Bogleheads.org

We hire it done. Our lives feel simple, but we had to provide 26 documents to the accountant and the page count for the federal return + state + worksheets was 47 pages, which is about average for the last several years. I do not want to tackle that.

Agree with other that this is way over complicated for no purpose other than to confuse you into thinking you can't do it yourself. Note that many of these funds will have fairly high costs on top of the advisory fees, so the total cost to you is not good. Run, don't walk, to the exits. Open taxable, Roth and regular IRA accounts at your favorite brokerage and start the transfer there. When I left my advisor, they used funds that couldn't be held outside of the advisor, so they had to liquidate. They dawdled on that liquidation, so when transfer request came from Vanguard, there were $0 available to transfer and I had to start the whole transfer process over again, and they dawdled again and it happened again, ultimately taking two months t...

Early SS increases the tax costs of Roth Conversions, so as long as both of you have good health, I would wait to claim SS for a few years while you work on Roth Conversions.

This is mostly dependent on when you retire. Retired folks that are still participating here mostly retired after the GFC of 2008, so have had a much more pleasant ride than folks that retired in 1929 or 1966, meaning you won't learn anything from this question.

A couple other resources to check out:
Go to EarlyRetirementNow and download the SWR toolbox, which is a Google sheet with historical series and SWR calculations on a monthly basis back to 1871.
Or check out FireCalc, which is an online calculator that is quick way to see how your starting values would fare if various historical returns played out in the future.

A glance at a mortality table says the odds are greater than 50% that at least one of you makes it to age 89, which is the relevant breakeven point for the larger benefit. It's those last years when deferring SS pulls ahead. The addition of the opportunity to do some Roth Conversions before claiming your SS benefit is another bonus in favor of waiting to claim the larger benefit.

Traditionally, a 3.5-4% withdrawal rate is all you can count on in retirement, the advisor taking 1.7% is the only one that's going to have a nice retirement. Get all your current statements first, some brokers lock you out once they determine you are leaving. Next, initiate the transfer at the receiving institution. As others have pointed out, be prepared that you will have to sell things like proprietary mutual funds and take the tax hit. It's worth it in the long run to eliminate the parasite. Then, write a note to the advisor saying you are leaving, going to the receiving institution and they need to work with the receiving institution to get the money transferred. Expect wailing, gnashing of teeth, urgent calls for you to meet, etc. Ig...

I see some commenters built spreadsheets and good on them, but the tax code is a complicated beast with ACA, IRMAA, LTCG taxation, SS taxation, NIIT, etc. For folks that are not inclined to take the time to learn and program all that, I recommend a pre-built tool. I use Pralana Gold for these analyses, you tell it the unsubsidized ACA cost and for each year, and for Roth Conversion studies you select the limiting FPL multiple, tax bracket, IRMAA tier or whether to stop at the top of the 0% LTCG bracket. Depending most crucially on tax deferred balance, but also on age, taxable balance, pensions, SS benefits, heir tax bracket, life and estate goals, plus return and longevity assumptions, the answer could be anything. Some typical "landi...

The 6 month look back doesn't apply unless you were eligible for Medicare, so you can contribute to your HSA right up until you turn 65.

After you file for Medicare, your wife can still do a pro-rated share of the catch-up contribution in her own HSA.

I can't figure out if OP thinks the mistake was buying something that went down (we all do that from time to time) or putting bonds in taxable. Neither of those is a mistake. Since the bonds took a small loss, that can be written off against your income or future capital gains. To "harvest" that loss without creating a wash sale, you need to buy something different with the money. I used Vanguard's Intermediate bonds as a tax loss partner for BND for instance. Some folks may benefit from avoiding bonds in taxable to be able to get ACA premium credits or whatnot, but in general, there is nothing wrong with holding bonds in taxable. Some folks advocate for bonds in tax deferred and stocks in Roth/taxable in the name of tax efficienc...

One thing you could do is to do Roth conversions up to the limit of your existing tax bracket. It makes no sense to me to put yourself into the next tax bracket up with a Roth conversion. You could model this with tax software, run scenarios and see how your taxes are affected. ACA subsidies is the complicating factor. We're in the 12% bracket. Let's say our expected income is $50K (family of 3)...converting $60K of Roth funds (taking income up to $110K, which is close to the top of the bracket after standard deduction), results in $8000 less in subsidies for the year. What matters are the current and future marginal tax rates , and those may or may not be the same as the individual's tax bracket. ACA premium tax credits and Taxation of So...

Like all of us, MIL must live within her means, to have burned through her assets suggests she has been denying this simple reality for a while now, even buying an expensive new car a few years ago when she had to have seen it was beyond her budget. As others have suggested, maybe she is having cognitive troubles. In any event, she can't afford a house on the beach, so needs to sell.

If MIL is OK physically and mentally, then there are other options besides moving in with OP, OP seems stuck thinking of the status quo vs moving MIL in with them as the only options.

I recently gained access to a mega back door Roth through my job. However, as I understand it, the pro rata rule means I would have to convert my existing rollover IRA first. The rollover IRA has about $50,000. We are likely to be in the 32% tax bracket this year and it is not clear whether our tax rate will be higher or lower in retirement. I’m 40 years old. Any help appreciated. I would not do a Roth. Your tax rate in retirement is unknown and not predictable with certainty. It’s speculation to do a Roth conversion. They are nothing burgers. But people like to talk about them on fora like this. If you seek more information, use the RPM spreadsheet which will quantify the same answer for you. I made the same mistake in misreading a post a...

I grew up behind a lawnmower, but as I approach 50 I'm beginning to reassess whether I shouldn't just pay somebody to take care of the mowing/edging/trimming etc. We live in a subdivision in Houston on a 8000sf lot with lots of beds. I do enjoy some lawn care, just not the 3-4 hours per week. I travel with my job (3-4 days gone per week) and always feel like I don't have enough time on the days off. I would just like more time to do the things I want to do, especially now that the kids are almost gone. Our income level/hourly wage more than dwarfs the cost of lawn care. I recently hired a pool company to take care of the pool, so maybe its just a trend..... My question is has any other Bogleheads reached this conclusion and do you have any...

You did not rack up all this debt in the three months since you lost your job, you need to take a hard look at exactly what you are spending and where.

No vacations, no lattes, lunches or dinners out, rice and beans. Cut the phone bill as others suggested.

Do you have a car you can sell and get something cheaper?

Can you apply with the court to lower your child support?

I retired and spent a year trying to get used to it. Turned out, we don't really like travel. I had turned work into my hobby, solving problems while getting paid for it. We live in SE Texas, where the only outdoor hobbies are excess sweating and mosquito swatting. So after a year, I decided I was bored, reached out to the former employer and crafted a part time position where I could contribute with a minimum of politics or sales involvement.

We seem to have put a stigma on people working as long as they can, but some of us get satisfaction, enjoy the feeling of contributing and being useful. There are no right or wrong answers that others can give you, you have to do what's right for you at the moment.

Our kids were happily contributing to tax deferred accounts. We showed them our account balance to explain that they would likely be in a higher tax bracket when we pass, so they should do Roths now. We also decided to start gifting to them each year and didn't want them to worry.

dogagility wrote: ↑Wed Feb 22, 2023 7:26 pm

In general DCA questions are really about asset allocation fears and doubts.

Yup, it's that simple.

Exactly, so when OP wanted to do the statistically correct thing, it's truly weird that the advisor friend advised against it. The role of an advisor should be to give statistically good advice, along with caveats about how sometimes things don't go your way. But to jump on OP for doing the right thing and instead propose an emotional crutch that's more likely to hurt than help, I wouldn't consult this friend for advice anymore.

I think you are saying that you have at least 31 years of expenses saved up, so your average withdrawal rate would less than 3.2%. If your calculation includes taxes as part of your expenses (remember IRA money gets taxed), then it seems like your retirement is pretty secure. Historically a 3.6% withdrawal rate didn't fail in 30 years and about 3.2% could be drawn forever without fully depleting the principal using typical 50/50 or 60/40 portfolios. So I think you are in good shape if you use typical asset allocations. Unless you have more funds than you indicated, I would be careful about buying a vacation home, they all cost a lot of money, time and effort, but not all of them appreciate in value enough to offset the maintenance, taxes, i...

Up to age 60, past earnings are adjusted upwards by the average wage index, a much higher adjustment than just inflation. So if you showed us your unadjusted earnings, your highest earning years according their math are actually your early years. I doubt you are getting any benefit increase based on additional years of work. You do get benefit increases from waiting to claim. Logon to SSA.gov and use their tools to see.

8301 wrote: ↑Fri Feb 17, 2023 8:51 pm

Exchme wrote: ↑Fri Feb 17, 2023 8:39 pm It's only right if your tax bracket in retirement will be larger than right now. That could be true at the start of a lucrative career, but most of us don't really know it will be a lucrative career when we are just starting (industry could change, we might hate it, maybe we're not cut out for it, need to move to take care of family, have health problems, etc.). So yes there is a risk that you are making a mistake by pre-paying taxes, time will tell.

You are confused. You invest in Mega backdoor Roth in addition to the tax-deferred 401k. Otherwise, the money will be invested in taxable accounts.

Agreed, my employer doesn't do allow that, hadn't thought it through.

It's only right if your tax bracket in retirement will be larger than right now. That could be true at the start of a lucrative career, but most of us don't really know it will be a lucrative career when we are just starting (industry could change, we might hate it, maybe we're not cut out for it, need to move to take care of family, have health problems, etc.). So yes there is a risk that you are making a mistake by pre-paying taxes, time will tell.

Bucket strategies are great for people who like them. Many different ways to do it. If someone wants to pick one specific way to do a bucket strategy and say it is inefficient I bet their are many people who do find it efficient for them. How can anyone say they are ineffective when they are different from person to person. Way too much over analyzing going on from ”experts”. The best approach to retirement spending I have seen comes from the guys doing the Retirement and IRA Show podcast. They don’t call their approach buckets but they clearly are. The very fact that there are so many flavors of bucket strategies is actually evidence that none of them are effective. If one specific strategy really worked, we would all know it and use it. ...

Bucket strategies are great for people who like them. Many different ways to do it. If someone wants to pick one specific way to do a bucket strategy and say it is inefficient I bet their are many people who do find it efficient for them. How can anyone say they are ineffective when they are different from person to person. Way too much over analyzing going on from ”experts”. The best approach to retirement spending I have seen comes from the guys doing the Retirement and IRA Show podcast. They don’t call their approach buckets but they clearly are. The very fact that there are so many flavors of bucket strategies is actually evidence that none of them are effective. If one specific strategy really worked, we would all know it and use it. ...

...he said he will leave half of his estate to my wife and half to her sister. Not that you need another reason not to do this but another problem with this is that is possible that your wife could die before him or that you could get divorced. If that happens it is very likely that you would not be left anything in those situations. Folks are onto the right idea, get alignment with the sister and say something like: "Dad, we really appreciate it, but if something should happen to you and you need care, you'll need that money! God forbid that would happen, but If it did, using it for your care would be tax deductible, so there's a chance that no one would have to pay taxes on it. So let's just leave it alone as a rainy fund, OK?"...

Folks are onto the right idea, get alignment with the sister and say something like:

"Dad, we really appreciate it, but if something should happen to you and you need care, you'll need that money! God forbid that would happen, but If it did, using it for your care would be tax deductible, so there's a chance that no one would have to pay taxes on it. So let's just leave it alone as a rainy fund, OK?"

You are overthinking this. Your fixed income initially starts with long duration bonds, then each year, you sell some of that and buy some short duration bonds, keeping the average maturity equal to one half your remaining planning duration. You keep your stock/bond allocation constant. You "soft re-balance" by selling what's over-represented and if things get really out of balance and you hit your rebalancing band, sell stocks to buy bonds or vice-versa. Ok. But what about the scenario where stocks and long bonds are in the red for an extended period-- where are the withdrawals coming from (assuming I want to always avoid selling at a loss)? Perhaps from the short duration allocation you refer to. But won't I need a large alloca...

You are overthinking this. Your fixed income initially starts with long duration bonds, then each year, you sell some of that and buy some short duration bonds, keeping the average maturity equal to one half your remaining planning duration. You keep your stock/bond allocation constant. You "soft re-balance" by selling what's over-represented and if things get really out of balance and you hit your rebalancing band, sell stocks to buy bonds or vice-versa.

Then forget about money and go do what you intended to do with your retirement.

FrugalInvestor wrote: ↑Sun Feb 12, 2023 11:37 pm

krisSA wrote: ↑Sun Feb 12, 2023 11:18 pm I am a currently self employed, using COBRA for my health insurance and also taking tax deduction for COBRA premiums. Can I consider it as HSA qualified expense? I'll be medicare eligible in couple of years, but will have to pay insurance premiums for my dw. Will that be considered as HSA qualified expense?

Generally no, but there are exceptions. See here.....
https://www.goodrx.com/insurance/fsa-hs ... e-premiums

I would recommend researching this further as the exceptions are very specific.

COBRA is reimbursable with an HSA.

This is not a hard call to make. Get a different job. Being unhappy working for a dysfunctional boss is no way to go through life.

What are your intentions to do with the money? If you intend to do QCDs or give your IRA balance in your estate to charity, there is less urgency to do Roth Conversions. If you have heirs in high tax brackets and are trying to ensure they, rather than the government, gets the most, then Roth Conversions are more strongly indicated.

With $3M in tax deferred and planning for heirs, my guess is to convert to the top of the 24% bracket. I recommend you get a tool like RPM (free spreadsheet at this site's Wiki, but very manual on Roth Conversions) or Pralana Gold (paid spreadsheet, very powerful) and model it.

calculators are only as good as the assumptions used. It is rather unknowable. Correct. We have much less knowledge about your future finances, return expectations, life expectancy, goals for the money, tax brackets for any heirs, desire to give to charity, etc. than you do. The best you can do is get a quality calculator and work a range of scenarios and see what seems to fit you. The only thing we seem to know is that you have room in the 24% bracket, so that sounds like a good idea to fill that up. If there is still room in the IRMAA tier at the top of the 24% bracket (depends on AGI), it's probably worth going into the 32% bracket enough to fill the IRMAA tier. I don't think it's best to think about conversions as some sort of percenta...

The phase-in of SS taxation makes this not a big deal. Assuming no other taxable income aside from the pension, you could do $3700 in Roth Conversions at 0% taxes. Then you could do another $6,000 at an effective 18.5% rate (10% bracket x 1.85 phase in of SS taxes). After that, you are in for 22.2% marginal costs for conversion (12%*1.85) for the next $28,200. Above that and you are in the 22% x 1.85 bracket, so clearly unpalatable. This is the OP's projected income (SS goes up with inflation indexing): At 73 I'll be (30000SS, 10000pension and RMD 41000) I believe that he will always be in the 85% SS tax zone. Yes? OP is not taking RMDs yet, will turn 70 and take SS in a couple months and take RMDs at 73. During that interim, he can make s...

The phase-in of SS taxation makes this not a big deal. Assuming no other taxable income aside from the pension, you could do $3700 in Roth Conversions at 0% taxes. Then you could do another $6,000 at an effective 18.5% rate (10% bracket x 1.85 phase in of SS taxes).

After that, you are in for 22.2% marginal costs for conversion (12%*1.85) for the next $28,200.

Above that and you are in the 22% x 1.85 bracket, so clearly unpalatable.

The premise is the problem. It's mostly a myth that there is any benefit to holding bonds in the IRA/stocks in taxable/Roth. Some wise folks here guided me on this and I followed it up with some modeling, so now I'm a believer. The "benefit" is effectively coming from a stock/bond allocation change. That is, the IRA is partly owned by you, partly by the government because of the taxes you owe on it. When you preferentially fill that with bonds, you have pushed bonds into the government's share, leaving more of your portfolio's stocks for you (since you hold stocks outside the IRA). That's equivalent to just holding a higher allocation of stocks equally in all accounts. The difference in effective allocation can be surprising - I ...

The premise is the problem. It's mostly a myth that there is any benefit to holding bonds in the IRA/stocks in taxable/Roth. Some wise folks here guided me on this and I followed it up with some modeling, so now I'm a believer. The "benefit" is effectively coming from a stock/bond allocation change. That is, the IRA is partly owned by you, partly by the government because of the taxes you owe on it. When you preferentially fill that with bonds, you have pushed bonds into the government's share, leaving more of your portfolio's stocks for you (since you hold stocks outside the IRA). That's equivalent to just holding a higher allocation of stocks equally in all accounts. The difference in effective allocation can be surprising - I s...

Not a good idea. You have 40 years of retirement to fund, there is nothing special about the next two. In fact, if the market were to crash while you were working you might have an option to keep working, for a lot of professions, once you stop, you can't get back in at anywhere near the compensation.

Put differently, you have to have some amount of average market exposure over your lifetime. By making that zero for the next two years, it must average greater than it otherwise would have after that. So a market crash once you are taking more more risk is more damaging than if you had leveled out your risk over your lifetime.

To answer your first question, you select the fund and amount of shares to convert, Vanguard makes no decisions about it, you do. Note you do not have to sell first, there is a "convert" button.

I agree with others that you need to really understand your tax situation before doing any Roth Conversions, let alone a large conversion like this.

We hadn't filed form 8606 for a decade for our non-deductible IRA contributions but had records (barely!). The good folks here advised us to get the forms from the IRS website for all those past years and fill them out as we should have done originally, tallying up year-by-year the non-deductible contributions. Then we sent them all to the IRS with a note explaining what we did. After we sent in the forms, we never heard back, so we are proceeding as if all is well and keeping those old records in case a question ever comes up.

Best of luck!

I would wait until retired. Your tax bracket today looks much too high compared to your likely bracket when you quit working to make this profitable now. You will have several years after you retire to worry about Roth Conversions.

When you do retire, either hire a one time fee CFP to help you plan conversions or buy a tool that allows you to evaluate different scenarios.

Sounds like Rob's method would give folks an easy way to gather their data accurately and ensure it's in a consistent format. I applaud you for trying to drag bogelheads' kicking and screaming into the 21st century! I suspect you are not getting a lot of comments because this mostly benefits folks asking for portfolio reviews and those are maybe not consistent readers/commenters on the site. I really like the idea of your tool, I often skip over the Portfolio Review threads as I find the text-only interface for what ought to be tabular or graphic data interferes with my understanding and tries my patience. The issue you are currently addressing often leads to confusion too as inevitably the requester has left out something needed to underst...

Assuming it's you that goes first, your spouse will get her own benefit plus enough survivor benefit to total your benefit (assuming you have already claimed). Since the program found that age 70 was optimum for you, that's the age it assumed.

It's probably a good idea to put the cash to work regardless of the rollover, so I would do that to partially compensate.

I did two large rollovers over the years. The first one, I got "lucky" and the market dumped while I was out, avoiding a 4% loss. The second time, I got clever and compensated like you are doing - only the money didn't transfer on time, so I was doubled up on stocks when the market swooned, then the money came out and the market rose. That transfer was a smaller amount, but since I got whipsawed, it wiped out my lucky avoided loss from first transfer, almost to the $.

So compensating is fine, just make sure you know when the account will really be sold, or you could repeat my mistake.

You need a budget that you absolutely abide by and that includes something substantial left over each month so you aren't always on the razor's edge of disaster. I know someone that spends every dime in good months and then is surprised by bad months so those go on the credit card, making the hole deeper and deeper. That is the way to ruin. Do you have a car you could sell, you need to be driving an old beater, anything at all nice needs to be converted to cash. Other assets to sell? Do you have a home you could get a HELOC on? Part time job flipping burgers? Taking money from your retirement accounts is OK if you really and truly have reformed your spending. The advice you are getting is because folks know that the real risk is that you wi...

There are two different parts to the wife's (lower) benefit. The benefit on her earning record, which was reduced by her claiming at 62 and the spousal portion that was not reduced since she he waited until she was past her FRA before he claimed. Some rough math - First we need the PIA amounts. Let's say the husband is claiming at exactly age 63, so his PIA was $3290. The wife claimed on her benefit at 62, her FRA was 66 and 2 months, so her benefit was reduced 25.8%, so her PIA would be $1140. If she had claimed both spousal and on her record at her FRA, she would have gotten $1140 on her benefit and $505 ($3290/2-1140) as spousal. That $505 is not reduced since her spousal claim is not early. She will continue to get her $846 on her recor...

All good advice so far. I would add that one reason for your wife to defer claiming SS is to leave more room for Roth Conversions in those years. Once you claim SS, the phase-in of taxes on SS benefits may compete with Roth Conversions. You need to build a model to help you understand the interplay of the various puzzle pieces and make a plan.

There are some good free tools like the Retirement Portfolio Model spreadsheet available at this site's wiki. Quite a few things about that are manual, so I like Pralana Gold, a paid spreadsheet, as having a lot of power and features. There are some paid on-line calculators like New Retirement that I've seen others comment on favorably, though I haven't used those.

In the last 3 years, we have needed:
-new shower to fix a leak (turned out it was an underground leak)
-both garage doors
-both furnaces
-both air conditioners
-gutter guards (ask my now bionic elbow how important that is)
-replacement landscaping due to bad weather (twice!)
-water softener replacement due to wind damage
Almost $40k total

Aside from air conditioners, we didn't anticipate those. But deterioration doesn't stop, we have fence, carpet and roof all near end of life, interior and exterior that need paint, plus whatever arises as surprises.

With $10M in assets plus a possible $3M inheritance, so you are pretty well set if you want to go. However, you have a chance to create intergenerational wealth, make a significant impact to your charitable causes, afford the best stuff, etc. You may feel you missed out on those opportunities if you stop working now. Also, depending on your personality, work can offer a lot of opportunities for social interaction, leadership, feeling useful, etc. that may be hard to replace. So I would think through more than just "can I spend what I want" before pulling the plug.

So far equity market seems to be holding up well from the Sep 2022 lows and I have upped my AA from 55:45 to 65:35. Now I am thinking whether to up it further to 75:25 or stay put. The dark clouds of recession seem to be hanging over the horizon along with further fed rate rise concern. So what does the cognoscenti think about the future course of the market :D Who knows? Remember how Lucy would pull the ball away from Charlie Brown again and again just as he was trying to kick it even though she promised not to? That's what bear markets do - they tease you over and over again. They when you finally give up and believe it'll never come back, the bottom actually holds. That's why Bogleheads counsel you to set your allocation and stick with ...

It would be nice if there were a back test of the "Bucket Strategy" from 2000 to 2010 for year 2000 retirees starting the decumulation phase. If there were I believe everyone would see the benefits of the bucket strategy for those in the decumulation phase. I'm in the camp that the believe the bucket strategy is a withdrawal only strategy and not for the accumulation phase. 1) You maintain your asset allocation based on your risk tolerance. 2) You withdraw from Safe assets only. 3) You rebalance from risky assets into safe assets when your asset allocation becomes out of balance at your preset triggering event (5% yearly etc.). Keep in mind that you are withdrawing from safe assets the entire time. It's a pretty safe consideratio...

Your proposal is just saving differently, not running out to blow the dough, so will not get any criticism from me. It's all one portfolio, whether you call it "house", "529" or "retirement". We paid our house off when the numbers said it wasn't a great idea, but it reduced our stress level, so was worth it.