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General Discussion / Re: College Student Questions
« Last post by gocurrycracker on July 26, 2020, 06:51:31 AM »
Welcome - college is a good time to get started, congratulations.

>Since I have never invested before, I know that I am probably likely to lose it nerve-wise in the event of crashes.
Maybe, maybe not.

>Question: other than simply dumping my money into VTI and not worrying about it, what can I do to?
You can have a different asset allocation (include bonds)

>Are large banks (for example Fidelity and Schwab) actually different when it comes to buying the same stock?

--> I am not a Taiwanese citizen - my wife is. I don't really understand your question here, sorry. We pay $25/month/person for insurance so it is below my radar for things to worry about.
General Discussion / College Student Questions
« Last post by jxyz13 on July 25, 2020, 12:38:22 PM »
I am a college student projected to graduate with no debt. Because of corona, savings, and having recently learned that I should be investing instead of leaving the money lying around, I have capital to put in the market. I've read The Simple Path to Wealth and some other things. Since I have never invested before, I know that I am probably likely to lose it nerve-wise in the event of crashes.
Question: other than simply dumping my money into VTI and not worrying about it, what can I do to? I know I should know better than to try to time the market, and I don't want to play emotionally with Covid and trying to "wait for the second crash". Is there something I can do to help manage emotional risk? (short of sitting tight and telling myself not to worry)
Are large banks (for example Fidelity and Schwab) actually different when it comes to buying the same stock? For example, if I have a (no fee) brokerage account with both, will buying the same share of S&P or whatever fund be different? Do you know if any of these offer automatic purchasing options so I can take advantage of dollar cost averaging?
Specifically since you, sir, have said you're a Taiwanese citizen - are there any benefits to new citizens that I should be aware I can take advantage of? (I don't mean basic rights like voting, living there, etc., more like financial.) Also, how do you navigate the 3-month minimum NIH fees every time you visit? It seems that becoming a citizen who visits may be quite expensive if I don't actually live there.
Thanks very much.
Early Retirement / Re: FIRE planning with expected inheritance
« Last post by gocurrycracker on July 22, 2020, 11:20:36 PM »
I would put together some marginal rate guesstimates for the different life stages -

One possibility:
- present day (24%)
- father's lifetime (32%+)
- pre-retirement (still working, SECURE Act 10 year withdrawals) (35%+ )
- retirement (pre-Medicare) (27%+ - 12% federal, 10-15%+ ACA)
- retirement (post-Medicare) (12%+ - but probably higher due to intentionally larger Roth conversions)
- RMD to age 80 (12%+, optimistically) --> (higher with Social Security)
- RMD 80+ (22%+)

Assuming some level of accuracy here, you won't have a marginal rate of <24% until age 65.

Based on the math in the 401k too big posts, if your TIRA accounts are under ~$2.0 million at that point, you could potentially pay <22% going forward. (25 years of 7% real growth = today's TIRA value of ~$375k.)

Early Retirement / Re: FIRE planning with expected inheritance
« Last post by glocklt4 on July 22, 2020, 02:03:37 PM »
Thank you very much for your reply.  I agree, with a conservative expected inheritance included we are already ~40x FI, but continuing our plans as if we aren't and aiming for 30-35x in ~7yrs.   The retirement date is driven partially by benefits rather than investment goals only.  If we make it through all 7 of those working years without both of my parents passing, then inheritance anytime after that would push us to increase our expected yearly retirement spending since we'd be something like 60+x and the $ would outlive us with no children, even with significant philanthropy.  Estate tax will not apply luckily (unluckily? haha).

I misspoke before - we were actually in the 24% bracket in 2019, and should continue to be until the expiration of TCJA, then 2 years of whatever is in store after that.  My parents currently cycle between 22-24% depending on investment income, so working with a moving target of 2% difference probably isn't worth the effort, but as you point out that could jump up to 32-35% when my father has to file single - a much bigger deal.  It is difficult for them to estimate taxable income prior to EOY, but I will try and push them get a better idea.  Additional Roth conversions this year and next year (if my mom makes it into 2021) may be a good idea, especially if they will be in 22% or less. 

Agree on planning in stages.  It's obviously a delicate subject with my mom's health deteriorating, but an important one I've been trying to find some time to discuss with them.  Not a bad idea to investigate my mom bequeathing to us directly, but they do have a trust setup which might complicate that.

Appreciate the links - I did find the one about GCC Jr which was very helpful, and am trying to comprehend the 401k too large articles.  Healthcare is indeed a major concern in general after I stop working (giving up completely free healthcare will be pretty difficult!), and we have more to figure out there with expectations of living outside the US a while as well.  We'll worry more about that closer to retirement time.  Good idea about Roth conversions post-medicare.

BTW, we have the same plan as you buying a sailboat, which is another reason we are significantly increasing our taxable savings.  Boat purchase and 10-20% value in expenses per year adds up!
 ASA 101/103/104 complete and doing 114 this weekend, and we have bareboat charters setup for the next couple of years and will continue to do that at least once a year as we finish out our careers!  Charter in BVI a couple years ago was a bad idea haha :).

Thanks again for your advice!
Early Retirement / Re: FIRE planning with expected inheritance
« Last post by gocurrycracker on July 20, 2020, 01:35:16 AM »
Hi glocklt4

I would think of it this way - for retirement math purposes, start including your expected inheritance $ as part of your overall portfolio. (What you are doing.)

If you are half way to 25x/33x or whatever now, then with inheritance is sounds like you are already FI.

Presumably you will inherit less than ~$22 million (or lower threshold for many States) so there is no estate tax.

Tax minimization is largely a game of marginal rates - for all IRA funds, paying 22% now is the same as paying 22% 50 years from now.

If IRA totals are within a stone's throw of the thresholds discussed in this post, then you have some opportunities to save a few percent in taxes.

If the whole family is on the tax minimization team, then you can "plan" actions in stages:
- present day
- father's lifetime
- pre-retirement (still working)
- retirement (pre-Medicare)
- retirement (post-Medicare)

Some of these stages could overlap. The word plan is in quotes because at best we are guessing.

Present day
You pay Y (22%? or whatever.) Your parents pay X%. If X < Y, your parents can do larger Roth conversions now.
One example: how I am thinking of it for GCC Jr

Father's lifetime 
With the same number of assets but filing as single, RMDs will be taxed at a higher marginal rate.

One way to reduce the impact could be to have your Mom bequeath funds to you directly - may or may not be tax advantageous.

Retirement - pre-Medicare
If you are on the ACA for health insurance, those mandatory withdrawals could be expensive, tax wise

Retirement - post-Medicare
With no ACA, now can be a good time to boost Roth conversions to arrive at RMD age with smaller Traditional accounts
Early Retirement / FIRE planning with expected inheritance
« Last post by glocklt4 on July 15, 2020, 02:35:27 PM »
I know that GCC doesn't talk much about inheritances because he is not going to receive one, but I am trying to make sure that wife and I are planning for early retirement properly knowing that I will likely receive one within the next 15-25ish years.  I believe based on the types of accounts to be inherited and recent SECURE Act changes, it could change our retirement savings plans now.

I'm 39, wife is 36, no children (and no plans to).  We are planning to retire early in 7yrs when I turn 46, but it's likely that we'll both have some light contract work for a few years after this since we both love what we do (just not 55+hrs a week!).  We are half way to our retirement savings goal at this point but have recently ramped up our savings rate significantly to finish out in 7yrs.   

  • Roth 401k/IRA - 47%
  • Trad 401k/IRA - 48%
  • Taxable - 5%

Thanks to a generous 1:1 401k match and the ability to do mega-backdoor contributions, I will obviously continue maxing out all 401k possibilities until retirement, but we have plans to significantly increase taxable accounts so that we can use that (plus some light contract work) to bridge the gap to me turning 59.5.  I have almost always contributed to a Roth 401k to keep Traditional/Roth in somewhat of a 50/50 split due to 1:1 match, but we have been considering switching contributions to traditional due to 22% marginal rate (even though we've been at that or higher over the past 8yrs) and so that we can put more into taxable.  If we do this, we'll still increase Roth funds with backdoor Roth IRA's and mega-backdoor Roth 401k though.

Obviously no bets on anything in the future, but from inheritance I'd expect to receive (in today's $ equivalent of our current balances):

  • Roth IRA - ~100% of our current Roth balance.  Inherited Roth IRA now has 10yr RMD thanks to SECURE Act, but no tax so will withdraw at end of year 10.
  • Trad IRA - ~75% of our current Trad balance (though most variable since parents have RMDs from it now).  Inherited Trad IRA also has 10yr overall RMD thanks to SECURE Act, and it seems most reasonable to withdraw evenly each year if that lowers marginal rate.
  • Taxable - ~2000% of our current taxable balance.

Wife and I are currently planning our retirement savings as if there is no Social Security and no inheritance, but it seems like ignoring the likely inheritance means we could cause some potentially bad tax situations where we could not do free/low tax Roth conversions of traditional accounts as GCC constantly reminds we should do in early retirement. 

A lot of this really seems to depend on timing of when my parents pass away.  Unfortunately my mother has a rare aggressive cancer and likely has around 6mo, and my father is 75.  At some point we have to face reality.  If my father lives another 15 years to 90, that leaves 8 years from our retirement to inheriting investments that could heavily increase our taxable income (ex: Trad IRA RMDs, dividends/gains on taxable acct).  I don't know that I would have enough time to do Roth conversion ladders of most of our traditional acct $ by the time any inheritance comes our way, so it makes me wonder about contributing much more to traditional accounts with a plan to convert to Roth for free.

Thoughts/Suggestions on how to approach this?  Thank you!
Journals / Re: Retirement in the rearview mirror
« Last post by LK in WA on July 08, 2020, 06:10:35 PM »
Having the hobby make some $$ would be great!  Hopefully I gain enough skills to make that happen.  So far it has been a lot of fun.
Journals / Re: Retirement in the rearview mirror
« Last post by gocurrycracker on July 05, 2020, 08:44:39 PM »
I like the combo of outdoor activities (hiking) and learning new stuff - and maybe making some $?
Journals / Re: Retirement in the rearview mirror
« Last post by LK in WA on July 04, 2020, 09:13:19 AM »
On nice weather days, my focus has been outside.  There are still projects to do but I have pulled enough weeds and trimmed enough branches that I can now see the end in sight.  Well, not the end, but a shift into maintenance mode instead of catch up mode.  Another week of nice weather and we will be firmly into maintenance mode.

With that, focus is shifting to inside the house.  I bought those light fixtures I wanted.  I still haven’t changed them out…baby steps. Unfortunately, with the weather nice, I don’t want to work on these indoor projects.  I would rather be doing fun things outside.  Not more “work”.

I have started exploring things to do.  Recreational things to do.  Because of the covid, I have pretty much spent my first month and a half just working on projects around the house.  There was a need and I couldn’t do much else because of the social distancing.  Well, we still have the social distancing but I am branching out!

Now…what to do?  Hiking, biking, beach combing, camping (though that might be too popular this year to find much peace and quiet), rockhounding, gold prospecting, etc.  Over the years I have done plenty of hiking, biking, and camping.   What is new is the beach combing, rock hounding, and gold prospecting. These are all things I was interested in but never had the time to devote to it.  I like the idea of coupling something physical like hiking with collecting rocks and minerals.  It requires me to learn a new skill, learn about geology, and get some exercise.  Probably get some great photos too!

Because I am a complete newbie when it comes to the prospecting, combing, hounding…I have been doing some research.  Watching you tube videos, reading DNR notices, buying small amounts of pay dirt to practice with, etc.  I have found some gold and silver as well as some garnets and crystals in the pay dirt that I bought.  That is pretty exciting.  There are places within a half hours drive from my home where I can go and get my own pay dirt.  Next week I plan to go try my hand at it.  Surely I have learned something actionable from all those videos!  Wish me luck   8)

A note about the Covid-19.  Cases are on the rise again, many states have seen spikes in new cases.  WA is seeing rising cases but not so many as to be considered a “spike”.  People have Covid-fatigue and have been out doing things that cause more spread.  US-Canada border is still closed.  They will review again on or around July 21.   
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