So, Wow [AA change after divorce]

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THY4373
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Re: So, Wow [AA change after divorce]

Post by THY4373 » Tue Sep 24, 2019 5:35 pm

Outer Marker wrote:
Tue Sep 24, 2019 4:19 pm
I consider my job to be very secure, but you never know . . .
18ish years is a really long time and your health is also a risk factor in all this. Looking over my career 18 years was a completely different world from today.

I am nearly 50 with plans to possibly retire in the 55-58 range. i am currently 75% stocks/25% bonds and I am fine with that. I went into and came out of the Great Recession at above 90% in stocks. Now i do have a pension coming to me that is good but not great (not complaining) but that does allow me to be a bit more risky with my investments.

EnjoyIt
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Re: So, Wow [AA change after divorce]

Post by EnjoyIt » Wed Sep 25, 2019 8:37 am

Outer Marker wrote:
Tue Sep 24, 2019 4:19 pm
EnjoyIt wrote:
Tue Sep 24, 2019 3:50 pm
I would also not be adjusting my asset allocation unless your risk tolerance has really changed. Do you really need to take the additional risk?

BTW, how secure is your job? What would happen in the next recession? Can you lose the job and not be able to afford any of this because 70% of your equities dropped by 50%. Tread lightly with adding more risk to a lifestyle that you are having difficulty sustaining already.
That's the real nub of the question. Although my prior 50/50 allocation was very conservative for my age at the time, I did so because I had, in Bogle's words, "enough." I don't think that is the case anymore. I'd want to be able to draw at least $90,000 a year, which requires a $3M portfolio at a 3% safe rate of withdrawal. Which means I have a ways to go.

Per the Vanguard allocation models, going from 50-50 to 70/30 increases expected returns by almost a full percentage point from 8.2% to 9.1% - which is substantial - especially if we knock 2% off of those returns for inflation.

My risk tolerance is quite high. I bought like crazy in 2008, and at one point was 90/10 - but dialed it back after I reached my goal. I think its time to ratchet it back up. But, I'm a lot closer to potential retirement than I was at 40.

I consider my job to be very secure, but you never know . . .
Can we look a little closer at your reality? How in the red are you every year? How bad would it be if you switched to a 30 year mortgage? Have you taken SS at 70 into account? If you are pulling some cash out of your $2 million portfolio, what percent is it every year? Is it sub 4%? If so, there is a very reasonable chance that money will continue to grow over the next 20 years. Have you tried running your data in cfiresim, putting in your expenditures and future SS and trying different withdrawal rates? Unless you're in the red by $100k/yr, you are in much better shape than you think.


Lastly, 3% safe withdrawal is a little bit on the conservative side. 4% only failed once in history. 3.8% never failed. 3.5% is very very conservative. 3% is ultra conservative. Realise that 3% invested in TIPS will last you for 33+ years.

I ran a Cfiresim for you with these parameters
you are 52 right now
you have $2 million in a 50/50 portfolio
you are in the red by $40k/yr that will stop in 10 years.
you will retire at 62 spending $90k/yr
you will collect $30k SS at 70

Output:
You have a historical 99% chance of portfolio survival.


Adjust any of the above just a little and your portfolio survival increases to 100%.
For example a 60/40 portfolio had 100% success rate.
If you are in the red for $35k/yr for 10 years you success rate is 100% with a 50/50 AA
If you are in the red for $40k/year for 9 years instead of 10 years at a 50/50 AA you have 100% success.

wolf359
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Re: So, Wow

Post by wolf359 » Wed Sep 25, 2019 9:11 am

dogagility wrote:
Tue Sep 24, 2019 4:20 pm
lakpr wrote:
Tue Sep 24, 2019 8:38 am
For what it is worth: I am almost there (just a year shy of age 50), and my allocation is set to 70:30, and I plan to be at this target allocation for at least a decade more.
Yes. Asset allocation is personal; there is no reason to think you couldn't be 70:30 if that fits your situation.
I'm early 50s, expecting to retire in about five years, and am comfortable with my current 80:20 tilt. For some context, I was happy with my 100:0 AA up until a few years ago.
Another way to think of this:

OP has just suffered a 50% decline in his portfolio without a market event. In this case, bonds didn't mitigate this risk.

How does he feel? Will OP be able to take another -50% event, or has his feelings on risk changed?

Many current investors haven't faced this kind of decline due to the extended bull market. OP is facing it due to personal circumstances. OP has the opportunity to examine his feelings about that and pick an appropriate asset allocation.

dbr
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Re: So, Wow

Post by dbr » Wed Sep 25, 2019 9:24 am

wolf359 wrote:
Wed Sep 25, 2019 9:11 am
dogagility wrote:
Tue Sep 24, 2019 4:20 pm
lakpr wrote:
Tue Sep 24, 2019 8:38 am
For what it is worth: I am almost there (just a year shy of age 50), and my allocation is set to 70:30, and I plan to be at this target allocation for at least a decade more.
Yes. Asset allocation is personal; there is no reason to think you couldn't be 70:30 if that fits your situation.
I'm early 50s, expecting to retire in about five years, and am comfortable with my current 80:20 tilt. For some context, I was happy with my 100:0 AA up until a few years ago.
Another way to think of this:

OP has just suffered a 50% decline in his portfolio without a market event. In this case, bonds didn't mitigate this risk.

How does he feel? Will OP be able to take another -50% event, or has his feelings on risk changed?

Many current investors haven't faced this kind of decline due to the extended bull market. OP is facing it due to personal circumstances. OP has the opportunity to examine his feelings about that and pick an appropriate asset allocation.
Yes. Changed circumstances require rethinking the financial plan. We haven't exactly resolved if the OP needs to take more risk now or what ability he has to take risk. There is a lot of discussion about what should be the objectives. All of these are personal enough that you can't just type in a reply telling someone what to do.

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Outer Marker
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Re: So, Wow [AA change after divorce]

Post by Outer Marker » Wed Sep 25, 2019 10:50 am

EnjoyIt wrote:
Wed Sep 25, 2019 8:37 am

Can we look a little closer at your reality? How in the red are you every year? How bad would it be if you switched to a 30 year mortgage? Have you taken SS at 70 into account? If you are pulling some cash out of your $2 million portfolio, what percent is it every year? Is it sub 4%? If so, there is a very reasonable chance that money will continue to grow over the next 20 years. Have you tried running your data in cfiresim, putting in your expenditures and future SS and trying different withdrawal rates? Unless you're in the red by $100k/yr, you are in much better shape than you think.

Excellent point. I did a bit of a deeper dive last night that I probably should have done before I posted. I need to input it all into my Excel spreadsheet - which I used to do quarterly, but haven't in five years. I'm running about a $5,000/mo deficit. It would be less if I realized all my income instead of maxing out 401K at $25,000 a year. But, its beneficial as I get a very generous 12% match on the first 5% of earnings, and the remainder reduces my taxes in the 35% fed. bracket and 6% state.

I am in better shape than I thought. Current invested assets are $2.4M. So, if I move that to a 60/40 allocation at 8.5% expected return, its growing by a little more than $200,000 a year, plus the additional contributions of around $30,000. I don't have to sell equities to make up the monthly deficit, but am using the dividends the after-tax funds throw off and cash I have on hand. Its a slow drift down of those assets, and I'd prefer to be reinvesting the dividends rather than spending them.

Since I'm not living paycheck-to-paycheck, the monthly "deficit" is not a big deal IMO. All money is fungible. So, while I could take out a 30 year vs. 15 mortgage, I'd be paying a higher rate for much longer. Its just optics on the monthly balance sheet, and at the end of the day less financially adventagous. Same if I decreased 401K contributions. Yes, at some gut level it bothers me to be spending more on a monthly basis than I earn, but if you look behind the curtain its not that bad.

As noted, over time the assisted living and child support will go away, and income is likely to increase. I was one step away for the C-suite at a fortune 500 company before the fall from grace, but rebuilding quickly. A $100K increase, which is realistic, will wipe out the deficit.

Worst comes to worst, I have multiple "bail out" options including moving to my family home in New England or Panama. But, I like being in the game and enjoy challenges. With a very young future wife, I don't want to sit at home with the dog and play golf just yet. I want to leave a legacy for my kids and for her. The topic of a third child has already come up . . .

This thread has been very helpful in thinking my way through it. I'm inclined now towards a 60/40 asset allocation. 70/30 is the most I'd feel comfortable with. 50/50 is too conservative. So, splitting the difference at 60/40 seems right.

EnjoyIt
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Re: So, Wow [AA change after divorce]

Post by EnjoyIt » Wed Sep 25, 2019 11:10 am

Outer Marker wrote:
Wed Sep 25, 2019 10:50 am
EnjoyIt wrote:
Wed Sep 25, 2019 8:37 am

Can we look a little closer at your reality? How in the red are you every year? How bad would it be if you switched to a 30 year mortgage? Have you taken SS at 70 into account? If you are pulling some cash out of your $2 million portfolio, what percent is it every year? Is it sub 4%? If so, there is a very reasonable chance that money will continue to grow over the next 20 years. Have you tried running your data in cfiresim, putting in your expenditures and future SS and trying different withdrawal rates? Unless you're in the red by $100k/yr, you are in much better shape than you think.

Excellent point. I did a bit of a deeper dive last night that I probably should have done before I posted. I need to input it all into my Excel spreadsheet - which I used to do quarterly, but haven't in five years. I'm running about a $5,000/mo deficit. It would be less if I realized all my income instead of maxing out 401K at $25,000 a year. But, its beneficial as I get a very generous 12% match on the first 5% of earnings, and the remainder reduces my taxes in the 35% fed. bracket and 6% state.

I am in better shape than I thought. Current invested assets are $2.4M. So, if I move that to a 60/40 allocation at 8.5% expected return, its growing by a little more than $200,000 a year, plus the additional contributions of around $30,000. I don't have to sell equities to make up the monthly deficit, but am using the dividends the after-tax funds throw off and cash I have on hand. Its a slow drift down of those assets, and I'd prefer to be reinvesting the dividends rather than spending them.

Since I'm not living paycheck-to-paycheck, the monthly "deficit" is not a big deal IMO. All money is fungible. So, while I could take out a 30 year vs. 15 mortgage, I'd be paying a higher rate for much longer. Its just optics on the monthly balance sheet, and at the end of the day less financially adventagous. Same if I decreased 401K contributions. Yes, at some gut level it bothers me to be spending more on a monthly basis than I earn, but if you look behind the curtain its not that bad.

As noted, over time the assisted living and child support will go away, and income is likely to increase. I was one step away for the C-suite at a fortune 500 company before the fall from grace, but rebuilding quickly. A $100K increase, which is realistic, will wipe out the deficit.

Worst comes to worst, I have multiple "bail out" options including moving to my family home in New England or Panama. But, I like being in the game and enjoy challenges. With a very young future wife, I don't want to sit at home with the dog and play golf just yet. I want to leave a legacy for my kids and for her. The topic of a third child has already come up . . .

This thread has been very helpful in thinking my way through it. I'm inclined now towards a 60/40 asset allocation. 70/30 is the most I'd feel comfortable with. 50/50 is too conservative. So, splitting the difference at 60/40 seems right.
$5k/month is $60k/yr but we need to subtract 401k contributions which I agree you should do. That leaves you with a $35k deficit a year. By doing a 401k contribution you are effectively moving money from your taxable brokerage account into pre-tax savings and in the process getting a 12% match as well as tax savings. This is a must.

Also, a $35k deficit for 10 years on a 60/40 portfolio with $2.4 million has a 100% success rate historically and will leave some cash behind to your lovely young wife and kids. $35k from $2.4 million is a 1.45% withdrawal rate. That means your $2.4 million should continue to grow with that withdrawal.

Also, I like your 60/40 decision. When in doubt, split the difference.

Lafder
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Re: So, Wow [AA change after divorce]

Post by Lafder » Wed Sep 25, 2019 11:17 am

Outer Marker,

You are a wonderful son! Your mom did a great job raising you.

As far as a 30 year mortgage, the advantage is that you can make lower payments when money is more tight, but still escalate payments and pay off in less than 15 years when funds are more available. For me it would depend on the costs of a refi and the difference in payments and interest rates. The $ lost with closing/refi costs is painful so the numbers would have to overall make sense. Perhaps rates have dropped since you got the loan?

The negative cash flow each month would make me nervous. But as you are saying, childrens' expenses and mom's expenses will both end some day and you will still have savings and hopefully a paid off house by then.

Thanks for the explanations on your med student girlfriend. Judgers will judge. It sounds like you have your eyes open and would do a prenup if this proceeds to marriage.

I agree with maxing your retirement accounts now.

We are average age 53, and our goal AA is 65/35, but we are saving every month, not negative.

lafder

EnjoyIt
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Re: So, Wow [AA change after divorce]

Post by EnjoyIt » Wed Sep 25, 2019 11:22 am

If we really evaluate the total package you are not hemorrhaging cash. Your investments and income provide a return that is positive after removing yearly expenses.

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Outer Marker
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Re: So, Wow [AA change after divorce]

Post by Outer Marker » Wed Sep 25, 2019 12:47 pm

Lafder wrote:
Wed Sep 25, 2019 11:17 am
You are a wonderful son! Your mom did a great job raising you.

As far as a 30 year mortgage, the advantage is that you can make lower payments when money is more tight, but still escalate payments and pay off in less than 15 years when funds are more available. For me it would depend on the costs of a refi and the difference in payments and interest rates. The $ lost with closing/refi costs is painful so the numbers would have to overall make sense. Perhaps rates have dropped since you got the loan?
Thanks for your kind words.

I don't think a 30 year mortgage would be a a good thing. It would be purely for optics of smoothing out cash flow - but costs more and will keep me in debt longer. On a $726,000 balance (the max for conforming, non-jumbo) the rate differnce is a half a point, or $3,630 a year in additional interest.

I also like having a goal in sight. I can't retire until this thing is paid off. 15 years is doable. Less if I'm able to throw more cash at it once the other obligations are done. There was an episode of "the office" where Michael bought a new town house. I remember the line from one of the coworkers. At his age, he's just buying a coffin. He'll be dead before he pays if off. That made an impression on me.

I'll refi in a heartbeat if the rates drop. I churned my last mortgage 8 times for negative points and turned a profit on every refi. My once 800+ credit is slowly recovering from the low 700s, so that will help too.

ralph124cf
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Re: So, Wow [AA change after divorce]

Post by ralph124cf » Wed Sep 25, 2019 12:58 pm

Can you deduct your mother's medical expenses on your taxes? I'm not sure of the law on this. Is she claimed as a dependent?

If you do not get the deduction your mother should be paying her own expenses until she spends down very significantly. Selling her house in the North East may be a tax free event. In any case your mother would be able to offset any profit on the house by her medical bills.

You would have to consider the advantage of selling now against a possible step-up basis in her house after she passes.

Ralph

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Re: So, Wow [AA change after divorce]

Post by Outer Marker » Wed Sep 25, 2019 1:18 pm

ralph124cf wrote:
Wed Sep 25, 2019 12:58 pm
Can you deduct your mother's medical expenses on your taxes? I'm not sure of the law on this. Is she claimed as a dependent?

If you do not get the deduction your mother should be paying her own expenses until she spends down very significantly. Selling her house in the North East may be a tax free event. In any case your mother would be able to offset any profit on the house by her medical bills.

You would have to consider the advantage of selling now against a possible step-up basis in her house after she passes.

Ralph
I haven't done Mom's taxes yet for 2018 - extension till Oct. 15, so time to get going. The medical expenses might make a difference, but her income is quite low to begin with. I manage all of her finances and could deplete the IRAs beyond the RMD I'm currently taking out, spend her cash, and sell the house. But, that would stress her out, and it's all passing to me as her only child anyway. So, its just right pocket - left pocket accounting. I also like owning the house I grew up in, could possibly retire there, and is a cash-positive rental at the moment.

That does remind me of a good idea though. I should be doing IRA conversions from regular to Roth to the top of the 24% bracket, since I will need to draw RMD in a much higher bracket once I inherit them. That would also give more income to apply the medical deduction against.

lakpr
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Re: So, Wow [AA change after divorce]

Post by lakpr » Wed Sep 25, 2019 3:54 pm

Outer Marker wrote:
Wed Sep 25, 2019 1:18 pm
That does remind me of a good idea though. I should be doing IRA conversions from regular to Roth to the top of the 24% bracket, since I will need to draw RMD in a much higher bracket once I inherit them. That would also give more income to apply the medical deduction against.
Roth conversion is a good idea, but because the income goes up the value of your medical deduction reduces/vanishes. I believe it's set to be only those medical expenses that exceed 10% of your income, so the higher the income, lower the deduction.

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Re: So, Wow [AA change after divorce]

Post by Outer Marker » Wed Sep 25, 2019 4:03 pm

lakpr wrote:
Wed Sep 25, 2019 3:54 pm
Roth conversion is a good idea, but because the income goes up the value of your medical deduction reduces/vanishes. I believe it's set to be only those medical expenses that exceed 10% of your income, so the higher the income, lower the deduction.
Good point. I will have to do a number of "what if" scenarios on turbotax!

ralph124cf
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Re: So, Wow [AA change after divorce]

Post by ralph124cf » Wed Sep 25, 2019 4:24 pm

lakpr wrote:
Wed Sep 25, 2019 3:54 pm
Outer Marker wrote:
Wed Sep 25, 2019 1:18 pm
That does remind me of a good idea though. I should be doing IRA conversions from regular to Roth to the top of the 24% bracket, since I will need to draw RMD in a much higher bracket once I inherit them. That would also give more income to apply the medical deduction against.
Roth conversion is a good idea, but because the income goes up the value of your medical deduction reduces/vanishes. I believe it's set to be only those medical expenses that exceed 10% of your income, so the higher the income, lower the deduction.
True statement, but with $10,000 per month medical expenses that leaves a lot of room for zero tax conversions.

Ralph

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Re: So, Wow [AA change after divorce]

Post by BarbBrooklyn » Wed Sep 25, 2019 5:42 pm

My mom, who was by no means wealthy, found it a source of pride, dignity and independence as she aged that she was "paying her own way" and was not a financial burden on her children. And yes, my parents put us all through college; taught us not to assume that there would be an "inheritance".

None of us thought that we should dip into retirement or current income to support her.

Different folks have different ways of looking at this issue, for sure.
BarbBrooklyn | "The enemy of a good plan is the dream of a perfect plan."

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whodidntante
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Re: So, Wow [AA change after divorce]

Post by whodidntante » Wed Sep 25, 2019 5:50 pm

BarbBrooklyn wrote:
Wed Sep 25, 2019 5:42 pm
My mom, who was by no means wealthy, found it a source of pride, dignity and independence as she aged that she was "paying her own way" and was not a financial burden on her children. And yes, my parents put us all through college; taught us not to assume that there would be an "inheritance".

None of us thought that we should dip into retirement or current income to support her.

Different folks have different ways of looking at this issue, for sure.
I doubt the OP's mom set out to be a financial burden on her child. Sometimes people run out of money and need support from their family, friends, or government. Sometimes those people were responsible and saved a lot, and then get divorced, sued, disabled, etc.

Momus
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Re: So, Wow [AA change after divorce]

Post by Momus » Wed Sep 25, 2019 5:52 pm

Did you work hard alone all your life to get 2.5M gone just like that? :shock:

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Re: So, Wow [AA change after divorce]

Post by ncbill » Wed Sep 25, 2019 5:52 pm

If mom needs assisted living because she can't perform two or more activities of daily living (ADLs) the OP should be able to take that off their taxes (not mom's):

https://ttlc.intuit.com/community/retir ... /00/406028

As well as the OP claiming mom as a dependent.

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Re: So, Wow [AA change after divorce]

Post by BarbBrooklyn » Wed Sep 25, 2019 6:10 pm

whodidntante wrote:
Wed Sep 25, 2019 5:50 pm
BarbBrooklyn wrote:
Wed Sep 25, 2019 5:42 pm
My mom, who was by no means wealthy, found it a source of pride, dignity and independence as she aged that she was "paying her own way" and was not a financial burden on her children. And yes, my parents put us all through college; taught us not to assume that there would be an "inheritance".

None of us thought that we should dip into retirement or current income to support her.

Different folks have different ways of looking at this issue, for sure.
I doubt the OP's mom set out to be a financial burden on her child. Sometimes people run out of money and need support from their family, friends, or government. Sometimes those people were responsible and saved a lot, and then get divorced, sued, disabled, etc.
But he reports his mom has investments from which she needs to take RMDs. And a paid off house. His mother has the means to pay for at least part of her care.

I understand that the OP wants to see his mom cared for well. But in general, it is considered unwise to go into the red to pay for parents' LTC expenses when they have means to pay themselves. Just wish OP would consult an eldercare attorney to figure out the best way to arrange this.

Would you agree to a divorce settlement without consulting a lawyer? This is a similar situation.
BarbBrooklyn | "The enemy of a good plan is the dream of a perfect plan."

clip651
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Re: So, Wow [AA change after divorce]

Post by clip651 » Wed Sep 25, 2019 6:12 pm

BarbBrooklyn wrote:
Wed Sep 25, 2019 5:42 pm
My mom, who was by no means wealthy, found it a source of pride, dignity and independence as she aged that she was "paying her own way" and was not a financial burden on her children. And yes, my parents put us all through college; taught us not to assume that there would be an "inheritance".

None of us thought that we should dip into retirement or current income to support her.

Different folks have different ways of looking at this issue, for sure.
Yes there are different ways of looking at this in different families.

But if you look through OP's posts, it's not that simple here. His mom hasn't run out of assets. He or they are choosing to spend his rather than drain hers (e.g. rent out her house rather than sell it, only take RMDs rather than drain her IRA, etc). OP expects to be the sole heir, and referred to it somewhere above as moving money from one pocket to another.

I'm not advocating for OP's solution, as I think it has risks as well, and it's not really my business. But it isn't quite as simple as his mom not paying her own way, or being a burden.

clip651
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Re: So, Wow [AA change after divorce]

Post by clip651 » Wed Sep 25, 2019 6:14 pm

BarbBrooklyn wrote:
Wed Sep 25, 2019 6:10 pm
whodidntante wrote:
Wed Sep 25, 2019 5:50 pm
BarbBrooklyn wrote:
Wed Sep 25, 2019 5:42 pm
My mom, who was by no means wealthy, found it a source of pride, dignity and independence as she aged that she was "paying her own way" and was not a financial burden on her children. And yes, my parents put us all through college; taught us not to assume that there would be an "inheritance".

None of us thought that we should dip into retirement or current income to support her.

Different folks have different ways of looking at this issue, for sure.
I doubt the OP's mom set out to be a financial burden on her child. Sometimes people run out of money and need support from their family, friends, or government. Sometimes those people were responsible and saved a lot, and then get divorced, sued, disabled, etc.
But he reports his mom has investments from which she needs to take RMDs. And a paid off house. His mother has the means to pay for at least part of her care.

I understand that the OP wants to see his mom cared for well. But in general, it is considered unwise to go into the red to pay for parents' LTC expenses when they have means to pay themselves. Just wish OP would consult an eldercare attorney to figure out the best way to arrange this.

Would you agree to a divorce settlement without consulting a lawyer? This is a similar situation.
We were posting at the same time. I agree with your points, in general.

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whodidntante
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Re: So, Wow [AA change after divorce]

Post by whodidntante » Wed Sep 25, 2019 6:17 pm

BarbBrooklyn wrote:
Wed Sep 25, 2019 6:10 pm
whodidntante wrote:
Wed Sep 25, 2019 5:50 pm
BarbBrooklyn wrote:
Wed Sep 25, 2019 5:42 pm
My mom, who was by no means wealthy, found it a source of pride, dignity and independence as she aged that she was "paying her own way" and was not a financial burden on her children. And yes, my parents put us all through college; taught us not to assume that there would be an "inheritance".

None of us thought that we should dip into retirement or current income to support her.

Different folks have different ways of looking at this issue, for sure.
I doubt the OP's mom set out to be a financial burden on her child. Sometimes people run out of money and need support from their family, friends, or government. Sometimes those people were responsible and saved a lot, and then get divorced, sued, disabled, etc.
But he reports his mom has investments from which she needs to take RMDs. And a paid off house. His mother has the means to pay for at least part of her care.

I understand that the OP wants to see his mom cared for well. But in general, it is considered unwise to go into the red to pay for parents' LTC expenses when they have means to pay themselves. Just wish OP would consult an eldercare attorney to figure out the best way to arrange this.

Would you agree to a divorce settlement without consulting a lawyer? This is a similar situation.
:sharebeer

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LilyFleur
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Re: So, Wow [AA change after divorce]

Post by LilyFleur » Wed Sep 25, 2019 7:27 pm

BarbBrooklyn wrote:
Wed Sep 25, 2019 6:10 pm
whodidntante wrote:
Wed Sep 25, 2019 5:50 pm
BarbBrooklyn wrote:
Wed Sep 25, 2019 5:42 pm
My mom, who was by no means wealthy, found it a source of pride, dignity and independence as she aged that she was "paying her own way" and was not a financial burden on her children. And yes, my parents put us all through college; taught us not to assume that there would be an "inheritance".

None of us thought that we should dip into retirement or current income to support her.

Different folks have different ways of looking at this issue, for sure.
I doubt the OP's mom set out to be a financial burden on her child. Sometimes people run out of money and need support from their family, friends, or government. Sometimes those people were responsible and saved a lot, and then get divorced, sued, disabled, etc.
But he reports his mom has investments from which she needs to take RMDs. And a paid off house. His mother has the means to pay for at least part of her care.

I understand that the OP wants to see his mom cared for well. But in general, it is considered unwise to go into the red to pay for parents' LTC expenses when they have means to pay themselves. Just wish OP would consult an eldercare attorney to figure out the best way to arrange this.

Would you agree to a divorce settlement without consulting a lawyer? This is a similar situation.
I think it would be good to analyze the tax impact of mom's care. I am unclear as to what type of LTC mom is currently in (and the tax deductibility of that care)--assisted living? skilled nursing? It might be good to look at the tax benefits of using her own RMDs to pay for her care right now... if mom should die before her tax-deferred assets are depleted, OP will inherit a tax-deferred account that he will need to start taking RMDs from very soon, and the family will end up paying a higher tax rate from mom's savings.
I don't know if mom is considered a dependent on OP's current tax returns, or if her assets will have to be depleted before she would be considered a dependent.
OP could probably research all of this and run the numbers on a tax calculator.
When my own mother was put on hospice, we made sure she took a fairly large RMD right away, as her care that year had been so expensive, and the tax burden for her last year of life was still at a much lower tax rate than her heirs. I do understand that OP's mother is far from hospice, but the point is the same: try to minimize the tax burden for the family as a whole as later-in-life expenses increase.

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Re: So, Wow [AA change after divorce]

Post by BarbBrooklyn » Wed Sep 25, 2019 7:52 pm

LilyFleur wrote:
Wed Sep 25, 2019 7:27 pm
BarbBrooklyn wrote:
Wed Sep 25, 2019 6:10 pm
whodidntante wrote:
Wed Sep 25, 2019 5:50 pm
BarbBrooklyn wrote:
Wed Sep 25, 2019 5:42 pm
My mom, who was by no means wealthy, found it a source of pride, dignity and independence as she aged that she was "paying her own way" and was not a financial burden on her children. And yes, my parents put us all through college; taught us not to assume that there would be an "inheritance".

None of us thought that we should dip into retirement or current income to support her.

Different folks have different ways of looking at this issue, for sure.
I doubt the OP's mom set out to be a financial burden on her child. Sometimes people run out of money and need support from their family, friends, or government. Sometimes those people were responsible and saved a lot, and then get divorced, sued, disabled, etc.
But he reports his mom has investments from which she needs to take RMDs. And a paid off house. His mother has the means to pay for at least part of her care.

I understand that the OP wants to see his mom cared for well. But in general, it is considered unwise to go into the red to pay for parents' LTC expenses when they have means to pay themselves. Just wish OP would consult an eldercare attorney to figure out the best way to arrange this.

Would you agree to a divorce settlement without consulting a lawyer? This is a similar situation.
I think it would be good to analyze the tax impact of mom's care. I am unclear as to what type of LTC mom is currently in (and the tax deductibility of that care)--assisted living? skilled nursing? It might be good to look at the tax benefits of using her own RMDs to pay for her care right now... if mom should die before her tax-deferred assets are depleted, OP will inherit a tax-deferred account that he will need to start taking RMDs from very soon, and the family will end up paying a higher tax rate from mom's savings.
I don't know if mom is considered a dependent on OP's current tax returns, or if her assets will have to be depleted before she would be considered a dependent.
OP could probably research all of this and run the numbers on a tax calculator.
When my own mother was put on hospice, we made sure she took a fairly large RMD right away, as her care that year had been so expensive, and the tax burden for her last year of life was still at a much lower tax rate than her heirs. I do understand that OP's mother is far from hospice, but the point is the same: try to minimize the tax burden for the family as a whole as later-in-life expenses increase.
Lily, good point. A nuanced view of this situation is warranted.
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Re: So, Wow [AA change after divorce]

Post by Dottie57 » Wed Sep 25, 2019 8:35 pm

Outer Marker wrote:
Tue Sep 24, 2019 4:19 pm
EnjoyIt wrote:
Tue Sep 24, 2019 3:50 pm
I would also not be adjusting my asset allocation unless your risk tolerance has really changed. Do you really need to take the additional risk?

BTW, how secure is your job? What would happen in the next recession? Can you lose the job and not be able to afford any of this because 70% of your equities dropped by 50%. Tread lightly with adding more risk to a lifestyle that you are having difficulty sustaining already.
That's the real nub of the question. Although my prior 50/50 allocation was very conservative for my age at the time, I did so because I had, in Bogle's words, "enough." I don't think that is the case anymore. I'd want to be able to draw at least $90,000 a year, which requires a $3M portfolio at a 3% safe rate of withdrawal. Which means I have a ways to go.

Per the Vanguard allocation models, going from 50-50 to 70/30 increases expected returns by almost a full percentage point from 8.2% to 9.1% - which is substantial - especially if we knock 2% off of those returns for inflation.

My risk tolerance is quite high. I bought like crazy in 2008, and at one point was 90/10 - but dialed it back after I reached my goal. I think its time to ratchet it back up. But, I'm a lot closer to potential retirement than I was at 40.

I consider my job to be very secure, but you never know . . .
Taking more risk doesn’t guarantee a higher Return. And your runway is smaller than when you were 40.

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Re: So, Wow [AA change after divorce]

Post by Katietsu » Wed Sep 25, 2019 11:28 pm

Another vote for addressing the tax situation. This is potentially a big deal. With assisted living, there is an amount, usually about a third of the cost, attributable directly to medical expenses. But with proper documentation, the entire cost may be a medical expense depending on the help that Mom needs. Some of this documentation must be obtained though before the expense is incurred in order to deduct. This is all a bit complicated but should be researched ASAP. If taxes can be avoided on a $100,000 a year, that almost makes up for the deficit.

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Re: So, Wow [AA change after divorce]

Post by Outer Marker » Thu Sep 26, 2019 2:49 pm

clip651 wrote:
Wed Sep 25, 2019 6:12 pm
But if you look through OP's posts, it's not that simple here. His mom hasn't run out of assets. He or they are choosing to spend his rather than drain hers (e.g. rent out her house rather than sell it, only take RMDs rather than drain her IRA, etc). OP expects to be the sole heir, and referred to it somewhere above as moving money from one pocket to another.

I'm not advocating for OP's solution, as I think it has risks as well, and it's not really my business. But it isn't quite as simple as his mom not paying her own way, or being a burden.
This, exactly. I'm completely in charge of my mother's assets. Have POA over all the accounts, and a quitclaim deed to the house when she passes, so it won't need to go through probate. My POA also authorizes me to sell the house, if I wish. All-in its about $350,000 in assets. So, while I favor keeping her assets and the house intact, its just mental accounting. At the end of the day, its one pot of "family" money that I control. I could pay for 100% of her current care from her own assets. But, I like owning the house, and Mom still likes looking at her bank statements each month and knowing she's not broke.

I hired the best elder care attorney in the state, and have a solid estate plan in place. We considered the medicade spend-down gambit, which requires some complicated maneuvering to transfer money to a third party as a loan and convert it into an income stream, which is ignored for elibibility purposes. (Something of a sham transaction). But, Medicate facilities are abysmal, so I decided not to go that route.

The tax situation is really not that complicated. Mom is not my dependent. She files (I prepare) her own taxes. The simple solution here is to take RMD and then convert as much as possible each year to a Roth IRA up to the top of the 24% federal bracket.

The bulk of Mom's assets are the house, worth about $175,000 and a CD maturing next month worth $100,000. I finally convinced her about 10 years ago to move her $75,000 IRA into a 40/60 Vanguard balanced fund. If only she'd put her money into the S&P index fund back in the 70's instead of effectively putting stuffing it in a mattress. She had zero risk tollerace and I think lost money on every stock she dabbled in, because she sold at the slightest downturn. But, that's a whole different topic!

Sadly, I don't think I will have the "burden" of caring for my mom too much longer. The downturn in the last 18 months since my Dad passed has been alarming. Just that long ago, she was living independently in that house she loved, driving her own car, etc. Now, she gets confused about what day it is, sometimes does not know if its morning or night, needs help with basically everything, and has collapsed and had two visits to the ER in the last 3 months. She's coming to visit and see my new house next month for her 91st birthday. I doubt she will make it to 92, but I'll hope for the best.

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Re: So, Wow [AA change after divorce]

Post by Sandi_k » Thu Sep 26, 2019 4:44 pm

Outer Marker wrote:
Thu Sep 26, 2019 2:49 pm

I'm completely in charge of my mother's assets. Have POA over all the accounts, and a quitclaim deed to the house when she passes, so it won't need to go through probate. My POA also authorizes me to sell the house, if I wish.
Hmmm. Are you sure that a quitclaim deed, filed AFTER her passing, is legal? My understanding was that she could only transfer her interest while alive - and then you lose the step-up basis.

I would choose a TOD deed instead, if your state allows them.

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Re: So, Wow [AA change after divorce]

Post by tibbitts » Thu Sep 26, 2019 5:03 pm

Sandi_k wrote:
Thu Sep 26, 2019 4:44 pm
Outer Marker wrote:
Thu Sep 26, 2019 2:49 pm

I'm completely in charge of my mother's assets. Have POA over all the accounts, and a quitclaim deed to the house when she passes, so it won't need to go through probate. My POA also authorizes me to sell the house, if I wish.
Hmmm. Are you sure that a quitclaim deed, filed AFTER her passing, is legal? My understanding was that she could only transfer her interest while alive - and then you lose the step-up basis.

I would choose a TOD deed instead, if your state allows them.
I would be interested to know this too. In one state I can do TOD, but the other state I own property requires a Ladybird deed to sort of achieve TOD, and it would seem such a quitclaim deed would be a too-simple way around that, possibly except for the step-up issue.

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Re: So, Wow [AA change after divorce]

Post by BarbBrooklyn » Thu Sep 26, 2019 6:09 pm

As long as you've been the Eldercare attorney route, I'm happy and will stop nagging you. Wishing you and your mom the best.
BarbBrooklyn | "The enemy of a good plan is the dream of a perfect plan."

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Re: So, Wow

Post by Startingover2019 » Thu Nov 07, 2019 4:45 pm

Outer Marker wrote:
Tue Sep 24, 2019 9:17 am
BarbBrooklyn wrote:
Tue Sep 24, 2019 9:06 am
Why are you funding your mother's long term care?
That is a sacred obligation. I'd bankrupt myself before I neglected my mom.
Good for you. Isn’t that what we are supposed to do for our parents?
However, would it be possible to move her in with you if she is not severely disabled or ill and have a visiting nurse come a few times a week instead? May be much cheaper than a nursing home.

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Re: So, Wow [AA change after divorce]

Post by Vanguard Fan 1367 » Thu Nov 07, 2019 5:19 pm

Granted we are in the midst of a long term bull market but the wife and I were comfortable with a 70/30 AA until a year or so ago. I am almost 67. We now are at 60/40.

The great Warren Buffet isn't a big bond fan. So the wife and I are more into stocks than that age in bonds thing.

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Re: So, Wow [AA change after divorce]

Post by Outer Marker » Thu Nov 07, 2019 7:31 pm

So, one of the happy coincidences of ignoring your portfolio during a 5 year bull run is that equities have grown wild - well out of proportion to my IPS. At the last rebalance back in January 2014, I stood at roughly 55/45 stocks/bonds. As of today I am now at 75/25 as follows (all in ultra low cost index funds):

Large Cap 29.1%
Mid/Small 14.3%
Small Value 7.5%
Reits 6.7%
International Blend 11.6%
International Small 6%
Bonds/Short 6.7%
Bonds/Intermediate 13.8%
TIPS/Ibonds 4.2%

Total Portfolio value - $2.3M

As it turns out, then, rather than increasing my actual exposure to 60/40 to better achieve my new goals, I would be reducing equity exposure to get to that level.

My proposed new 60/40 AA (at age 53) would be:

Large Cap 20%
Mid/Small 10%
Small Value 10%
Reits 5%
International Blend 10%
International Small 5%
Bonds/Short 10%
Bonds/Intermediate 15%
TIPS/Ibonds 15%

Welcome any comments on the proposed new allocation, including, specifically, over weighting towards small and value (which I've always done), and bond allocation, especially the % allocated to TIPS. I know the arguments about the simplicity of the 3-fund portfolio, but I think there is a premium to be had, and I don't mind the complexity.

I plan to start "gardening" in the portfolio tomorrow, reducing large value holdings by taking RMDs out the inherited accounts in that asset class. I should be able to achieve target allocation by moving holdings around within the tax protected accounts with no tax consequences.

Thanks to all in advance for your help and advice.

-O.M.

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Re: So, Wow [AA change after divorce]

Post by LadyGeek » Thu Nov 07, 2019 9:33 pm

Several off-topic posts commenting on a relationship have been removed. As a reminder, see: General Etiquette
At all times we must conduct ourselves in a respectful manner to other posters.
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Re: So, Wow [AA change after divorce]

Post by Vanguard Fan 1367 » Thu Nov 07, 2019 11:50 pm

Outer Marker wrote:
Thu Nov 07, 2019 7:31 pm
Welcome any comments on the proposed new allocation, including, specifically, over weighting towards small and value (which I've always done), and bond allocation, especially the % allocated to TIPS. I know the arguments about the simplicity of the 3-fund portfolio, but I think there is a premium to be had, and I don't mind the complexity.
I used to be like you and desire a more complex portfolio. You already know the arguments about the simplicity of less funds. I have done well with Vanguard's Total Stock Market Index fund. That and some sort of bond fund or funds is where I am trying to get to eventually. (No international).

I do like your comment that you are in low expense ratio funds. It pains me to see my loved ones and friends who feel like they need to have 1 percent assets under management fees, 1 percent expense ratios, and a 5.5 percent load to get started with their investing.

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