1.8M portfolio, no debts and needing only 11,500/yr income stream within the next 1 to 4 yrs. from retirement at age 66, I never in my wildest dreams expected this AA from Vanguard. My questionnaire response showed that I'm a true Couch Potatoe Investor. My behavior has been to set it and forget it to an extreme fault. I can emotionallly handle an aggressive AA for my life stage. However, my idea of "aggressive" was 50/50 up to 40% stock/60% bonds. Anyway, my jaw dropped when I saw that. Otherwise, he is recommending a basic 3 index portfolio which is my basic strategy. I just had to share this with you bogleheads. The forum will be getting my full portfolio info, but I'm just trying to get back down from the shock of last night.
1. Should a small amount VG REIT index fund be included in the IRA?
2. Do I move the 401K while I am still working to VG or leave in place while I'm still working? The 401K has about $150,000 in a LgCap S&P500 Index fund with an ER=0.32%. That's the only fund with a low ER in my plan.
texasgal47 wrote:I'm 66 and my plan allows my to move all of the 401K now. The issue is the additional $5000 RMD from the 401K added on top of the other $30,000 RMD taken at age 70 1/2 bumps me into the tax bracket where more is taxed on SS and increased payments into Medicare and part D (prescription insurance).
Naikansha wrote:Whatever she will use for a qualified charitable distribution (say 5k in this case) can be deducted from the RMD amount so will not be taxable.
texasgal47 wrote:I'm sorry, but really need to know if electing to have a portion of an RMD distributed directly to charity reduces the amount of Gross income, or Adjusted Gross Income (AGI), as a tool to reduce income for the purpose of means testing. Here is an example of what I am trying to ask. Say my yearly pension and SS combined are $50,000. My RMD for 2017 is $35,000. I elect to have Vanguard distribute $5000 of the RMD directly to my local church as a charitable contribution. Will turbo tax calculate my gross income as $85,000 or $80,000? What about calculation of the Adjusted Gross Income (AGI)?
I am now going to quote some information related by the Dallas financial columnist, Scott Burns, in one of his columns entitled, "Required minimum distributions can change tax bracket." As a single filer, using federal income tax rates in 2013, everything between $36,250 and $87,850, is taxed at 25% ($72,500 to $146,400 for joint filers). RMDs in the future will move my total income above $87,850 and into the higher marginal tax rate of 28%. So this is one of the reason for my questions posted above. Will the $5000 RMD charitable contribution move the tax bracket goal post back $5000 to give more breathing room before the $87,850 milestone is reached? Mr. Burns also presents another strategy to delay reaching that higher tax bracket -- "You can create some flexibility by making withdrawals from your qualified accounts up to the edge of the 28% tax bracket. You can do a Roth conversion with the withdrawals until you reach the age for required minimum distributions." -- That is another suggestion I plan to implement.
In that same newspaper column, Scott Burns also writes the following -- "The other milestone you want to watch for is the threshold rate for having to pay a surcharge on your Medicare insurance. This year the basic monthly premium for Medicare Part B for most people is $104.90. The Part B premium will rise to $146.90 for joint filers with taxable incomes of $170,000 ($85,000 for single taxpayers), and there will be a Medicare part D surcharge of an additional $11.60 a month. Required minimum distributions may drive your taxable income into this range, so some amount of Roth conversion will reduce the odds this will happen."
I read where the House Republican have presented a proposal to lower the threshold for the Medicare premium rise to around $80,000 for single taxpayers. (I've forgotten the proposed amount for joint filers.) So I'm getting back to that important question of where does the $5000 RMD charitable contribution put one's income for the purposes of federal income tax means testing in determining these additional charges, at $80,000 or $85,000?
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