Help with Retirement Plan

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calliecake47
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Joined: Mon Apr 04, 2016 6:33 pm

Help with Retirement Plan

Post by calliecake47 » Mon Apr 24, 2017 7:09 pm

My husband and I are now planning to retire either at the end of the year or early next year. We had originally planned to work longer, but the opportunity seems to be now. With help from Bogleheads this past year we’ve separated from our FA and sold a gazillion different accounts and now have something manageable that we can deal with.

I am 55, husband is 61
Current Tax Rate Fed: 28%, State: 6.7%
Own home, mortgage will be paid, even trade to new home
State of current residence: NY, relocation to FL after sale
Desired allocation 60/40 or 50/50, 5-10% in international
After business sale we will have 68% in joint non-retirement and 32% in retirement

2791 Joint non-retirement (1000 will be coming from business sale after taxes paid)
Current Unrealized Cap Gains = 126

1408 Cash (Of the 1408, 1000 after taxes will be coming from business sale 2017/2018)
677 VTSAX Vanguard Total Stock
132 VTIAX Vanguard Total Int’l Stock
146 VWIUX Vanguard Intermediate TE Bonds
296 FCNTX Fidelity Contrafund
92 Handful of stocks at TD Ameritrade
25 5yr CD @ 2%

1303 Retirement:

Me
326 401k VTSAX Vanguard Total Stock (annual contribution 24k)
73 Roth VTSAX Vanguard Total Stock
15 HSA Savings account

Husband
594 401k VBTLX Vanguard Total Bond (annual contribution 24k)
76 Roth VTSAX Vanguard Total Stock
20 Inherited IRA VTSAX Vanguard Total Stock
214 Annuity (still with FA until end of year when penalty expires, mix of stocks/bonds)

We are estimating a 150k per year withdrawal (corrected 4/25)

Social Security: Planning to start in 2025
(these amounts are accurate taking into account no income from when we stop work)

Husband at 70 would be 41k
Me at 64 would be 22k
Total of 63k

Questions:
Best places for money that is needed within the next 5 to 7 years?
What are your thoughts on SS timing?
What would be the most tax efficient allocation before and after SS starts?
Which methods are best to confirm Roth conversion amounts?
Any thoughts on placement of the one-time windfall for use until SS and for tax efficiency?
Thoughts on overall asset allocation?

Thanks,
Callie
Last edited by calliecake47 on Tue Apr 25, 2017 9:32 am, edited 1 time in total.

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Taylor Larimore
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"The Bogleheads Guide to Retirement Planning"

Post by Taylor Larimore » Mon Apr 24, 2017 7:27 pm

Callie:

I would like to suggest that many of your questions (and more) are answered in The Bogleheads' Guide to Retirement Planning. This is the link.

All royalties are donated to The National Constitution Center where Mr. Bogle was the first chairman.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

abonder
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Joined: Sat Nov 03, 2012 10:52 am

Re: Help with Retirement Plan

Post by abonder » Mon Apr 24, 2017 7:54 pm

You pose a number of excellent and complex questions. Each question is the topic of countless extended threads in this forum.

1. Money needed in next 5-7 years needs to be safe (essentially no risk of loss of principle) - high-income savings account, CDs, treasuries, etc

2. Many Bogleheads via social security as longevity insurance and accordingly advocate for delaying to 70 or as long as feasible. Since you appear to have about 4 million in assets (with most in taxable so taxes have a smaller impact) and you need 100k per year, you should be fine even without SS as you need less than a 3 percent withdrawal rate to support your needs. This should really be sustainable even under poor market conditions. So my take would be that the timing of SS probably won't have a huge impact on you, but it will impact your income and play a role in possible timing of Roth conversions.

3. And 4. Not sure that you need to alter your asset placement pre and post SS. Not exactly sure what you are getting at. Roth conversions are a huge topic here. Search some old threads. Essentially you need to run projected tax numbers and decide how much tax you want to pay now and what your income tax bracket will look like when you are getting SS.

I think there are additional questions but I'm going to defer to others. Hope this creates a starting point.

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Peter Foley
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Re: Help with Retirement Plan

Post by Peter Foley » Mon Apr 24, 2017 8:02 pm

You are starting out in an excellent position with more of your retirement savings in after tax than in 401k's. Your mix of funds is not horribly complex and your proposed asset allocation is appropriate.

Taxable: I would hold at least $200,000 if not $300,000 in one year CD's - Ally Bank pays about 1%. The balance can be held in total stock market total international and a bond fund in a proportion that would support your AA proposal. To be a little more tax efficient hold less on bonds in taxable and raise your bond allocation in your 401k.

You have a couple choices with regard to your 401ks - you could withdraw from them for a few years prior to taking SS benefits while your tax rate is low, or do annual Roth conversions and withdraw from taxable.

I would run Roth conversion scenarios both in i-orp and the Retiree Portfolio Model. Generally speaking, the scenarios I have run have shown that if your are going to convert into the 25% tax bracket, it is better to do a few slightly larger conversions early than spreading out the conversion over a number of years. Filling up the 15% tax bracket with a combination of Roth conversions and long term capital gains is an oft recommended approach that I too would endorse.

You are moving to a state with no state income tax. If need be, I would certainly delay a year to do Roth conversions until you move.

calliecake47
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Re: "The Bogleheads Guide to Retirement Planning"

Post by calliecake47 » Tue Apr 25, 2017 9:05 am

Taylor Larimore wrote:Callie:

I would like to suggest that many of your questions (and more) are answered in The Bogleheads' Guide to Retirement Planning. This is the link.

All royalties are donated to The National Constitution Center where Mr. Bogle was the first chairman.

Best wishes.
Taylor
Thank you. I did read the book and found it very helpful. The best thing about this site is all the input that one receives. Just wanted to make sure we were on the right path.

calliecake47
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Joined: Mon Apr 04, 2016 6:33 pm

Re: Help with Retirement Plan

Post by calliecake47 » Tue Apr 25, 2017 9:13 am

Thanks for all the responses. I did make a typo in the post though. I mistakenly put that we planned a 100k withdrawal, but it should say at least 150k. I just wanted to correct that for any responses going forward.

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FrugalInvestor
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Re: Help with Retirement Plan

Post by FrugalInvestor » Tue Apr 25, 2017 9:20 am

calliecake47 wrote:Thanks for all the responses. I did make a typo in the post though. I mistakenly put that we planned a 100k withdrawal, but it should say at least 150k. I just wanted to correct that for any responses going forward.
You should correct this in your original post and note it as corrected. Some may not see it (eventually) buried here.
IGNORE the noise! | Our life is frittered away by detail... simplify, simplify. - Henry David Thoreau

calliecake47
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Re: Help with Retirement Plan

Post by calliecake47 » Tue Apr 25, 2017 9:32 am

OK thank you. I made the correction.

calliecake47
Posts: 58
Joined: Mon Apr 04, 2016 6:33 pm

Re: Help with Retirement Plan

Post by calliecake47 » Tue Apr 25, 2017 7:22 pm

So in an effort to try to make this tax efficient we keep the bond funds in the retirement portion and the stocks in the taxable, I get that. We're looking to do a 60/40 or 50/50 split. So if we have say 70% of our assets in taxable and 30% in retirement, we will need to have a lot of bonds/cd/tips in the taxable portion as well. While we have some tax free bonds, that will need to be increased substantially to reach the desired asset allocation. Or would one suggest Vanguard Total Bond for the taxable portion as well in this case?

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Taylor Larimore
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Re: Help with Retirement Plan

Post by Taylor Larimore » Tue Apr 25, 2017 7:48 pm

calliecake47 wrote:So in an effort to try to make this tax efficient we keep the bond funds in the retirement portion and the stocks in the taxable, I get that. We're looking to do a 60/40 or 50/50 split. So if we have say 70% of our assets in taxable and 30% in retirement, we will need to have a lot of bonds/cd/tips in the taxable portion as well. While we have some tax free bonds, that will need to be increased substantially to reach the desired asset allocation. Or would one suggest Vanguard Total Bond for the taxable portion as well in this case?
calliecake47:

Total Bond Market is seldom recommended for taxable accounts because it is tax-inefficient (nearly all its return is taxed at income-tax rates -- not capital-gain lower tax rates).

I would not want 100% of bonds in a single-state. However, you might consider a good-quality single-state tax-exempt bond fund for your taxable account.

A good choice in a taxable account (when tax-advantaged accounts are full of bonds) is Vanguard Tax-Exempt Intermediate-Term bond fund.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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Peter Foley
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Re: Help with Retirement Plan

Post by Peter Foley » Tue Apr 25, 2017 8:48 pm

Taylor wrote:
A good choice in a taxable account (when tax-advantaged accounts are full of bonds) is Vanguard Tax-Exempt Intermediate-Term bond fund.
I agree this is a good choice for taxable accounts. Keep in mind that cash is also part of your AA allocation. Also note that you will have to do some annual rebalancing if you are holding strictly bonds in your 401k and withdrawing $50K or more per year from those accounts. That may mean holding a bit more of the tax exempt fund over time.

I think it would be prudent to hold as much as 3 years worth of cash in your taxable account to help manage taxes and avoid a bad sequence of returns in the first years of your retirement.

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abuss368
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Re: "The Bogleheads Guide to Retirement Planning"

Post by abuss368 » Tue Apr 25, 2017 8:48 pm

Taylor Larimore wrote:Callie:

I would like to suggest that many of your questions (and more) are answered in The Bogleheads' Guide to Retirement Planning. This is the link.

All royalties are donated to The National Constitution Center where Mr. Bogle was the first chairman.

Best wishes.
Taylor
Hi Taylor -

A great book that I really enjoyed reading. I am hoping the Bogleheads write another excellent book!

Best.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

calliecake47
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Joined: Mon Apr 04, 2016 6:33 pm

Re: Help with Retirement Plan

Post by calliecake47 » Wed Apr 26, 2017 6:25 am

Peter Foley wrote:Taylor wrote:
I think it would be prudent to hold as much as 3 years worth of cash in your taxable account to help manage taxes and avoid a bad sequence of returns in the first years of your retirement.
That's what I was thinking but I thought that might be stupid so I'm glad you said that!

kmurp
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Joined: Fri Jun 01, 2007 1:53 pm

Re: Help with Retirement Plan

Post by kmurp » Wed Apr 26, 2017 7:33 am

calliecake47 wrote:Thanks for all the responses. I did make a typo in the post though. I mistakenly put that we planned a 100k withdrawal, but it should say at least 150k. I just wanted to correct that for any responses going forward.
That's 150k withdrawal or $150k spending? Make sure you ballpark your taxes.

calliecake47
Posts: 58
Joined: Mon Apr 04, 2016 6:33 pm

Re: Help with Retirement Plan

Post by calliecake47 » Thu Apr 27, 2017 2:49 pm

kmurp wrote:
calliecake47 wrote:Thanks for all the responses. I did make a typo in the post though. I mistakenly put that we planned a 100k withdrawal, but it should say at least 150k. I just wanted to correct that for any responses going forward.
That's 150k withdrawal or $150k spending? Make sure you ballpark your taxes.
150k withdrawal

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