Can we retire?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
cacophony
Posts: 493
Joined: Tue Oct 16, 2007 9:12 pm

Re: Can we retire?

Post by cacophony » Sun Jan 12, 2020 6:41 pm

willthrill81 wrote:
Sun Jan 12, 2020 6:36 pm
cacophony wrote:
Sun Jan 12, 2020 6:25 pm
willthrill81 wrote:
Sun Jan 12, 2020 6:16 pm
To add to marcopolo's post above, with a significant taxable account, it may be fairly easy to keep one's taxable income low enough that one qualifies for ACA subsidies and pays very little for an ACA health insurance plan. For instance, if you sell an investment that has a high cost-basis, you're only realizing a small capital gain. For instance, if your cost basis in some stock is $70k and you sell it for $100k, then you only have $30k of long-term capital gains, and if you had no other income, a MFJ couple would likely qualify for significant ACA subsidies despite now having $100k to spend. But this assumes that you would be happy with an ACA plan. Managing the whole process is, as marcopolo noted, cumbersome at times.
Wouldn't a significant taxable account (at least one that is reasonably well diversified) have large dividends that are unavoidable? The current TSM dividend is 1.66%.
Most of the dividends from a fund like VTSAX are qualified, meaning that they are taxed at the much more favorable LTCG rates. A married filing jointly couple could have over $100k of qualified dividends and pay no tax at all.

Read this for more details.
I was referring to your statement about the ACA subsidies/cliff (bolded above)

Topic Author
2020content
Posts: 23
Joined: Sun Jan 12, 2020 10:34 am

Re: Can we retire?

Post by 2020content » Sun Jan 12, 2020 6:41 pm

willthrill81 wrote:
Sun Jan 12, 2020 6:36 pm
cacophony wrote:
Sun Jan 12, 2020 6:25 pm
willthrill81 wrote:
Sun Jan 12, 2020 6:16 pm
To add to marcopolo's post above, with a significant taxable account, it may be fairly easy to keep one's taxable income low enough that one qualifies for ACA subsidies and pays very little for an ACA health insurance plan. For instance, if you sell an investment that has a high cost-basis, you're only realizing a small capital gain. For instance, if your cost basis in some stock is $70k and you sell it for $100k, then you only have $30k of long-term capital gains, and if you had no other income, a MFJ couple would likely qualify for significant ACA subsidies despite now having $100k to spend. But this assumes that you would be happy with an ACA plan. Managing the whole process is, as marcopolo noted, cumbersome at times.
Wouldn't a significant taxable account (at least one that is reasonably well diversified) have large dividends that are unavoidable? The current TSM dividend is 1.66%.
Most of the dividends from a fund like VTSAX are qualified, meaning that they are taxed at the much more favorable LTCG rates. A married filing jointly couple could have over $100k of qualified dividends and pay no tax at all.

Read this for more details.
Wow! That was very helpful! I had no idea!

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willthrill81
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Location: USA

Re: Can we retire?

Post by willthrill81 » Sun Jan 12, 2020 6:42 pm

cacophony wrote:
Sun Jan 12, 2020 6:41 pm
willthrill81 wrote:
Sun Jan 12, 2020 6:36 pm
cacophony wrote:
Sun Jan 12, 2020 6:25 pm
willthrill81 wrote:
Sun Jan 12, 2020 6:16 pm
To add to marcopolo's post above, with a significant taxable account, it may be fairly easy to keep one's taxable income low enough that one qualifies for ACA subsidies and pays very little for an ACA health insurance plan. For instance, if you sell an investment that has a high cost-basis, you're only realizing a small capital gain. For instance, if your cost basis in some stock is $70k and you sell it for $100k, then you only have $30k of long-term capital gains, and if you had no other income, a MFJ couple would likely qualify for significant ACA subsidies despite now having $100k to spend. But this assumes that you would be happy with an ACA plan. Managing the whole process is, as marcopolo noted, cumbersome at times.
Wouldn't a significant taxable account (at least one that is reasonably well diversified) have large dividends that are unavoidable? The current TSM dividend is 1.66%.
Most of the dividends from a fund like VTSAX are qualified, meaning that they are taxed at the much more favorable LTCG rates. A married filing jointly couple could have over $100k of qualified dividends and pay no tax at all.

Read this for more details.
I was referring to your statement about the ACA subsidies/cliff (bolded above)
You would have to have a lot of dividends indeed for them alone to push you over the ACA cliff.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

cacophony
Posts: 493
Joined: Tue Oct 16, 2007 9:12 pm

Re: Can we retire?

Post by cacophony » Sun Jan 12, 2020 6:51 pm

willthrill81 wrote:
Sun Jan 12, 2020 6:42 pm
cacophony wrote:
Sun Jan 12, 2020 6:41 pm
willthrill81 wrote:
Sun Jan 12, 2020 6:36 pm
cacophony wrote:
Sun Jan 12, 2020 6:25 pm
willthrill81 wrote:
Sun Jan 12, 2020 6:16 pm
To add to marcopolo's post above, with a significant taxable account, it may be fairly easy to keep one's taxable income low enough that one qualifies for ACA subsidies and pays very little for an ACA health insurance plan. For instance, if you sell an investment that has a high cost-basis, you're only realizing a small capital gain. For instance, if your cost basis in some stock is $70k and you sell it for $100k, then you only have $30k of long-term capital gains, and if you had no other income, a MFJ couple would likely qualify for significant ACA subsidies despite now having $100k to spend. But this assumes that you would be happy with an ACA plan. Managing the whole process is, as marcopolo noted, cumbersome at times.
Wouldn't a significant taxable account (at least one that is reasonably well diversified) have large dividends that are unavoidable? The current TSM dividend is 1.66%.
Most of the dividends from a fund like VTSAX are qualified, meaning that they are taxed at the much more favorable LTCG rates. A married filing jointly couple could have over $100k of qualified dividends and pay no tax at all.

Read this for more details.
I was referring to your statement about the ACA subsidies/cliff (bolded above)
You would have to have a lot of dividends indeed for them alone to push you over the ACA cliff.
If I understand correctly the cliff for a married couple is ~$66k. The TSM dividend is 1.66% currently so assuming a taxable account with a stock/bond mix that averaged 1.66% overall, a $4.1M portfoloio would cause you to go over the cliff with no other sources of income

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willthrill81
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Location: USA

Re: Can we retire?

Post by willthrill81 » Sun Jan 12, 2020 6:56 pm

cacophony wrote:
Sun Jan 12, 2020 6:51 pm
willthrill81 wrote:
Sun Jan 12, 2020 6:42 pm
cacophony wrote:
Sun Jan 12, 2020 6:41 pm
willthrill81 wrote:
Sun Jan 12, 2020 6:36 pm
cacophony wrote:
Sun Jan 12, 2020 6:25 pm


Wouldn't a significant taxable account (at least one that is reasonably well diversified) have large dividends that are unavoidable? The current TSM dividend is 1.66%.
Most of the dividends from a fund like VTSAX are qualified, meaning that they are taxed at the much more favorable LTCG rates. A married filing jointly couple could have over $100k of qualified dividends and pay no tax at all.

Read this for more details.
I was referring to your statement about the ACA subsidies/cliff (bolded above)
You would have to have a lot of dividends indeed for them alone to push you over the ACA cliff.
If I understand correctly the cliff for a married couple is ~$66k. The TSM dividend is 1.66% currently so assuming a taxable account with a stock/bond mix that averaged 1.66% overall, a $4.1M portfoloio would cause you to go over the cliff with no other sources of income
That sounds about right. But if you have a taxable account of over $4 million, should you really be worried much about paying for health insurance without ACA subsidies? :wink:
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

marcopolo
Posts: 2775
Joined: Sat Dec 03, 2016 10:22 am

Re: Can we retire?

Post by marcopolo » Sun Jan 12, 2020 6:56 pm

cacophony wrote:
Sun Jan 12, 2020 6:51 pm
willthrill81 wrote:
Sun Jan 12, 2020 6:42 pm
cacophony wrote:
Sun Jan 12, 2020 6:41 pm
willthrill81 wrote:
Sun Jan 12, 2020 6:36 pm
cacophony wrote:
Sun Jan 12, 2020 6:25 pm


Wouldn't a significant taxable account (at least one that is reasonably well diversified) have large dividends that are unavoidable? The current TSM dividend is 1.66%.
Most of the dividends from a fund like VTSAX are qualified, meaning that they are taxed at the much more favorable LTCG rates. A married filing jointly couple could have over $100k of qualified dividends and pay no tax at all.

Read this for more details.
I was referring to your statement about the ACA subsidies/cliff (bolded above)
You would have to have a lot of dividends indeed for them alone to push you over the ACA cliff.
If I understand correctly the cliff for a married couple is ~$66k. The TSM dividend is 1.66% currently so assuming a taxable account with a stock/bond mix that averaged 1.66% overall, a $4.1M portfoloio would cause you to go over the cliff with no other sources of income
I think most would consider a $4.1M taxable account "a lot". So, sure, then you might not be able to qualify for ACA subsidies, unless you move to Hawaii, Alaska, or adopt a couple of kids....
Once in a while you get shown the light, in the strangest of places if you look at it right.

vipertom1970
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Joined: Fri Jun 21, 2019 7:06 pm

Re: Can we retire?

Post by vipertom1970 » Sun Jan 12, 2020 6:57 pm

I need to talk to my accountant this year but its worth it to save about $5,000 per years for ACA vs doing a Roth conversion for the next 22 years or else the RMD withdraw at 72 from 1.3M(today's $$). 1.3M could potentially grow to 3.5M or more next 22 years.
Last edited by vipertom1970 on Sun Jan 12, 2020 6:59 pm, edited 1 time in total.

Bobby206
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Joined: Fri Oct 05, 2018 4:01 pm

Re: Can we retire?

Post by Bobby206 » Sun Jan 12, 2020 6:59 pm

Yes but keep an eye on the spending. Don't let lifestyle creep happen because it's easy to do.

randomguy
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Joined: Wed Sep 17, 2014 9:00 am

Re: Can we retire?

Post by randomguy » Sun Jan 12, 2020 6:59 pm

rossington wrote:
Sun Jan 12, 2020 6:14 pm

But do keep in mind that once converted the assets can grow with zero tax implications for the rest of his life, which now is presumably at least an extra 10-12 years head start.
Yes but having more assets growing can more than make up for paying taxes. Is it better to have 100k growing tax free or 145k? Depends a lot on returns and what you end up doing with the money.


Marco sums it up pretty good the basics. Actually figuring out what to do is a nightmare and can change. For example, in my state (every state is a bit different)
a) 2 64 year olds pay 29k for a silver plan. If you make 48k, you get a 25k/year subisdy
b) 2 50 years old pay 17.5 for a silver plan. If you make 48k, you get a 13k/year subsidy

If a ROTH will save you say 18k/year, the 50 year should do ROTH conversions while the 64 year old should take the subsidy. You need to make a ton of assumptions about returns and taxes to come up with these numbers.

If you look at the OP situation when both are 70, they will be looking at something like 75k of SS and 50k/year RMDs (assuming all bonds so almost no real growth over the next 15 years). That is going to put you towards the top 12% bracket. Taxable will through off dividends and interest which will push you into the 22% bracket.

With no ACA, converting to the top of 22% (or even 24% tax drag can cost you 2% and you might actually save some money by reducing SS taxation) will likely pay off. With ACA it gets messy.

Imagine you have a 100k. What is better
a) ROTH conversion. Pay 20k of added health care and 20k of taxes. Net 60k
b) Take the ACA subsidy. Having 100k growing.

In 20 years the market has gone up 4x.
a) has 240k they don't owe any taxes on
b) has 400k that they will owe taxes. If they can take the money out at 25%, they end up with 300k to spend. You basically end up with the 20k of subsidy money growing for you. You pay more in taxes and end up with more money to spend.

It will all come down to how big the subsidy is and your expected tax rates. Obviously predicting the medical situation in 10 years is beyond impossible. If silver plans keep growing at say 5%/year and general inflation is 2%, that subsidy will be a lot more valuable.

randomguy
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Joined: Wed Sep 17, 2014 9:00 am

Re: Can we retire?

Post by randomguy » Sun Jan 12, 2020 7:04 pm

vipertom1970 wrote:
Sun Jan 12, 2020 6:57 pm
I need to talk to my accountant this year but its worth it to save about $5,000 per years for ACA vs doing a Roth conversion for the next 22 years or else the RMD withdraw at 72 from 1.3M(today's $$). 1.3M could potentially grow to 3.5M or more next 22 years.
And if you don't do the ROTH conversion, how big does the taxable account (i.e. that you would have used to pay taxes), the IRA, and the ACA subsidy account grow to when you liquidates in 22 years? Somewhere around 3.5M or so would be my guess:) You would need to run the numbers with your exact situation and assumptions to learn if you end up at 3.7 million or 3.3 million which would tell you which way to go.

HomeStretch
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Joined: Thu Dec 27, 2018 3:06 pm

Re: Can we retire?

Post by HomeStretch » Sun Jan 12, 2020 7:04 pm

vipertom1970 wrote:
Sun Jan 12, 2020 5:50 pm
Could you or some one please explain why choosing ACA subsidy over Roth Conversion is better ? I just retired at 50 and I am in the same boat as the OP with same age and $$ but I choose Roth conversion instead of ACA. I got 1.3M in IRA and currently paying $900 for insurance per month for 2.
+1 to marcopolo’s comment that it is very specific to each person’s situation.

Your annual unsubsidized ACA premium of $10.8k is lower than ours will be. Going from memory here... The annual unsubsidized premium cost on the state exchange for spouse and I was quoted at $28k. At the maximum income to qualify for a subsidy (which does not include any room for Roth conversions), our premium will be about half. Right now, our projection says a $14k subsidy is more valuable than the Roth conversion while we use ACA coverage.

Our plan is to use COBRA/do Roth conversions for two tax years, then qualify for ACA subsidies/no Roth conversions until Medicare eligible, then do more Roth conversions (while avoiding IRMAA) starting at age 65. If our tIRAs grow too large, it’s also possible we may forfeit the subsidy for a year or two if necessary to do more Roth conversions.
Last edited by HomeStretch on Sun Jan 12, 2020 7:11 pm, edited 1 time in total.

cacophony
Posts: 493
Joined: Tue Oct 16, 2007 9:12 pm

Re: Can we retire?

Post by cacophony » Sun Jan 12, 2020 7:05 pm

willthrill81 wrote:
Sun Jan 12, 2020 6:56 pm
That sounds about right. But if you have a taxable account of over $4 million, should you really be worried much about paying for health insurance without ACA subsidies? :wink:
Go back and re-read your original example, considering a smaller taxable portfolio (say $2M). The 30K long term capital gains sale won't qualify you for "significant ACA subsidies" because you'll be right around the cliff.

marcopolo
Posts: 2775
Joined: Sat Dec 03, 2016 10:22 am

Re: Can we retire?

Post by marcopolo » Sun Jan 12, 2020 7:08 pm

randomguy wrote:
Sun Jan 12, 2020 6:59 pm
rossington wrote:
Sun Jan 12, 2020 6:14 pm

But do keep in mind that once converted the assets can grow with zero tax implications for the rest of his life, which now is presumably at least an extra 10-12 years head start.
Yes but having more assets growing can more than make up for paying taxes. Is it better to have 100k growing tax free or 145k? Depends a lot on returns and what you end up doing with the money.


Marco sums it up pretty good the basics. Actually figuring out what to do is a nightmare and can change. For example, in my state (every state is a bit different)
a) 2 64 year olds pay 29k for a silver plan. If you make 48k, you get a 25k/year subisdy
b) 2 50 years old pay 17.5 for a silver plan. If you make 48k, you get a 13k/year subsidy

If a ROTH will save you say 18k/year, the 50 year should do ROTH conversions while the 64 year old should take the subsidy. You need to make a ton of assumptions about returns and taxes to come up with these numbers.

If you look at the OP situation when both are 70, they will be looking at something like 75k of SS and 50k/year RMDs (assuming all bonds so almost no real growth over the next 15 years). That is going to put you towards the top 12% bracket. Taxable will through off dividends and interest which will push you into the 22% bracket.

With no ACA, converting to the top of 22% (or even 24% tax drag can cost you 2% and you might actually save some money by reducing SS taxation) will likely pay off. With ACA it gets messy.

Imagine you have a 100k. What is better
a) ROTH conversion. Pay 20k of added health care and 20k of taxes. Net 60k
b) Take the ACA subsidy. Having 100k growing.

In 20 years the market has gone up 4x.
a) has 240k they don't owe any taxes on
b) has 400k that they will owe taxes. If they can take the money out at 25%, they end up with 300k to spend. You basically end up with the 20k of subsidy money growing for you. You pay more in taxes and end up with more money to spend.

It will all come down to how big the subsidy is and your expected tax rates. Obviously predicting the medical situation in 10 years is beyond impossible. If silver plans keep growing at say 5%/year and general inflation is 2%, that subsidy will be a lot more valuable.
It is definitely a nightmare, with many assumptions that may or may not me right. I think you highlighted the issues exactly correctly.

I went through this analysis more times than I care to recall this past year (our first year on ACA). Other than a small Roth Conversion to generate enough taxes to take advantage of some tax credits (ie, free conversion), i opted to go for the credits this year (a little above $20k).

As you point out, it changes constantly, so will be re-evaluating each year.
Once in a while you get shown the light, in the strangest of places if you look at it right.

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PoultryMan
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Re: Can we retire?

Post by PoultryMan » Sun Jan 12, 2020 7:12 pm

PaulF wrote:
Sun Jan 12, 2020 4:14 pm
Agreed: Past the second bend point, you are pushing on a rope! :mrgreen:
I have 25 years into SS payment and want to retire in 5. I often wonder what the ss will be without those 5 years of earning, how do I figure that out?

sambb
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Re: Can we retire?

Post by sambb » Sun Jan 12, 2020 7:13 pm

i would put in another 1-3 years, not comfortable due to healthcare and taxes, political changes, demographic changes, and social security potential changes
Last edited by sambb on Sun Jan 12, 2020 7:14 pm, edited 1 time in total.

vipertom1970
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Re: Can we retire?

Post by vipertom1970 » Sun Jan 12, 2020 7:13 pm

^^^^FIRST WORLD PROBLEM :sharebeer

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willthrill81
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Re: Can we retire?

Post by willthrill81 » Sun Jan 12, 2020 7:15 pm

cacophony wrote:
Sun Jan 12, 2020 7:05 pm
willthrill81 wrote:
Sun Jan 12, 2020 6:56 pm
That sounds about right. But if you have a taxable account of over $4 million, should you really be worried much about paying for health insurance without ACA subsidies? :wink:
Go back and re-read your original example, considering a smaller taxable portfolio (say $2M). The 30K long term capital gains sale won't qualify you for "significant ACA subsidies" because you'll be right around the cliff.
True. As marcopolo noted above, trying to take advantage of ACA subsidies can get very messy. I'm a bit dubious as to whether it's worth the OP's efforts, but some here are very 'gung-ho' on getting the subsidies.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

marcopolo
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Re: Can we retire?

Post by marcopolo » Sun Jan 12, 2020 7:23 pm

HomeStretch wrote:
Sun Jan 12, 2020 7:04 pm
vipertom1970 wrote:
Sun Jan 12, 2020 5:50 pm
Could you or some one please explain why choosing ACA subsidy over Roth Conversion is better ? I just retired at 50 and I am in the same boat as the OP with same age and $$ but I choose Roth conversion instead of ACA. I got 1.3M in IRA and currently paying $900 for insurance per month for 2.
+1 to marcopolo’s comment that it is very specific to each person’s situation.

Your annual unsubsidized ACA premium of $10.8k is lower than ours will be. Going from memory here... The annual unsubsidized premium cost on the state exchange for spouse and I was quoted at $28k. At the maximum income to qualify for a subsidy (which does not include any room for Roth conversions), our premium will be about half. Right now, our projection says a $14k subsidy is more valuable than the Roth conversion while we use ACA coverage.

Our plan is to use COBRA/do Roth conversions for two tax years, then qualify for ACA subsidies/no Roth conversions until Medicare eligible, then do more Roth conversions (while avoiding IRMAA) starting at age 65. If our tIRAs grow too large, it’s also possible we may forfeit the subsidy for a year or two if necessary to do more Roth conversions.
If the IRA starts getting too big, it might be worth doing the analysis of blowing through IRMAA vs giving up subsidy.
We are still a number of years out, but my current analysis shows that blowing through the first IRMAA threshold from 65-70 (gets even better now that you can go to 72), would work out better than giving up the subsidy now. But, so much of it depends on specifics, and the assumptions you make.
Once in a while you get shown the light, in the strangest of places if you look at it right.

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willthrill81
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Re: Can we retire?

Post by willthrill81 » Sun Jan 12, 2020 7:25 pm

PoultryMan wrote:
Sun Jan 12, 2020 7:12 pm
PaulF wrote:
Sun Jan 12, 2020 4:14 pm
Agreed: Past the second bend point, you are pushing on a rope! :mrgreen:
I have 25 years into SS payment and want to retire in 5. I often wonder what the ss will be without those 5 years of earning, how do I figure that out?
Go check out the SSA's calculators here. You'll probably find that the additional 5 years make very little difference. I plan on retiring after having had about 21 'good' years of earnings, and if I kept contributing to SS for an additional 14 years, it wouldn't make what I deem to be a worthwhile difference in our benefits.
Last edited by willthrill81 on Sun Jan 12, 2020 7:29 pm, edited 1 time in total.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

marcopolo
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Re: Can we retire?

Post by marcopolo » Sun Jan 12, 2020 7:27 pm

willthrill81 wrote:
Sun Jan 12, 2020 7:15 pm
cacophony wrote:
Sun Jan 12, 2020 7:05 pm
willthrill81 wrote:
Sun Jan 12, 2020 6:56 pm
That sounds about right. But if you have a taxable account of over $4 million, should you really be worried much about paying for health insurance without ACA subsidies? :wink:
Go back and re-read your original example, considering a smaller taxable portfolio (say $2M). The 30K long term capital gains sale won't qualify you for "significant ACA subsidies" because you'll be right around the cliff.
True. As marcopolo noted above, trying to take advantage of ACA subsidies can get very messy. I'm a bit dubious as to whether it's worth the OP's efforts, but some here are very 'gung-ho' on getting the subsidies.
It is messy, and our numbers are right around what is being thrown around here. Our PTC this past year was a little over $20k, so to me it was worth the messiness. It helps that we are in Hawaii (higher FPL). I don't how "gung-ho" i am, view it as any other tax optimization strategy.
Once in a while you get shown the light, in the strangest of places if you look at it right.

HomeStretch
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Re: Can we retire?

Post by HomeStretch » Sun Jan 12, 2020 7:31 pm

marcopolo wrote:
Sun Jan 12, 2020 7:23 pm
If the IRA starts getting too big, it might be worth doing the analysis of blowing through IRMAA vs giving up subsidy.
We are still a number of years out, but my current analysis shows that blowing through the first IRMAA threshold from 65-70 (gets even better now that you can go to 72), would work out better than giving up the subsidy now. But, so much of it depends on specifics, and the assumptions you make.
Agree. The subsidy is valuable enough that we will most likely pay at least IRMAA first tier rather than give up the subsidy. Our annual spending in a HCOL area is 6-figure which adds its own twist to the whole analysis. The delay of RMDs until age 72 and indexing IRMAA brackets both help.

Thanks for all your posts on the subject as they have been very helpful to me and hopefully to OP as well. OP, it’s well worth doing some projections to help optimize your situation.
Last edited by HomeStretch on Sun Jan 12, 2020 7:33 pm, edited 1 time in total.

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willthrill81
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Re: Can we retire?

Post by willthrill81 » Sun Jan 12, 2020 7:32 pm

marcopolo wrote:
Sun Jan 12, 2020 7:27 pm
willthrill81 wrote:
Sun Jan 12, 2020 7:15 pm
cacophony wrote:
Sun Jan 12, 2020 7:05 pm
willthrill81 wrote:
Sun Jan 12, 2020 6:56 pm
That sounds about right. But if you have a taxable account of over $4 million, should you really be worried much about paying for health insurance without ACA subsidies? :wink:
Go back and re-read your original example, considering a smaller taxable portfolio (say $2M). The 30K long term capital gains sale won't qualify you for "significant ACA subsidies" because you'll be right around the cliff.
True. As marcopolo noted above, trying to take advantage of ACA subsidies can get very messy. I'm a bit dubious as to whether it's worth the OP's efforts, but some here are very 'gung-ho' on getting the subsidies.
It is messy, and our numbers are right around what is being thrown around here. Our PTC this past year was a little over $20k, so to me it was worth the messiness. It helps that we are in Hawaii (higher FPL). I don't how "gung-ho" i am, view it as any other tax optimization strategy.
In our zip code, the ACA subsidy for a 50 year old with two members in the household and a MAGI of $35k is only $4,200.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

marcopolo
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Re: Can we retire?

Post by marcopolo » Sun Jan 12, 2020 7:35 pm

willthrill81 wrote:
Sun Jan 12, 2020 7:32 pm
marcopolo wrote:
Sun Jan 12, 2020 7:27 pm
willthrill81 wrote:
Sun Jan 12, 2020 7:15 pm
cacophony wrote:
Sun Jan 12, 2020 7:05 pm
willthrill81 wrote:
Sun Jan 12, 2020 6:56 pm
That sounds about right. But if you have a taxable account of over $4 million, should you really be worried much about paying for health insurance without ACA subsidies? :wink:
Go back and re-read your original example, considering a smaller taxable portfolio (say $2M). The 30K long term capital gains sale won't qualify you for "significant ACA subsidies" because you'll be right around the cliff.
True. As marcopolo noted above, trying to take advantage of ACA subsidies can get very messy. I'm a bit dubious as to whether it's worth the OP's efforts, but some here are very 'gung-ho' on getting the subsidies.
It is messy, and our numbers are right around what is being thrown around here. Our PTC this past year was a little over $20k, so to me it was worth the messiness. It helps that we are in Hawaii (higher FPL). I don't how "gung-ho" i am, view it as any other tax optimization strategy.
In our zip code, the ACA subsidy for a 50 year old with two members in the household and a MAGI of $35k is only $4,200.
Yeah, that would definitely change the math. That is why i have repeatedly said that it is specific to each person's situation, and needs to be analyzed as such.
Once in a while you get shown the light, in the strangest of places if you look at it right.

Topic Author
2020content
Posts: 23
Joined: Sun Jan 12, 2020 10:34 am

Re: Can we retire?

Post by 2020content » Sun Jan 12, 2020 7:44 pm

HomeStretch wrote:
Sun Jan 12, 2020 7:31 pm
marcopolo wrote:
Sun Jan 12, 2020 7:23 pm
If the IRA starts getting too big, it might be worth doing the analysis of blowing through IRMAA vs giving up subsidy.
We are still a number of years out, but my current analysis shows that blowing through the first IRMAA threshold from 65-70 (gets even better now that you can go to 72), would work out better than giving up the subsidy now. But, so much of it depends on specifics, and the assumptions you make.
Agree. The subsidy is valuable enough that we will most likely pay at least IRMAA first tier rather than give up the subsidy. Our annual spending in a HCOL area is 6-figure which adds its own twist to the whole analysis. The delay of RMDs until age 72 and indexing IRMAA brackets both help.

Thanks for all your posts on the subject as they have been very helpful to me and hopefully to OP as well. OP, it’s well worth doing some projections to help optimize your situation.
I agree, this has been extremely helpful. I now feel more confident that we can retire, but I also realize that I'll need to do some serious analysis to ensure we are successful at maximizing our financial situation. I have a lot to learn! Thanks to everyone for the replies and please keep them coming!

PaulF
Posts: 207
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Location: Wisconsin

Re: Can we retire?

Post by PaulF » Sun Jan 12, 2020 10:32 pm

willthrill81 wrote:
Sun Jan 12, 2020 7:25 pm
PoultryMan wrote:
Sun Jan 12, 2020 7:12 pm
PaulF wrote:
Sun Jan 12, 2020 4:14 pm
Agreed: Past the second bend point, you are pushing on a rope! :mrgreen:
I have 25 years into SS payment and want to retire in 5. I often wonder what the ss will be without those 5 years of earning, how do I figure that out?
Go check out the SSA's calculators here. You'll probably find that the additional 5 years make very little difference. I plan on retiring after having had about 21 'good' years of earnings, and if I kept contributing to SS for an additional 14 years, it wouldn't make what I deem to be a worthwhile difference in our benefits.
In addition to the official source that Will cites, it may be easier to take a look at the spreadsheet from Mr. Money Mustache, which has a tab for SS calculations: https://drive.google.com/file/d/1aPE6Mb ... hqINg/view

I cannot be the only one confused by the fact that this spreadsheet is referenced in the Boglehead Wiki and in MMM by names including: CashFlow, Case Study, and Personal Finance Toolbox. (If I have conflated unlike things, please forgive me -- I have trouble disambiguating them).

Financologist
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Re: Can we retire?

Post by Financologist » Sun Jan 12, 2020 11:06 pm

Indeed. However sequence matters. If the market were to crash this year, suddenly OP (and the model) loses some confidence. So depending on required confidence level, OP's willingness to cut back or work again in response to a shock is the lever that puts a plan to retire now over the top. Also, difficult to predict an investor's response to a crash early in retirement. Many run for the hills despite BH's best efforts. But with "planned adaptability" it's likelier an investor will stay the course with her investments.


delamer wrote:
Sun Jan 12, 2020 5:52 pm
Financologist wrote:
Sun Jan 12, 2020 5:47 pm
I can't see how this won't work out well. The one question to ask yourself is... if the market suffers a dramatic fall are you willing to spend less or go back to work to restore the level of confidence the models give you today?

Good luck
The stock market will almost certainly suffer a dramatic fall (or falls) at sometime during the OP’s retirement. It isn’t “if” but “when.”

The models take that into account when determining the likelihood that a portfolio will survive at a given level of withdrawals.

flyingaway
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Re: Can we retire?

Post by flyingaway » Mon Jan 13, 2020 8:05 am

As I said in several similar situations, working an additional year makes all those ACA and Roth mathematics much less appealing. If my job is not killing me, I would work for one more year to save my brain cells from being killed by those calculations.

randomguy
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Re: Can we retire?

Post by randomguy » Mon Jan 13, 2020 5:44 pm

flyingaway wrote:
Mon Jan 13, 2020 8:05 am
As I said in several similar situations, working an additional year makes all those ACA and Roth mathematics much less appealing. If my job is not killing me, I would work for one more year to save my brain cells from being killed by those calculations.
Brain cells are killed by not using them. Much healthier to quit the job and do some math for fun:)

Again the OP is off in absurdly safe land with 3.5 million +SS and 80k of expenses. They can piss tens of thousands/year away if they wanted to and still be fine. A lot of us though hate pissing money away as a general principle.:)

marcopolo
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Re: Can we retire?

Post by marcopolo » Mon Jan 13, 2020 6:04 pm

flyingaway wrote:
Mon Jan 13, 2020 8:05 am
As I said in several similar situations, working an additional year makes all those ACA and Roth mathematics much less appealing. If my job is not killing me, I would work for one more year to save my brain cells from being killed by those calculations.
I could work 10 more years have way more money than i need (maybe already do), but i would still be thinking about how to improve/optimize all sorts of various financial situations, ACA, Roth conversion, Education Tax Credits, Tax loss harvesting, etc. are just some examples. Not sure if any amount of money would really make me stop thinking about it in those terms. It is just the way i am wired.

How much additional money will one more year get you? And that will be the difference between trying to improve financial efficiency and simply giving up relatively large sums of money (10s of thousands of dollars each year) without a care in the world?
Once in a while you get shown the light, in the strangest of places if you look at it right.

soccerrules
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Re: Can we retire?

Post by soccerrules » Mon Jan 13, 2020 6:35 pm

2020content wrote:
Sun Jan 12, 2020 10:58 am

- We both should be able to collect near maximum SS benefit once we get there.

Can we retire?
Yes you can retire. Congrats
Others have mentioned Healthcare and you have 15 years to navigate prior to Medicare.

i would check your SS calculations. If you are using the SS site and their estimates it projects you will make the same (as last year) until you retire. You will have needed to hit the maximum from age 20 to 50 to have 30 years. I would surmise you might have 3-4 "$0" years and perhaps several non-maxed years (early 20's?). Something to check.
You are likely past the second bend point. FYI for each $100K of indexed earnings (past the 2nd bend point) it is worth $35.70/mo at FRA.

BUT you have $3.5M plus a decent amount from SS -- you should be fine.
Don't let your outflow exceed your income or your upkeep will be your downfall.

Royal Blue
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Re: Can we retire?

Post by Royal Blue » Mon Jan 13, 2020 8:07 pm

It seems like the financial mechanics of "Can we retire" have been well answered in the thread. I would only ask "do you have a life plan for once you're retired?" Should you retire? I had a two year mini-retirement when I turned 38, my healthcare company grew to the point where I didn't need to work and I had a great management team in-place to manage the 150 employees and continue to scale the company. I thought life was going to be amazing and guess what... it was the worse experience of my life. All my friends were working, I wasn't into enough hobbies to keep me occupied or engaged. I know the dream for many people is to retire early, but there is a dangerous place that one can go if you don't have a plan/strategy. After two years I ended up starting another company, and joining several non-profit boards to serve my community. Early retirement was the worse two years I ever experienced!

Topic Author
2020content
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Re: Can we retire?

Post by 2020content » Mon Jan 13, 2020 9:27 pm

randomguy wrote:
Mon Jan 13, 2020 5:44 pm
flyingaway wrote:
Mon Jan 13, 2020 8:05 am
As I said in several similar situations, working an additional year makes all those ACA and Roth mathematics much less appealing. If my job is not killing me, I would work for one more year to save my brain cells from being killed by those calculations.
Brain cells are killed by not using them. Much healthier to quit the job and do some math for fun:)

Again the OP is off in absurdly safe land with 3.5 million +SS and 80k of expenses. They can piss tens of thousands/year away if they wanted to and still be fine. A lot of us though hate pissing money away as a general principle.:)
OP likes "absurdly safe land"!

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willthrill81
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Re: Can we retire?

Post by willthrill81 » Mon Jan 13, 2020 9:33 pm

2020content wrote:
Mon Jan 13, 2020 9:27 pm
randomguy wrote:
Mon Jan 13, 2020 5:44 pm
flyingaway wrote:
Mon Jan 13, 2020 8:05 am
As I said in several similar situations, working an additional year makes all those ACA and Roth mathematics much less appealing. If my job is not killing me, I would work for one more year to save my brain cells from being killed by those calculations.
Brain cells are killed by not using them. Much healthier to quit the job and do some math for fun:)

Again the OP is off in absurdly safe land with 3.5 million +SS and 80k of expenses. They can piss tens of thousands/year away if they wanted to and still be fine. A lot of us though hate pissing money away as a general principle.:)
OP likes "absurdly safe land"!
Then you might be interested in constructing a liability matched portfolio. There are many threads about the concept. Basically, you determine how much you need to cover your essential spending, being careful to include your future SS benefits, pension, and any other income sources, and you construct a TIPS ladder to fund those expenses for at least the remainder of your life expectancy. It's about as safe of a retirement withdrawal strategy as there is.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Sandi_k
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Re: Can we retire?

Post by Sandi_k » Tue Jan 14, 2020 1:50 pm

Yes, you can retire. A couple of notes, for planning purposes:

1) Roth conversions have been mentioned. We are working on those as well. They matter mainly because the sole survivor or your couple-dom will have obscene RMDs and tax rates once one of you has passed. Given recent tax law changes in inherited IRAs, the more money you have in Roths, the better.

2) Read up on IRMAA. It's a Medicare surcharge for high income retirees, based on your income two years before using MC.

3) Make up a timeline for retirement. I have a timeline in the rows of my "retirement plan" spreadsheet. Each row is a year (age 55, 56, 57, etc.) and in the notes, I highlight "consider Roth conversions this year" or "DH is 62, and files for SS", "Dh eligible for Medicare", "house is paid off", or "buy car this year." Having those directives really helps shape our planning.

The columns outline our various sources of income, to be summed at the end, showing estimated annual income each year. We have pension income, with an estimated 2% COLA every year; we have DH Social Security at age 62; mine elected at 70; and withdrawals from investments. The investments we assume drawdown of 3.5% from age 60-65, 3.75% for ages 65-70, and 4% after age 70. We then assume a 4% real return each year, on the end-of-year balance.

4) Read up on Sequence of Return Risk. A big drop in the market early in retirement would be very stressful for most early retirees. We have crafted a "bucket" or "bridging" strategy for the years between retirement and Social Security. One way to deal with this is a Liability Matching Portfolio, which I see has been mentioned.

5) Keep reading. I find that I have learned enormous amounts just by reading threads that might not apply to our situation immediately, but are useful for LT planning. Peripheral vision when dealing with these LT issues is hugely helpful in getting more sophisticated as an investor, as a taxpayer, and as a retiree.

Best of luck!

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Johnsson
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Re: Can we retire?

Post by Johnsson » Tue Jan 14, 2020 6:14 pm

I'm surprised no one has mentioned I-Orp-extended (or maybe I missed the mention)... https://www.i-orp.com/TaxRepeal/extended.html

While subsidies are a separate factor, the software definitely accounts for the ACA cliff and optimizes Roth conversions. You'll just need to back into the benefits of the ACA subsidies. It should be a big help in the tactical decisions.
'In theory there is no difference between theory and practice. In practice there is.' Yogi Berra

Topic Author
2020content
Posts: 23
Joined: Sun Jan 12, 2020 10:34 am

Re: Can we retire?

Post by 2020content » Tue Jan 14, 2020 9:36 pm

Sandi_k wrote:
Tue Jan 14, 2020 1:50 pm
Yes, you can retire. A couple of notes, for planning purposes:

1) Roth conversions have been mentioned. We are working on those as well. They matter mainly because the sole survivor or your couple-dom will have obscene RMDs and tax rates once one of you has passed. Given recent tax law changes in inherited IRAs, the more money you have in Roths, the better.

2) Read up on IRMAA. It's a Medicare surcharge for high income retirees, based on your income two years before using MC.

3) Make up a timeline for retirement. I have a timeline in the rows of my "retirement plan" spreadsheet. Each row is a year (age 55, 56, 57, etc.) and in the notes, I highlight "consider Roth conversions this year" or "DH is 62, and files for SS", "Dh eligible for Medicare", "house is paid off", or "buy car this year." Having those directives really helps shape our planning.

The columns outline our various sources of income, to be summed at the end, showing estimated annual income each year. We have pension income, with an estimated 2% COLA every year; we have DH Social Security at age 62; mine elected at 70; and withdrawals from investments. The investments we assume drawdown of 3.5% from age 60-65, 3.75% for ages 65-70, and 4% after age 70. We then assume a 4% real return each year, on the end-of-year balance.

4) Read up on Sequence of Return Risk. A big drop in the market early in retirement would be very stressful for most early retirees. We have crafted a "bucket" or "bridging" strategy for the years between retirement and Social Security. One way to deal with this is a Liability Matching Portfolio, which I see has been mentioned.

5) Keep reading. I find that I have learned enormous amounts just by reading threads that might not apply to our situation immediately, but are useful for LT planning. Peripheral vision when dealing with these LT issues is hugely helpful in getting more sophisticated as an investor, as a taxpayer, and as a retiree.

Best of luck!
Thank you, this was very helpful. I started working on my spreadsheet today.

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Sandi_k
Posts: 1158
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Location: SF Bay Area

Re: Can we retire?

Post by Sandi_k » Wed Jan 15, 2020 1:04 pm

2020content wrote:
Tue Jan 14, 2020 9:36 pm
Sandi_k wrote:
Tue Jan 14, 2020 1:50 pm
Yes, you can retire. A couple of notes, for planning purposes:

1) Roth conversions have been mentioned. We are working on those as well. They matter mainly because the sole survivor or your couple-dom will have obscene RMDs and tax rates once one of you has passed. Given recent tax law changes in inherited IRAs, the more money you have in Roths, the better.

2) Read up on IRMAA. It's a Medicare surcharge for high income retirees, based on your income two years before using MC.

3) Make up a timeline for retirement. I have a timeline in the rows of my "retirement plan" spreadsheet. Each row is a year (age 55, 56, 57, etc.) and in the notes, I highlight "consider Roth conversions this year" or "DH is 62, and files for SS", "Dh eligible for Medicare", "house is paid off", or "buy car this year." Having those directives really helps shape our planning.

The columns outline our various sources of income, to be summed at the end, showing estimated annual income each year. We have pension income, with an estimated 2% COLA every year; we have DH Social Security at age 62; mine elected at 70; and withdrawals from investments. The investments we assume drawdown of 3.5% from age 60-65, 3.75% for ages 65-70, and 4% after age 70. We then assume a 4% real return each year, on the end-of-year balance.

4) Read up on Sequence of Return Risk. A big drop in the market early in retirement would be very stressful for most early retirees. We have crafted a "bucket" or "bridging" strategy for the years between retirement and Social Security. One way to deal with this is a Liability Matching Portfolio, which I see has been mentioned.

5) Keep reading. I find that I have learned enormous amounts just by reading threads that might not apply to our situation immediately, but are useful for LT planning. Peripheral vision when dealing with these LT issues is hugely helpful in getting more sophisticated as an investor, as a taxpayer, and as a retiree.

Best of luck!
Thank you, this was very helpful. I started working on my spreadsheet today.
You are welcome! I look forward to your updates as you get closer. We're still 5+ years out, and DH makes fun of my spreadsheet noodling. But it really does help reduce the stress of "Do we have enough?"

Topic Author
2020content
Posts: 23
Joined: Sun Jan 12, 2020 10:34 am

Re: Can we retire?

Post by 2020content » Wed Jan 15, 2020 9:39 pm

I agree, Sandi_k, re: spreadsheets.

Another question for the group: Considering we already have a large sum in our IRAs and 401ks, and considering RMDs could really be large, does it make sense to continue contributing to our IRAs? Would it be wiser to invest those same moneys into a tax efficient fund in our taxable account? The IRA contributions don't provide any immediate tax benefit. We are maxing our 401k contributions due to the significant tax deferment and the company matching.

TheDDC
Posts: 562
Joined: Mon Jan 08, 2018 11:11 am

Re: Can we retire?

Post by TheDDC » Wed Jan 15, 2020 9:52 pm

Those expenses are too high especially for "modest and frugal" lifestyle in a LCOL area. You must have a different understanding of these terms. Are either one of you a sole proprietor or have real estate maintenance expenses that you are writing off? Otherwise, why?

I would worry about health insurance costs the most, but $3M invested in good growth mutual funds should keep you with a good stream without having to touch the principal for sure.

-TheDDC
Refreshingly, a double barrel shotgun blast of truth... | Rules to wealth building: 100% VTSAX piled high and deep, 0% given away to banks, minimize amount given to health care industrial complex

Topic Author
2020content
Posts: 23
Joined: Sun Jan 12, 2020 10:34 am

Re: Can we retire?

Post by 2020content » Wed Jan 15, 2020 10:02 pm

TheDDC wrote:
Wed Jan 15, 2020 9:52 pm
Those expenses are too high especially for "modest and frugal" lifestyle in a LCOL area. You must have a different understanding of these terms. Are either one of you a sole proprietor or have real estate maintenance expenses that you are writing off? Otherwise, why?

I would worry about health insurance costs the most, but $3M invested in good growth mutual funds should keep you with a good stream without having to touch the principal for sure.

-TheDDC
Thank you, TheDDC - In a previous post, I apologized for using the word frugal. All things are relative, and relative to our peers, coworkers, neighbors, and etc... we live modestly.

PaulF
Posts: 207
Joined: Wed Aug 06, 2008 10:07 pm
Location: Wisconsin

Re: Can we retire?

Post by PaulF » Wed Jan 15, 2020 10:05 pm

2020content wrote:
Wed Jan 15, 2020 9:39 pm
Another question for the group: Considering we already have a large sum in our IRAs and 401ks, and considering RMDs could really be large, does it make sense to continue contributing to our IRAs? Would it be wiser to invest those same moneys into a tax efficient fund in our taxable account? The IRA contributions don't provide any immediate tax benefit.
Reasonable people can disagree, but we decided to stop contributing to tax-deferred, and started saving only in taxable and Roth IRA. I plan to use the taxable money to pay taxes on Roth conversions after retirement (or to have non-Roth money for lump-sum expenditures). I expect my marginal tax rate to be the same in retirement as it is now, so my scheme is sort of like making additional Roth contributions now (less a few years tax-free earning and plus a little flexibility).

TheDDC
Posts: 562
Joined: Mon Jan 08, 2018 11:11 am

Re: Can we retire?

Post by TheDDC » Wed Jan 15, 2020 10:08 pm

2020content wrote:
Wed Jan 15, 2020 10:02 pm
TheDDC wrote:
Wed Jan 15, 2020 9:52 pm
Those expenses are too high especially for "modest and frugal" lifestyle in a LCOL area. You must have a different understanding of these terms. Are either one of you a sole proprietor or have real estate maintenance expenses that you are writing off? Otherwise, why?

I would worry about health insurance costs the most, but $3M invested in good growth mutual funds should keep you with a good stream without having to touch the principal for sure.

-TheDDC
Thank you, TheDDC - In a previous post, I apologized for using the word frugal. All things are relative, and relative to our peers, coworkers, neighbors, and etc... we live modestly.
Perhaps. I would make sure the mortgage(s) is/are all paid off, everything else paid off, which is mostly what I assume is part of the $80k. If not, what else is the liability? Outstanding debt is a huge liability, especially when you are no longer in the accumulation phase. Debt is something I plan on not having during retirement to help with my annual expenses.

-TheDDC
Refreshingly, a double barrel shotgun blast of truth... | Rules to wealth building: 100% VTSAX piled high and deep, 0% given away to banks, minimize amount given to health care industrial complex

multiham
Posts: 299
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Re: Can we retire?

Post by multiham » Wed Jan 15, 2020 10:28 pm

Enjoy your upcoming retirement! Sounds like you and your spouse worked hard for this and did a great job in saving. With no mortgage or kids to put through college, its time to enjoy everything you worked for. Start the countdown clock and don't look back!

marcopolo
Posts: 2775
Joined: Sat Dec 03, 2016 10:22 am

Re: Can we retire?

Post by marcopolo » Wed Jan 15, 2020 10:47 pm

TheDDC wrote:
Wed Jan 15, 2020 10:08 pm
2020content wrote:
Wed Jan 15, 2020 10:02 pm
TheDDC wrote:
Wed Jan 15, 2020 9:52 pm
Those expenses are too high especially for "modest and frugal" lifestyle in a LCOL area. You must have a different understanding of these terms. Are either one of you a sole proprietor or have real estate maintenance expenses that you are writing off? Otherwise, why?

I would worry about health insurance costs the most, but $3M invested in good growth mutual funds should keep you with a good stream without having to touch the principal for sure.

-TheDDC
Thank you, TheDDC - In a previous post, I apologized for using the word frugal. All things are relative, and relative to our peers, coworkers, neighbors, and etc... we live modestly.
Perhaps. I would make sure the mortgage(s) is/are all paid off, everything else paid off, which is mostly what I assume is part of the $80k. If not, what else is the liability? Outstanding debt is a huge liability, especially when you are no longer in the accumulation phase. Debt is something I plan on not having during retirement to help with my annual expenses.

-TheDDC
The OP said in the initial post that they have no debt including their house. They have $3.5M in investments, why shouldn't they spend $80k/year (or even more) if they want to. Isn't that why the money is there. $80k/$3.5M = ~2.3%. Are you worried they are going to run out of money? A balanced portfolio probably yields close to that in interest and dividends, not even counting growth!
Once in a while you get shown the light, in the strangest of places if you look at it right.

TheDDC
Posts: 562
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Re: Can we retire?

Post by TheDDC » Wed Jan 15, 2020 10:53 pm

marcopolo wrote:
Wed Jan 15, 2020 10:47 pm
TheDDC wrote:
Wed Jan 15, 2020 10:08 pm
2020content wrote:
Wed Jan 15, 2020 10:02 pm
TheDDC wrote:
Wed Jan 15, 2020 9:52 pm
Those expenses are too high especially for "modest and frugal" lifestyle in a LCOL area. You must have a different understanding of these terms. Are either one of you a sole proprietor or have real estate maintenance expenses that you are writing off? Otherwise, why?

I would worry about health insurance costs the most, but $3M invested in good growth mutual funds should keep you with a good stream without having to touch the principal for sure.

-TheDDC
Thank you, TheDDC - In a previous post, I apologized for using the word frugal. All things are relative, and relative to our peers, coworkers, neighbors, and etc... we live modestly.
Perhaps. I would make sure the mortgage(s) is/are all paid off, everything else paid off, which is mostly what I assume is part of the $80k. If not, what else is the liability? Outstanding debt is a huge liability, especially when you are no longer in the accumulation phase. Debt is something I plan on not having during retirement to help with my annual expenses.

-TheDDC
The OP said in the initial post that they have no debt including their house. They have $3.5M in investments, why shouldn't they spend $80k/year (or even more) if they want to. Isn't that why the money is there. $80k/$3.5M = ~2.3%. Are you worried they are going to run out of money? A balanced portfolio probably yields close to that in interest and dividends, not even counting growth!
Can't imagine what you are spending $80k on when nearing retirement is all... Seems that there is some sort of liability here to suss out.

(BTW OP in case you haven't picked up on it, these back and forth hypothetical arguments about first world problems are the lifeblood of what BHs do all day around here. Pay no nevermind. Hah!)

-TheDDC
Refreshingly, a double barrel shotgun blast of truth... | Rules to wealth building: 100% VTSAX piled high and deep, 0% given away to banks, minimize amount given to health care industrial complex

marcopolo
Posts: 2775
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Re: Can we retire?

Post by marcopolo » Wed Jan 15, 2020 10:56 pm

TheDDC wrote:
Wed Jan 15, 2020 10:53 pm
marcopolo wrote:
Wed Jan 15, 2020 10:47 pm
TheDDC wrote:
Wed Jan 15, 2020 10:08 pm
2020content wrote:
Wed Jan 15, 2020 10:02 pm
TheDDC wrote:
Wed Jan 15, 2020 9:52 pm
Those expenses are too high especially for "modest and frugal" lifestyle in a LCOL area. You must have a different understanding of these terms. Are either one of you a sole proprietor or have real estate maintenance expenses that you are writing off? Otherwise, why?

I would worry about health insurance costs the most, but $3M invested in good growth mutual funds should keep you with a good stream without having to touch the principal for sure.

-TheDDC
Thank you, TheDDC - In a previous post, I apologized for using the word frugal. All things are relative, and relative to our peers, coworkers, neighbors, and etc... we live modestly.
Perhaps. I would make sure the mortgage(s) is/are all paid off, everything else paid off, which is mostly what I assume is part of the $80k. If not, what else is the liability? Outstanding debt is a huge liability, especially when you are no longer in the accumulation phase. Debt is something I plan on not having during retirement to help with my annual expenses.

-TheDDC
The OP said in the initial post that they have no debt including their house. They have $3.5M in investments, why shouldn't they spend $80k/year (or even more) if they want to. Isn't that why the money is there. $80k/$3.5M = ~2.3%. Are you worried they are going to run out of money? A balanced portfolio probably yields close to that in interest and dividends, not even counting growth!
Can't imagine what you are spending $80k on when nearing retirement is all... Seems that there is some sort of liability here to suss out.

-TheDDC
You might consider expanding your imagination.
One doesn't need to have any liability to spend at that level.
I suspect many on this forum spend significantly more than that, even without mortgage or other debts to service.
Once in a while you get shown the light, in the strangest of places if you look at it right.

supersharpie
Posts: 743
Joined: Wed Dec 22, 2010 1:28 pm

Re: Can we retire?

Post by supersharpie » Wed Jan 15, 2020 11:06 pm

TheDDC wrote:
Wed Jan 15, 2020 10:53 pm
marcopolo wrote:
Wed Jan 15, 2020 10:47 pm
TheDDC wrote:
Wed Jan 15, 2020 10:08 pm
2020content wrote:
Wed Jan 15, 2020 10:02 pm
TheDDC wrote:
Wed Jan 15, 2020 9:52 pm
Those expenses are too high especially for "modest and frugal" lifestyle in a LCOL area. You must have a different understanding of these terms. Are either one of you a sole proprietor or have real estate maintenance expenses that you are writing off? Otherwise, why?

I would worry about health insurance costs the most, but $3M invested in good growth mutual funds should keep you with a good stream without having to touch the principal for sure.

-TheDDC
Thank you, TheDDC - In a previous post, I apologized for using the word frugal. All things are relative, and relative to our peers, coworkers, neighbors, and etc... we live modestly.
Perhaps. I would make sure the mortgage(s) is/are all paid off, everything else paid off, which is mostly what I assume is part of the $80k. If not, what else is the liability? Outstanding debt is a huge liability, especially when you are no longer in the accumulation phase. Debt is something I plan on not having during retirement to help with my annual expenses.

-TheDDC
The OP said in the initial post that they have no debt including their house. They have $3.5M in investments, why shouldn't they spend $80k/year (or even more) if they want to. Isn't that why the money is there. $80k/$3.5M = ~2.3%. Are you worried they are going to run out of money? A balanced portfolio probably yields close to that in interest and dividends, not even counting growth!
Can't imagine what you are spending $80k on when nearing retirement is all... Seems that there is some sort of liability here to suss out.

(BTW OP in case you haven't picked up on it, these back and forth hypothetical arguments about first world problems are the lifeblood of what BHs do all day around here. Pay no nevermind. Hah!)

-TheDDC
You probably are quite frugal. My wife and I could (but do not) spend 80k per year sans mortgage. I'm thinking:

20k for travel
10k for healthcare
10k dining out/take out
6k utilities (including cable, streaming services, internet)
5k grocery bills
5k home upkeep
5k car maintenance/gas
5k entertainment (concerts, plays, comedy shows, etc.)
3k booze
3k various insurance policies
3k property taxes
3k gifts for family/friends
2k charity

Topic Author
2020content
Posts: 23
Joined: Sun Jan 12, 2020 10:34 am

Re: Can we retire?

Post by 2020content » Thu Jan 16, 2020 7:36 am

supersharpie wrote:
Wed Jan 15, 2020 11:06 pm
TheDDC wrote:
Wed Jan 15, 2020 10:53 pm
marcopolo wrote:
Wed Jan 15, 2020 10:47 pm
TheDDC wrote:
Wed Jan 15, 2020 10:08 pm
2020content wrote:
Wed Jan 15, 2020 10:02 pm


Thank you, TheDDC - In a previous post, I apologized for using the word frugal. All things are relative, and relative to our peers, coworkers, neighbors, and etc... we live modestly.
Perhaps. I would make sure the mortgage(s) is/are all paid off, everything else paid off, which is mostly what I assume is part of the $80k. If not, what else is the liability? Outstanding debt is a huge liability, especially when you are no longer in the accumulation phase. Debt is something I plan on not having during retirement to help with my annual expenses.

-TheDDC
The OP said in the initial post that they have no debt including their house. They have $3.5M in investments, why shouldn't they spend $80k/year (or even more) if they want to. Isn't that why the money is there. $80k/$3.5M = ~2.3%. Are you worried they are going to run out of money? A balanced portfolio probably yields close to that in interest and dividends, not even counting growth!
Can't imagine what you are spending $80k on when nearing retirement is all... Seems that there is some sort of liability here to suss out.

(BTW OP in case you haven't picked up on it, these back and forth hypothetical arguments about first world problems are the lifeblood of what BHs do all day around here. Pay no nevermind. Hah!)

-TheDDC
You probably are quite frugal. My wife and I could (but do not) spend 80k per year sans mortgage. I'm thinking:

20k for travel
10k for healthcare
10k dining out/take out
6k utilities (including cable, streaming services, internet)
5k grocery bills
5k home upkeep
5k car maintenance/gas
5k entertainment (concerts, plays, comedy shows, etc.)
3k booze
3k various insurance policies
3k property taxes
3k gifts for family/friends
2k charity
+1

That budget is not dissimilar from ours. We have many hobbies and try our best to enjoy the pleasures that a little extra spending can provide. Nothing to suss out, TheDDC. If we needed to cut back, we could live on less than half of that budget. We don't see the need to be that conservative with the budget. Our days of counting TP squares are over!

printer86
Posts: 126
Joined: Mon Apr 25, 2016 8:45 am

Re: Can we retire?

Post by printer86 » Thu Jan 16, 2020 9:59 am

2020Content,

Can I ask how you have the $3.5mm invested? I'm curious as I am in a similar situation, just a couple years older and a couple hundred G's less money.

TheDDC
Posts: 562
Joined: Mon Jan 08, 2018 11:11 am

Re: Can we retire?

Post by TheDDC » Thu Jan 16, 2020 10:02 am

2020content wrote:
Thu Jan 16, 2020 7:36 am
supersharpie wrote:
Wed Jan 15, 2020 11:06 pm
TheDDC wrote:
Wed Jan 15, 2020 10:53 pm
marcopolo wrote:
Wed Jan 15, 2020 10:47 pm
TheDDC wrote:
Wed Jan 15, 2020 10:08 pm


Perhaps. I would make sure the mortgage(s) is/are all paid off, everything else paid off, which is mostly what I assume is part of the $80k. If not, what else is the liability? Outstanding debt is a huge liability, especially when you are no longer in the accumulation phase. Debt is something I plan on not having during retirement to help with my annual expenses.

-TheDDC
The OP said in the initial post that they have no debt including their house. They have $3.5M in investments, why shouldn't they spend $80k/year (or even more) if they want to. Isn't that why the money is there. $80k/$3.5M = ~2.3%. Are you worried they are going to run out of money? A balanced portfolio probably yields close to that in interest and dividends, not even counting growth!
Can't imagine what you are spending $80k on when nearing retirement is all... Seems that there is some sort of liability here to suss out.

(BTW OP in case you haven't picked up on it, these back and forth hypothetical arguments about first world problems are the lifeblood of what BHs do all day around here. Pay no nevermind. Hah!)

-TheDDC
You probably are quite frugal. My wife and I could (but do not) spend 80k per year sans mortgage. I'm thinking:

20k for travel
10k for healthcare
10k dining out/take out
6k utilities (including cable, streaming services, internet)
5k grocery bills
5k home upkeep
5k car maintenance/gas
5k entertainment (concerts, plays, comedy shows, etc.)
3k booze
3k various insurance policies
3k property taxes
3k gifts for family/friends
2k charity
+1

That budget is not dissimilar from ours. We have many hobbies and try our best to enjoy the pleasures that a little extra spending can provide. Nothing to suss out, TheDDC. If we needed to cut back, we could live on less than half of that budget. We don't see the need to be that conservative with the budget. Our days of counting TP squares are over!
Right, you "could." But I think lifestyle creep is the hidden budget killer based on your response, even more so at such a young retirement age. I see it in many other posts here as well. Finance is mostly behavioral, not logical.

Lots of luck on this.

-TheDDC
Refreshingly, a double barrel shotgun blast of truth... | Rules to wealth building: 100% VTSAX piled high and deep, 0% given away to banks, minimize amount given to health care industrial complex

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