Investment choice 3 years prior to taking SS

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hoops777
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Investment choice 3 years prior to taking SS

Post by hoops777 » Tue Sep 12, 2017 4:49 pm

So I just retired at 65,wife is 67.Always planned to not take SS until 70.We will be doing Roth conversions at the max,but that will keep us in the 15 pct bracket.We have 28 months until my wife takes her SS at about 2000 a month.Starting in January We will have no taxable income besides the conversions,a CD that pays 2400 a year and state tax on HSA withdrawals.Our travel will be covered by rewards points and our living expenses are about 3000 a month.

Our main,but not only source of income will be about 150,000 currently invested in Vang California intermediate and limited turn funds.We also have a couple GO muni bonds paying about 450 a month,HSA accounts and some wonderful IBonds at a zero basis that I have no problem cashing in if need be.
Thanks
K.I.S.S........so easy to say so difficult to do.

The Wizard
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Re: Investment choice 3 years prior to taking SS

Post by The Wizard » Tue Sep 12, 2017 5:27 pm

Sounds good, so I guess no real question here.

You might want to project what your tax situation will be in five years with both on SS plus RMDs.
Still in 15% bracket or higher?
That info could help you tune your Roth conversion amounts to keep income taxes close to level across the next decade...
Attempted new signature...

hoops777
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Joined: Sun Apr 10, 2011 12:23 pm

Re: Investment choice 3 years prior to taking SS

Post by hoops777 » Tue Sep 12, 2017 5:49 pm

The Wizard wrote:
Tue Sep 12, 2017 5:27 pm
Sounds good, so I guess no real question here.

You might want to project what your tax situation will be in five years with both on SS plus RMDs.
Still in 15% bracket or higher?
That info could help you tune your Roth conversion amounts to keep income taxes close to level across the next decade...
Yes I think I have it dialed in to keep us in the 15 pct bracket going forward.I have spent so much time worrying about our money lasting,taxes on SS,etc.,but I did not plan for the spending part before SS because I was not going to retire before 70.Well a couple of issues came up and I retired within a matter of 2 weeks very abruptly,so we are just starting the spending part with no income.I will tell you it is a strange feeling,not having my business income and all of a sudden subtracting instead of adding.
K.I.S.S........so easy to say so difficult to do.

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Watty
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Re: Investment choice 3 years prior to taking SS

Post by Watty » Tue Sep 12, 2017 5:58 pm

It sounds like you will be in a pretty low tax bracket so you may not need to use the muni funds in retirement since you might be able to get a higher after tax return with taxable bonds.

It would also be a good idea to do a dummy tax return to see how much taxable income you can have before you have to pay any taxes once you both start Social Security. I don't have them handy but as I recall when I was playing with my numbers it looked like we could have about $30K in taxable income in addition to Social Security and still pay almost no federal taxes. You would want to look at you numbers three ways, as a couple and as if one of you survives the other.

It could be that you will be in a lower tax bracket later so doing Roth conversion in the 15% tax bracket might not be a good idea.

The way Social Security is taxed is complicated so be sure to understand that.

https://www.bogleheads.org/wiki/Taxatio ... y_benefits

https://www.bogleheads.org/wiki/Social_ ... calculator

mhalley
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Re: Investment choice 3 years prior to taking SS

Post by mhalley » Tue Sep 12, 2017 9:12 pm

Sounds like your portfoliois 100% bonds? That won't keep up with inflation, you might consider going to 30% stocks.what happens to your income should one of you die? i agree munis are not right for your tax bracket. You might check out rick ferries center of gravity post.
https://portfoliosolutions.com/latest-l ... y-retirees

hoops777
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Re: Investment choice 3 years prior to taking SS

Post by hoops777 » Tue Sep 12, 2017 11:03 pm

I was making a good income until I retired a few months ago,and most of our money is in my SEP and other IRAs.Our income will be almost 0 the next 4 years and when I start my SS in 2022,Our combined SS will be about 5300 a month and our RMDS about 40K with no conversions.By doing the conversions now we will permanently decrease our SS taxation.
K.I.S.S........so easy to say so difficult to do.

hoops777
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Joined: Sun Apr 10, 2011 12:23 pm

Re: Investment choice 3 years prior to taking SS

Post by hoops777 » Wed Sep 13, 2017 5:29 pm

mhalley wrote:
Tue Sep 12, 2017 9:12 pm
Sounds like your portfoliois 100% bonds? That won't keep up with inflation, you might consider going to 30% stocks.what happens to your income should one of you die? i agree munis are not right for your tax bracket. You might check out rick ferries center of gravity post.
https://portfoliosolutions.com/latest-l ... y-retirees
I read the center of gravity post and ironically I have committed myself to being 30/70 when we start taking SS.I have gone back and forth but I have come to peace with that allocation because the 70 pct fixed income covers our needs with room to spare.
K.I.S.S........so easy to say so difficult to do.

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Peter Foley
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Re: Investment choice 3 years prior to taking SS

Post by Peter Foley » Wed Sep 13, 2017 7:12 pm

I confess ignorance on this subject because it does not apply to my wife and me but it is something for you to explore.

When the ability to file and suspend SS benefits was modified a couple years, I recall there being exceptions for persons born before a certain date.

Do you possibly qualify for this? Could your wife file and suspend and could you collect spousal benefits?

On a different note, I would suggest you read about a "Rising equity glide path" for insight into how you might determine your near term AA.

Wade Pfau and Michael Kitces (if i remember correctly).

hoops777
Posts: 1767
Joined: Sun Apr 10, 2011 12:23 pm

Re: Investment choice 3 years prior to taking SS

Post by hoops777 » Wed Sep 13, 2017 9:29 pm

Peter Foley wrote:
Wed Sep 13, 2017 7:12 pm
I confess ignorance on this subject because it does not apply to my wife and me but it is something for you to explore.

When the ability to file and suspend SS benefits was modified a couple years, I recall there being exceptions for persons born before a certain date.

Do you possibly qualify for this? Could your wife file and suspend and could you collect spousal benefits?

On a different note, I would suggest you read about a "Rising equity glide path" for insight into how you might determine your near term AA.

Wade Pfau and Michael Kitces (if i remember correctly).
Thank you.I will look into it.
K.I.S.S........so easy to say so difficult to do.

hoops777
Posts: 1767
Joined: Sun Apr 10, 2011 12:23 pm

Re: Investment choice 3 years prior to taking SS

Post by hoops777 » Fri Sep 15, 2017 1:49 pm

Peter Foley wrote:
Wed Sep 13, 2017 7:12 pm
I confess ignorance on this subject because it does not apply to my wife and me but it is something for you to explore.

When the ability to file and suspend SS benefits was modified a couple years, I recall there being exceptions for persons born before a certain date.

Do you possibly qualify for this? Could your wife file and suspend and could you collect spousal benefits?

On a different note, I would suggest you read about a "Rising equity glide path" for insight into how you might determine your near term AA.

Wade Pfau and Michael Kitces (if i remember correctly).
I did look into it and just found about 36,000 in spousal benefits I can earn the next 4 years and an extra 43,000 from my wife filing at 68.That is almost 80,000 we were not planning on.On top of that we would be about 100 years old at the break even point if we just both waited until 70.This really eliminates any concerns about our taxable accounts.I really want to thank you because I had read that the old suspend option had been eliminated,and was not of aware of the deemed filing option that we still qualified for.I realize that I should have known, but go bogleheads! :D :moneybag :sharebeer
K.I.S.S........so easy to say so difficult to do.

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