Introduction and some questions!

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marksmall
Posts: 3
Joined: Sun Sep 23, 2018 5:40 pm

Introduction and some questions!

Post by marksmall » Sun Sep 23, 2018 5:51 pm

Hello All! I can't wait to review the many topics and start understanding the world of financial security here at Bogleheads!

Some info about me:
* 48 Years old
* Retiring in December 2018
* No Pension - will be on Affordable Care Act for insurance
* live in $500,000 home
* $200,000 mortgage
* Single dad, 3 kids out of the house/on own
* looking to retire to Phoenix area from up state NY

Some questions:
I have approximately $3,200,000 in retirement funds with Merrill Lynch and most of that money is post taxed earnings/non IRA.

Family History would leave me to believe I won't make 90 years old.

I'd like to withdrawal approximately $120,000 yearly with a COLA added very few years

Can you guys give me some advice on the above along with controlling my taxes? I'm not really happy with Merrill. Thank you!

Regards,
Mark

Factor1
Posts: 69
Joined: Wed Apr 04, 2018 10:18 pm

Re: Introduction and some questions!

Post by Factor1 » Sun Sep 23, 2018 6:47 pm

Although this does not answer any of your specific questions, here is "65 Ways To Retire Smart" from Personal Capital that I received this week.

https://www.dropbox.com/s/8n23ks2ayfpnw ... 8.pdf?dl=0

JBTX
Posts: 4034
Joined: Wed Jul 26, 2017 12:46 pm

Re: Introduction and some questions!

Post by JBTX » Sun Sep 23, 2018 7:30 pm

marksmall wrote:
Sun Sep 23, 2018 5:51 pm
Hello All! I can't wait to review the many topics and start understanding the world of financial security here at Bogleheads!

Some info about me:
* 48 Years old
* Retiring in December 2018
* No Pension - will be on Affordable Care Act for insurance
* live in $500,000 home
* $200,000 mortgage
* Single dad, 3 kids out of the house/on own
* looking to retire to Phoenix area from up state NY

Some questions:
I have approximately $3,200,000 in retirement funds with Merrill Lynch and most of that money is post taxed earnings/non IRA.

Family History would leave me to believe I won't make 90 years old.

I'd like to withdrawal approximately $120,000 yearly with a COLA added very few years

Can you guys give me some advice on the above along with controlling my taxes? I'm not really happy with Merrill. Thank you!

Regards,
Mark
That is almost a 4% withdrawal rate at 49 years old which is a little high. It is true once you get social security you can withdraw somewhat less. Still I'd shoot for 3-3.5% max.

Does your 3.2 million include money for kids college? Of so obviously that isn't available for retirement

Your future income will be largely made up of capital gains. The more income the less aca subsidy you get. Anything you can do to lower taxable income increases your subsidy. Tax savings strategies include:

1. Offset capital gains with capital losses, to the extent you have any
2. The less you spend, the less capital gains you realize, the lower your income, the higher your subsidy

Also be prepared for higher insurance rates and potentially the ACA market falling apart down the road. The individual mandate is now gone, and thus people can jump in and out of the ACA market at will, and are more likely to jump in when sick which drives up premium costs. It is very plausible more and more insurers just drop out of aca market. We could end up with non aca policies that have much more skeletal coverage.

Get out of merrill Lynch (unless merrill edge which is OK) and go to fidelity or vanguard or schwab. Have new investment company transfer investments directly to avoid capital gains. Then over time move to index funds but be very careful about recognizing capital gains for the reasons stated above.

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linenfort
Posts: 2094
Joined: Sat Sep 22, 2007 9:22 am
Location: #96151D

Re: Introduction and some questions!

Post by linenfort » Sun Sep 23, 2018 7:37 pm

Consider moving your savings to Vanguard and congrats on leaving upstate NY (I grew up there so I can say that, right?)
bogleheads, don't knock state lotteries. They helped defund the mafia.

Lafder
Posts: 3793
Joined: Sat Aug 03, 2013 7:56 pm
Location: East of the Rio Grande

Re: Introduction and some questions!

Post by Lafder » Sun Sep 23, 2018 7:43 pm

Welcome here!

Take the time to post all of your holdings in this format viewtopic.php?f=1&t=6212

List them as % of total, include expense ratios (ERs). This will help you get a good look at your current asset allocation and help you start thinking about what asset allocation you want.

You mentioned the assets are mostly taxable, not specially lettered/numbered retirement accounts. So there could be capital gains tax if you sell holdings with gains. But gains can be cancelled by losses.

It may be worth listing your cost basis of each holding to see what the tax hit would be if you sell anything, and to see if any are at a loss.

Merrill Lynch is known for high cost funds. You can decrease costs by moving to lower cost holdings. But it may not be worth making big changes depending on the tax hit you will take to sell what you do have.

Have you visited Phoenix in summer ? I would not move there til you have spent a few weeks in summer to see if you can stand the heat!

lafder

JBTX
Posts: 4034
Joined: Wed Jul 26, 2017 12:46 pm

Re: Introduction and some questions!

Post by JBTX » Sun Sep 23, 2018 8:05 pm

http://www.wnchealthinsurance.com/subsidy-calculator/

Take a look at how income impacts your aca subsidies.

HereToLearn
Posts: 169
Joined: Sat Mar 17, 2018 5:53 pm

Re: Introduction and some questions!

Post by HereToLearn » Sun Sep 23, 2018 11:31 pm

Will the earnings on the post-tax/non-IRA $3.2 million not push you over the ACA subsidy level?

marksmall
Posts: 3
Joined: Sun Sep 23, 2018 5:40 pm

Re: Introduction and some questions!

Post by marksmall » Tue Sep 25, 2018 7:01 pm

Thanks - I have some homework to do.

Is there a simple button for this, to allow me to withdrawal a certain amount yearly and allow me to maximize returns with minor fees without using a brokerage firm? Dump all the funds in to a Vanagrd type of mutual fund?

Re ACA, I won’t be receiving a subsidy and will just chose the best/cheapest healthcare option (ACA, private etc) based on any changes in healthcare reform.

HEDGEFUNDIE
Posts: 847
Joined: Sun Oct 22, 2017 2:06 pm

Re: Introduction and some questions!

Post by HEDGEFUNDIE » Tue Sep 25, 2018 8:22 pm

Congrats on making it to the finish line.

If I were in your shoes, I would dump all the taxable funds into Vanguard Tax Managed Balanced Fund (VTMFX) and all the tax-advantaged funds into Vanguard Wellesley (VWIAX).

Both funds have had a long term annual return of 7% with low volatility.

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Peter Foley
Posts: 4535
Joined: Fri Nov 23, 2007 10:34 am
Location: Lake Wobegon

Re: Introduction and some questions!

Post by Peter Foley » Tue Sep 25, 2018 10:49 pm

Congratulations.

Like JBTX I think your withdrawal rate is a little too high for someone so young. I would aim for a withdrawal rate of about 3.5% until you start drawing Social Security. The difference in lifestyle between a $120,000/year draw and a $112,000/year draw is not great.

Do look for a better mix of low cost investments. Vanguard, Fidelity, and Schwab all have good low cost options. One caution is that you do not want to pay a lot in taxes as you transition.

Lower expense ratios are certainly better, but paying slightly higher expense ratios over a short time period is acceptable in my opinion. Expense ratios are like negative compound interest - it is the effect of 20 to 30 years of higher interest that makes a difference, not 5 years.

marksmall
Posts: 3
Joined: Sun Sep 23, 2018 5:40 pm

Re: Introduction and some questions!

Post by marksmall » Mon Oct 15, 2018 1:54 pm

Thank you, I agree I can certainly lower my withdrawl rate, however I really need to review my current situation. I'm down 3% for the year with these guys and that seems extremely poor. I have so much work to do to understand my current situation.

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