quote:

Originally posted by konata88:
Rey, if I keep money in a 401k bond fund, is that enough? Or are you suggesting an additional cash/fund outside of 401k?

These iBond ladders are inside my 401k still just because the money is there. I added the link in my post. I chose corporate bonds because they pay higher than treasuries. I don’t buy high yield because it defeats the purpose of having the money in safer bonds.

In December of this year, IBDQ will liquidate inside my 401k. I’ll buy XBIL with it. In January, I’ll transfer the first quarter’s worth of XBIL into my regular brokerage account which is a taxable event but I can wait until December to pay the Federal taxes via a withdrawal from my IRA account. If my total for the year is over $150,000 then I have to pay AZ taxes manually as I go. But since it won’t for the next 3 years to maximize the “no tax on social security,” I can also wait until December to pay that.

Then every start of the month, I sell enough to have a month’s worth of cash at the end of the month after planned expenses and put the cash in high yield savings and checking accounts at 4% APY.

Getting ready to retire at the end of December. We have enough money saved to spend about $3K / month of "fun" money to the ripe old age of 82. The fun money is taking into account taxes, food, clothing, utilities, etc. The thing that the wife and I worry about is health care. We're both pretty healthy but 1 disease could change that "fun" money into $0 / month very quickly. Right now we're evaluating Medicare plans AND the supplement plans, Advantage plans are out of the question in our circumstance.

quote:

Originally posted by Powers77:
As simple as I can make it is suck it up and find a good Financial Planner to help you.
Every situation is unique and they can fine tune a plan for you.
Ours costs us less than 1% annually and projects about a 10% return.

That is my problem with financial advisors, you can get 10% just investing in the S&P500. If they cannot beat that, are they really worth it? In your case, the CPA access is worthwhile. I do not see 10% as a good return for a professional who does that for a living. I can and do exceed that with my own investing and have for years now.

I retired in 2011, a few years before SS eligibility. Always kept it pretty simple...

Zero debt (no mortgage, no car payment, nothing. CC paid off monthly.)
Cash in - cash out = 0 or above.
Budget and stick to it.

Took SS and pension as soon as available. Lived frugally off savings for a couple years until then. Now living comfortably off SS and pension income with some left over. Don't need IRA income but our uncle says I have to take it so it's party time.

But, and this is a big BUT...we planned for early retirement for years prior to being able to do so. Never used a financial planner. I learned to read a long time ago.

quote:

Originally posted by mrvmax:

quote:

Originally posted by Powers77:
As simple as I can make it is suck it up and find a good Financial Planner to help you.
Every situation is unique and they can fine tune a plan for you.
Ours costs us less than 1% annually and projects about a 10% return.

That is my problem with financial advisors, you can get 10% just investing in the S&P500. If they cannot beat that, are they really worth it? In your case, the CPA access is worthwhile. I do not see 10% as a good return for a professional who does that for a living. I can and do exceed that with my own investing and have for years now.

Yes the S&P 500 has averaged roughly 10% annually. What I didn't mention is that my current portfolio has a significantly lower Beta than the S&P 500. So, with my current situation I net 10%, have a much lower Beta, have them advising me on tax efficient withdraws, and I don't have to micromanage it myself.
I'm realistic enough to understand that return rate generally comes with some level of risk. In other words there are "no free lunches".
Is my current plan for everyone? No, but that goes to my initial point of working with a financial planner that can personalize a plan that will match your risk acceptance/return expectations.

^^^^^^
Pretty much my situation with my financial advisor. Lower beta than most index funds, and he coordinates with my tax guy. It’s a fee-based account, so no additional charges for trades.

When I interviewed him I asked for references from his current clients. One was a retired financial planner. He obviously could’ve managed his own investments, but was happy to pay to avoid the hassle.

My financial guy is also helpful in other ways. He kept urging me to set up a trust. When I finally accepted that advice he arranged a meeting with himself, a trusted local attorney, a guy from the Trust Department of my bank, and me. All done in one meeting.

Without sidetracking the thread much, can you tell us more about this trust, Pipe Smoker?

A friend of mine has been after me to set up a trust for the house and I feel like I just don't know enough about it to get started. Pros, cons, challenges, rewards?

Thank you.

quote:

Originally posted by vthoky:
Without sidetracking the thread much, can you tell us more about this trust, Pipe Smoker?

A friend of mine has been after me to set up a trust for the house and I feel like I just don't know enough about it to get started. Pros, cons, challenges, rewards?

Thank you.

We haves had a trust since 2017. In our case it's a comprehensive estate planning tool that covers the will, living will etc...
Another bonus with our trust is that it owns ours assets such as our home. It provides an additional degree of liability protection. Also lets your heirs inherit without having to go through probate.
The Will resides within the trust and can be updated if needed.

^^^^^
Also, if I am in a state that I can’t manage my affairs, the Trust Department of my bank will do that for me.

On my demise the Trust Department will convert my physical assets to liquid assets for distribution to my heirs. They won’t have to do anything but scatter my ashes over my parent’s graves.

The Trust name a physician, my trusted GP, to decide if life support should or should not be maintained.

Zero “cons”. The biggest challenge is finding a competent and honest local Trust attorney with moderate fees.

My property tax bill names my trust as owner of my home.

oK guys lets not get into the financial advisor discussion or a deep dive into ladder bonds or how to spend your day. Or doing trusts.

Simple retirement planning idea's that will help us get started and navigate through the learning and application process of retirement.

Diversification is one thing is foundational to retirement planning and one that can be a struggle.

Most do not have any kind of a pension from an employer. Those have all but disappeared. Many public/gov. employees will have their sponsored retirement. But many do not. So there is Social sec. Hopefully some kind of 401k or retirement savings acct.
Owning your own home outright is huge. No mortgage or rent. For most, those are three key pieces to the diversification stool.
If you own additional real estate or rental income that is huge. Have a separate investment account, that would also be a big addition.
Having some kind of long term care plan could be a benefit. But now trying to do something like that has gotten hugely expensive and not very realistic for most.

What else?

There is some rule or guideline for savings ratios like 60% equity (growth), 40% bonds (minimal growth but minimally volatile). Intent is to grow savings while also being somewhat resistant to downturns.

To that end, there is a corollary about having enough in (bond like) savings that are more immune to downturns to survive 5 years (w/o needing to touch growth funds; with 5 years being a reasonable expectation for growth funds to recover).

So something like: savings are 60% equity, 40% bonds AND sufficient funds in bonds to last 3-7 years.

I agree about taking SS early. You "MIGHT" make more later if you are around to do so but if you can't make it now, why wait and kill yourself.

Like others have said, having your home paid off is big and if I may add, possible reducing your home size while you are younger so you don't have to deal with stuff later. Of course with the price of homes now, that might not be so easy.

Most of the "Breakeven calculators" online for SS start age are just taking benefits into account. They do not account for the lost earnings on the foregone amounts in early years, assuming that your planned budgeted cashflow is the same with or without SS. IOW, you're pulling that amount out of other investments.

Only decent argument for delaying is if your spouse will be getting your benefit instead of theirs in the event you pass away first. If that will matter from a cashflow standpoint, have to balance those risks.

Similar to SS timing, the other strategy that has been de rigueur for several years now is actively pursuing pretty high levels of Roth conversions if you have a lot of pre-tax accounts.

Similarly, the breakeven point for these two strategies is very far down the road if you take into account earnings and saved taxes. You are also dramatically increasing your exposure to sequence-of-return risk in your early years.

With a properly designed plan, you're already likely to be leaving a fair portion of starting balance to heirs. I don't wish to increase my risks to save them taxes as part of an estate planning tool.

There has been a MASSIVE shift in the enthusiasm with which this strategy is being recommended now.

quote:

Originally posted by old rugged cross:
oK guys lets not get into ladder bonds.

I would challenge you that ladder bonds is as simple as can be. Can you tell me a better actionable way than to have the money you’ll need in the next 2 or 3 years relatively safe maturing successively into cash just in time for when you need it while also earning at the same time?

quote:

Similar to SS timing, the other strategy that has been de rigueur for several years now is actively pursuing pretty high levels of Roth conversions if you have a lot of pre-tax accounts.

Yes! I think this is very important and depending on your tax situation, it's worth converting IRA funds into your Roth fund. Yes, you pay tax for the conversion, but I believe worth it over time. I convert as much as I can and have for several years. I'll continue until I'm 73...six more years.

I have cash in a vanguard checking account earning 3.5%. It's available anytime, in case of an unexpected expense and is a very small percentage of overall holdings.

quote:

Originally posted by Georgeair:
Similar to SS timing, the other strategy that has been de rigueur for several years now is actively pursuing pretty high levels of Roth conversions if you have a lot of pre-tax accounts.

I think large scale Roth conversions are over-rated. They are also costly to do, because the right way is to pay the tax upfront out of cash, not out of the converted funds, which is a really exposes you to high sequence of returns risk and extends the break even much farther out.

A couple more points:

1) Bonds can and do go up and down just like any other investment such as stocks. This is important to understand, because bond ETFs likewise go up and down. You can lose money in a bond ETF just as easily as in a stock ETF.

But, bonds will be worth their full value at maturity. So, if you keep bonds to maturity you are guaranteed not to lose money. (*This presumes the bonds are good, such as US Government Treasury bonds. Not junk bonds from sketchy sources, which might default.)

Thus, I own US Treasury bonds directly. It is super easy to buy them from your online brokerage, just like buying stocks. I have bonds maturing each month, providing cash to spend. Anyone can do this easily.

2) One of the big benefits of a good financial planner is analyzing the tax implications of various choices. Roth conversions, SS taxes, capital gains on selling your home (and the painful IRMAA it could trigger), future Required Minimum Distributions from IRAs, etc. Aside from if they beat the market returns on the portfolio, they may save you many thousands in taxes.

quote:

Originally posted by Fly-Sig:
1) Retired means you reached financial independence. You don't need to work in order to eat. [i]

Yep. I love what I do, and I don't want to retire. But I do want to be able to retire. Five years to go.