The “I want to retire soon” thread (1 Viewer)

[SFBayDuck]

I guess my reason is twofold. I get to “double dip” and collect my pension plus the salary for that time. And I still want to keep busy and do something, so working during the winter months in Winnipeg will help keep me sane (with a little travel sprinkled in).

Sounds like you played the game well and won! Congrats, and enjoy the 275 days a year of doing what you want to do!

 

[Judge Smails]

People just don’t understand how ridiculously expensive everything is in the Bay Area. I fought and fought for 25 years to keep my financial head above water, making a pretty decent living…..for almost anywhere else in the country.

After 5 years there, we left a situation splitting a modest 2 BR apartment with another couple where they got the master, so our share was "only" $2400/mo, and with a brief stop in Chicago for my wife's grad school (where we had a solo apartment around the same size as the 2 BR for $1600/mo), we ended up in Dallas, where we have a comparatively giant house for a mortgage of only $3400/mo (incl prop tax). That doesnt even include that we get a yard, we have a garage and no longer pay for parking, and our utilities are all cheaper.

Bay Area cost of living is absolutely bonkers.

For those in California, I would take whatever equity you have and move to another state upon retirement. Cali is just too expensive. Your money will buy more elsewhere.

It depends. With Prop 13 our property taxes can be really low if you have lived in the house a long time. We've been in ours 25 years. It's paid off in 3 years (2.75%, $2,400). Probably $1.3-$1.4M. And property tax is about $5K a year. In Texas that would be $22,400 in property taxes every year. Big difference. In retirement income goes down, so CA state taxes hit less.

 

[-OZ-]

won't have this issue but do any parents these days help out with wedding costs or is it pretty much understood that the wedding couple needs to cover the costs themselves?

Our kids aren’t even seriously dating yet (this discussion could derail the retirement thread) but if they do get married we’ll give them a set amount, like $10k as a wedding gift. They can do whatever they want with it. Same as we’re doing with their college.

According to the Brides American Wedding Study, parents cover anywhere between 35 and 42 percent of the cost of their children's weddings

Seems about right, depending on ages and parents finances. When we got married 25 Years ago, we split wedding costs equally 1/3 each - until my parents gifted us our share. But that wedding was around $3000.

 

[-OZ-]

I have two boys (26, 28), one of whom is likely to get married soon. His g/f's family doesn't have much such I expect we'll cover much of the wedding cost. They are pretty frugal, but I like the idea of offering a number and then letting them budget around it to keep expectations in check.

As for retirement, I am financially ready but I'm having trouble with the idea of not working at 58. I'm cautiously targeting Spring of 2025 and plan to take 3-6 months off to reset, get healthy, and re-prioritize what I want to do with my remaining years. After that initial period though, I'm worried that I could fall into a funk and get comfortable doing "nothing", My wife is especially terrified of me sitting around the house all day. It's a bit of a chicken and egg problem where I can't really figure out what I want to do in retirement while I'm still fully consumed with the daily grind of working. I also don't want to inquire about PT work/volunteer opportunities while I'm still employed. Have any of you struggled with this and how did you break out of it?

I can't assuage your concerns but I can only 100% assure that if you want to stay busy in retirement, the amount of volunteer work is endless, and I mean ENDLESS. You do have to break the tie between "work" and getting paid "financially". When you volunteer, you will still be working but the pay comes in the form of helping others.

There are opportunities in almost every town unless you live in the complete sticks, then you might have to drive a bit to find them.

Funny, I was just talking about this with my wife on our walk last night. I had just talked with my parents and my dad’s complaining about being bored resonated. They’re 77 and 80, living in assisted living. He’s got a bad back and mom is blind. So that makes things harder than for some.

I enjoy my job enough but by 60 I’ll be ready to move on. We plan to move when I retire, but only 30-45 minutes away so we don’t completely leave our community. We intend to spend a few months traveling every year, probably with two months in the same place. I think I’ll look at temporary employment while we’re staying there for those months. Possibly in tax preparation, as the area is quite wealthy. Or I’d be fine working at an ice cream parlor or the local fleet feet. We just need to get linked up with the right people. We have a few friends there, so hopefully that helps.

 

[Ministry of Pain]

The guys I know that stay working or busy seem to have less health problems as they age.
I have a friend who is 72, 74 something like that and he still runs a shipping company out of South Florida
He's up every day at 6, office by 7, works until around 4-5 o'clock and his mind is as sharp as anyone I know.
I would like to finally settle into something I know i could keep working at until well past 60-65
I think its better for you mentally than physically, let's be honest, the body gives out over time so you gotta put in some work there if you want to last.

 

[-OZ-]

let's be honest, the body gives out over time so you gotta put in some work there if you want to last.

This is the greatest fear for many. (Us included)

 

[Ministry of Pain]

let's be honest, the body gives out over time so you gotta put in some work there if you want to last.

This is the greatest fear for many. (Us included)

You gotta treat the body like a temple not a woodshed
-Easier said than done, I know

I think anything you can do past 60-65 is positive even if it's volunteer work since some don't really need the money
Staying active is more than just a walk or run daily. You need something that pushes you to get out of bed in the morning

 

[Atomic Punk]

Agreed MoP. Having a purpose is probably the most important thing for sustaining your soul. That purpose doesn’t need to be work. It can be anything. The trick (I think) is to at least give this some thought and incorporate it into your plans. Driving blind will eventually lead to a dead end.

 

[WVU Alum]

I have always known that my purpose is to be retired. I just have to get the preliminaries out of the way to fully realize my true purpose.

 

[Navin R Johnson]

I have always known that my purpose is to be retired. I just have to get the preliminaries out of the way to fully realize my true purpose.

Today I found out what my special purpose is for!

 

[Peggy]

Bump for @Al Czervik since I kinda highjacked the stock tread.

I think generally speaking when you move towards retirement and grow older you adjust percentage down in equities and more into fixed income. That's less risk for less of an investment period (less years till death). But yeah, still keep in mind that the investment period is still 30+ years, hopefully, so you still have time to weather a recession depending on all the different factors.

 

[Chemical X]

So, i will bring this over from my Italian relocation thread. I am staring a retirement in 3 months. Myself and the wife are pursuing Italian visas. She will be able to keep her job and work, but my employer 99.99% sure will not allow me to work 12 months remotely from another country (security issues, as i work for bank). We have been planning this path for a while and i have done the financial planning on my own. Savings, plus a couple of small pensions for me, until likely 65 to cash SSI. I think i am going to begin sliding money into widow stocks with high dividends.

We are not yet 60 but have had parents die early. I don't want to get to the point where we've saved for this magical adventure and then be too old to actually enjoy it. We have no kids, i have no family. Basically, our goal (my goal) is to not leave anything left for her nieces to inherit. I might be able to do some TEFL teaching or tutor english over there, but my employment is likely ending June. I am not formally retiring, i will be resigning without another job.

 

[Peggy]

@Al Czervik
In your hypothetical you had 3 million spread out at 60s, 70s, 80s.

If you thought about it as a 70-30 stocks to bonds in your 60s and 60-40 for your 70s and 50-50 for your 80s that averages out to 60-40 right?

The bigger question for me is what is the percentage of fixed income in today's market. My financial advisor made the comment in our last meeting that he thought the traditional 60-40 split is dead. We're going to discuss more the next time we meet, but, given the performance of bonds in the past couple of decades are the percentages suggested above too conservative? Right now I'm at a 75-25 split and am targeting to retire this year. We've been advising the younger people in our company to start with 90-10, just enough to take advantage of rebalancing. That's a shift from starting out at 80-20 for a higher risk higher return early portfolio,.

 

[-fish-]

So, i will bring this over from my Italian relocation thread. I am staring a retirement in 3 months. Myself and the wife are pursuing Italian visas. She will be able to keep her job and work, but my employer 99.99% sure will not allow me to work 12 months remotely from another country (security issues, as i work for bank). We have been planning this path for a while and i have done the financial planning on my own. Savings, plus a couple of small pensions for me, until likely 65 to cash SSI. I think i am going to begin sliding money into widow stocks with high dividends.

We are not yet 60 but have had parents die early. I don't want to get to the point where we've saved for this magical adventure and then be too old to actually enjoy it. We have no kids, i have no family. Basically, our goal (my goal) is to not leave anything left for her nieces to inherit. I might be able to do some TEFL teaching or tutor english over there, but my employment is likely ending June. I am not formally retiring, i will be resigning without another job.

Congratulations!

 

[Sand]

So hypothetically, if I would retire at 60 with $3 million, budgeting a million for my 60's, 70's and 80's, wouldn't I treat the money I need in my 80's different than the money I need in my 60's (i.e. could be a little more aggressive and weather some ups and downs if I will not be accessing it for another 20 years)?

ETA; Sorry, maybe this is better suited for the "I want to retire soon" thread.

Bringing this over. There are four variables you have to deal with for retirement spending - interest rate risk, market return risk, spending amount, and sequence of returns. You can't do anything about the first two, have good control over spending, and have some control to manage SORR. As far as allocation goes there are studies out there that try to blunt the sequence of returns risk (bond tent article). In general one spends a good bit less in their 80s than in their 60s, so that glidepath in early retirement is so important to protect that it overrides most everything else. In general what has been shown is that going into retirement with more fixed income and then slowly dialing up equities is the more optimal path.

Honestly I wouldn't look at money by decade. I'd look at protecting returns, particularly avoiding horrible returns, over the first 5-7 years of retirement as the high priority. That's going to swing the pendulum way farther than an allocation issue in your 80s.

 

[AAABatteries]

I am not formally retiring, i will be resigning without another job.

Congrats! Out of curiosity, why resign vs. retire? I’m assuming there’s some difference for you to make that decision, no?

 

[Sand]

@Al Czervik
In your hypothetical you had 3 million spread out at 60s, 70s, 80s.

If you thought about it as a 70-30 stocks to bonds in your 60s and 60-40 for your 70s and 50-50 for your 80s that averages out to 60-40 right?

The bigger question for me is what is the percentage of fixed income in today's market. My financial advisor made the comment in our last meeting that he thought the traditional 60-40 split is dead.

Eh - I disagree with this. 60/40 is nowhere near dead. Interest rate risk and their effect on bond funds has been a shock to a lot of folks (me included); that's likely where a lot of the angst is coming from. I have been moving monies into CD ladders, treasuries, and some AA corporate bonds with the intention of holding to maturity. Goal is to get about half of my bond allocation to fixed rate returns instead of being rate change sensitive like funds are. If I had a pot of money dropped on me now that's where I'd put it - lock in those 5% returns going out a while. That's a good return.

 

[Godsbrother]

Just gave my notice to my boss that I will be retiring in July.

 

[Chemical X]

I am not formally retiring, i will be resigning without another job.

Congrats! Out of curiosity, why resign vs. retire? I’m assuming there’s some difference for you to make that decision, no?

i need to check with my HR, but i am under the assumption that if i say "retire", they will automatically start paying me an accruing small pension that i have earned. unless it stops accruing once i leave.....

 

[Desert_Power]

I am not formally retiring, i will be resigning without another job.

I did this today too, but am way too young for formal retirement from this firm.

 

[Sand]

I am not formally retiring, i will be resigning without another job.

Congrats! Out of curiosity, why resign vs. retire? I’m assuming there’s some difference for you to make that decision, no?

i need to check with my HR, but i am under the assumption that if i say "retire", they will automatically start paying me an accruing small pension that i have earned. unless it stops accruing once i leave.....

So by not "retiring" you can defer the pension?

 

[SFBayDuck]

Eh - I disagree with this. 60/40 is nowhere near dead. Interest rate risk and their effect on bond funds has been a shock to a lot of folks (me included), though, and that's likely where a lot of the angst is coming from. I have been moving monies into CD ladders, treasuries, and some AA corporate bonds with the intention of holding to maturity. Goal is to get about half of my bond allocation to fixed rate returns instead of being rate change sensitive like funds are. If I had a pot of money dropped on me now that's where I'd put it - lock in those 5% returns going out a while. That's a good return.

Do you mind sharing your current asset allocation, and what you want it to be at retirement? Just curious what others like you are doing.

At 51 1/2, I'm currently at:
62% US Stocks
10% Int'l Stocks
11.5% Bonds
5% Gold
4% REITs
1.5% crypto
6% cash

I've recently reallocated some from equities into the gold, reit, and bond buckets. And I've upped the % of bonds in my ongoing 401K contributions as well (hopefully buying low down here).

My current thinking in how I'm looking to "de-risk" is that between now and 59 1/2 (8 years) I'd like to get it to something like the below, with the goal to regularly rebalance across these relatively uncorrelated asset classes for the first several years to (hopefully) minimize SORR, and then likely let the equity allocation drift up a bit if things performs anything like they historically have (obviously no guarantees there).

45% Stocks (mostly US)
25% Bonds (mostly long-term treasuries)
10% Gold
10% REITS
2% crypto/other alts
6% cash/short term bonds/CDs,etc

 

[Peggy]

@Al Czervik
In your hypothetical you had 3 million spread out at 60s, 70s, 80s.

If you thought about it as a 70-30 stocks to bonds in your 60s and 60-40 for your 70s and 50-50 for your 80s that averages out to 60-40 right?

The bigger question for me is what is the percentage of fixed income in today's market. My financial advisor made the comment in our last meeting that he thought the traditional 60-40 split is dead.

Eh - I disagree with this. 60/40 is nowhere near dead. Interest rate risk and their effect on bond funds has been a shock to a lot of folks (me included), though, and that's likely where a lot of the angst is coming from. I have been moving monies into CD ladders, treasuries, and some AA corporate bonds with the intention of holding to maturity. Goal is to get about half of my bond allocation to fixed rate returns instead of being rate change sensitive like funds are. If I had a pot of money dropped on me now that's where I'd put it - lock in those 5% returns going out a while. That's a good return.

Thanks, going to be exploring all that a lot more over the next few months. Have any suggestions for good reads on bonds, bond ladders and the like?

And I do expect some large pots of money coming soon.

 

[Chemical X]

I am not formally retiring, i will be resigning without another job.

Congrats! Out of curiosity, why resign vs. retire? I’m assuming there’s some difference for you to make that decision, no?

i need to check with my HR, but i am under the assumption that if i say "retire", they will automatically start paying me an accruing small pension that i have earned. unless it stops accruing once i leave.....

So by not "retiring" you can defer the pension?

i assume yes. this has been my thought. i don’t need the mini pension money right now and if it’s still accruing, i may as well wait to “retire”. i have another bank pension that stops accruing at my age 60. no reason to wait till 63, it won’t grow anymore. i don’t know if my current one will keep growing after i leave yet.

 

[Peggy]

Eh - I disagree with this. 60/40 is nowhere near dead. Interest rate risk and their effect on bond funds has been a shock to a lot of folks (me included), though, and that's likely where a lot of the angst is coming from. I have been moving monies into CD ladders, treasuries, and some AA corporate bonds with the intention of holding to maturity. Goal is to get about half of my bond allocation to fixed rate returns instead of being rate change sensitive like funds are. If I had a pot of money dropped on me now that's where I'd put it - lock in those 5% returns going out a while. That's a good return.

Do you mind sharing your current asset allocation, and what you want it to be at retirement? Just curious what others like you are doing.

At 51 1/2, I'm currently at:
62% US Stocks
10% Int'l Stocks
11.5% Bonds
5% Gold
4% REITs
1.5% crypto
6% cash

I've recently reallocated some from equities into the gold, reit, and bond buckets. And I've upped the % of bonds in my ongoing 401K contributions as well (hopefully buying low down here).

My current thinking in how I'm looking to "de-risk" is that between now and 59 1/2 (8 years) I'd like to get it to something like the below, with the goal to regularly rebalance across these relatively uncorrelated asset classes for the first several years to (hopefully) minimize SORR, and then likely let the equity allocation drift up a bit if things performs anything like they historically have (obviously no guarantees there).

45% Stocks (mostly US)
25% Bonds (mostly long-term treasuries)
10% Gold
10% REITS
2% crypto/other alts
6% cash/short term bonds/CDs,etc

Main retirement account:
30% Large Cap
10% Mid-Small Cap
5% Micro Cap
20% International
10% REIT
20% Bond
5% High Yield Bond

I have a bunch of other smaller accounts that for simplicity just use:
55% Total Stock Market
20% International
25% Bonds

 

[fruity pebbles]

@Al Czervik
In your hypothetical you had 3 million spread out at 60s, 70s, 80s.

If you thought about it as a 70-30 stocks to bonds in your 60s and 60-40 for your 70s and 50-50 for your 80s that averages out to 60-40 right?

The bigger question for me is what is the percentage of fixed income in today's market. My financial advisor made the comment in our last meeting that he thought the traditional 60-40 split is dead.

Eh - I disagree with this. 60/40 is nowhere near dead. Interest rate risk and their effect on bond funds has been a shock to a lot of folks (me included), though, and that's likely where a lot of the angst is coming from. I have been moving monies into CD ladders, treasuries, and some AA corporate bonds with the intention of holding to maturity. Goal is to get about half of my bond allocation to fixed rate returns instead of being rate change sensitive like funds are. If I had a pot of money dropped on me now that's where I'd put it - lock in those 5% returns going out a while. That's a good return.

Seems like an overreaction to me as well based on bonds underperforming the last couple years. If anything bonds look better now imo.

 

[Sand]

@Al Czervik
In your hypothetical you had 3 million spread out at 60s, 70s, 80s.

If you thought about it as a 70-30 stocks to bonds in your 60s and 60-40 for your 70s and 50-50 for your 80s that averages out to 60-40 right?

The bigger question for me is what is the percentage of fixed income in today's market. My financial advisor made the comment in our last meeting that he thought the traditional 60-40 split is dead.

Eh - I disagree with this. 60/40 is nowhere near dead. Interest rate risk and their effect on bond funds has been a shock to a lot of folks (me included), though, and that's likely where a lot of the angst is coming from. I have been moving monies into CD ladders, treasuries, and some AA corporate bonds with the intention of holding to maturity. Goal is to get about half of my bond allocation to fixed rate returns instead of being rate change sensitive like funds are. If I had a pot of money dropped on me now that's where I'd put it - lock in those 5% returns going out a while. That's a good return.

Seems like an overreaction to me as well based on bonds underperforming the last couple years. If anything bonds look better now imo.

I generally agree, though I am putting new monies to work on fixed bonds - 5% is pretty darn good so I'm getting that while the getting is good.

I bought a bunch of TLT back when it was at 85, so I'm not immune from a bet or two on rates. So far so good.

 

[fruity pebbles]

@Al Czervik
In your hypothetical you had 3 million spread out at 60s, 70s, 80s.

If you thought about it as a 70-30 stocks to bonds in your 60s and 60-40 for your 70s and 50-50 for your 80s that averages out to 60-40 right?

The bigger question for me is what is the percentage of fixed income in today's market. My financial advisor made the comment in our last meeting that he thought the traditional 60-40 split is dead.

Eh - I disagree with this. 60/40 is nowhere near dead. Interest rate risk and their effect on bond funds has been a shock to a lot of folks (me included), though, and that's likely where a lot of the angst is coming from. I have been moving monies into CD ladders, treasuries, and some AA corporate bonds with the intention of holding to maturity. Goal is to get about half of my bond allocation to fixed rate returns instead of being rate change sensitive like funds are. If I had a pot of money dropped on me now that's where I'd put it - lock in those 5% returns going out a while. That's a good return.

Seems like an overreaction to me as well based on bonds underperforming the last couple years. If anything bonds look better now imo.

I generally agree, though I am putting new monies to work on fixed bonds - 5% is pretty darn good so I'm getting that while the getting is good.

I bought a bunch of TLT back when it was at 85, so I'm not immune from a bet or two on rates. So far so good.

Me too. I’m on the short end right now. 5% no risk is a nice return imo.

 

[Peggy]

@Al Czervik
In your hypothetical you had 3 million spread out at 60s, 70s, 80s.

If you thought about it as a 70-30 stocks to bonds in your 60s and 60-40 for your 70s and 50-50 for your 80s that averages out to 60-40 right?

The bigger question for me is what is the percentage of fixed income in today's market. My financial advisor made the comment in our last meeting that he thought the traditional 60-40 split is dead.

Eh - I disagree with this. 60/40 is nowhere near dead. Interest rate risk and their effect on bond funds has been a shock to a lot of folks (me included), though, and that's likely where a lot of the angst is coming from. I have been moving monies into CD ladders, treasuries, and some AA corporate bonds with the intention of holding to maturity. Goal is to get about half of my bond allocation to fixed rate returns instead of being rate change sensitive like funds are. If I had a pot of money dropped on me now that's where I'd put it - lock in those 5% returns going out a while. That's a good return.

Seems like an overreaction to me as well based on bonds underperforming the last couple years. If anything bonds look better now imo.

It was a fleeting comment at the end of our last meeting so I plan to explore his thinking more the next time we meet. And I do take all advise with a grain of salt. They are a reputable company hired by a by a large company (that I work for) that provide the service to me and I do like the guy whom I've been working for for a few years now.

I'm more risk adverse than most though so less fixed income is ok for me, but on the other hand, locking in guaranteed 5%+ sounds pretty good too.

 

[Sand]

Eh - I disagree with this. 60/40 is nowhere near dead. Interest rate risk and their effect on bond funds has been a shock to a lot of folks (me included), though, and that's likely where a lot of the angst is coming from. I have been moving monies into CD ladders, treasuries, and some AA corporate bonds with the intention of holding to maturity. Goal is to get about half of my bond allocation to fixed rate returns instead of being rate change sensitive like funds are. If I had a pot of money dropped on me now that's where I'd put it - lock in those 5% returns going out a while. That's a good return.

Do you mind sharing your current asset allocation, and what you want it to be at retirement? Just curious what others like you are doing.

65% US stocks, lots of IVV and QQQ. 10% of that is the old poker account which is in individual stocks. No dedicated international.
5% REITs (should be a bit higher, but it has underperformed lately)
25% bonds
5% cash

I want to be more 65/35, but bonds have underperformed and stocks have done well so it has drifted (my company stock in particular has doubled in the last year).

 

[-OZ-]

You gotta treat the body like a temple not a woodshed

I treat my body like a temple
You treat yours like a tent
But the right word at the right time
May get me a little hug
That's the difference between lightning
And a harmless lightnin' bug

 

[-OZ-]

Me too. I’m on the short end right now. 5% no risk is a nice return imo.

Yeah, I think I’m going to buy some more I bonds in April. Unless someone else has a better suggestion for a safe way to beat inflation. This money is retirement or “next house fund”

 

[SFBayDuck]

(my company stock in particular has doubled in the last year).

Nice, mine too! But it's not a big part of my portfolio yet as I just hit my first year RSU vesting back in November. Have new RSUs vesting quarterly, and am also participating in ESPP at 15% discount. Other than selling some to cover my tax bill next month, I'm hoping to let it build a bit over the next year or two and turn it into part of an early retirement/bridge to 59 1/2 portfolio. Concentrated position, obviously, but taking the risk to see if I can shave off a couple of years of working. If that doesn't work out it won't change my long-term (post 59 1/2) plan at all, just what happens between now and then.

 

[Gatorade]

Just found this thread. I'm 66 and have been retired for three years and loving every minute of it. My health is much better now since I can get plenty of rest. Yoga, walking and bike rides keep me active. Gave up FF for a few years before I retired, but started back up now that I have time . In three dynasty leagues now and enjoying research since I don't watch college football at all. Happy to be here .......

 

[Peggy]

I don't count my company's stock (~30% of my portfolio) in my percent allocations. It's privately held with virtually zero risk. It's another reason I can be more risk adverse though. But as soon as I retire it turn into cash and causes a big tax bill.

 

[Gatorade]

I don't count my company's stock (~30% of my portfolio) in my percent allocations. It's privately held with virtually zero risk. It's another reason I can be more risk adverse though. But as soon as I retire it turn into cash and causes a big tax bill.

Can't you roll it into something else to put off the tax hit ? At least some of it.

 

[Peggy]

I don't count my company's stock (~30% of my portfolio) in my percent allocations. It's privately held with virtually zero risk. It's another reason I can be more risk adverse though. But as soon as I retire it turn into cash and causes a big tax bill.

Can't you roll it into something else to put off the tax hit ? At least some of it.

No, it's (most of it) is bought with after tax cash so it's the same as a regular taxable brokerage account with stock gains that you must sell when you leave the company.

That is until recently, we figured out how to use After Tax 401K contributions rolled out into a Roth and then purchase the stock offerings there. I soooooo wish they had that as an option when I was younger. Not only can they keep it in a retirement fund after they retire, it's in a Roth that they'll never pay capitol gains on.

Some of our younger employees that I am mentoring are going to be filthy rich before they even know what happened. One because they are paying attention to saving and investing money now, in their mid-twenties (I had no clue when I was that age). And two, they have this investment vehicle that's going to tax shelter huge privately held stock gains.

I just looked it up, I guess the mega backdoor roth "loophole" wasn't tax law until 2014 (we didn't figure it out as a company until 2018 or 2019, many companies still haven't) So, I was destine to miss a decade plus of early compounding years anyway.

 

[⚡DEADHEAD⚡]

So a question on a backdoor Roth IRA. Do I need to open a new account every time I want to do this? (Household income exceeds the limit).

 

[Sand]

(my company stock in particular has doubled in the last year).

Nice, mine too! But it's not a big part of my portfolio yet as I just hit my first year RSU vesting back in November. Have new RSUs vesting quarterly, and am also participating in ESPP at 15% discount. Other than selling some to cover my tax bill next month, I'm hoping to let it build a bit over the next year or two and turn it into part of an early retirement/bridge to 59 1/2 portfolio. Concentrated position, obviously, but taking the risk to see if I can shave off a couple of years of working. If that doesn't work out it won't change my long-term (post 59 1/2) plan at all, just what happens between now and then.

 

[Peggy]

So a question on a backdoor Roth IRA. Do I need to open a new account every time I want to do this? (Household income exceeds the limit).

No.

First make sure you don't have any existing non-employer IRAs. If you do the tax liability Is across total IRA dollars and probably isn't worth it, just keep contributing to the regular IRA.

Open both an IRA account and Roth IRA account. I do this at BoA(Merrill Edge) where I do my banking so the initial transfer is easy, push of a button.

Contribute to the IRA account (I can transfer right from my checking or saving account). Then call the bank the next day and tell them you want to do an IRA to Roth IRA convertion.They will move the money from the IRA to the Roth IRA for you.

Leave the IRA open with a few pennies in it so you can repeat the process next year without opening another account.

When you do the initial deposit you will have a choice between a deductible or non-deductible contribution. Choose non-dedectible because you're using after tax dollars (you can always fix this when you file your taxes if you mess it up). When you do the conversion they will ask you if you want tax withheld, you do not because it's after tax so you've already paid taxes.

You have until April to contribute for 2023, 6,500 (7,500 if age 50). You have until next April to do 2024, $7,000 (8,000 age 50), but you might as well do it now to get it invested.

 

[Peggy]

It's per individual too so you can do one for yourself and one for your wife. That's $28,000 total for the two years ($30,000 if both age 50).

 

[Mookie]

It's per individual too so you can do one for yourself and one for your wife. That's $28,000 total for the two years ($30,000 if both age 50).

I'm assuming one has to set up two separate Roth accounts - one for wife and one for me? And a Roth is not subject to capital gains?

On a broader note, this market run up is surely going to result in another wave of retirements. Looking at my situation, my hope was to retire at 58 in a year, but now it looks like I can retire today if I want! I'm not emotionally ready to leave my job and I'd be leaving a lot of pension $ on the table if I quit today, but it sure is nice knowing that I will be financially independent no matter what happens. The golf course beckons....

 

[Peggy]

It's per individual too so you can do one for yourself and one for your wife. That's $28,000 total for the two years ($30,000 if both age 50).

I'm assuming one has to set up two separate Roth accounts - one for wife and one for me? And a Roth is not subject to capital gains?

On a broader note, this market run up is surely going to result in another wave of retirements. Looking at my situation, my hope was to retire at 58 in a year, but now it looks like I can retire today if I want! I'm not emotionally ready to leave my job and I'd be leaving a lot of pension $ on the table if I quit today, but it sure is nice knowing that I will be financially independent no matter what happens. The golf course beckons....

Yes and correct. Congrats.

 

[IvanKaramazov]

I'm enjoying the posts in here about asset allocation. My wife and I followed a boring strategy for wealth accumulation: we just invested the same amount every month into an S&P 500 index fund and spent the next 30 years not worrying about it. That worked out pretty much exactly the way the math said it was supposed to, so no complaints there. When were in our 40s, we didn't worry about being 100% in equities -- that's fine IMO. But now that we're both in our 50s and looking to retire before age 60, we should really start moving some funds into bonds or similar securities.

Nothing about this is especially mysterious, but it involves a lot a money so I feel like I should really be doing some homework here. Is there a particular book or website people recommend that might point me to things I need to be thinking about that I might be overlooking? What I mean is, I don't need anybody to explain to me the difference between a 30-year Treasury bond and a municipal bond. But I am kind of interested in how a reasonable person might structure two Roths plus a taxable account as they get on the retirement glide path. I've been focusing entirely on asset accumulation, and I've never given all that much thought to what happens when I need to draw on those assets for income, or when I need to spend them down.

 

[Peggy]

I'm enjoying the posts in here about asset allocation. My wife and I followed a boring strategy for wealth accumulation: we just invested the same amount every month into an S&P 500 index fund and spent the next 30 years not worrying about it. That worked out pretty much exactly the way the math said it was supposed to, so no complaints there. When were in our 40s, we didn't worry about being 100% in equities -- that's fine IMO. But now that we're both in our 50s and looking to retire before age 60, we should really start moving some funds into bonds or similar securities.

Nothing about this is especially mysterious, but it involves a lot a money so I feel like I should really be doing some homework here. Is there a particular book or website people recommend that might point me to things I need to be thinking about that I might be overlooking? What I mean is, I don't need anybody to explain to me the difference between a 30-year Treasury bond and a municipal bond. But I am kind of interested in how a reasonable person might structure two Roths plus a taxable account as they get on the retirement glide path. I've been focusing entirely on asset accumulation, and I've never given all that much thought to what happens when I need to draw on those assets for income, or when I need to spend them down.

I meet with a financial advisor 4 times a year and have read a dozen or so books. For asset allocation I like; All About Asset Allocation by Richard Ferri. For drawdown and spend during retirement I haven't found the perfect if this, then do that, flowchart that guides you through all the scenarios. Just a bunch of different strategies from all over the place. I mean it's so situational we can't even come to a consensus whether it's better to draw SS as soon as you can or wait. But if I had to sum up cash flow during retirement in two words it would be "tax avoidance". I'm going to retire a few years before 59 1/2 too and my rough drawdown plan is:

1 - Live off cash and taxable investment accounts first at a minimum bridging the gap to 59 1/2.
2 - Because of #1 we will have zero to low income, just paying some capital gains. So, during those years roll chunks for 401k and IRA into Roth by paying the lowest taxable income then and can then grow tax free thereafter.
3 - When it comes time to start drawing from retirement accounts - drawdown any regular 401k and IRA remaining that counts as income first, but, balancing it with non-taxable if it makes sense to stay in a lower tax bracket.
4 - If I get smart enough maybe there is fixed income each month from bond ladders and dividends.
5 - Required mandatory withdrawals (RMDs) for 401K and IRA (and SEP) start at age 70.
6 - Start collecting wife's SS early and postpone mine to age 70. That way she get's my highest possible payout if I die before she does.
7 -HSA accounts are second to last because no RMDs and can leave to wife tax free. Other heirs would pay tax as income.
8 - Roth very last accounts to take from, no RMDs and can leave to heirs tax free.

I'm 100% sure I'm screwed up in some of that planning. I'd appreciate any recommendations for books and websites too particularly management of cashflow during retirement and fixed income strategies.

 

[brun]

I'm enjoying the posts in here about asset allocation. My wife and I followed a boring strategy for wealth accumulation: we just invested the same amount every month into an S&P 500 index fund and spent the next 30 years not worrying about it. That worked out pretty much exactly the way the math said it was supposed to, so no complaints there. When were in our 40s, we didn't worry about being 100% in equities -- that's fine IMO. But now that we're both in our 50s and looking to retire before age 60, we should really start moving some funds into bonds or similar securities.

Nothing about this is especially mysterious, but it involves a lot a money so I feel like I should really be doing some homework here. Is there a particular book or website people recommend that might point me to things I need to be thinking about that I might be overlooking? What I mean is, I don't need anybody to explain to me the difference between a 30-year Treasury bond and a municipal bond. But I am kind of interested in how a reasonable person might structure two Roths plus a taxable account as they get on the retirement glide path. I've been focusing entirely on asset accumulation, and I've never given all that much thought to what happens when I need to draw on those assets for income, or when I need to spend them down.

I meet with a financial advisor 4 times a year and have read a dozen or so books. For asset allocation I like; All About Asset Allocation by Richard Ferri. For drawdown and spend during retirement I haven't found the perfect if this, then do that, flowchart that guides you through all the scenarios. Just a bunch of different strategies from all over the place. I mean it's so situational we can't even come to a consensus whether it's better to draw SS as soon as you can or wait. But if I had to sum up cash flow during retirement in two words it would be "tax avoidance". I'm going to retire a few years before 59 1/2 too and my rough drawdown plan is:

1 - Live off cash and taxable investment accounts first at a minimum bridging the gap to 59 1/2.
2 - Because of #1 we will have zero to low income, just paying some capital gains. So, during those years roll chunks for 401k and IRA into Roth by paying the lowest taxable income then and can then grow tax free thereafter.
3 - When it comes time to start drawing from retirement accounts - drawdown any regular 401k and IRA remaining that counts as income first, but, balancing it with non-taxable if it makes sense to stay in a lower tax bracket.
4 - If I get smart enough maybe there is fixed income each month from bond ladders and dividends.
5 - Required mandatory withdrawals (RMDs) for 401K and IRA (and SEP) start at age 70.
6 - Start collecting wife's SS early and postpone mine to age 70. That way she get's my highest possible payout if I die before she does.
7 -HSA accounts are second to last because no RMDs and can leave to wife tax free. Other heirs would pay tax as income.
8 - Roth very last accounts to take from, no RMDs and can leave to heirs tax free.

I'm 100% sure I'm screwed up in some of that planning. I'd appreciate any recommendations for books and websites too particularly management of cashflow during retirement and fixed income strategies.

Great info.
FWIW - I think the RMD age has changed to 72 (73 if you reach age 72 after Dec. 31, 2022).

 

[SFBayDuck]

I'm enjoying the posts in here about asset allocation. My wife and I followed a boring strategy for wealth accumulation: we just invested the same amount every month into an S&P 500 index fund and spent the next 30 years not worrying about it. That worked out pretty much exactly the way the math said it was supposed to, so no complaints there. When were in our 40s, we didn't worry about being 100% in equities -- that's fine IMO. But now that we're both in our 50s and looking to retire before age 60, we should really start moving some funds into bonds or similar securities.

Nothing about this is especially mysterious, but it involves a lot a money so I feel like I should really be doing some homework here. Is there a particular book or website people recommend that might point me to things I need to be thinking about that I might be overlooking? What I mean is, I don't need anybody to explain to me the difference between a 30-year Treasury bond and a municipal bond. But I am kind of interested in how a reasonable person might structure two Roths plus a taxable account as they get on the retirement glide path. I've been focusing entirely on asset accumulation, and I've never given all that much thought to what happens when I need to draw on those assets for income, or when I need to spend them down.

I meet with a financial advisor 4 times a year and have read a dozen or so books. For asset allocation I like; All About Asset Allocation by Richard Ferri. For drawdown and spend during retirement I haven't found the perfect if this, then do that, flowchart that guides you through all the scenarios. Just a bunch of different strategies from all over the place. I mean it's so situational we can't even come to a consensus whether it's better to draw SS as soon as you can or wait. But if I had to sum up cash flow during retirement in two words it would be "tax avoidance". I'm going to retire a few years before 59 1/2 too and my rough drawdown plan is:

1 - Live off cash and taxable investment accounts first at a minimum bridging the gap to 59 1/2.
2 - Because of #1 we will have zero to low income, just paying some capital gains. So, during those years roll chunks for 401k and IRA into Roth by paying the lowest taxable income then and can then grow tax free thereafter.
3 - When it comes time to start drawing from retirement accounts - drawdown any regular 401k and IRA remaining that counts as income first, but, balancing it with non-taxable if it makes sense to stay in a lower tax bracket.
4 - If I get smart enough maybe there is fixed income each month from bond ladders and dividends.
5 - Required mandatory withdrawals (RMDs) for 401K and IRA (and SEP) start at age 70.
6 - Start collecting wife's SS early and postpone mine to age 70. That way she get's my highest possible payout if I die before she does.
7 -HSA accounts are second to last because no RMDs and can leave to wife tax free. Other heirs would pay tax as income.
8 - Roth very last accounts to take from, no RMDs and can leave to heirs tax free.

I'm 100% sure I'm screwed up in some of that planning. I'd appreciate any recommendations for books and websites too particularly management of cashflow during retirement and fixed income strategies.

Thanks, @Peggy ! Can you talk more about your financial advisor? Is it someone you've worked with for years? Someone that focuses on retirement that you engaged as you were preparing to retire? And what do they specifically do for you - asset allocation, asset location, stock picking, tax planning, etc?

 

[Terminalxylem]

I'm enjoying the posts in here about asset allocation. My wife and I followed a boring strategy for wealth accumulation: we just invested the same amount every month into an S&P 500 index fund and spent the next 30 years not worrying about it. That worked out pretty much exactly the way the math said it was supposed to, so no complaints there. When were in our 40s, we didn't worry about being 100% in equities -- that's fine IMO. But now that we're both in our 50s and looking to retire before age 60, we should really start moving some funds into bonds or similar securities.

Nothing about this is especially mysterious, but it involves a lot a money so I feel like I should really be doing some homework here. Is there a particular book or website people recommend that might point me to things I need to be thinking about that I might be overlooking? What I mean is, I don't need anybody to explain to me the difference between a 30-year Treasury bond and a municipal bond. But I am kind of interested in how a reasonable person might structure two Roths plus a taxable account as they get on the retirement glide path. I've been focusing entirely on asset accumulation, and I've never given all that much thought to what happens when I need to draw on those assets for income, or when I need to spend them down.

The people at Boggleheads.com seem pretty sharp, and more than willing to answer questions specific to your financial situation.

I’m in a similar boat as you, but far more ignorant of finance. Really need to get motivated soon.

 

[Peggy]

I'm enjoying the posts in here about asset allocation. My wife and I followed a boring strategy for wealth accumulation: we just invested the same amount every month into an S&P 500 index fund and spent the next 30 years not worrying about it. That worked out pretty much exactly the way the math said it was supposed to, so no complaints there. When were in our 40s, we didn't worry about being 100% in equities -- that's fine IMO. But now that we're both in our 50s and looking to retire before age 60, we should really start moving some funds into bonds or similar securities.

Nothing about this is especially mysterious, but it involves a lot a money so I feel like I should really be doing some homework here. Is there a particular book or website people recommend that might point me to things I need to be thinking about that I might be overlooking? What I mean is, I don't need anybody to explain to me the difference between a 30-year Treasury bond and a municipal bond. But I am kind of interested in how a reasonable person might structure two Roths plus a taxable account as they get on the retirement glide path. I've been focusing entirely on asset accumulation, and I've never given all that much thought to what happens when I need to draw on those assets for income, or when I need to spend them down.

I meet with a financial advisor 4 times a year and have read a dozen or so books. For asset allocation I like; All About Asset Allocation by Richard Ferri. For drawdown and spend during retirement I haven't found the perfect if this, then do that, flowchart that guides you through all the scenarios. Just a bunch of different strategies from all over the place. I mean it's so situational we can't even come to a consensus whether it's better to draw SS as soon as you can or wait. But if I had to sum up cash flow during retirement in two words it would be "tax avoidance". I'm going to retire a few years before 59 1/2 too and my rough drawdown plan is:

1 - Live off cash and taxable investment accounts first at a minimum bridging the gap to 59 1/2.
2 - Because of #1 we will have zero to low income, just paying some capital gains. So, during those years roll chunks for 401k and IRA into Roth by paying the lowest taxable income then and can then grow tax free thereafter.
3 - When it comes time to start drawing from retirement accounts - drawdown any regular 401k and IRA remaining that counts as income first, but, balancing it with non-taxable if it makes sense to stay in a lower tax bracket.
4 - If I get smart enough maybe there is fixed income each month from bond ladders and dividends.
5 - Required mandatory withdrawals (RMDs) for 401K and IRA (and SEP) start at age 70.
6 - Start collecting wife's SS early and postpone mine to age 70. That way she get's my highest possible payout if I die before she does.
7 -HSA accounts are second to last because no RMDs and can leave to wife tax free. Other heirs would pay tax as income.
8 - Roth very last accounts to take from, no RMDs and can leave to heirs tax free.

I'm 100% sure I'm screwed up in some of that planning. I'd appreciate any recommendations for books and websites too particularly management of cashflow during retirement and fixed income strategies.

Thanks, @Peggy ! Can you talk more about your financial advisor? Is it someone you've worked with for years? Someone that focuses on retirement that you engaged as you were preparing to retire? And what do they specifically do for you - asset allocation, asset location, stock picking, tax planning, etc?

Sure.

The firm is hired by our company. Large privately owned (employee owned stock) company. For about two decades now we've been so big that we have a too much cash problem. As a result, instead of cash sitting in the bank making low interest, which doesn't help the stock price and returns, they end up buying back stock. Basically giving cash to the shareholders. The company realized that people needed help investing the cash so they hired this company.

The basic service is free (paid for by the company) which is 4 one hour meetings a year to review accounts, propose solutions, give guidance etc. And the advisor assigned to you will always answer questions by email. We can elect to pay more to upgrade the service which is more frequent meetings, they will do your taxes for you (instead of just tax advise) and some other stuff. The highest service is to completely take control of your investing and everything that comes with it, taxes, filing etc. which I think amounts to 1% cost and 1 million minimum. More millions the rate probably drops a little bit.

I've been using the free service for about 5 years (had the same guy who I like) and after I retire I would definitely consider paying for it myself to keep the 4 meetings as it's helped me a ton and I always have new questions. I think it costs the company around $2,500 per person a year. It's perfect for someone who wants to have control of everything, but, wants to avoid mistakes and have someone there to give solid answer to your questions and concerns. A few examples how he has helped me:

- I know there are online versions of the monte carlo cash flow analysis, but, these guys have a great piece of software that generates a 30 page report that covers everything. They take all your income and account numbers and then run "what if" scenarios. Dozens of charts to digest in each report. It takes into account everything from varying interest rates to cost of long term care.

- Review asset allocation and suggest changes. For example, I used to own more AMZN and GOOG than I should, but, he suggested that I could take that risk if I wanted to because it was offset by more than the same amount company stock that was super safe and high returns. As compared to say the rule of no more than one asset being more than 5% total portfolio. Then when I decided to get out of individual stocks he reinforced my thinking and gave suggestions on funds and percentages.

- Before I started meeting with him I had screwed up the Roth contribution rule for my wife because she had money in an existing IRA which made me go back and amend 3 years of taxes. He looked over what I put into turbo tax to make sure I did all those amendments correctly. Note: Turbo Tax didn't have the calculation exactly right for doing those amendments out of the box in some of those years.

- Tax harvesting strategy in taxable accounts at the end of every year.

For our next meeting:

- Rerun cash flow analysis with current numbers and assumptions.
- Discuss plan in taxable retirement account: Using municipal bonds to avoid taxes. Plan on how to move out the individual stocks while minimizing capitol gains.
- Questions I have on reinvesting dividend strategies and rebalancing in tax vs tax advantaged.
- Review my allocations after everything I did at the end of the year.

I'd be happy to let you know what firm it is by PM.

 

[Sand]

I'm enjoying the posts in here about asset allocation. My wife and I followed a boring strategy for wealth accumulation: we just invested the same amount every month into an S&P 500 index fund and spent the next 30 years not worrying about it. That worked out pretty much exactly the way the math said it was supposed to, so no complaints there. When were in our 40s, we didn't worry about being 100% in equities -- that's fine IMO. But now that we're both in our 50s and looking to retire before age 60, we should really start moving some funds into bonds or similar securities.

Nothing about this is especially mysterious, but it involves a lot a money so I feel like I should really be doing some homework here. Is there a particular book or website people recommend that might point me to things I need to be thinking about that I might be overlooking? What I mean is, I don't need anybody to explain to me the difference between a 30-year Treasury bond and a municipal bond. But I am kind of interested in how a reasonable person might structure two Roths plus a taxable account as they get on the retirement glide path. I've been focusing entirely on asset accumulation, and I've never given all that much thought to what happens when I need to draw on those assets for income, or when I need to spend them down.

I meet with a financial advisor 4 times a year and have read a dozen or so books. For asset allocation I like; All About Asset Allocation by Richard Ferri. For drawdown and spend during retirement I haven't found the perfect if this, then do that, flowchart that guides you through all the scenarios. Just a bunch of different strategies from all over the place. I mean it's so situational we can't even come to a consensus whether it's better to draw SS as soon as you can or wait. But if I had to sum up cash flow during retirement in two words it would be "tax avoidance". I'm going to retire a few years before 59 1/2 too and my rough drawdown plan is:

1 - Live off cash and taxable investment accounts first at a minimum bridging the gap to 59 1/2.
2 - Because of #1 we will have zero to low income, just paying some capital gains. So, during those years roll chunks for 401k and IRA into Roth by paying the lowest taxable income then and can then grow tax free thereafter.
3 - When it comes time to start drawing from retirement accounts - drawdown any regular 401k and IRA remaining that counts as income first, but, balancing it with non-taxable if it makes sense to stay in a lower tax bracket.
4 - If I get smart enough maybe there is fixed income each month from bond ladders and dividends.
5 - Required mandatory withdrawals (RMDs) for 401K and IRA (and SEP) start at age 70.
6 - Start collecting wife's SS early and postpone mine to age 70. That way she get's my highest possible payout if I die before she does.
7 -HSA accounts are second to last because no RMDs and can leave to wife tax free. Other heirs would pay tax as income.
8 - Roth very last accounts to take from, no RMDs and can leave to heirs tax free.

I'm 100% sure I'm screwed up in some of that planning. I'd appreciate any recommendations for books and websites too particularly management of cashflow during retirement and fixed income strategies.

A couple notes - before 65 one can try to use taxable monies to control their income so that they qualify for ACA subsidies. Also an HSA can be used for Medicare premiums - that's what I plan for most of my monies in that account to go to.