Got a call from my FA, good news or bad?

[pb4uski]

..... Average RMDs over the first 10 years is 4%.
And 4% times $770k is $31k, added to SS of I'm guessing $30k.
$61k minus $24k (standard deduction) = $37k of taxable income, but, I don't think they will even be taxed on their SS because, adjusted gross income + nontaxable interest + half of your Social Security benefits will be below $32k. That $32k has it's own yearly inflation increase, so it will be higher when the RMDs start. ....

You got a couple things wrong here.

First, the hurdles do not increase as a result of inflation as you suggest. That is a well known problem that cause more of SS to be taxedas time goes on since SS increases but the hurdles are fixed.

Second, the number that you cite would result in SS being taxed. $31k RMD + 1/2 of $30k in SS = $46k which exceeds the $44k hurdle for a couple so 85% of SS would be taxable.

... According to the IRS, the quick way to see if you will pay taxes on your Social Social Security income is to take one half of your Social Security benefits and add that amount to all your other income, including tax-exempt interest. This number is known as your combined income (combined income = adjusted gross income + nontaxable interest + half of your Social Security benefits). ...

...For married couples filing jointly, you will pay taxes on up to 50% of your Social Security income if you have a combined income of $32,000 to $44,000. If you have a combined income of more than $44,000, you can expect to pay taxes on up to 85% of your Social Security benefits. ...

.... My gut feeling with only the details the OP has given is, it may cost them more if they do Roth Conversions then if they don't. ....

Jethro Gibbs you are not... your gut feeling is wrong... if it were right why would the OP's tax preparer be talking with the OP about Roth conversions?

.... have you thought about ROTH conversions...

... Yes when we had our taxes done the lady ask us about that. We figured we would look at that later this year since this will be our 1st full year of not working,so we will know where we stand.

 

[CoolRich59]

Slowly wins.

Take your time, let the spinning stop, make a thoughtful decision and execute. If this takes even six months that is not particularly important in the big picture.

Well said.

 

[Venturer]

Ok folks, I got another call yesterday from my guy. I informed him that we would not be meeting with him and his new wonderful boss. He said again that I really should let them come to the house and talk. I said once more that we would not be interested and to please take my name out of his phone since we would not be needing his advice. He then ask what was wrong and I told him that I understood that he wasn't supposed to contact me about going with him to another firm,isn't that called "churning"? He hesitated and then said I could call him later if anything changed. I said ok thanks and hung up. We were in the car and my wife thanked me for "not getting ugly"! I have been diligently searching for more info. watching some video's and listening to podcasts from folks on Bogleheads, and looking at info on Vanguard and Fidelity. I also looked at Bettermont,and wealthfront. Whew mind mind is spinning. I am a little confused about the fund fees. I think we are going to go the advisor route for now at least. But I'm not sure which will serve us best. VG or Fido? Here is a quick summery of our situation. My 401k is still at Prudential 306k ,my rolled over Ira at WF 55k,wife's rolled over 401k and rolled over ira 225k total at WF. We want to do I think an in kind transfer to which ever one is best. I'm 68 in march wife is 67 in June. We have also 65k in stock at TD from my former employer through payroll deductions & 40k in cd's and money markets in local bank because wife says she wants quick run to bank and get money for emergency on hand just in case,and she won't budge from that! We both were poor growing up and have tried to live within our means. Looking around and seeing some of the post here I know we don't have the money some do but we got each other. We have lived off of our social security and 2 small pensions for our daily stuff since we retired in June and July.
So thanks again for all who have posted to me so far & thanks in advance for any who may do so in the future. Have a great day.

You got a couple things wrong here.

First, the hurdles do not increase as a result of inflation as you suggest. That is a well known problem that cause more of SS to be taxedas time goes on since SS increases but the hurdles are fixed.

Second, the number that you cite would result in SS being taxed. $31k RMD + 1/2 of $30k in SS = $46k which exceeds the $44k hurdle for a couple so 85% of SS would be taxable.





Jethro Gibbs you are not... your gut feeling is wrong... if it were right why would the OP's tax preparer be talking with the OP about Roth conversions?

So as of now our normal monthly expenses are covered by our SS and pensions. our before tax total from those is $46000.00 so mabey we won't need to do any Roths at all according to what I read here. If that is the case then so be it.Sounds like it may be simpler that way. I know we will have to pay tax for 2020 because we sold 32,000 of stock that I had from 25 years of payroll deducted purchases. When I started buying it it was around 15.00 per share and I sold at 1150.00 so my tax will spike. I am prepared for this with set aside money.I am going to set up an appointment with the Fidelity office nearest us in Atlanta suburb to talk to them. If I decided to go with them and want to go with a simple 4 to 6 fund portfolio what would be a good suggested mix, or would I need more? Thanks again.

 

[Markola]

You certainly don’t need more than 4-6. And tell them you want funds with the lowest expense ratios possible, only index mutual or ETF funds. If they argue or try to sell you annuities or other nonsense, be prepared to walk. If they honor your wishes, you’ve probably found the right place. I’m a Vanguard/Boglehead partisan but you will almost certainly be better off at Fidelity than Wells Fargo. Good luck and keep us posted!

 

[OldShooter]

I vote for one or two on the equity side.

 

[pb4uski]

....I know we will have to pay tax for 2020 because we sold 32,000 of stock that I had from 25 years of payroll deducted purchases. When I started buying it it was around 15.00 per share and I sold at 1150.00 so my tax will spike. ...

Not necessarily.

You may not have to pay any tax on that gain on the sale of the stock. As long as your total income for 2020 for a married couple is less than $104,400 you would pay no tax on long-term capital gains and it sounds like your total income will be well below $104,400 from what you wrote.

In fact, if you have other taxable investments that are worth more than you paid for them you could sell them and buy them right back if you wish to and pay no tax but have a higher tax basis.

 

[Time2]

You got a couple things wrong here.

First, the hurdles do not increase as a result of inflation as you suggest. That is a well known problem that cause more of SS to be taxed as time goes on since SS increases but the hurdles are fixed.

Your are correct, from what I can see, it hasn't changed since 1993!


Second, the number that you cite would result in SS being taxed. $31k RMD + 1/2 of $30k in SS = $46k which exceeds the $44k hurdle for a couple so 85% of SS would be taxable.


I'm surprised and disappointed that SS gets taxed at such low incomes.

Jethro Gibbs you are not... your gut feeling is wrong...

Rule #3



if it were right why would the OP's tax preparer be talking with the OP about Roth conversions?[/QUOTE]


Rule #3


Add to that that, he does have some pensions, he may vary well be better off with the Roth conversions. This heightens the fact that I really need to get busy on my Roth conversions or I'll be paying a lot in taxes at 72.

 

[pb4uski]

.... I'm surprised and disappointed that SS gets taxed at such low incomes. ...

Why? You will receive much more than you paid in and previously paid taxes on.

If I divide what I paid in SS as shown on page 3 of my SS statement by my monthly benefit at my FRA I get 44 months. If I live to an average age of 82, that is 190 months... so a big part of what I receive is "growth" on my contributions that I have never been tax on and will get taxed on as I collect them... just like if instead of paying into SS I had contributed to a non-deductble IRA I would be taxed on the growth as I withdraw it.

 

[davebarnes]

Simple is good

....appointment with the Fidelity office...to talk to them. If I decided to go with them and want to go with a simple 4 to 6 fund portfolio what would be a good suggested mix, or would I need more?

1. Two stock funds and two bond (different time horizons) are plenty.
2. Fido has many funds with expense ratios under 0.2%. Don't fixate on zero and read this—https://humbledollar.com/2020/02/counting-the-costs/ . 2/10 of a percent means $2000/year on a million $ portfolio.
3. Do your research. This page list many low-cost funds—https://www.fidelity.com/mutual-funds/investing-ideas/index-funds Find funds that meet your needs.

 

[Markola]

Those are cheap expense ratios but remember, those are on top of the advisory fee. For simplicity, let’s say he ends up with an average expense ratio across his mutual funds of .10. .10 needs to be added to whatever the advisory fee is. I say “whatever”, because the Fidelity website is quite vague.

https://www.fidelity.com/wealth-management/wealth-management-detail

It says the fee ranges between .50 and 1.50. So the OP will be paying either .60% or 1.60% or something in between year after year inclusive of his mutual fund ERs. That may not sound like much until you consider that a safe withdrawal rate is thought to be 4% or less. Buyer beware.

It sounds like the ship has sailed but I will say that we pay .30 for Vanguard’s assigned advisor service plus expense ratios averaging .14 for a total of .44. One can build a DIY portfolio for almost zero fees but it is worth it to me to pay .44 for all of the marital harmony, SS and health insurance projection advice, mistake prevention insurance and other benefits. I’ve consistently had excellent service at Vanguard too. YMMV.

 

[Time2]

Why? You will receive much more than you paid in and previously paid taxes on.

If I divide what I paid in SS as shown on page 3 of my SS statement by my monthly benefit at my FRA I get 44 months. If I live to an average age of 82, that is 190 months... so a big part of what I receive is "growth" on my contributions that I have never been tax on and will get taxed on as I collect them... just like if instead of paying into SS I had contributed to a non-deductble IRA I would be taxed on the growth as I withdraw it.

I just thought it would be higher.
For what it's worth, I looked at the SS paid divided by my FRA benefit and I got 65 Months.
Interestingly enough, I also noted employers only paid 12% of my SS taxes. I had a lot of self employment.

 

[mrfeh]

If I decided to go with them and want to go with a simple 4 to 6 fund portfolio what would be a good suggested mix, or would I need more? Thanks again.

https://www.bogleheads.org/wiki/Bogleheads®_investing_start-up_kit

https://www.bogleheads.org/wiki/Fidelity

 

[Venturer]

I have got an appointment with Fidelity rep. in one of the Atlanta offices next Thursday.
It is a free 1 hr. session to look over our current stuff and give us suggestions. My biggest fear as of this morning is the falling market. I just pulled up my Pru.401k and is is down 12 % from 1/2020 till today,I'm thinking I might be better off to stay the course where I am since rolling it over will be selling low. I've been reading here a lot this am too,and see the general consensus is go play outside and quit looking! Boy it's hard esp.since my DW is almost crying.

 

[FinancialDave]

So as of now our normal monthly expenses are covered by our SS and pensions. our before tax total from those is $46000.00 so mabey we won't need to do any Roths at all according to what I read here. If that is the case then so be it.Sounds like it may be simpler that way. I know we will have to pay tax for 2020 because we sold 32,000 of stock that I had from 25 years of payroll deducted purchases. When I started buying it it was around 15.00 per share and I sold at 1150.00 so my tax will spike. I am prepared for this with set aside money.I am going to set up an appointment with the Fidelity office nearest us in Atlanta suburb to talk to them. If I decided to go with them and want to go with a simple 4 to 6 fund portfolio what would be a good suggested mix, or would I need more? Thanks again.

Are your total retirement funds down by 12% YTD or just your one account as you mention (or is that basically one in the same).

Mine is down maybe 5.5% and the Total Stock Market index is down maybe 7.5% at this time, so 12% is a pretty aggressive allocation for someone that seems to be retired??

Dave

 

[PatrickA5]

My wife had a meeting last Friday with a financial advisor that her small company hired to be a "fiduciary" for their 401k (administered through ADP). The guy (former Edward Jones) didn't come across well to an office full of women, making assumptions that their husbands were the higher earner, when in fact they all make 6 figures and most are the higher earning (my wife is). It didn't go well, and I doubt he picked up any new clients.

He told DW that she was too conservative for her age (61) at a 40/60 allocation and suggested she move that equity exposure up to 70ish. The guy is probably hiding under the bed after this weeks declines.

 

[Venturer]

Are your total retirement funds down by 12% YTD or just your one account as you mention (or is that basically one in the same).

Mine is down maybe 5.5% and the Total Stock Market index is down maybe 7.5% at this time, so 12% is a pretty aggressive allocation for someone that seems to be retired??

Dave

Thanks Dave,
That is only my 401K account which is still in my company thru Prudential I only looked at the summary, I am going to carry my latest statements with us from all our accounts to our Fidelity meeting next Thur. 3/5. I'm not touching anything till after that meeting.

 

[Venturer]

Its been a hurry up 2 weeks since my last post here. Between Dr. visits meeting with a financial advisor, and helping out with granddaughter we are wore out. We are going to A Fidelity office next week. to talk about our situation and to make plans for future. We are worried about if we go ahead and move our assets now how much we will in fact lose instead of just paper loss. I just pulled up my Prudential 401k that is still with the company I retired from. It has dropped from 305 k 01/2020 to 270k yesterday. That hurts and is scary. I just don't know should we stay for now or just go ahead and move it all now and get it over with? My wife's was 224.k is down to 205k with wells fargo!

 

[RobLJ]

I've been intending to consolidate my wife's rollover IRAs this year, but I'm holding off right now with 4-10% market swings up and down.
The exception, I suppose, is if you can do in kind rollovers where they transfer the stock/bond funds directly from one account/provider to another, without selling them.

If the roll-over/transfer stays invested then it shouldn't matter.
YMMV, of course.

Its been a hurry up 2 weeks since my last post here. Between Dr. visits meeting with a financial advisor, and helping out with granddaughter we are wore out. We are going to A Fidelity office next week. to talk about our situation and to make plans for future. We are worried about if we go ahead and move our assets now how much we will in fact lose instead of just paper loss. I just pulled up my Prudential 401k that is still with the company I retired from. It has dropped from 305 k 01/2020 to 270k yesterday. That hurts and is scary. I just don't know should we stay for now or just go ahead and move it all now and get it over with? My wife's was 224.k is down to 205k with wells fargo!

 

[ERD50]

Its been a hurry up 2 weeks since my last post here. Between Dr. visits meeting with a financial advisor, and helping out with granddaughter we are wore out. We are going to A Fidelity office next week. to talk about our situation and to make plans for future. We are worried about if we go ahead and move our assets now how much we will in fact lose instead of just paper loss. I just pulled up my Prudential 401k that is still with the company I retired from. It has dropped from 305 k 01/2020 to 270k yesterday. That hurts and is scary. I just don't know should we stay for now or just go ahead and move it all now and get it over with? My wife's was 224.k is down to 205k with wells fargo!

I've been intending to consolidate my wife's rollover IRAs this year, but I'm holding off right now with 4-10% market swings up and down.
The exception, I suppose, is if you can do in kind rollovers where they transfer the stock/bond funds directly from one account/provider to another, without selling them.

If the roll-over/transfer stays invested then it shouldn't matter.
YMMV, of course.

Yes, I was just going to post that.

Venturer - relax, take a breath. If you are doing a "sideways move" (keeping the same ratio of stocks/bonds), the market drop has nothing at all to do with your move. You would have been hit by it whether the money was in the 1st account, or if it was moved to the 2nd account. It is of no consequence at all, it is still "just a paper loss", transfer or no transfer.

The only thing to watch is the tax consequence (and even that doesn't matter if this is all 401K/IRA), and actually, this drop makes that less of an issue (cold comfort, I know!). And if you can move things in-kind, no problem anyhow.

Let me repeat - relax, take a breath.

-ERD50

 

[Sunset]

Its been a hurry up 2 weeks since my last post here. Between Dr. visits meeting with a financial advisor, and helping out with granddaughter we are wore out. We are going to A Fidelity office next week. to talk about our situation and to make plans for future. We are worried about if we go ahead and move our assets now how much we will in fact lose instead of just paper loss. I just pulled up my Prudential 401k that is still with the company I retired from. It has dropped from 305 k 01/2020 to 270k yesterday. That hurts and is scary. I just don't know should we stay for now or just go ahead and move it all now and get it over with? My wife's was 224.k is down to 205k with wells fargo!

Others have said it, but since you sound nervous I'll repeat: Transfer your stocks/funds/etf's (basically everything) IN KIND.

Then what you have stays the same.

 

[RetMD21]

in kind transfers are the way to go. I place a mutual fund sell order in my taxable account this week but ended up cancelling. I want to sell an relatively more expensive less tax efficient fund and I have offsetting losses but selling in the midst of a sharp downturn is not the way to go.