Pinpointed DCA and AA accuracy when buying a home

[kgtest]

Man am I glad I joined this forum. You guys if anything showed me I needed to track my money better. Since then I have been able to pinpoint my DCA and AA to the point where I have a healthy balance between equities and real estate.

I was able to project a downpayment I needed for my next home purchase, then adjust my DCA (contributions) for both me and DH IRAs so that we have juuuust enough money for our downpayment. We needed 31k to close and we are just under the wire at 30k on closing date. We do have a cash reserve or "rainy day" fund but I think I can eek out another thousand in a month with some tricks.

Furnishing this mansion will be the next challenge... here's hoping for bears!

 

[rodi]

kgtest -
congrats on your pending real estate purchase.

I have a question about your signature. It says you'll start SS at 72? I thought you had to start at 70? Also - assets going to an inherited IRA. AFAIK, you can't contribute to an inherited IRA, just take withdrawals... is this an IRA you intend to pass on to heirs, or one you inherited?

As far as furnishing your mansion... nothing says you have to have furniture in every room, or new furniture, for that manner... But then again - I always joke that my furnishing style is "early american salvation army"... In reality it's a mix of hand me downs, inherited items, stuff my husband brought to the marriage, and stuff I brought that is well worn... But it's comfortable and friends don't seem to mind.

 

[kgtest]

kgtest -
congrats on your pending real estate purchase.

I have a question about your signature. It says you'll start SS at 72? I thought you had to start at 70? Also - assets going to an inherited IRA. AFAIK, you can't contribute to an inherited IRA, just take withdrawals... is this an IRA you intend to pass on to heirs, or one you inherited?

As far as furnishing your mansion... nothing says you have to have furniture in every room, or new furniture, for that manner... But then again - I always joke that my furnishing style is "early american salvation army"... In reality it's a mix of hand me downs, inherited items, stuff my husband brought to the marriage, and stuff I brought that is well worn... But it's comfortable and friends don't seem to mind.

I am not sure where I read I could withdraw SSN at 72 but I could be wrong, I better look into that closer. I thought I grabbed it from the SSN website.

As for the inherited IRA, yes that is one I plan on inheriting, reinvesting, and then passing down. I would take RMDs from 401k or 403b when needed. I am hoping RE income will be enough to shoot the gap until RMD.


Thankfully my wife is quite conservative otherwise I might worry about throwing our LBYM strategy out of whack furnishing the house. We have plenty of friends and family offering to donate to our cause

 

[pb4uski]

You don't "have" to start at 70 but you don't get any delayed retirement credits after age 70 so if you start at 72 you get the same monthly amount as if you started at 70 (adjusted for any COLA increases).

 

[REWahoo]

... if you start at 72 you get the same monthly amount as if you started at 70 (adjusted for any COLA increases).

And cut yourself out of two years of SS income.

 

[pb4uski]

Yes, that was my point but I should have been clearer.

 

[rodi]

As for the inherited IRA, yes that is one I plan on inheriting, reinvesting, and then passing down. I would take RMDs from 401k or 403b when needed. I am hoping RE income will be enough to shoot the gap until RMD.

If you inherit an IRA after your deceased loved one was collecting RMDs (in other words - they were older than 70.5), and if you're not the spouse of the person who died - you must take RMDs from that inherited IRA. The RMD calculation for this IRA is a bit different than a regular IRA - it's based on the deceased persons birthday, your birthday, etc... But if the market growth is big enough, and you die young enough, you can definitely pass on that inherited IRA.

But money is fungible. You can use the RMDs from the beneficiary IRA to live on, preserving the IRAs you have in your own name, until you hit the RMD stage for those. Between the IRA(s) in your own name, and the inherited one, you should end up with some money to pass on, in this pre-tax manner, to your heirs.

All of this assumes tradtional IRAs - not Roth - Roth IRAS don't have RMDs during the original owner's lifetime - but RMDs kick in for the beneficiary. So to pass on the most to your heirs - fund your savings into Roth IRAS, and spend the inherited IRA when you get it. Or not... I think you'd need a spreadsheet to figure out the optimum on this.

Required Minimum Distributions for IRA Beneficiaries

Retirement Plans FAQs regarding Required Minimum Distributions

 

[MooreBonds]

If you inherit an IRA after your deceased loved one was collecting RMDs (in other words - they were older than 70.5), and if you're not the spouse of the person who died - you must take RMDs from that inherited IRA. The RMD calculation for this IRA is a bit different than a regular IRA - it's based on the deceased persons birthday, your birthday, etc... But if the market growth is big enough, and you die young enough, you can definitely pass on that inherited IRA.

Just to clarify this point, as the calculation for an inherited IRA is non-intuitive:

You take your age on Dec 31 in the year you inherited the IRA, and that age is your starting point. You calculate your RMD based on that first year - similar to how you determine your RMD for a regular IRA.

HOWEVER - for every year after the 1st year of an Inherited IRA, you SUBTRACT one from the divisor to determine your RMD, rather than using the tables for each subsequent year (you only use the IRS tables for the first year you inherit it).

So after just 20 years of having an Inherited IRA, your divisor is growing pretty small and you start to get to VERY large RMDs, to the point that you eventually reach a divisor less than one (i.e. you are forced to take out all of the assets remaining in the IRA).

As an example, if you are 50 in the first year you receive the inherited IRA, your initial RMD divisor is 34.2. However, the following year, your divisor is 33.2, then 32.2, 31.2, 30.2, etc....leading up to your age 83, where your divisor is roughly 1.2 (or, an RMD of 83.3% of last year's ending balance must be withdrawn).