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Old 08-24-2019, 07:41 AM   #21
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Originally Posted by potto0213 View Post
CindyBlue, I think you are getting a lot of good , well intentioned advice but in my opinion, you really don't need to change anything. The target fund you are in is a solid choice and requires no action on your part. You could move money around from tax-deferred (your 403b) to taxable to improve your tax situation but in the big picture that is only nibbling at the edges. Trying to do too much may just cause you needless anxiety. You are in reasonably good shape with your pension, SS, and 403b. The enemy of a good plan is insisting on the perfect plan. I would just leave things be and try to relax. You've earned a good retirement now go out and enjoy it.
On the first part, I agree... the difference between the 2025 and 2020 funds are so minor that it is just a matter of preference.

On the second part about tax strategy nibbling at the edges, WADR, we don't know enough about the OP's tax situation or 403b to make a valid conclusion. Depending on her other sources of income she could withdraw or convert up to $51,375 a year before her pension starts and pay little in tax... $4,543 or 8.8% if she had NO other income... a savings of $6,760 compared to paying 22% later. While she probably has other income so her withdrawals/conversions and annual savings would be lower, it still might be more than chump change. Now OTOH, if she'll be in the 12% tax bracket once her pension and SS are online then I agree it would be nibbling at the edges.
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Old 08-24-2019, 07:52 AM   #22
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I just want to chime in that there is "conservative" asset allocations like the 2020 fund
and then there is Conservative with a 2015 fund that is more bonds than stocks
and then there is me... with most of my $ in a 401K stable value fund, CD's, and "high" (a relative term) interest savings accounts and almost no stocks (as a percentage).

You mentioned going through the 2008 crash without getting smacked. As you noted, its a little different watching your account balance fall by 40% while you still have a job earning income vs. when you're relying on your now reduced savings for income.

I recommend starting with assessing your tolerance for risk... If you saw headlines that markets had tanked and your balance was down 40%, would you still sleep well at night?
There are assessment tools such as this one:
https://personal.vanguard.com/us/FundsInvQuestionnaire

Depending on your answers, it might recommend 100% bonds.
Google around and run several... they're free.


The stable value fund I'm in only pays 3%, but it didn't drop a dime in 2008 (or year end 2018). But before you go uber-conservative you need to be aware that safer investments do have inflation risk. It depends on how much savings you have, what pensions/SS/etc will be coming, etc. as to if you can afford less risky investments that might not do well with inflation.
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Old 08-24-2019, 08:13 AM   #23
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Originally Posted by mrfeh View Post
You shouldn't be considering just the AA of your 403b, you should be looking at the overall AA of your portfolio.

I suggest you start here: https://www.bogleheads.org/wiki/Bogl...g_start-up_kit
This is great! I've started reading it and I'm learning a lot. Thanks!
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Old 08-24-2019, 08:18 AM   #24
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No, not necessarily. One thing you could do is to take that withdrawal money that you have taken out to save taxes on and invest it in the same 2025 fund, but in a taxable account rather than the tax deferred 403b..... you save on taxes now compared to later because you are in a low tax bracket now but get the same growth. Then use you taxable account savings for spending as planned. You're just moving money from a tax-deferred pocket to a taxable pocket but saving taxes in the process.

Or better yet, invest some of your taxable account in domestic equities like Total Stock.... where qualified dividends and long-term capital gans can be tax-free if your income is $51,575 or lower (in 2019) or only 15% if your income is higher.... and make corresponding adjustments in your 403b (like shifting to the 2020 Fund)... you can end up the the same asset allocation/risk but more tax-free or low tax income.

Another option is to rather than withdraw the 403b money, do what is called a Roth conversion....you would move the money subject to low taxes from the 403b to a Roth IRA and invest the Roth IRA in the same 2025 fund.... after that you never pay taxes on the growth in the Roth IRA whereas you eventually pay taxes on the growth in the 403b.
This is an interesting idea!

Question: At what point is my income "low"? Do I have to wait until the end the year when taxes are due to prove I have no income? Because for the next four months I'll have no income at all. After that, I'll have the pension, and 14 months after that, I'll have social security. But those four months of no income - is that enough to have "low" taxes? How is this figured?

I'm sorry to bother you all what are probably really basic questions, and you folks have been so patient with me! Thank you!
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Old 08-24-2019, 08:33 AM   #25
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Originally Posted by potto0213 View Post
CindyBlue, I think you are getting a lot of good , well intentioned advice but in my opinion, you really don't need to change anything. The target fund you are in is a solid choice and requires no action on your part. You could move money around from tax-deferred (your 403b) to taxable to improve your tax situation but in the big picture that is only nibbling at the edges. Trying to do too much may just cause you needless anxiety. You are in reasonably good shape with your pension, SS, and 403b. The enemy of a good plan is insisting on the perfect plan. I would just leave things be and try to relax. You've earned a good retirement now go out and enjoy it.
Thanks! I suspect that this is what I want to do, but I'm afraid to "blow it" now that I am actually earning no money. This is scary! There was a great quote in the bogleheads article that mrfeh sent me (thanks, mrfeh!), by Jonathan Clements

"If you want to see the greatest threat to your financial future, go home and take a look in the mirror.

I don't want to "blow it." I have saved money all my life, and would like to save money on fees etc. too, but if I don't know what I"m doing and, as you mentioned, it would cause so much stress because I don't know what I'm doing, then it might be worth it to just pay the fees, since no one here seems to think they are too high, and just let it be until I educate myself further and I'm willing (if ever) to take the risk of moving the money around.

I don't know what I'd do without you people here on the FIRE forum. You are incredibly helpful, and so generous with your time and expertise and advice. My decisions are my own, and I'm so happy to get all sorts of varying opinions to help me make those decisions.
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Old 08-24-2019, 09:55 AM   #26
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Originally Posted by CindyBlue View Post
This is an interesting idea!

Question: At what point is my income "low"? Do I have to wait until the end the year when taxes are due to prove I have no income? Because for the next four months I'll have no income at all. After that, I'll have the pension, and 14 months after that, I'll have social security. But those four months of no income - is that enough to have "low" taxes? How is this figured?

I'm sorry to bother you all what are probably really basic questions, and you folks have been so patient with me! Thank you!
If it were me I would begin with your last year's tax return, then replace your 2018 earnings from working with your 2019 earnings from working and see if there are any other adjustments that need to be made to estimate what your 2019 income will be.... similarly if you used the standard deduction then it will be $12,200 for 2019. So essentially you're doing an estimate of what your 2019 tax return will show for taxable income without any 403b withdrawals or Roth conversions.

The top of the 12% tax bracket for 2019 is $39,475 for a single. Your withdrawal or Roth conversions would be the excess of $39,475 over the amount you calculated in the prior paragraph. Since you worked for 2/3 or so of this year, you my already be in the 22% tax bracket.... in which case there may not be any benefit.

If you have a tax preparer you may want to talk with them about your calculations for 2019, 2020 and beyond and see what tax bracket you are in.

If your pension benefit grows if you defer taking it you might consider deferring your pension and SS for a couple years and use those years to do some low tax-cost withdrawals and/or Roth conversions. So for example, if you lived off savings in 2020 and deferred your pension and SS, your income would be really low and you could do a significant amount of withdrawals or conversions and pay very little tax.
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Old 08-24-2019, 02:19 PM   #27
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Originally Posted by donheff View Post
+1 Stay put for now and take some time to learn some of the basics about asset allocation and tax strategies like those pb4uski mentioned. These matters are not very complicated but they can be a little daunting until you develop a base level of knowledge. Once you are a comfortable with the basics you can consider things like moving to a couch potato portfolio or Roth conversions. Vanguard offers a number of training resources online and this board offers a ton of info although it may be a little difficult to parse initially. But, as potto points out you are in a decent place and can take it slow.
A lot of us here are very interested in investing. We could suggest books and internet links but practically speaking, you are fine. The difference between the 2025 fund and the 2020 fund is not much. If you want simple just stick with what you have and the bond allocation will gradually increase. Or switch to the 2020. It doesn't much matter.

Generally the idea is that you select the fund for the year you will retire and achieve the desired conservative allocation at that point so maybe you should have been in the 2020 fund all along.
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Old 08-24-2019, 08:33 PM   #28
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Originally Posted by pb4uski View Post
If it were me I would begin with your last year's tax return, then replace your 2018 earnings from working with your 2019 earnings from working and see if there are any other adjustments that need to be made to estimate what your 2019 income will be.... similarly if you used the standard deduction then it will be $12,200 for 2019. So essentially you're doing an estimate of what your 2019 tax return will show for taxable income without any 403b withdrawals or Roth conversions.

The top of the 12% tax bracket for 2019 is $39,475 for a single. Your withdrawal or Roth conversions would be the excess of $39,475 over the amount you calculated in the prior paragraph. Since you worked for 2/3 or so of this year, you my already be in the 22% tax bracket.... in which case there may not be any benefit.

If you have a tax preparer you may want to talk with them about your calculations for 2019, 2020 and beyond and see what tax bracket you are in.

If your pension benefit grows if you defer taking it you might consider deferring your pension and SS for a couple years and use those years to do some low tax-cost withdrawals and/or Roth conversions. So for example, if you lived off savings in 2020 and deferred your pension and SS, your income would be really low and you could do a significant amount of withdrawals or conversions and pay very little tax.
Thank You!
My pension doesn't grow and I can't defer it, as far as I know. I will definitely talk to my tax lady and let her know the rough calculations I've made so far about my "earnings" for next year. I think that using the 403b rather than the Social Security and/or savings is a really good thing to think about!
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Old 08-25-2019, 06:04 AM   #29
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Cindy,
Does your 403b give you access to more Vanguard funds then have been mentioned here?
It may benefit you in retirement to eliminate the additional fees in those target funds by simple picking one or two funds with extremely low fees.
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Old 08-25-2019, 10:22 AM   #30
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Not sure if I have access to more funds at Vanguard...I never thought to ask about it until I started reading the advice you all are so kind as to be giving me. I will ask around! Thank you!
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Old 09-10-2019, 03:55 PM   #31
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We have had good safe returns with their 500 Index Fund. If you want to possibly grow your money, look at companies generating "5G" products. Parnasus (sic) is another good 500 index fund we are in and doing well with TDAmeritrade.
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Old 09-10-2019, 05:13 PM   #32
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Hi Cindy,
Target 2019 touched on my questions regarding your 403b. My wife has her 401k thru vanguard, and she has limited funds available to her. Our plan is to roll over her 401k when she retires in a few months to a vanguard IRA so she has all that vanguard has to offer.

For example, we use Wellington and Wellesley in our roths and in my rollover IRA, but its not available in her 401k. We also use Primecap Oddessy Growth purchased thru vanguard, and short term and medium term investment gradebond funds, not available to her.
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Old 09-10-2019, 08:15 PM   #33
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Having just retired this past June (wow, still can't believe it!) I am hoping for some advice about my Vanguard 403b account.
Now to the question (I hope I am asking it correctly, but I don't really know much about it!)
My 403b is currently in a "20-25" fund which I was told is a "sliding retirement type fund" for someone retiring in 2025. This fund is 65% stocks and 35% bonds, I was told by the nice gal at Vanguard. She also told me I could move it to a "20-20 fund," which is 55% stocks and 45% bonds, i.e., more conservative.
Any advice for me as to whether should I leave my 403b in the "20-25" fund, or move it to the "20-20" fund?
Given a choice between 65%/35% portfolio and 55%/45% portfolio, I recommend the more conservative 55%/45% portfolio for the following reasons:
1. You are retired and you are no longer young who have the years remaining to recover from a market crash.
2. Most economists are now predicting a recession within 12 and 24 months. This additional risk means you should become defensive.
3. What are your primary objective? Is it capital preservation which is designed to prevent loss or is it equity appreciation which is design to maximize growth which also involve higher risk.

I was in a 60/40% portfolio before I decided to switch to 100% treasuries because I decided that I made enough money during the 10 years bull market and switched to a capital preservation strategy. This was a personal decision on my part. You should also make a personal decision based on your objective and your risk tolerance.
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Old 09-11-2019, 08:41 AM   #34
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Thank you so much everyone! I have called Vanguard, and am trying to figure out what they said (smile!) I can move it to a more conservative account - right now, according to them, I'm on a sort of sliding retirement account that moves my money into more conservative accounts as the years pass, ending when I'm 67, I think. I would like to move it to one that ends up at the most conservative account by the time I'm 65 (next year.)
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Old 09-11-2019, 06:22 PM   #35
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CindyBlue, I think you are getting a lot of good , well intentioned advice but in my opinion, you really don't need to change anything. The target fund you are in is a solid choice and requires no action on your part. You could move money around from tax-deferred (your 403b) to taxable to improve your tax situation but in the big picture that is only nibbling at the edges. Trying to do too much may just cause you needless anxiety. You are in reasonably good shape with your pension, SS, and 403b. The enemy of a good plan is insisting on the perfect plan. I would just leave things be and try to relax. You've earned a good retirement now go out and enjoy it.
Superb comment.
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Old 09-11-2019, 07:28 PM   #36
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A side note of possible negative interest rates: I know someone in Japan who decided to rent a large safe deposit box at a bank and placed hard currency in the safe deposit box. He was charged a fee for the safe deposit box but this fee was smaller than the negative interest rates. In addition, banks tend to go bankrupt....so if the bank goes bankrupt and cannot pay their depositors, then at least he still have access to his safe deposit box.

I agree with his reasoning since banks will definitely suffer during a negative rate environment. He also mentioned some corporate bonds in Japan are now charging negative rates for their corporate bonds. We live in interesting times.
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Old 09-11-2019, 08:08 PM   #37
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I agree with pb4uski that getting some low-tax money out of the 403(b) could be a good move, now that your income is low. I like Roth conversions, myself. Once in the Roth, they should never be taxed - even the increases. Once you reach 70 1/2 you are forced to take money out of the 403(b) (I think rules are same as 401(k)) and you pay at your current top rate of taxation - with (almost) no way out of it (I'm THERE now - thankfully was able to get a lot out of 401(k) and ALL out of tIRAs before 70 1/2.)

Sorry, this was supposed to be about asset allocation, but I think the investment vehicle (for future tax planning) is almost as important. But YMMV.
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Old 09-11-2019, 08:19 PM   #38
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Superb comment.
I agree, RockLife. Plus, I have to stop worrying so much about things I cannot control...at least I have to try (smile!)
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