Tough ER Enivronment?

[brewer12345]

Well, thank you for your [-]slam[/-] heart-felt thanks. I'd tell you [-]where to put it[/-] this will continue but I'm going to finally retire in a few months.

I'm only here to avoid a massive tax bill if I retire mid-year.

Heheh. Finally going to pull the plug?

Just curious, but how do you avoid big taxes by waiting? Is this related to long term gains?

 

[Andre1969]

I retired at a better time, I suppose, in 2009. But you know, all the news media and everyone else were saying "This time is DIFFERENT", that we would at the very least have a double dip recession, that we would not pull out of it for 30 years, and so on.

Yeah, this time it's different, just like every other time! And FWIW, I saw a double dip in the "Great Recession"...just in rapid succession. Bottomed out in late November 2008, climbed back up about 30% around January or February 2009, only to bottom out again on March 9. I don't know if they classify that as a double dip though...probably just a volatile market.

 

[Katsmeow]

I'm trying to ignore these types of thoughts as I prepare to ER. But these are the things that have me wondering is 35x enough?

In August 2013, you said you were not quite 50 and that you had 15x to 30x expenses depending on whether you have a lavish or barebones retirement. This apparently did not include college funds separately set aside. And, you weren't including future social security.

I don't know what your expenses are for either lavish or high. If say, bare bones expenses were $50,000 then 30x would be $1.5 million and 35x would be $1.75 million.

But, that doesn't count future Social Security and you are apparently at least 12 years away from it.

I am not a fan of not counting SS. But if you are not quite 50 then you certainly may want to discount it a bit and have to make it until then.

So, I think in your case, it isn't so much where the market is but whether you could live a satisfying life on how much you think you could safely withdraw with possibly a higher withdrawal rate until you get to SS age.

A lot of people at younger ages want to withdraw at a lower rate (but then some spend at a higher rate until they get to SS age and then go sharply lower).

The thing with bare-bones v. lavish budgets is that it doesn't say much about what you are satisfied with. If all you can afford if you retire is bare-bones and you would be miserable with it, then I would be cautious.

 

[2B]

Heheh. Finally going to pull the plug?

Just curious, but how do you avoid big taxes by waiting? Is this related to long term gains?

The short answer is I screwed up.

A slightly longer answer is I enrolled in a Supplemental Employee Retirement Plan (SERP) which is for us "highly compensated, key employees." When I signed up, I put down an immediate payout having though I heard that I could change it easily later. When the account started to get seriously large, I went to change the payout to over 5 years. Then I was told it would delay the payout by 5 years for making a change. I decided I didn't want the account to be held captive for 5 years after I leave the company so I made no change to this lump sum. I did change my future SERP contributions to payout over 5 years.

The SERP will make this one time payout amount within a month of my leaving the company. It is for an amount that is safely greater than a full year's pay without any deductions. That's a bunch.

If I retired today, I would be well into the 33% marginal tax bracket, have my personal exemptions partially phased out and probably lose my other deductions to the AMT. Almost all of the payout would be hit with 33%.

If I wait until January 2015 to get it, I would be barely in the 33% bracket. The tax savings would be about $65,000 to $70,000 depending on the stock market between now and then. Most of the SERP payment would fill up the lower brackets in the 2015 tax year.

This SERP payout mistake is one of my bigger financial mistakes.

 

[FIREd]

I for one am happy all you [-]suckers[/-] OMYers are continuing to [-]pay my Obamacare subsidies[/-] service the national debt. I don't think you can ever have enough money or margin of safety in retirement...

So I take it you are not going back to work anymore?

 

[2B]

A lot of people at younger ages want to withdraw at a lower rate (but then some spend at a higher rate until they get to SS age and then go sharply lower).

The thing with bare-bones v. lavish budgets is that it doesn't say much about what you are satisfied with. If all you can afford if you retire is bare-bones and you would be miserable with it, then I would be cautious.

I have a sinking fund represented by laddered CDs that will pay several years of deferred SS and Medicare medical savings. My withdrawl rate is higher during this period but I've accounted for it in my plan.

I plan to start off spending what I want to. Most of my spending is considered variable so the amount of money available would decrease as the size of my portfolio (ex sinking fund) decreases.

 

[NW-Bound]

... I saw a double dip in the "Great Recession"...just in rapid succession. Bottomed out in late November 2008, climbed back up about 30% around January or February 2009, only to bottom out again on March 9...

Whether the recession is U-shaped, V-shaped, or W-shaped, I can handle it. But if it is L-shaped we are all dead meat.

Well, maybe not myself. Got myself a comfortable RV, ready to drive into the woods... Not trying to scare anybody or anything.

 

[explanade]

I don't mind my heirs having a party when I'm gone. I'd like to help fund the grandkid's college and do things that my parents weren't able to do with us and our kids.

Nothing wrong with a good party, but hopefully they will have a little class and not be standing over you saying.... "Just hurry up and die would ya!"


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Heard that children who are spoiled tend to be less responsible with money, get into debt when they're adults.

Not saying leaving money for college would spoil them. But if they didn't have any worries about paying for college, maybe they're more likely to spend for other things?

I didn't have a credit card when I went to college but these days, the banks are chasing college students.

 

[Andre1969]

Well, maybe not myself. Got myself a comfortable RV, ready to drive into the woods... Not trying to scare anybody or anything.

In my case, if the kitty litter hits the fan, I have a few options. Catalina, Park Avenue, Fifth Avenue, or even Le Mans would be really Grand... Unfortunately, these are cars I'm referring to, rather than the locales...

 

[CaliforniaMan]

Heard that children who are spoiled tend to be less responsible with money, get into debt when they're adults.

Not saying leaving money for college would spoil them. But if they didn't have any worries about paying for college, maybe they're more likely to spend for other things?

I didn't have a credit card when I went to college but these days, the banks are chasing college students.

Recently went over my son's college funds, he has enough to finish (just enough) by also working a little for gas and spending money. He said it would really be easier if he didn't have to work while studying. I didn't take the bait.

If he really had an emergency I would of course help him out, but this is just normal planning, spending control, and time management. His learning now will help him out much better for his future than if I just handed him some extra cash. I had to work part time through college too, and believe it is part of the reason I am now better off than friends who had it much easier than me.

 

[CaliforniaMan]

Whether the recession is U-shaped, V-shaped, or W-shaped, I can handle it. But if it is L-shaped we are all dead meat.

Well, maybe not myself. Got myself a comfortable RV, ready to drive into the woods... Not trying to scare anybody or anything.

Planned for U or V, but what the L if it occurs, got a paid off house, will batten down here, petition to get property taxes reduced as my house value plummets, and enjoy sitting outside watching the humming birds in the summer, walking deserted beaches in the winter, and being better off than the worst.

 

[REWahoo]

If he really had an emergency I would of course help him out, but this is just normal planning, spending control, and time management. His learning now will help him out much better for his future than if I just handed him some extra cash. I had to work part time through college too, and believe it is part of the reason I am now better off than friends who had it much easier than me.

+1

I've always found it difficult to understand parents who provided their children with a full-boat ride all the way through college, then complain about their adult children's lack of money management skills.

 

[JDARNELL]

I will have one entering college in 2-3 yrs. He will go to an instate 2 yr school at first. If its local he will live at home. If it not local he will be playing baseball and living with the team in the dorms. The latter will cover everything but 1K a semester. The previous will cost more however with the $2500 America ?? Tax Credit and with the phasing out above that tuition will cost about $1500 more plus books, etc. I am going to have him pay a % so he is vested in the whole school thing no matter what. Now I will take those $$ and set it aside for him but he doesn't need to know that. I have been having him umpire this summer and he makes about $18 per hr. Plus I am going to teach him to build and repair screens. Pretty easy work and not a bad return.

JDARNELL

 

[brewer12345]

So I take it you are not going back to work anymore?

Eh, I am going to talk to a megabank about a consulting opportunity late this month. I have some heartburn about this, to say the least. If I do it, it will be full time pay for part time work with minimal travel and a hard end date. I will also structure it to be highly tax efficient. If it does not happen, I will be somewhat relieved.

 

[REWahoo]

Eh, I am going to talk to a megabank about a consulting opportunity late this month. I have some heartburn about this, to say the least. If I do it, it will be full time pay for part time work with minimal travel and a hard end date. I will also structure it to be highly tax efficient.

You'll be doing a great service for us SS and Medicare recipients, but our gratitude will pale in comparison to that of the Colorado squirrel community.

 

[brewer12345]

You'll be doing a great service for us SS and Medicare recipients, but our gratitude will pale in comparison to that of the Colorado squirrel community.

SS and Medicare will be the lion's share of taxes I would be paying, as actual income taxes I can mostly wiggle out of.

Remember, full time pay for PART TIME work. The squirrel, rabbit, dove, pheasant, duck and anything else vaguely edible populations will still be very much in my sights.

 

[NW-Bound]

Planned for U or V, but what the L if it occurs, got a paid off house, will batten down here, petition to get property taxes reduced as my house value plummets, and enjoy sitting outside watching the humming birds in the summer, walking deserted beaches in the winter, and being better off than the worst.

Paid-for homes may still require beaucoup money for maintenance and repair (see photo found on Web). That money may be better spent on gas for the RV, so that travel activity can continue. Getting wife to agree to it may be the problem.

 

[FIREd]

Eh, I am going to talk to a megabank about a consulting opportunity late this month. I have some heartburn about this, to say the least. If I do it, it will be full time pay for part time work with minimal travel and a hard end date. I will also structure it to be highly tax efficient. If it does not happen, I will be somewhat relieved.

I hear you. I was considering going back to work, but tax calculators showed that I would be wasting my time working for a W-2 income. So it's either I find a highly tax efficient way of making money or I am just going to stay home.

 

[brewer12345]

I hear you. I was considering going back to work, but tax calculators showed that I would be wasting my time working for a W-2 income. So it's either I find a highly tax efficient way of making money or I am just going to stay home.

If they cannot make me a 1099 contractor, the price will be a lot higher.

 

[Mulligan]

Recently went over my son's college funds, he has enough to finish (just enough) by also working a little for gas and spending money. He said it would really be easier if he didn't have to work while studying. I didn't take the bait.

If he really had an emergency I would of course help him out, but this is just normal planning, spending control, and time management. His learning now will help him out much better for his future than if I just handed him some extra cash. I had to work part time through college too, and believe it is part of the reason I am now better off than friends who had it much easier than me.

Hey, you gotta give him "credit" for giving it the "ol college try". Nothing wrong with one of those "if you like it, take it, if you don't send it right back" comments.


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[NW-Bound]

My children worked part-time and during summers for textbook expenses and for spending money. I paid for tuition, gave each a good running car, and paid for their car and health insurance.

 

[CaliforniaMan]

Hey, you gotta give him "credit" for giving it the "ol college try". Nothing wrong with one of those "if you like it, take it, if you don't send it right back" comments.


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Good point! Thanks. I do, he is a smart kid!
So far he is managing his money pretty well, getting decent grades and staying focused on being employable. No complaints really.

 

[robnplunder]

I for one am happy all you [-]suckers[/-] OMYers are continuing to [-]pay my Obamacare subsidies[/-] service the national debt. I don't think you can ever have enough money or margin of safety in retirement...

Ouch!

 

[CaliforniaMan]

Paid-for homes may still require beaucoup money for maintenance and repair (see photo found on Web). That money may be better spent on gas for the RV, so that travel activity can continue. Getting wife to agree to it may be the problem.

If I can afford to keep up my Costco membership, they have some pretty cheap tarps, and maybe I can scrounge some used plywood.

 

[NW-Bound]

Look at blue tarps from Harbor Freight. Why, recently they even gave out coupons for a free one, and perhaps I should go claim one to save for rainy days (literally!).

However, that size may not be enough even for the tiny homes we talk about on another thread. Oh well, it would still be good for my RV when that starts leaking too.