Investment Advice

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Topic Author
Loveinglife
Posts: 2
Joined: Mon Jul 29, 2019 6:12 pm

Investment Advice

Post by Loveinglife » Mon Jul 29, 2019 6:15 pm

I retired a year ago last April. I turned 65 last November. I’m trying to figure out my game plan for living off my retirement income and minimizing my taxes. I’ve been playing with firecalc and Optimal Retirement Planner. It looks like I should start taking more out of my 401k to minimize my taxes long term. Let me tell you what I have.

After Tax money
VTSAX Vanguard Total Stock Market $65k
VSMGX Vanguard LifeStrategy Moderate Growth $50K I now know this is not the best place to have this but to late now.
Federal Money Market $82k
Cash $30k
Total after tax money ~$227k

401K
VSMGX Vanguard LifeStrategy Moderate Growth $1700k
CREF Stock R2 $80k

Grand Total ~$2M

I have a state pension of $12k/year

I plan on waiting until 70 before taking SS. I will get $36k when I start.

I’ve already taken $30k out of my 401k this year. I’m thinking about taking another $30k out. This should give me $72k for taxes and keep me below $85k for my MAGI.

My living expenses are ~$70K/year

So do you think this makes since to take out $60k/year until 70?

I looked at ROTH conversions and it didn’t seem to help.

Thanks
Last edited by Loveinglife on Tue Jul 30, 2019 5:59 pm, edited 1 time in total.

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nedsaid
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Re: Investment Advice

Post by nedsaid » Mon Jul 29, 2019 6:31 pm

Please edit your post and add the name of the fund after the ticker symbol. Folks don't want to keep looking those up. Thank you and I am sure others will respond.
A fool and his money are good for business.

Flyer24
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Re: Investment Advice

Post by Flyer24 » Mon Jul 29, 2019 6:55 pm

This is the best format to follow to get the most responses.
viewtopic.php?f=1&t=6212

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nedsaid
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Re: Investment Advice

Post by nedsaid » Sat Aug 03, 2019 3:59 pm

The $60K withdrawal out of a $1,700,000 401(k) is a withdrawal rate of about 3.5% which is sustainable. You are delaying your Social Security until age 70, so in effect you are using part of your withdrawals to buy an inflation adjusted annuity. So at age 70, you said you would get $36,000 a year plus a State pension of $12,000 a year and living expenses of probably $75,000 to $80,000 a year at age 70. So you would need withdrawals of $32,000 or less to sustain your lifestyle. Looks to me like you are okay.
A fool and his money are good for business.

HomeStretch
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Re: Investment Advice

Post by HomeStretch » Sat Aug 03, 2019 5:42 pm

You have $2 million and need $300k ($60k for 5 years) until you reach age 70. At age 70, you have $1.7 million left and need to withdraw $22k/year (= $70k - $12k pension - $36k SS). That’s a 1.3% withdrawal rate.

Rough calculation, but assuming your $70k expenses number is solid your plan looks sustainable. Firecalc and I-ORP can give you a more refined picture.

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Wiggums
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Re: Investment Advice

Post by Wiggums » Sat Aug 03, 2019 5:56 pm

I’m not sure what you mean by taking out more from the 401k. If you mean $60,000 plus pension, that is reasonable.

We’re you thinking of taking out more than what you need for done other reason?

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FiveK
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Re: Investment Advice

Post by FiveK » Sat Aug 03, 2019 7:27 pm

Loveinglife wrote:
Mon Jul 29, 2019 6:15 pm
I looked at ROTH conversions and it didn’t seem to help.
Charts below assume single filer age 65+ with $12K pension, $2K interest, and $3K qualified dividends. The first chart is with no SS, the second with $36K SS. Spikes are when IRMAA tiers occur.

Might not help a huge amount, but taking just enough from traditional (a little under $68K for the given assumptions) to avoid the first IRMAA jump seems a "go do" for 2019 and similarly for other years before taking SS.

The third chart shows the marginal rates if one assumes the $68K has already been withdrawn, and looks at the cost for taking more. That the cumulative curve stays between 25-30% for most of both the second and third chart indicates why large Roth conversions didn't help.

See the personal finance toolbox Excel spreadsheet if you'd like to do similar "what if...?" calculations.

Image

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nedsaid
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Re: Investment Advice

Post by nedsaid » Sat Aug 03, 2019 7:30 pm

Keep in mind the taxability of Social Security. When the Original Poster starts collecting Social Security, he will pay tax on as much as 85% of it at whatever tax bracket he will be in at the time.
A fool and his money are good for business.

averagedude
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Re: Investment Advice

Post by averagedude » Sat Aug 03, 2019 7:36 pm

The answer is it depends. How much do you want to leave your heirs.

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FiveK
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Re: Investment Advice

Post by FiveK » Sat Aug 03, 2019 8:07 pm

nedsaid wrote:
Sat Aug 03, 2019 7:30 pm
Keep in mind the taxability of Social Security. When the Original Poster starts collecting Social Security, he will pay tax on as much as 85% of it at whatever tax bracket he will be in at the time.
Agreed. See post just prior. :beer

Topic Author
Loveinglife
Posts: 2
Joined: Mon Jul 29, 2019 6:12 pm

Re: Investment Advice

Post by Loveinglife » Mon Aug 12, 2019 5:18 pm

Thanks for the help. Is the excel spreadsheet the "Retiree Portfolio Model". I've been trying to figure that one out. Theres a lot to it.I will take the additional $30k this year and then $60k out each additional year until 70. If the market really tanks then I can just hold off the withdrawals.

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FiveK
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Re: Investment Advice

Post by FiveK » Mon Aug 12, 2019 5:33 pm

Loveinglife wrote:
Mon Aug 12, 2019 5:18 pm
Thanks for the help. Is the excel spreadsheet the "Retiree Portfolio Model".
No. That's a good one also, but the one used to generate the charts is the personal finance toolbox Excel spreadsheet.

From that wiki link, the most recent version is https://drive.google.com/file/d/1aPE6Mb ... sp=sharing

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