Messages

1

Early Retirement / Re: How to convert investments to cash

« on: February 16, 2023, 10:15:17 AM »

Thanks, Jeremy. It appears I am not much wiser, but we can agree on older part, for sure.
You make a lot of great points and I think the main take home message is to play the long game here and not get too caught up in the details. I also need to embrace the reality that “some days you win and others you lose,” but in general it is always up and to the right, which is a long-term win. And, I think you are right that I am trying to use my imaginary dowsing rods instead of systematically playing the probabilities.
So, I think here is my plan moving forward:
1)   Go with an 80/20 bond allocation and two years of cash/rolling treasuries. Since I will start getting a pension at 55 and have others in the future I think heavier stocks with a cash cushion will suit me quite well. I’ll reallocate once or twice each year.
2)   Move all of my TIRA VBTLX to VTSAX since I likely won’t tap them for 8 more years.
3)   Sell some of my Brokerage VBTLX (probably 15k) to build cash and harvest the loss in my final year with a larger salary. I can put these in short term rolling treasuries to get a better return since I don’t need them immediately.
4)   Stay in the 12% tax bracket by funding my 457 this year.
5)   If I do decide to sell my house and live in a van for a couple years I will move bonds to equities and live off the cash and perhaps withdraw up to the 12% tax bracket each year (to replenish cash for a down payment on new house) and keep a low-cost ACA plan. Any cash above the down payment I will invest, of course.
Thanks for the clear advice and calling me out for my slow, ominous decent into market timing. Your willingness to help the masses here is really a kind and generous gesture. And I’ll do my part to help other on the path to FI, when I can, to pay it forward.

2

Early Retirement / Re: How to convert investments to cash

« on: February 05, 2023, 06:50:07 PM »

Hi Jeremy. Thanks for the reply.
Since my last post the following has changed:
1)   Not only did my portfolio not grow, it dropped in the neighborhood of 75k. This is fine, and I know it will happen again, but I decided not to stop work during a down market when I can work another year and increase my portfolio, pension, and SS and at the same time as saving a year of spending in a down market.
2)   My home value also dropped about 75k and I’m undecided on staying here or doing the van thing for a couple years. But even if I do get a van, I will eventually buy a home again and will likely need all the equity for a new home purchase within likely 3 years. So, I am not really counting on that money as I will need it in liquid form to put a down payment on a new home.
3)   I discovered I am subject the Windfall Elimination Provision (WEP) with my SS which has decreased my SS benefit. I’ve spent endless phone calls and emails with folks the SSA and cannot get a straight answer to figure out what I will get exactly. [An aside: I know how to calculate the WEP PIA by hand but no one can tell me what number they use as “non-covered pension” amount required to calculate the WEP PIA. I have an option of collecting as low as 520/mo at 55 or up to 1050/mo at 65; my choice. The difference in my SS is $300/mo depending on which number I use. I cannot get anyone to tell me how they decide what number to use (oddly, given it is exactly the same pension). Talking with SSA folks is about the most infuriating experience one can have. So, if you want get really irritated give ‘em a call and ask a question. 😊] That said, until I know otherwise, I am planning to pull the 520/mo (which will also give me a 30k lump sum payout) at 55 with the hope that I will get a bigger SS check. And given the need for some cash in the early years, it might be better plan anyway to get 30K plus 520/mo starting at 55. But that choice will reduce my post-70 pensions+SS, giving me (a worst case scenario) closer to 36k a year and not 50k. If I'm guessing correctly, it might be as high as ~41K.
So, multiple FIRE calculators suggest I am in the 90+% range of success for the whole ride. And I also have lots of things I can do to mitigate a 1965-like situation.
I am mostly worried at this point, particularly given the hit both stocks and bonds took this last year, about how many years of cash/treasuries I should have when I walk away in June of 2024 to be safe from the sequence of returns risks in my available funds before 59.5. In general, my lack of post-tax money throughout retirement concerns me a bit regarding taxes, particularly if I run into any large expenses.
So, with all that, do I need to do anything in particular in the next 1.5 years with rearranging allocations to treasuries or bonds (or do I just leave stuff in equities?) to have the best available cash and tax situation when I walk. Should I be moving money to cash from my bonds/equities with my current allocations? Is the idea of loss harvesting and reallocating for 2 or three years of treasuries just spinning my wheels or a good idea? Or do I just sit on what I have where it is and withdraw regardless of the market?
Thanks again for any thoughts. Your help is always very much appreciated.

3

Early Retirement / How to convert investments to cash

« on: February 04, 2023, 11:50:40 AM »

Hi all,
I am hoping to retire in August of 2024. I will be 53. I think my portfolio and pensions/SS will be in a good place to walk. But I have very little cash and I am worried about having enough if I get the worst sequence of returns issue right when I retire.
I will make 78K this year and then 50k in 2024 before leaving work in June. I spend about 46K a year (with very cheap and good quality health insurance as a teacher that I will lose when I leave). My state tax is 9%. I plan on needing 50K/yr each year in retirement with higher insurance costs.
•   At 55 I will get 520/mo pension with a lump sum payout of 30K.
•   At 65 I will get another pension of 1240/mo with a 54,000 lump sum (rolled to my IRA).
•   At 70 I get SS at 1500/mo.

My portfolio allocations are attached.
 
I have been investing a lot and probably waited a bit too long to build up cash for my first few years and am probably too heavy in bonds (especially right now!).
Would love feedback on what I plan to do.
Plan for cash this year:
•   Put 17k to my 457 (bond fund) this to keep salary very close to the 22% tax bracket and pair this with selling 17k of my brokerage bond fund (at a 3K loss) to add 17k to treasuries in my brokerage (and harvest the 3K loss to add any salary to 457 or treasuries). I’m also maxing an HSA.
•   Add a 5K RMD from my inheritance IRA to treasuries as well.
•   This year and next: I will continue to loss harvest bond funds to buy treasuries next year (market conditions allowing) to get the 50K cash for the first year and then an additional 14K for when I turn 55 and maybe some more for a third year. (In my 55 year I will start my first pension (6.2K/yr) and get the lump sum 30K… so that is effectively 36K cash). Then, at 56 I will see what I have and hope that bonds are more useful.
So, I find this all kind of confusing and wonder a few things:
•   Is the plan good enough to succeed? Will my available/accessible money last me until 59.5?
•   How much cash/treasuries do I actually need when I walk away? And how much in bonds?
•   Should I put my 457 money in bonds or equities? Bonds are feeling terrible right now.
•   Should I shift away from all bonds throughout my portfolio to treasuries (for example in my inherit IRA) and shift back when the treasuries stop returning 4.5% +?
•   And big picture: How do you decide in retirement when the market is “good enough” to pull funds from equities and bonds to replenish cash? Or do you just make an objective annual rule and follow it no matter what?
Thanks for any thoughts.

4

Early Retirement / Re: Taking the dive is terrifying!

« on: November 19, 2021, 08:35:28 AM »

This is incredibly helpful, Jeremey! Thanks so much. I am so impressed with how dialed in you are with every detail.

Of course, holding off on the IRA while I empty the Inheritance IRA and 457 make total sense. And trying to get the lowest tax bracket and especially the lowest MAGI for the ACA saves a lot of money too. I haven’t thought enough about the ACA savings. And I am regretting my lack of brokerage and Roth funds to help offset the taxable funds I have saved.

So, I’ve been going over my spreadsheet with these new ideas and adjusting all the variables to see various outcomes of taxes, penalties, ACA costs, accumulating funds and depleting funds. And I’m fretting over keeping money from the house sale for a future down payment or using it to buy a van outright (or should I finance the van?) or dumping into the brokerage so I can use it to keep the MAGI down as long as possible. And then my eyes wander to the total value of the portfolio over time and I can see that only spending 49K a year will never get me to die with zero…or anywhere even close. I’ll be so busy saving several thousand dollars a year that I’ll end up with an oversized portfolio while  withhold from myself some the possibilities of reaping enjoyment from spending a bit more.

And so I’m back to the odd conundrum of being a lifelong frugal saver who can’t seem to see that at some point I need to stop skiing up hill; that it’s ok to turn around and glide down, to reap the rewards of that money I have earned to buy experiences, and even some material things, after years of hard work saving it all up. Will it raise my MAGI and make my insurance more costly? Yes. Will my taxes be higher? Yes. Will my portfolio decrease? Yes. But isn’t that the point? Didn’t I do all this to get this exact freedom?

And I’m further tormented over the reality that each year forward will get harder physically and cognitively and that many great experiences that I could enjoy now with my money, which I earned at great sacrifice, have a limited time to be accomplished. And perhaps I should do the hard work of de-accumulation and pay a few more taxes, shell out more for health insurance, and pay a few penalties here and there so I can realize some of those opportunities that are fast disappearing.

So, now I’m starting to say to myself, try this: spend 70 or 75K for a year for a year or two and see what parts you enjoy and hate. Evaluate the portfolio at that point and decide how to proceed. I think I can find the sweet spot that way and settle in.  And then I chuckle as I think, ok if I spend 75K a year, how can I minimize my taxes? How can get my MAGI down? Should I start rolling into Roths? Should I keep putting money into my HSA? What about capital gains and loss harvesting? So, I guess it doesn’t matter what I free myself to spend, I will fret none the less. Ha! I guess we can never escape our true selves.

In the end, what I likely will do is splurge in some years, spend done down the portfolio for experiences, and then toggle back on others (likely in response to the market). And I will never actually get to zero, but I would like to see the portfolio get cut in half or less before entering the full pension and SS stage. That way I have a cushion for emergencies and some peace of mind but know I enjoyed my savings. I suspect at 70 and beyond I’ll have slowed considerably and not need nearly what I will in my 50s.

What I do know for sure after reading so much on this website and reading the forums is that Jeremy is a savant with all he knows, and a mensch with all he shares. It’s a pretty incredible resource.  Thank you, sir. I’m planning to apply soon for an individual consult to find a strategy for hitting that sweet spot.

5

Early Retirement / Taking the dive is terrifying!

« on: November 16, 2021, 11:22:46 PM »

Hi Everyone.
I want retire from teaching at a college. It’s been a great career but it’s time for me to leave. I’m 50. I hope to leave in June 2023 at just shy of 52.
I am comfortably living off about 40K/yr now but hope to spend more like 50k-60k/yr in the first decade of retirement. I want to maximize spending (and do more charitable giving) while I still feel good (and do some things I have denied myself to this point) so plan to taper spending as I age. I’d rather scrape by when I am older and I don’t want to move any more. I am very physically active and spend a lot time exercising and doing outdoor activities. I will be paying more for an ACA plan than my excellent school insurance but I’m thinking I can get a decent plan for 600-800/mo. And I may sell my home in Oregon (invest most of the money) and use some of the money to buy a van for travelling the West (and staying with family and friends periodically) for a year or two before settling down somewhere in the west (CO, UT or NV) with lower state taxes and closer to family. I’d likely live in a modest condo or small house that is not in a big city. I did a lot of international travel when I was younger and got that out of my system so local travel to outdoor destinations will be mostly what I do. I also have no kids and hope to spend most of my money by the time I die. The book “Die with Zero” speaks to me. 😊
Assets at 52 (including additions @6% growth):
•   IRA/403b/IAP (rolled upon quitting in one IRA): 615K
(50% VTSAX, 25% VBTLX, 25% REIT & DIV Index funds)
•   Inheritance IRA: 150K
(100% VTSAX)
•   457: 61K
(100% Lg Cap Index)
•   Roth: 32K
(100% VTSAX)
•   Brokerage: 83K
(50% VTSAX, 50% VBTLX)
•   HSA: 15K
(100% VTSAX)
•   Home equity: 300K
Two Pensions (with COLA)
•   #1: 1050/mo starting at 62years old
•   #2: 1050/mo starting at 65
SS (using the “My PIA” calculator):
•   1850/mo starting at 70
My plan upon quitting is to withdraw in the following way:
IRA: 30,000
Inheritance IRA: 10,000
457: 10,000
Roth: 7,000
Brokerage: 6,000
Total: 63,00-->After taxes: 54,094
IRA penalty: -3,000 (Ouch! I know! But the SEPP doesn’t give me enough money (especially if I split it into two IRAs) and doesn’t allow flexibility for extra withdrawals or Roth rollovers…and I still should have plenty of money even with penalties… I think)

I will use the bonds when the market is low and stocks if it is high. And probably move a year (or two?) into cash soon.
Questions:
•   Is the plan sound? My calculations show plenty of money but I keep doubting I haven’t made a huge error somewhere.
•   Are my allocations ok? Do I need more in bonds and cash?
•   Is the withdrawal strategy reasonable?
•   Can spend more money earlier? (I do want die with no money after all!)

I’m learning that saving is easy, it’s taking the leap and figuring out how to spend it that is truly terrifying!
Thanks in advance for any thoughts!