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General Discussion / Re: Guidance for One Getting Started Very Late
« Last post by gocurrycracker on May 21, 2022, 09:14:10 AM »
Paying off a house and sending 4 kids to college is a heck of an accomplishment, congrats!


The difference with a later starting date is you have less time for compound interest to do its thing. Otherwise the principles are all the same.

Key principle: If your expected withdrawal marginal tax rate is higher than your current tax rate, then it is better to contribute to Roth accounts. If the opposite, then contribute to Traditional.


Most of your SS income will be tax-free. (I assume the $2,200/month is for both of you, either from spouse's own benefit or 50% spousal benefit.)
That puts a tax rate of 0% on a large chunk of other income due to standard deduction. 0% tax space shrinks a bit when the inevitable happens (switch to single from MFJ.)

With 0% tax rate in the future and 12% tax rate now (MFJ, $50k gross income) that says to contribute to Traditional accounts (take the tax deduction now), e.g. 403b


8% is a bit optimistic for real returns for 20 years, I'd plan for a percent or two lower - which means more of your nest egg needs to come from direct savings.

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General Discussion / Guidance for One Getting Started Very Late
« Last post by mjwillyone on May 19, 2022, 11:40:19 AM »
Hello all!

I would love some suggestions for my particular situation and one which I am sure many older people who have stepped into the FIRE zone can attest to:  Starting late to investing enough.

My question is:  what investment accounts are best used for someone who is NOT planning to retire early but wants to pay $0 in tax??  When I retire I do plan to retire .. no further income other than what comes in from social security and my investments.

I am 54 (almost 55) and have about $19,000 in retirement accounts.  My house will be paid off in December and my wife and due to our excellent health our renew for 20 years of term life (even at our ages) is a mere $45 for $300,000 of coverage.  We have no debt and my credit rating is 790.   I have just received 3 credit cards in an attempt to make use of sign-on bonuses for travel that we would like to do (Chase Sapphire Preferred, Southwest Rapid Rewards business card and Southwest Rapid Rewards personal card - I am about to get the companion pass with the amount of sign-on bonuses I will soon be getting.)

My question is this:  My plan is to retire at 67.  I want to live on $50K each year from investments.  I will draw $2,200 each month ($26,400 yearly) from social security.   This leaves $23,600 to take care of on my own.  At an 8% rate of return for 12 years, and needing $590,000 ($23,600 x 25) I need to set aside $2,437 each month. 

What's the best investment location for me?  I have access to 403(b), Roth 403(b), IRA, Roth IRA, and a standard investment account.

It is unfortunate that I didn't come across those in the FI community sooner (Go Curry Cracker, Mr. Money Mustache, J.L Collins, etc.)  I chose, instead, to pay for all of my 4 children's college educations (with them working to do the same) and to pay off my house and keep other debt as zero while making about $50,000 per year. 

Thank you to all who can give insight on this issue.

Mike

PS ... I would love to see spreadsheets created in the FI community that would address these type of questions.   I have created a spreadsheet that can help some .. but I don't have enough of a handle on the particulars of when one type of investment would be better suited to someone (based upon age, or other criteria) to build a spreadsheet that would actually give me greater clarity.
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Taxes / Re: Minimizing tax
« Last post by gocurrycracker on May 09, 2022, 01:10:17 AM »
Congratulations on your big gain!

Unfortunately there isn't much you can do here beyond paying the tax and moving on.

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Taxes / Minimizing tax
« Last post by aswam on May 08, 2022, 02:23:42 PM »
Hi,

I have a large amount in one stock that I wanted to move to VTSAX.  If I sell all that stock at once  I will be netting ~300K capital gains on top of my 250K W2. I am in a 7% state tax. Also, I don't want to wait for a long time. What should be my strategy?

Thanks in Advance.

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Taxes / Re: Spiked or smoooooth income for ACA?
« Last post by theupperwestmike on May 07, 2022, 02:33:49 PM »
Thanks!
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Taxes / Re: Spiked or smoooooth income for ACA?
« Last post by gocurrycracker on May 05, 2022, 01:49:02 PM »
Thanks Mike

I don't plan to do this ever again. It was a 1-time thing as we transitioned from a low-tax to a not-low-tax environment.
Details here: https://www.gocurrycracker.com/harvesting-massive-capital-gains/

I'll be 48 this year, just 11.5 years away from unrestricted access to IRAs. Between this one-time $150k cap gain and debt (https://www.gocurrycracker.com/sweet-sweet-debt/) we shouldn't have any issues hitting 59.5 without big tax bills or ACA premiums.

If that weren't the case, the ACA tick tock can be a good approach as long as there are no underlying (high cost) health issues.
https://www.gocurrycracker.com/the-obamacare-tick-tock/
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Taxes / Spiked or smoooooth income for ACA?
« Last post by theupperwestmike on May 04, 2022, 01:26:28 PM »
https://www.gocurrycracker.com/go-curry-cracker-2021-taxes/

Brilliant stuff as usual. I admire your creativity!

One of your moves got me thinking: your tax gain harvesting of $150k to ease the next few years of income for ACA (and other benefits). Assuming tax and ACA laws are unchanged, do you think you'll repeat something like that every few years - where you have one low/no ACA subsidy year followed by two or three generous subsidy years - or do you think that once you've run out of that full basis $150k, you will sell/convert a little each year going forward?

If not for your household situation, can you think of an early retiree household type where a spiked income pattern makes a lot of sense?
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General Discussion / Re: Beneficiary or Living Trust
« Last post by gocurrycracker on March 25, 2022, 11:14:57 AM »
I would discuss this with the person that helped you create the living trust.

Trusts add a layer. More layers = more complexity. I don't know or understand all the details of trusts. Worst case, trusts have more aggressive RMD rules than an inherited IRA (5 years vs 10.)

If your estate is worth ~$22 million+ (married couple) then the estate will pay some taxes (maybe state level estate tax on smaller amounts.) Else there are no taxes on an inherited Roth - the taxes have already been paid by definition of a Roth-type account (assuming meets 5-year rule.)

Yes, same 10 years to distribute funds from an inherited IRA, both Roth and Traditional. With traditional, the beneficiary will pay taxes at their rate. With Roth, no taxes (taxes paid previously at  legator's rate.)
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General Discussion / Re: Roth or Taxable Account
« Last post by gocurrycracker on March 25, 2022, 10:19:14 AM »
Maybe. This is the general idea behind these posts:
https://www.gocurrycracker.com/roth-sucks/
https://www.gocurrycracker.com/roth-hypocrisy/

Something to consider:
IRA contribution limits are ~$6k/person/year. If you are aiming for investments worth $1 million+, where you put $6k at the end probably doesn't matter that much
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General Discussion / Roth or Taxable Account
« Last post by Paul1011 on March 24, 2022, 04:38:24 PM »
Sorry if already asked, but could not find it.

If we plan on "trying" to stay in the 0% capital gains rate upon retirement, wouldn't it make sense now to put more into our taxable account versus our Roth IRA account?
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