Bogleheads.org

saver1 wrote: ↑Wed Mar 22, 2023 10:28 am Hello All,

My thinking is that the money in the brokerage can be handed over to him when my wife and I think the time is appropriate to use for Roth IRA contributions or other life events such as a wedding or buying a house later down the line.

Up to 35k can be rolled from a 529 to a Roth IRA. It is subject to the same annual limits and restriction on earned income.

Money for a wedding or house should not be in a 529 since there is no easy way to access it for those purposes.

Will you be 59.5 when your child is likely to get married and buy a house? Are you currently maxing out your Roth (IRA, mega-backdoor) space? I am saving the wedding/house fund in my own Roth space so I can hand it off easily without tax consequences.

TSP has a new document called a Lifetime Income Illustration - Thrift Savings Plan. This is in addition to the usual statements. It seams to be an attempt to let people know what kind of income to expect from their TSP. I like the attempt at income transparency and the assumptions seam mostly reasonable. " Lifetime Income Illustration - Thrift Savings Plan This statement provides you with information about how much monthly income you could collect at retirement based on your current account balance. The estimated monthly payments in this statement are for illustrative purposes only; they are not a guarantee. Having this information now may help you plan how much money to save for your retirement. Summary of Monthly Income Illustration ...

Navillus1968 wrote: ↑Sun Mar 19, 2023 11:04 pm
Breakeven number of months after 70:

A break even analysis only speaks to the risk of dying early and receiving less from SS then you otherwise might. It doesn't address the risk of longevity and running out of money.

A 68 year old female has an average life expectancy of 88, a 46% chance to living to 90, and 23% change of living to 95. If her health is better then average (working to 70 suggests it may be), then the odds are higher.

https://www.longevityillustrator.org/Pr ... ortResults

I'd be more concerned about longevity, and collect those delayed retirement credits.

lynneny wrote: ↑Sun Mar 19, 2023 8:51 pm
She will turn 70 in 15 months, so would her benefit increase enough in such a short period to be worth suspending it? We´re assuming she would want to resume her benefit at 70 since I don´t think it would increase after that (except for COLA adjustments, of course). Her current Social Security benefit is $1,350/month.

You get 2/3 of 1% for each month of delayed retirement credits, so 15 months = 10%. That 10% will be COLA adjusted for the rest of her life.

If she is relatively healthy and likely to live to her life expectancy, then it absolutely makes sense to delay.

Nothing wrong with a (SPIA) annuity. Much easier to spend when you know it can never run out. Inflation is a risk, but it sounds like you are taking steps to mitigate that. You might look at your state's annuity guaranties, they may protect you up to a certain limit, which can help you feel safer with the decision.

SnowBog wrote: ↑Wed Mar 15, 2023 8:08 pm
Edited to add: I had forgotten that with SECURE 2.0's 529 changes, if the 529 is unused/unneeded - it could be used to fund contributions to a Roth IRA when the kids start working, up to $35k - which is likely what we'll remain under.

529 plans can also be transferred to ABLE accounts for those with disabilities, in the unfortunate situation that that applies.

So, the idea of "setting aside" that money as needed ($3k at birth) shouldn't be hard to deal with, especially if it can grow tax-free (and require no extra overhead other than setup effort) is appealing to us. I actually really like this idea. You can set it up, and then it compounds without any tax consequences. I don't think you need to worry about the generation-skipping transfer tax as the annual and lifetime gift tax exemption can deal with that. Also the double beneficiary change would work. I believe the rules for changing account owners vary by state. Some allow it, and others require special circumstances such as death or divorce. You might pick a plan that would allow you to transfer ownership to your niece/nephew if n...

Medicare doesn’t cover 100% though? Medicare part A covers nursing home care for rehab (physical, occupational, speech therapy) and skilled nursing (IV antibiotics, wound care, tube feeding ect). Medicare covers 100% of the first 20 days, and another 80 days with a $200 / day copay (copay covered by Medicaid/coinsurance). After the rehab or skilled nursing is over (either because you don’t need it, or you hit the 100 days) then you transition to custodial care which is NOT covered by Medicare. At that point Medicaid would begin paying as primary. The nursing home is NOT allowed to kicked you out, as long as they accept payment from Medicaid. Therefore you can end up at a fairly decent skilled nursing facility for custodial care under Medic...

Vanguard User wrote: ↑Wed Mar 15, 2023 5:20 pm
Will my mother be able to get it for free meaning everything covered if she needs it? She has no assets. Only income is SSI (less than $800) and SNAP. We are in Houston, TX suburb area.

Do I need to hire a lawyer to process this? What is the timeline looking like and is there a waitlist to admit her?

If she is on SSI then she already has medicaid. Getting in to a decent nursing home on medicaid can be challenging depending on the area. Her best bet would be to admit to the nursing home from a hospital on medicare for rehab, and then just never leave.

I’ve heard, but not verified, that the FERS pension is designed similar to social security to be actuarially neutral……..you get the same expected lifetime payout regardless of when you start taking it. It can be, based on when you claim but is not actuarially neutral throughout all claiming years. Actuarial neutrality requires that the present value of accrued pension benefits for working an additional year is the same as in the year before (benefits increase only by the additional entitlement earned in that year). FERS gains 10% for working to age 62, and loses the social security supplement at age 62, so it is not actuarially neutral exactly. Those two can balance each other, and the timing of the claim changes the present value of the p...

We have $600K+ in my husband's company 401k. My husband will be 59-1/2 this year and is planning to keep working. However, I am concerned about our tax liability. His income is low enough compared to maxing out retirement, that we have not owed much tax the last few years. We are not very literate compared to some people about finances but I am interested in rolling over to Roth's and was wondering if someone could help me with specifics. I read you cannot touch them until five years. That is fine but I am concerned with how much to do. I am not sure how much our tax liability will be for 2022 as we haven't done our taxes yet but the income is our highest so far and this year will probably match that. You will not owe taxes on the 600k 401...

My golf buddies (who are typically knowledgeable on these susbjects), state that my wife will not receive any of my SS benefits if I die before I begin withdrawing my SS. That is not true. If you die before beginning your benefit, then your survivors are eligible for benefits on your record as if you claimed the day before you died. There is NO penalty to your survivors if you die before claiming a benefit. https://www.socialsecurityintelligence.com/social-security-survivor-benefits-and-death/ "If the deceased spouse never filed for benefits, and died after their full retirement age, the survivor receives the deceased’s benefit in the same amount it would have been on the date of the deceased’s death (including delayed retirement cred...

Seams like he is doing ok. 100% US stocks over the last 25 years did better than a 70/30 or 80/20 portfolio, even with the recent drop in stocks. If he is working to 67, and only spends <40k per year, and has a 1.7 mil networth, after SS and any other income his retirement is actually overfunded by a large margin. He has the resources to delay SS past when he stops working, so that should be considered. If he “does not expect to use his retirement funds” then he is investing for his estate which has a 20+ year horizon. 100% stocks is not inappropriate. I would encourage him to dream a bit and spend some of his resources to really maximize his retirement experience, you only get one. He seams like a hands off investor. If he does want to div...

I do like the Annuity option because of the income stream, but being single, my children could not benefit from that option. By providing monthly income, it protects the rest of your assets which may be a benefit to your children. As with any annuity, if you outlive your life expectancy it will have a positive effect on the size of your estate, if you die early then it will have a negative effect on the size of your estate. To spend 48k you need about 53k (+state taxes) so that doesn't leave too much room between your SS+pension and income needs. Your pension has no COLA, and while SS does have a COLA it will likely NOT keep pace with the inflation on your retirement expenses which tend to be a bit higher then general inflation. Therefore ...

industrialauk wrote: ↑Sat Mar 11, 2023 5:43 pm
Question: I want to set up an insurance policy to distribute funds to her if I don't survive. What do fellow forum members think of this plan? Due to a genetic medical condition, life insurance providers denied a policy for me (the purpose of that policy was for my spouse and kids). What options do I have? The policy value would be 100k.

Do you have access to life insurance on a group plan through work? May have no/different underwriting requirements.

What was the term on the policy you were denied? You might try a shorter term to see if that helps.

Did you try several different companies? Each company has different underwriting requirements.

I don't think there is enough information. I think it will depend on your SS and how long you have to fund before SS and/or Medicare kick in, and your expenses in retirement. How much are you currently saving towards retirement per year? How old are you and your wife? Will either of you quality for Social Security, and if so what is your PIA? Does the 60k expense estimate include the Morgage, and if so what is your expense estimate without that? What is your plan for retirement, any spending beyond the basic expenses, travel ect.? Any desire to leave an inheritance? Help kids with weddings, or first homes? What is your plan for medical insurance both before Medicare at age 65, and after 65? What is your plan for aging related expenses, and ...

prd1982 wrote: ↑Sat Mar 11, 2023 2:28 pm How does Medicaid get the portion of his income which is used for his care?

The nursing home will charge a "deductible," "spenddown," or "share of cost" amount.

Medicaid will tell the nursing home what he is responsible for, I believe in Maryland they do it on a 6 month basis. He will owe that amount first, and then Medicaid will pick up the tab on any expenses beyond that. Ask the nursing home to tell you what they are going to charge him, compare that to what you were expecting to make sure they got it right.

She needs to not be able to do 2 essential daily living tasks by herself. Whether they pay is driven off of the provider notes. If the provider notes say that they have helped her with transferring, and getting in and out of the bath tub every day, then the insurance company will pay. If she is still doing these things herself without assistance they dont pay. It is driven off of the services provided, not off a doctors note. As mentioned, she is on the cusp of not being able to do these things by herself. Time will tell. The LTC insurance assitance, when activated, will make a big difference in her annual expenses. Many assisted living facilities charge by the level of service provided. So they have a financial incentive to provide more s...

In the fact sheet, it says "If you work for an employer who doesn’t withhold Social Security taxes from your salary, any retirement or disability pension you get from that work can reduce your Social Security benefits." The keyword that we are looking at is "get." Given that he only worked in Canada for a few years as a teaching assistant, whatever pension benefit he is eligible for is likely very small. So the question is, if he does not apply for it and hence not "getting" such retirement benefit, does WEP still apply in some way? We think WEP does not apply in this case. What do you think? I don't believe he has to receive the benefit in order for it to effect his SS. If he earned the benefit (regardless of...

After FRA you can claim benefits retroactively by 6 months (but not earlier then FRA). After FRA you earn 2/3 of 1% per month of delayed retirement credits. So in 6 months you earn 4%. If he is claiming retroactively 6 months, he has to give up 4%. So divide his current benefit by 1.04 (104%) to get his benefit 6 months ago. If he is claiming retroactively by 3 months, then divide his current benefit by 1.02 (102%) to get his benefit 3 months ago. Delayed retirement credits are applied in December of the year they are earned (if younger then age 70), and paid in the following January payment. The delayed retirement credits for 2022 were already applied to his record. If he was to claim retroactively to before Jan 2023 I don't think he would...

It seams there are two possibilities here. #1) You continue funneling the income through your record, so your SS is higher, and your spouse will draw a spousal benefit. #2) You split the earnings so both of your benefits will grow and you each claim your own SS. I used the earnings provided, and this calculator https://www.ssa.gov/benefits/retirement/planner/AnypiaApplet.html to estimate your PIA. #1) Assuming you continue earning 68,593 each year until age 67 (FRA), and you both claim your benefits at your individual FRA, your PIA is 2,527 and your wife's spousal benefit is 1,264. Your combined monthly benefit of $3,790. Your survivor benefit is 2,527. #2) Assuming you earn 34,296 (half of 68,593) until age 67 (FRA) AND your wife earns 34,...

Unfortunately financial literacy declines with age, but financial confidence does not, which leads to overconfidence. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1948627#:~:text=Confidence%20in%20financial%20decision%20making%20abilities%20does%20not,financial%20literacy%2C%20cogntive%20ability%2C%20household%20finance%2C%20cognitive%20aging "We find a consistent linear decline in average financial literacy score of about 1 percentage point per year among respondents over 60." "Confidence in financial decision-making ability does not decline with age, and the likelihood of having high confidence and a low financial literacy score rises in old age" "in aggregate and within all financial decision making domain...

I am trying to understand what income does NOT count for the SSI income limits.

According to SSA the following does not count for SSI income limits:

"interest or dividends earned on countable resources or resources excluded under other Federal laws"

What would be an example of interest of dividends from resources excluded under other Federal Laws?

https://www.ssa.gov/ssi/text-income-ussi.htm

For background my sister is disabled from birth, is currently 40, lives independently, and relies heavily on SSI. I would like to supplement her retirement at Age 62+ with monthly income, and am trying to learn about SSI so I can understand options.

The age 62 is a first to die annuity. The age 70 is a second to die annuity. This is correct. The age 62 SS (lower benefit) goes away after the first to die. The age 70 SS (higher benefit) lasts until the second to die. If the first to die, dies before the expected joint life expectancy, then claiming at 62 will have been a good decision. If the first to die lives past the expected joint life expectancy, claiming after 62 will have been a good decision. No way to know for sure in advance. If at 62 you are both in good health with the expectation that you will BOTH live to or beyond your joint life expectancy, then there is nothing wrong with delaying the 2nd SS past 62. Keep in mind that the SS life expectancy tables are a bit outdated and...

If an annuity fits in with your overall financial plan then delaying this annuity is a solid choice.

If you were to take it early and invest the $965 you would need a 12.3%+ annual return to purchase an annuity at 65 that replaces the lost income. 965/month at 12.3% over 7 years is 118k, which is what it would cost to purchase an annuity that pays $521 per month (1486-965) for a 52 and 65 year old according to immediateannuities com. So delaying guarantees you a 12.3%+ return, IF you were to buy an annuity.

Unfortunately California is not a good state for Long Term Care Partnership programs. They require 5% compound inflation protection which can be costly, and have limited companies so less competition and higher costs overall. Hopefully these issues will get settled in the future.

So bottom line, dad should start taking social security immediately per opensocialsecurity and mom should wait until 70? And the new benefit amounts should be reliable now now that future income has been factored in? If they stopped working, and have 0 as their last year income, then the calculator will assume 0 going forward, and the estimate should be more accurate. opensocialsecurity assumes they both live to their life expectancy. If that assumption proves not to be the case, then their suggestion won't have been the optimal one. No way of knowing in advance. Luckily it doesn't mater too much. Delaying one year or not isn't going to make a big difference. If you want to make an informed guess then consider their combined life expectanc...

herennow wrote: ↑Mon Mar 06, 2023 2:10 pm
I’m guessing that inflation has reduced his ss amounts similarly. Once an ss claim is made, then inflation will start to adjust ss amount upwards according to cola.

I don't believe that is true. Inflation may reduce the spending power of his benefit, but not the actual benefit itself.

COLA applies to the benefit from age 62 onward, it does not matter when you claim. Claim at 62, you get COLA for each year from age 62+. Claim at age 70, you get COLA for each year from age 62+.

It all depends on how much they need the money. We gift each of our children a substantial amount each year (under gift tax filing exemption). One of our children needs the money to pay the rent. We believe the other is investing the money for the future. We also contribute to 529 plans for their children. We have said that we think that our current gift plan is sustainable for the rest of our lives and beyond, but we can't reasonably provide them with a potential future inheritance because of the volatility of the market. Therefore, they can't depend on it either. Hopefully, they are taking responsibility for their own financial plans and appreciate as much support as we can provide. I love this and hope to be in this situation myself in ...

For a scenario where we are both born in Jan 1961, PIA ‘s of 3208 (me) and 1050 (her) open social security shows the low earner get more than the high earner at death I am staring at the open social security screen now and it says if I outlive her i get 27K a year and if she outlives me she gets 8.7K and 23K for a total of 31.8K a year The reason that the surviving spouse in your scenario receives a greater benefit is that you claimed so early. In general either surviving spouse gets a benefit that is equivalent to whichever SS benefit is higher. In your case your SS benefit is higher, so the surviving spouse would get that, and it would be the same regardless of who the survivor is. However the survivor benefit can not be less then 82.5% ...

How old are they now? What is the age gap between you and the kids? Do they have earned income? Do they max out their Roth IRAs? Do you need to keep the money out of their hands, or can you trust them to have ownership and not use it? If you die before they are 60, do you want to still keep it from them? Will you owe estate taxes (state and federal)? You could put it in two separate brokerage accounts with them listed as the beneficiaries. You will owe capital gains taxes on dividends. If you die before they hit 60 then they will get it tax free. If you are still alive when they turn 60 you can gift it to them. They won't get the step up in basis. You won't owe estate taxes if you are under the estate tax limits (12.92 mil in 2023 but subje...

inandrajog wrote: ↑Thu Mar 02, 2023 3:03 pm Our primary focus now is to provide for our next generation and the causes that we care about.

If your time horizon is 10+ years I don't see anything wrong with 100% stocks. If you are drawing down to give to family and causes now then that changes things.

inandrajog wrote: ↑Thu Mar 02, 2023 3:03 pm I do not panic when my holdings lose value but view the downturn as an opportunity to invest more.

I agree with this, during the accumulation phase when you have income to invest more. During the decumulation phase (retirement) you presumably don't have extra income. Without bonds (or other non correlated assets) you have no way to buy when stocks are down.

I do agree that 4% is reasonably safe. The most likely outcome of that spending plan is that they die with a lot of money. Meaning they could’ve done more in retirement. If 130k covers everything they could possibly want to do, and they don’t mind leaving a lot of money behind, then no need to do anything different. If they would rather spend more if they can, then they need a full retirement plan to figure out what is available for discretionary spending. A fee only financial planner who specializes in retirement can help them set up a plan. They need to figure out how much they need to cover necessary expenses, before they know what is left over for discretionary expenses. Expenses in retirement: - Basics lifestyle (food, utilities, trans...

I think the pension is a solid choice. More monthly income generally means more monthly spending which can mean more enjoyment (the whole purpose of retirement).

You mention you have a "pretty good size portfolio" so I assume that you have the resources to deal with "lumpy" spending, as well as long term care. So you don't really need this lump sum for anything else.

In general you need a trust when there is a need for either protection, or control. You mention that you and your brother are both responsible adults and so there doesn’t appear to be a need for control. Is there a need for protection? Do either of you anticipate divorce, or bankruptcy? If so, and if the trust is set up correctly, then there may be a protection benefit to the trust. One disadvantage for the trust is possibly higher taxes. Is the trust set up as a conduit or accumulation trust? A conduit trust will pay out the IRA distributions through the trust and to the beneficiary and the distributions will be on the beneficiary’s taxes (desirable). If the trust is an accumulation trust, then the IRA distributions pay into the trust and ...

Yes your mom will get 100% of his benefit (and give up hers) if he dies. The surviving spouse will get 100% of the higher of the two social securities, provided they are at full retirement age at that time. Her spousal benefit will not jump up to half his current benefit, or half his primary insurance amount PIA (his benefit at full retirement age). It will be somewhere between the two. The spousal benefit actually has two component. There is her benefit, and also a spousal “catch up.” If she claimed at full retirement age then her benefit plus the catch up would equal half of his PIA. Let’s assume her PIA is 1208 (846/.7), and his is 3525 (2468/.7). Then the spousal catch up is 553 (3525/2 - 1208). So 1208 (her benefit) + 553 (spousal catc...

Are you sure your SS and pension will cover your basic expenses to the end of life? Retirement expenses tend to inflate faster then CPI (driven largely by health care costs) and may outpace the COLA adjustment on your income. You may want to set aside some assets to cover the (future) gap. I would not buy a deferred income annuity now, its too far in the future and things change. However you may want to set aside some money with the intention of purchasing a SPIA around age 75 to 85 if you find that you need it at that point. How will your income change in a survivorship scenario? How much SS will you loose? Will the pension income drop? Your basic expenses may decrease some, but your taxes are likely to go up (single filer tax brackets are...

Given your description of your estate it seams fairly straight forward and I'd feel comfortable with a less expensive lawyer provided they know what they are talking about.

It doesn't sound like you need a trust. Retirement assets have beneficiary designations, same is true for bank accounts and insurance. You don't have a home. Your cars can be settled with the will. What else do you have that requires a trust?

His WEB reduction should be about $154 per month. WEP changes the percentage of income replacement for Social Security before the first bend point. For 2022 you would normally get 90% of the first $1,024 of average indexed monthly earnings (AIME). With WEP the 90% decreases by 5% for each year below 30 years of wages covered by social security. Since your friend has 27 years, his replacement for that first $1,024 will drop from 90% to 75%, or from $922 (1,024 * 90%) to $768 (1,024 * 75%). Therefore his WEB reduction should be about $154 per month. This assumes his AIME is at least $1,024, and his non covered pension is at least $308 (WEB reduction cannot exceed 1/2 of non covered pension). If he has indexed monthly earnings above the first ...

Engaging in sloth wrote: ↑Wed Aug 24, 2022 6:45 pm OP- I think you should have enough in fixed assets to cover expenses for the remaining yrs of life. Be safe and secure.

This is how I am modeling our retirement. We have stocks and cash only besides our house. No bonds.

How do you account for inflation, and longevity to ensure that your cash is sufficient to keep you safe and secure?

carolinaman wrote: ↑Fri Jan 20, 2023 9:42 am
people can sometimes use home health services to avoid LTC. Of course, there are some who spend years in LTC.

Many LTC policies do include coverage for home health services if the conditions are met (i.e. requires assistance with 2 out of 6 activities of daily living).

Cruise wrote: ↑Thu Jan 19, 2023 8:51 pm
My wife has been retired for a year. Boy do we love the peace of mind knowing that the pension check is flowing in on a monthly basis. We don't care whether a lump sum payout might have been a better bet, because we know if might not have been.

You can't overestimate the benefit of peace of mind.

Definitely the pension. Medical coverage from 55 to 65 AND a minor COLA is huge.

Umbrella policies are priced based on your risk. You have 5 rental policies, so 5 (additional) opportunities for people to get hurt and sue you. Honestly seams well worth it.

NewMoneyMustBeSmart wrote: ↑Sat Jan 14, 2023 10:45 am
But if the $33M principal if passed to each child, isn't that taxed?

Estate taxes are due within 9 months of the death of the decedent, and before distributions to beneficiaries. If the estate value is over the exemption limit (federal and/or state) the taxes are due at that time.

In your example the 100 mil is left over AFTER the estate tax was paid, thus any distribution of principal to beneficiaries is tax free (taxes were already paid).

The trust will own taxes annually on any income. The trust can pass that income to the beneficiaries and the income can be taxed at the beneficiary’s (likely lower) tax rate.

TDSFA wrote: ↑Tue Jan 10, 2023 5:20 pm When I retired I rolled my TSP into various Vanguard Funds, holding back in the TSP G Fund 3-5 years worth of withdrawals. I withdraw a set amount from the TSP monthly and replenish yearly from Vanguard as needed. Works great and I never have to worry about withdrawing during a downturn in the market.

This is my plan too. G fund for near term spending. Everything else in an IRA.

Will reevaluate at 70 (SS) and 75 (RMD) to see if the extra complexity makes sense.

I have read beyond the grave, which seems to be a "what could go wrong". In any case, the author talked about having some sort of gatekeeper that would evaluate the kids to see if they are ready for money. The idea is if the kids are ready for money earlier, all of the money can be release to them and if they become drug addict, the only isn't release to them. I have no idea how this works. The book suggest that there is some sort of psychological evaluation. For now, I would like some ideas. Keep in mind we can always make changes later when they are older. I also have a young child and read beyond the grave before setting up my trust. I went with 50% at age 25, and the remainder at age 30 at the discretion of the trustee. There...

JaneyLH wrote: ↑Tue Jan 03, 2023 9:00 pm My husband is very conservative about spending and everything I would like to spend is a fight. Most of the money is from my stock options and it saddens me that I spent my career in a very cut-through industry and now don't have the pleasure of spending my gains on things I would enjoy.

What about purchasing a 5 or 10 Year Period Certain annuity with the express purpose of spending that money on pleasure over the next 5 or 10 years. That way you have ONE fight over the annuity purchase, and then are free to spend the money however you want. I also recommend a separate checking or credit card so that he doesn't see exactly what you are spending it on and thus has less opportunity to comment.

1. I have read that, typically, Roth conversions make sense for people expecting to be in higher tax brackets when in retirement. That is unlikely to be true in my case, so I'm wondering about how the software would make such an unexpected recommendation to me. 2. Is it a good idea to follow such a recommendation? Generally and, specifically, considering your experience of using this particular software. 1. Are you suggesting that it is recommending Roth conversions now, while you are working and in the 32% tax bracket? I very much doubt that is beneficial. What may be beneficial are Roth conversions after you retire and your income (and tax bracket) drops. That will depend on what happens in the next 15 to 20 years. 2. Never do anything w...

What is the purpose of this investment?

Long term retirement investment? Roth
Inflation protected spending? I Bond