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Old 08-28-2013, 05:11 PM   #21
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Midpack, thanks for the link to the spreadsheet. I just downloaded it and will look at it myself.

Reading the thread, it confirms that complicated software can have hidden bugs (especially spreadsheets). User beware.
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Old 08-28-2013, 05:13 PM   #22
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Originally Posted by truenorth418 View Post
I also notice that i-ORP projects that I could safely increase my withdrawal rate by a large amount. This adds to my confidence, but I don't feel compelled to increase my withdrawals at this juncture.
Yeah, that does sound fishy, doesn't it?
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Old 08-28-2013, 05:55 PM   #23
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So, here is my dilemma: (not sure if it fits in this thread, however).
i-Orp suggest spending down my 'already taxed' money first.

I understand the idea behind letting your taxable money sit, HOWEVER, this post tax money generates a fair amount of income for me via bond and dividend payments. The idea of spending down my income generators vs my growth engine spooks me...a lot.

Anyone else feel this way?
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Old 08-28-2013, 10:48 PM   #24
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So, here is my dilemma: (not sure if it fits in this thread, however).
i-Orp suggest spending down my 'already taxed' money first.

I understand the idea behind letting your taxable money sit, HOWEVER, this post tax money generates a fair amount of income for me via bond and dividend payments. The idea of spending down my income generators vs my growth engine spooks me...a lot.

Anyone else feel this way?
Not at all. Money is fungible. The account the funds are in really shouldn't matter - if you spend some income generating money in your taxable account to get your AA back into balance you would need to sell some growth investments in your tax-deferred account and invest the proceeds in income paying investments in your tax deferred account (all else being equal).

Isn't it tax inefficient to have your taxable accounts in income paying investments to begin with?

Example: beginning of year is 1,000 portfolio. 500 equities in taxable account and 100 equities and 400 bonds in tax deferred. 60/40 AA. Tax efficient portfolio since taxable income is all qualified dividends and capital gains from equities and bond interest is in tax deferred accounts.

Withdrawal is 50 out of taxable account, reducing it to 450 - all equities. My new equities target is 570 ((1,000-50)*60%) so I want 120 of equities in my tax-deferred account, so I sell 20 of bonds and buy 20 of equities in my tax deferred account, bringing me back to 60/40 (570 equities + 380 fixed income).

Ignored income/appreciation in the interest of simplicity.
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Old 08-29-2013, 07:23 AM   #25
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Thanks pb4uski, this is helpful.
I think I was looking at the iOrp recommendations from the wrong end of the equation. I'm from a 'never touch the principal' family so the idea of actually selling an income producing vehicle often just doesn't compute.

As far as tax efficiency, I think I"m better paying the dividend rate from my taxable account rather than drawing those dividends as income from my IRA. So far anyway.
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Old 08-29-2013, 12:32 PM   #26
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Thanks pb4uski, this is helpful.
I think I was looking at the iOrp recommendations from the wrong end of the equation. I'm from a 'never touch the principal' family so the idea of actually selling an income producing vehicle often just doesn't compute.

As far as tax efficiency, I think I"m better paying the dividend rate from my taxable account rather than drawing those dividends as income from my IRA. So far anyway.
Or, you could figure out how to get them into a Roth account and pay no taxes on them in the future.
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Old 08-29-2013, 01:48 PM   #27
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Initially (like last year), I was favoring it due to uncertainty as to whether 0% LTCGs would survive the fiscal cliff. That reason is a bit moot now.

Now, I'm doing it to have more flexibility in riding my taxable account to age 70 when I will begin SS. If I take LTCG for the next 2-3 years they will be gone, then I'll transition to Roth conversions for ~10 years before RMDs begin.

Similar to others, i-orp says I can withdraw more than I am but it is reasonable consistent with other calculators using the same inputs. After I become more comfortable that I won't outlive my money I'll probably be more comfortable splurging more here and there.
I just had my free Vanguard Financial Plan session, which Midpack touted a while back. When I filled out the forms to provide to Vanguard to create my financial plan, I specifically asked about LTCG vs. Roth conversions. I was a little bit surprised that the CFP (Certified Financial Planner) I spoke with said fairly unequivocally that I should do LTCG harvesting first (I was expecting to hear waffling). The reason I was given was that the CFP felt it was more likely that the 0% LTCG tax rate would disappear before my overall 15% marginal tax rate would disappear.

Interestingly, the financial plan Vanguard provided did not have me harvesting the LTCG, because most of the LTCG are from investments which nicely fit the asset allocation & investments they're suggesting.

BTW, I did the same thing you did last year, and generated some LTCG because I expected the 0% rate to disappear.
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Old 08-29-2013, 03:20 PM   #28
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I just had my free Vanguard Financial Plan session, which Midpack touted a while back. When I filled out the forms to provide to Vanguard to create my financial plan, I specifically asked about LTCG vs. Roth conversions. I was a little bit surprised that the CFP (Certified Financial Planner) I spoke with said fairly unequivocally that I should do LTCG harvesting first (I was expecting to hear waffling). The reason I was given was that the CFP felt it was more likely that the 0% LTCG tax rate would disappear before my overall 15% marginal tax rate would disappear.
That's interesting. It appears it may depend on which CFP you get. I know the one who reviewed my VFP was in Charlotte NC, not at Vanguard HQ, so she may be an independent contractor or equivalent.

And to rain on my own parade, when I followed up with "my" Vanguard account advisor (not the CFP) about optimizing retirement income and answering the Roth conversion question - he directed me to their online tools which I've already seen and they're very generic. Then he told me I should talk to my tax advisor. Retirement income planning is not one of Vanguards strong suits from what I've seen...
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Old 08-29-2013, 04:08 PM   #29
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That's interesting. It appears it may depend on which CFP you get. I know the one who reviewed my VFP was in Charlotte NC, not at Vanguard HQ, so she may be an independent contractor or equivalent.

And to rain on my own parade, when I followed up with "my" account advisor (not the CFP) about optimizing retirement income and answering the Roth conversion question - he directed me to their online tools which I've already seen and they're very generic. Then he told me I should talk to my tax advisor. Retirement income planning is not one of Vanguards strong suits from what I've seen...
I had an interesting conversation with the CFP. For example, although both plans Vanguard generated ("consolidated portfolio" and "integrated portfolio") had me selling 100% of one particular investment, the CFP agreed with me that given several factors I cited, that I should hold on to it. There are a lot of factors that the software simply can't or doesn't consider.

The CFP is going to generate a follow-up plan based on our conversation. I'll be curious to see how it differs. I also explained to the CFP that I probably wouldn't make any significant changes until December, because of considerations regarding LTCG, the 15% tax bracket, and a possible PPACA subsidy.

Overall, I found it a worthwhile experience, and like you, I would recommend it if you can get it for free. Thanks again for convincing me to do it.
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Old 08-29-2013, 05:24 PM   #30
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......I was a little bit surprised that the CFP (Certified Financial Planner) I spoke with said fairly unequivocally that I should do LTCG harvesting first (I was expecting to hear waffling). The reason I was given was that the CFP felt it was more likely that the 0% LTCG tax rate would disappear before my overall 15% marginal tax rate would disappear.

Interestingly, the financial plan Vanguard provided did not have me harvesting the LTCG, because most of the LTCG are from investments which nicely fit the asset allocation & investments they're suggesting.....
That is interesting.

In the harvesting, I end up buying the same investments back so it doesn't affect my AA at all. For example, I'll use my cash/cash equivalents to buy the fund I have a gain in and then sell the appreciated shares the same day (specific identification method). Since the transaction is a gain, I don't need to worry about the wash sale rules. The Vanguard frequent trading policy can be a hassle, but I have been able to work around it.
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Old 08-29-2013, 07:05 PM   #31
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I did the same thing last December. I sold some shares to harvest a gain and bought 'em right back. Glad I did, too. Wish I had bought more.

In filling out the form that Vanguard bases their recommendations from, investors are asked for each taxable investment not with Vanguard, how much of a capital gain or loss there is. For taxable investments with Vanguard, they already know the capital gain/loss amounts, or course. The financial plans generated by Vanguard appear to be designed to minimize or avoid taking capital gains. Of course, you and I (and the CFP I had) are all aware of the 0% LTCG rate if you're in the 15% tax bracket. I very much doubt their software algorithm knows.

It would be interesting to find out what the software would have spit out if my taxable investments with significant LTCG were ones that didn't fit neatly into their recommended investments.

Back to the subject of i-orp, I found it very useful because it really opened my eyes to the beneficial effect of Roth conversions for my particular circumstances. That, in turn, gave me additional incentive to delay taking Social Security benefits so that I have more years to do conversions.
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Old 08-29-2013, 07:37 PM   #32
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That's interesting. It appears it may depend on which CFP you get. I know the one who reviewed my VFP was in Charlotte NC, not at Vanguard HQ, so she may be an independent contractor or equivalent.
Vanguard has had a big presence in Charlotte for as long as I remember...plenty of full timers, I'm sure.

But how does one get started with a Vanguard financial planner? Sorry, I missed it the first time around.
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Old 08-29-2013, 10:27 PM   #33
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ER is fast becoming a reality for me rather than a dream. So now the real work of money management starts, or at least my earned income can't paper over the mistakes I make.

Tax planning is very important and I'm running my numbers through i-orp. So does anyone rigorously follow it's withdrawal and transfer recommendations? and if you do are you happy?
I think i-orp is a good "first order" tool. In our case I found the tax planning was a bit defective but it at least got me to think about different income streams. I even contacted the author. Can't remember the exact exchange but he did seem to say that it was optimized for minimizing taxes a lot and might not be the optimal solution in all cases.

I-orp did get me to start actually using our Roth savings instead of being too conservative and just watching it grow. Before I used to think of the Roth savings as some sort of gold never to be fully touched. Now it's part of our income and helps a lot in reducing our marginal taxes in the years between starting SS and the time we must start taking RMD's.

Anyway, I think it is a decent tool. Maybe not to be taken too literally as all tools like this have their limitations.
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Old 08-30-2013, 08:48 AM   #34
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Vanguard has had a big presence in Charlotte for as long as I remember...plenty of full timers, I'm sure.

But how does one get started with a Vanguard financial planner? Sorry, I missed it the first time around.
Assuming you have an account with Vanguard already

https://personal.vanguard.com/us/wha...anningservices

There's a fee schedule, it's "free" if you have more than $500K with them. You begin by filling out a somewhat lengthy questionaire. They then send you a nicely done written plan (mine was 24 pages) and schedule a one-on-one with a CFP to review and answer questions. Of course their recommendations gravitate toward passive/index fund portfolio, so they won't help you develop a really unique, radical portfolio. OTOH, they don't try to push you to adopt their recommendations, they simply explain their reasons and let the customer decide what if anything to do.
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Old 08-30-2013, 02:43 PM   #35
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You begin by filling out a somewhat lengthy questionaire. They then send you a nicely done written plan (mine was 24 pages) and schedule a one-on-one with a CFP to review and answer questions.
I've followed suit. In fact, I suspect you've inspired so many of us with your previous post on this that there's been quite a spike in financial plan requests at Vanguard. They're probably trying to figure out what's behind it!

On the Vanguard questionnaire, there's a page where you select why you are requesting the financial plan. I made a point of choosing only the two items that related specifically to optimizing withdrawals and taking into account tax implications. And in the comments I focused on this as well. I'll be curious to see how helpful it ends up being in that respect. I know a fair number of us here are comfortable with the investing side of things but find the development of a drawdown strategy more challenging.
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Old 08-31-2013, 09:59 PM   #36
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I-ORP has me converting all of my regular IRA to a Roth IRA in the first seven years of my retirement. But as far as I can see, much of that conversion will take place in the 25% bracket.
I am in the same boat as Chuckanut so appreciate Animorph's explanation. But wanted to ask a simple question while we are on the subject of I-ORP. Concerning the After-Tax Account Estimated Federal Tax Rate and the Current Federal Personal Income Tax Level input, I'm assuming that the input is the overall tax rate and not the marginal tax rate? I used the default of 15% as my overall tax rate, not my marginal tax rate, and have always worried whether my input was correct.
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Old 09-01-2013, 06:14 AM   #37
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My numbers come out higher on i-ORP ( I can spend more than I currently plan) than my other calculations. Like truenorth, this gives me confidence, but I don't plan to increase my withdrawals. Maybe later on - I'm trying to be conservative as I just retired this year.
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Old 09-01-2013, 10:14 AM   #38
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Assuming you have an account with Vanguard already

https://personal.vanguard.com/us/wha...anningservices

There's a fee schedule, it's "free" if you have more than $500K with them. You begin by filling out a somewhat lengthy questionaire. They then send you a nicely done written plan (mine was 24 pages) and schedule a one-on-one with a CFP to review and answer questions. Of course their recommendations gravitate toward passive/index fund portfolio, so they won't help you develop a really unique, radical portfolio. OTOH, they don't try to push you to adopt their recommendations, they simply explain their reasons and let the customer decide what if anything to do.
I too have gone through Vanguard Financial planning. Although I didn't have over $500k by myself, when combined with my wife's funds we exceeded that amount and was able to get the plan for free. My plan (28 pages) came back on Friday. I will review it in detail tomorrow in preparation for review with my planner on Weds. Thanks for your write up which got me motivated to do this!
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Old 09-23-2013, 06:42 PM   #39
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I cannot connect with i-orp and have not been able to for a few days now. Anybody else having this problem? Hope it's not dead!
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Old 09-23-2013, 07:29 PM   #40
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I cannot connect with i-orp and have not been able to for a few days now. Anybody else having this problem? Hope it's not dead!

Works for me. Retirement Calculator - Parameter Form
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