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Old 06-10-2015, 04:19 PM   #41
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Thanks, that makes sense. One reservation i had about the i-orp recommendations (spend down all after-tax money early) is it can put you in a bad tax spot later if you need a big chunk of cash for something. In that case, it would hurt a lot less to take that money out at the CG rate than to take it from tIRAs as earned income. All this depends on the exact brackets and rates the person is subject to, obviously.
True. I didn't think of that. I've not studied CG stuff because, alas, I have no after tax appreciated assets of any consequence. But I wonder if you could use the illiquid asset feature for that. The model allows a current value, a cost basis, and a time to sell it. It's hard to model a contingency, but you could run one model where you hold your appreciated stock using that technique, faking the large unexpected cash need. Then run it without and see how different the recommendations are. Maybe you pick something in-between to hedge your bet.
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Old 06-10-2015, 04:52 PM   #42
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It was odd spending and not saving. I was overly careful with spending for the first 6 + months. I had 5 CDs that matured in march of each year for the first 5 years after RE. The CDs were more than enough for yearly expenses and I had planned on spending that money and leaving my investments alone. Thank goodness I had those CDs! I retired in June of 06 and having those CDs during the "crash" kept me sane! Never had to sell any equities.
Spending is not a problem now, I have spending money set up for now, later and way later and rarely worry at all anymore
9 years free and it just gets better!
Just wish time would slow down a little. Thursday is trash day for us.......seems like every other day is trash day, weeks fly by

PS the CDs were at 4.5 - 6.2%........wish I still had em or could get em. If I remember correctly I bought them around 2000 as 5-10 year durations for emergencies.....ER was not on my mind at that point. Love when things fall into place!
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Old 06-10-2015, 08:44 PM   #43
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Thanks, that makes sense. One reservation i had about the i-orp recommendations (spend down all after-tax money early) is it can put you in a bad tax spot later if you need a big chunk of cash for something. In that case, it would hurt a lot less to take that money out at the CG rate than to take it from tIRAs as earned income. All this depends on the exact brackets and rates the person is subject to, obviously.
I see this same problem with large amounts of CG's and RMD. I am taking LTCG at 0% in the 15% bracket now. Some folks say don't worry about making Roth conversions if you may be in the same tax bracket. I am splitting my income space with LTCG and Roth conversions. I will be just this side of the 25% bracket with SS and RMD's at 70. Having to take a bunch of CG at 70 might throw my plan under the bus.

If this doesn't make sense blame it on the zinfandel.
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Old 06-11-2015, 02:02 PM   #44
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Can someone explain to me why this is? I noticed the same thing in i-orp also, but I feel like I want to keep some of my cash reserves and take some tax deferred out at the same time.
The after-tax account goes first because its gains are taxed in the same year that they occur, thereby reducing the annual return on the account and lessening compounding as compared to the IRA or Roth.

If practice some sort of glide path tactic will have you are partly invested in fixed income assets and partly in equities. It doesn't matter if your cash is in your IRA as its there when you need. It compounds better than your after-tax account but when you take it out affects your taxes.
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Old 06-11-2015, 02:20 PM   #45
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Doesn't bother me a bit.

First, I don't really focus on our cash balance... that would be totally silly.... I focus on the total balance of our retirement savings.... which have grown 20% since I retired.

Second, I know the declining cash balance will be replenished when I rebalance as it has each of the years since I retired.
Same here.

It would be silly to obsess over our cash balance, since the cash balance is whatever I want it to be. Just one login to the brokerage account and one $5 commission --- and the cash balance will grow immensely.

In a way, I've been kinda hoping for a down market for a few years now. That's so it'll hit my bear-catcher signal and tell me to cut my equity positions and shift a bunch of money to cash. I hate to liquidate stocks when the signals still say to buy.

First-world problems.
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Old 06-12-2015, 02:51 AM   #46
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I am older than most people at 67 now so get SS and don't want to pay income tax on it. I am trying to limit my income so this year took about 9K from IRA and took some dividends from taxable to put that money in checking. I am not a spender I don't like to see money go away my SS pays my mortgage so when I put a few thousand in checking I can use it for a very long time for utilities and food and things. This month I will get about 700 in dividends in the taxable account then again in Sept and a bunch in December. In January I might take some more IRA money. I could maybe get by on just dividends but I don't want to have IRA get too big before 70 or leave ROTH when I die since that doesn't have a stepped up basis like taxable. I might start spending the ROTH money if I want some more money.
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Old 06-12-2015, 07:38 AM   #47
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Like others, there has been an adjustment period.


This has been lessened by having an after tax monthly budget. So far, after four years, we are right on the money. We need to increase it in the second half by eight percent to reflect inflation over the past four years and our increased spending in certain areas.


While we see our cash balances declining we have also seen the value of our equity position increasing substantially over the past several years.


I think that we would be much more concerned if our cash balances and our equity positions were both declining....and declining at a rate that we felt was not sustainable over the long term.
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Old 06-12-2015, 08:26 AM   #48
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Yeah, it's very hard to get out of the "don't touch the savings, they're for retirement" mindset!


I retired a year ago and it helps that the market has been doing very well, so our net worth has grown. I have a complicated system only an actuary could love, but withdraw from our main brokerage account about every 4 months and then keep it in a "living expenses" bucket on my spreadsheet, releasing a fixed amount into our spendable balance every month.


I also started tracking our expenses, which isn't too hard since nearly everything is put on the credit cards (and paid in full every month). That gives me reassurance that there's a huge chunk of our spending (mostly travel) that enhances the quality of life but could be cut back if necessary. There are plenty of "wants" in our spending (and a charitable budget that's bigger than our mortgage) but we can afford them.


As others have noted, sometimes your heaviest spending is early in retirement. I also remind myself that I've got a small pension ($12K/year) kicking in in 3 years when I turn 65, Spousal SS of $12K at age 66 and my own SS, which will add a net $24K (I'll get $36K but lose Spousal) at age 70. Medicare will be another break; right now DH has it but I'm paying $50/month for a plan with a $6K deductible.
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Old 06-12-2015, 09:44 AM   #49
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The after-tax account goes first because its gains are taxed in the same year that they occur, thereby reducing the annual return on the account and lessening compounding as compared to the IRA or Roth.

If practice some sort of glide path tactic will have you are partly invested in fixed income assets and partly in equities. It doesn't matter if your cash is in your IRA as its there when you need. It compounds better than your after-tax account but when you take it out affects your taxes.
Thank you for your explanation. I have to think about this some more and try to strategize.
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Old 06-12-2015, 09:47 AM   #50
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Here is the link to VG webcast transcript that was on yesterday that I meant to join, but i missed.
https://personal.vanguard.com/us/ins...pending-032014
It goes with some posters said here and i-opt says to use the after-tax money first (although some of us may want to keep the after-tax money for special events such as down payment on a vacation home, or some other events that we wouldn't want to incur a huge taxable event by taking extra money out of the tax-deferred.

Anyway, the webcast goes all over the place, but there are some good points in here that I didn't think about before, and there may be some benefits to some of you so I thought I'd post the link.
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Old 06-12-2015, 09:52 AM   #51
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As for Roth conversions, I will be moving to Canada soon, so I won't be able to do the conversions - I am very sad about this.
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Old 06-12-2015, 09:57 AM   #52
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Interesting responses so far. Tax management seems to be complicated and depends somewhat on government future policy.

In the early years we deferred SS for me and converted IRA to Roth. Now with full SS and before RMD's, we are spending some from IRA and the rest from Roth to get to a moderate tax rate. I would credite i-orp with the idea of spending from Roth's rather then always trying to protect that money. When RMD's hit us, taxes will go up but we have enough Roth to keep this under control, unless the portfolio zooms up and IRA's with it ... in which case the extra taxes will be a minor annoyance.
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