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How does it look?
Old 03-31-2018, 12:04 PM   #1
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How does it look?

Married 51, dw 44, two kids 7 and 9.
Net worth:
Cash/savings 300K
IBond 134K
Tax Deferred (IRA) 840K (Stock ETF: 730K, Reits:85K, Preferred 25K)
Taxable accounts: 5.76M, (Stock ETF:3.3M, Bonds: 1.33M, CD: 375K, Reits:340K, Pref:395K)
Kids accounts: 110k (all stock ETF)
HSA:9K
House: $1.35M with 645K mortgage.(7,200 monthly P&I)
Private Equity: 0-1.5M
No 529 plans
Effective Fed rate 12.9%, State 5.4%.
Interest & Div from all accounts about 190K
Outside of mortgage and taxes, we have the following big expenses:
Health:21K
RE :14.5K
Travel:10K
Kids:6K
Utilities:5K
Food: 9K
Insurance 4K
House and Household 5K

Any recommendations or advice? Thanks
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Old 03-31-2018, 12:15 PM   #2
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Interesting numbers.

But what are your goals?
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Old 03-31-2018, 12:21 PM   #3
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We have been Fired for years now. Our concern is to make sure we have enough to last us. Also wanted to see how our investment allocation looks. Are the assets in taxable account vs tax deferred look ok? Should we move more bond or reits into tax deferred? Would you change anything?

Thanks
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Old 03-31-2018, 02:45 PM   #4
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Looks to me as though your tax-deferred accounts will not be needed and will just grow until you hit RMDs.

With your kids that young, I'd personally go for the 529s to shelter the growth in them from taxes.

Doesn't look like you will suffer from large CG distributions from your taxable accounts, which cost us a lot in taxes in recent years.

Like joeea mentioned, a lot depends on your goals, both now and after the kids are on their own.
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Old 03-31-2018, 04:06 PM   #5
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Change tax-deferred to all bonds and make commensurate chages to taxable accounts (from bonds to equities) in the name of tax efficiency? Converts ordinary income to tax preferenced income. If you use TT you could use What-If worksheet to see if such a change would save you taxes.
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Old 03-31-2018, 04:09 PM   #6
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I like bonds in tax deferred, since bond income is mostly taxed at regular income rates, right? Or are these munis? And if you move some stock to taxable, dividends and gains on those are taxed at 15%. If you keep them in tax deferred, when you withdraw they are taxed at regular income rates. If that's 12 or 15% it's not a problem, but with your numbers it may be a higher rate?

I like REITs in tax deferred or Roth because they make taxes more complicated in taxable, IIRC from when I had them.

No idea on your overall numbers if you don't give all of the expenses, but unless you have a whole bunch of smaller expenses making a big number, I'd be shocked if you aren't in great shape.
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Old 03-31-2018, 04:10 PM   #7
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Any recommendations or advice? Thanks
A little sriracha sauce might help.

So, if you set aside money for the kids college education and weddings, and an emergency fund, what % of your remaining portfolio do you need to withdraw to fund 100% of your budget, including mortgage and taxes?
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Old 03-31-2018, 04:42 PM   #8
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We have been Fired for years now. Our concern is to make sure we have enough to last us.
Looks okay to me.

Why no 529s?
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Old 03-31-2018, 05:26 PM   #9
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We have been Fired for years now. Our concern is to make sure we have enough to last us. Also wanted to see how our investment allocation looks. Are the assets in taxable account vs tax deferred look ok? Should we move more bond or reits into tax deferred? Would you change anything?

Thanks
Sounds like your int and div covers all your spending, plus then you have your 7m+ portfolio principle. I would think this should last you even for a 50 year retirement.
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Old 03-31-2018, 07:29 PM   #10
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Thanks for all the inputs. I will take a look at 529 plan to see if it works for us. Also, will move bonds into tax deferred as bonds mature. The big current and future expense for us is the cost of medical which is moving up fast. And the cost of collage for two kids. We both have chronic illness that most likely will get worse over time. We don't have company pension or healthcare and there is always a risk for market crash. When one does not have wages or pension, it does feel scary at times.
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Old 03-31-2018, 08:10 PM   #11
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It looks likes you are probably paying a ton in taxes that you can easily avoid.

Quote:
Taxable accounts: 5.76M, (Stock ETF:3.3M, Bonds: 1.33M, CD: 375K, Reits:340K, Pref:395K)
...
Interest & Div from all accounts about 190K
In my taxable account I avoid interest, dividends (especially non-qualified dividends), and capital gains (especially short-term capital gains). If I need money to spend, then I sell something for a long-term capital gain which is either offset by previous tax-loss harvesting or I get a lower tax-rate on it. Return of capital is also tax-free.

So to me, your taxable account looks like a nightmare of taxes and tax inefficiency.
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Old 03-31-2018, 09:16 PM   #12
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.... When one does not have wages or pension, it does feel scary at times.
You'll get uesd to it.
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Old 04-02-2018, 06:41 AM   #13
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I know exactly how you feel, scary at times, as we have very similar circumstances. I think your allocation looks pretty good and could only recommend a few tweaks. Just curious on private equity, what does 0-1.5 mm mean?

Also, in terms of college expense, are you planning to foot the bill? I have three kids, 8, 7, and 5 and state schools will run $250k each roughly. Kids can be very expensive and I am actually budgeting a lot more than $250k each, but I plan to help them with a house down payment etc. Also, how much will a wedding cost 20 years from now?

I continue to work in a consulting role because I like the extra income even though the fircalc is flashing retire. For example, buying new bedroom furniture, ours is 20 years old, new leather chairs etc. I am a bit younger, 46 but stuff does wear out. I also have a new roof budget built in, my boiler is fairly new and I can replace water heaters dishwashers etc.

I guess my point is, we have a lot of time and stuff wears out, and retiring with kids is far different than when they are independent economic entities!
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Old 04-02-2018, 06:53 AM   #14
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OP, you look golden as long as your expenses run what you say they are. Live off the income from taxed accounts. Covert all tax deferred accounts to Roth slowly keeping conversions in lower tax brackets once you stop working. If your private equity can pay you guaranteed payments which can be considered earned income and can be contributed to Roth IRAs on an ongoing basis.
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Old 04-02-2018, 09:25 AM   #15
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I know exactly how you feel, scary at times, as we have very similar circumstances. I think your allocation looks pretty good and could only recommend a few tweaks. Just curious on private equity, what does 0-1.5 mm mean?

Also, in terms of college expense, are you planning to foot the bill? I have three kids, 8, 7, and 5 and state schools will run $250k each roughly. Kids can be very expensive and I am actually budgeting a lot more than $250k each, but I plan to help them with a house down payment etc. Also, how much will a wedding cost 20 years from now?

I continue to work in a consulting role because I like the extra income even though the fircalc is flashing retire. For example, buying new bedroom furniture, ours is 20 years old, new leather chairs etc. I am a bit younger, 46 but stuff does wear out. I also have a new roof budget built in, my boiler is fairly new and I can replace water heaters dishwashers etc.

I guess my point is, we have a lot of time and stuff wears out, and retiring with kids is far different than when they are independent economic entities!
Thanks for the reply. Yes, Kids are a very expensive. And I would feel a lot more comfortable when kids are all growth up and don't need any financial assistance. When I get to 65, I will worry less as I can get Medicare and at 70, get a little steady income from SS. It is hard to value the investment in PE, it can be worth zero or wishfully over $1.5M.

Based on this recent article, the average cost of wedding is $33K. We didn't spend much money on our wedding or college. But I guess time and circumstances have changed.

The average wedding cost in America depends on where you live - Business Insider

You mentioned few tweaks for our investment allocation, what would change?
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Old 04-02-2018, 09:30 AM   #16
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OP, you look golden as long as your expenses run what you say they are. Live off the income from taxed accounts. Covert all tax deferred accounts to Roth slowly keeping conversions in lower tax brackets once you stop working. If your private equity can pay you guaranteed payments which can be considered earned income and can be contributed to Roth IRAs on an ongoing basis.

Thanks. Yes, we are keeping an eye on expenses. I wish our housing cost was lower. But good schools around here are all very expensive places. Once the kids are done with school, we most likely will move to a low cost area with warm weather. Good point on converting to Roth during low tax rate years.
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