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At 45 I'm going to quit...came here to learn more
11-20-2019, 03:20 PM
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#1
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Dryer sheet wannabe
Join Date: Sep 2019
Posts: 21
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At 45 I'm going to quit...came here to learn more
Hi Everyone!
I'm 44 and I plan to FI/RE by April. I even have my LoR typed out ready to sign and date.
Currently I have no debt, no home (renting), no kids to pay for (graduated college and off of my payroll) and I'm looking toward the next phase of life... living adventurously in my self-converted van/RV.
In April I'll start on the Appalachian Trail.
I have my 4 buckets:
401K = 1,075k
Roth = 50k
Taxable brokerage account =85k
Cash/savings = 10k
I've got a long way to go until 59.5years old...
I came here to educate myself on:
1. Investing (AA, risk mitigation, and which buckets to put specific investments in)
2. Search for ways to minimize my taxes while drawing sufficient income (40k/year) for the next 35 or more years.
3. Find out more about utilizing an NUA to free monies from the PST (profit sharing trust) part of my 401K account... I've heard the name Frank Duke mentioned alot, but I'm not quite certain how to properly do this.
I look forward to searching this forum and learning from all of you.
-Grimey
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11-20-2019, 03:57 PM
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#2
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Recycles dryer sheets
Join Date: Oct 2012
Location: Minneapolis 'burbs
Posts: 382
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Welcome! I'm also 44 and am planning on pulling the ripcord next April when I'm 45. However, I plan on sleeping for the first 6 months or so.
If you're new to FIRE forums in general, the Mr. Money Mustache forum, here, and the Bogleheads forum will give you a good spectrum of experiences, viewpoints, etc.
Online calculators like Firecalc and c fire sim (all one word, but the board is giving me ***** if I try to type it out) can help you determine how likely your stash is to last the distance, if you haven't used them already.
And enjoy! There's a lot of ways to do retirement "right", I think everyone's here is slightly different, and I envy them all.
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11-20-2019, 04:56 PM
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#3
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,371
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Looks like you can do SEPPs for ~$42k a year. Your taxable income may be low enough to do low tax-cost Roth conversions as well at 12%. I don't know about NUA bu someone who does will come along.
What are you plans for health insurance?
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
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Health care with Early retirement'
11-20-2019, 06:15 PM
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#4
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Dryer sheet wannabe
Join Date: Sep 2019
Posts: 21
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Health care with Early retirement'
Quote:
Originally Posted by pb4uski
Looks like you can do SEPPs for ~$42k a year. Your taxable income may be low enough to do low tax-cost Roth conversions as well at 12%. I don't know about NUA bu someone who does will come along.
What are you plans for health insurance?
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I'm trying not to do SEPP due to the long (15 year) window. I'm looking towards Roth conversion ladder filled up under 12% bracket limit. I like the idea of keeping flexibility...
For healthcare, I plan to go on the open ACA market... Right now it looks like I can get a bronze plan for $500/mo.
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11-20-2019, 06:16 PM
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#5
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,371
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Quote:
Originally Posted by Grimelowe
I plan to go on the open ACA market... Right now it looks like I can get a bronze plan for $500/mo.
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The price of freedom! Is the $6k/year for health insurance included in your $40k/year of spending?
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
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11-20-2019, 06:24 PM
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#6
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Dryer sheet wannabe
Join Date: Sep 2019
Posts: 21
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Quote:
Originally Posted by pb4uski
The price of freedom! Is the $6k/year for health insurance included in your $40k/year of spending?
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Yes! I'm a man of few wants and fewer needs. 30K after Healthcare expenses feels right...according to the budget I've been living with the past few years. Fortunately, I'm partnered (not married though) with someone to share many expenses and have adventures (Hiking, biking, kayaking, travelling) with.
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11-20-2019, 06:38 PM
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#7
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2009
Posts: 6,695
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Quote:
Originally Posted by Grimelowe
Hi Everyone!
I'm 44 and I plan to FI/RE by April. I even have my LoR typed out ready to sign and date.
Currently I have no debt, no home (renting), no kids to pay for (graduated college and off of my payroll) and I'm looking toward the next phase of life... living adventurously in my self-converted van/RV.
In April I'll start on the Appalachian Trail.
I have my 4 buckets:
401K = 1,075k
Roth = 50k
Taxable brokerage account =85k
Cash/savings = 10k
I've got a long way to go until 59.5years old...
I came here to educate myself on:
1. Investing (AA, risk mitigation, and which buckets to put specific investments in)
2. Search for ways to minimize my taxes while drawing sufficient income (40k/year) for the next 35 or more years.
3. Find out more about utilizing an NUA to free monies from the PST (profit sharing trust) part of my 401K account... I've heard the name Frank Duke mentioned alot, but I'm not quite certain how to properly do this.
I look forward to searching this forum and learning from all of you.
-Grimey
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I retired 11 years ago at age 45. One key part of my plan was to use NUA to cash out the company stock in my 401k at lower tax rates and invest that money in a bond fund which would generate a steady income flow to cover my expenses. That plan has worked out quite well in the last 11 years and will continue to provide most of my income. Meanwhile, I have a rollover IRA from the reminder of my 401k along with SS and my frozen company pension awaiting me (my "reinforcements") starting in my 60s.
__________________
Retired in late 2008 at age 45. Cashed in company stock, bought a lot of shares in a big bond fund and am living nicely off its dividends. IRA, SS, and a pension await me at age 60 and later. No kids, no debts.
"I want my money working for me instead of me working for my money!"
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11-20-2019, 06:46 PM
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#8
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Dryer sheet wannabe
Join Date: Sep 2019
Posts: 21
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Quote:
Originally Posted by scrabbler1
I retired 11 years ago at age 45. One key part of my plan was to use NUA to cash out the company stock in my 401k at lower tax rates and invest that money in a bond fund which would generate a steady income flow to cover my expenses. That plan has worked out quite well in the last 11 years and will continue to provide most of my income. Meanwhile, I have a rollover IRA from the reminder of my 401k along with SS and my frozen company pension awaiting me (my "reinforcements") starting in my 60s.
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With the NUA, I'm assuming the basis was fairly low (creating a reasonable income tax), and then buying bonds was a LTCG on the exchange/sale? (NUA - This is something I'm learning about, and it may be a key to making my living expenses last until roth conversions become available...)
With 11 years of income flow from bond funds, do you feel like you missed out on stock growth?
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11-20-2019, 07:02 PM
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#9
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2009
Posts: 6,695
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Quote:
Originally Posted by Grimelowe
With the NUA, I'm assuming the basis was fairly low (creating a reasonable income tax), and then buying bonds was a LTCG on the exchange/sale? (NUA - This is something I'm learning about, and it may be a key to making my living expenses last until roth conversions become available...)
With 11 years of income flow from bond funds, do you feel like you missed out on stock growth?
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Yes, the cost ("par") basis on the stock was very low, about 3% of the total value, making the use of NUA very worthwhile. The 97% of the stock's value was taxed as LTCG which at the time was only 15%. The fact that I bought shares in that bond fund had nothing to do with the tax treatment using NUA.
I already had a good amount of my portfolio in stock mutual funds, some of which was already in my taxable portfolio and some of it in the rollover IRA. Both have done nicely in the last 11 years, of course.
__________________
Retired in late 2008 at age 45. Cashed in company stock, bought a lot of shares in a big bond fund and am living nicely off its dividends. IRA, SS, and a pension await me at age 60 and later. No kids, no debts.
"I want my money working for me instead of me working for my money!"
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11-20-2019, 07:39 PM
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#10
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Recycles dryer sheets
Join Date: Jan 2013
Posts: 192
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Maybe I don't understand fully your plan Grimelowe. Where do you plan to get your $40,000 per year from? Is this the total expenses for the two of you or are you planning on a combined higher total? Or do you only need to come up with some portion of the $40K? What about significant periodic expenses like replacing the van/other transportation?
Regarding NUA, what percentage of your 401k is company stock and what is your basis that will be treated as ordinary income? How confident are you that there will actually be any net unrealized appreciation when you have to do the complete conversion? How much of your nest egg will you lose when you have to pay regular income tax on the stock basis and the LTCG or STCG tax on the NUA? If I understand this correctly, you will have to do all of the NUA capture within a year of your retirement. I did not think that you could do this periodically over a longer time frame.
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11-20-2019, 08:54 PM
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#11
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Administrator
Join Date: Apr 2006
Posts: 23,038
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Quote:
Originally Posted by Grimelowe
Hi Everyone!
...
In April I'll start on the Appalachian Trail.
...
-Grimey
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Welcome, Grimey. One of our own, ikubak, through-hiked the Appalachian Trail this year. He has a great YouTube channel - PJ on the AT -- that you might find helpful.
__________________
Living an analog life in the Digital Age.
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11-21-2019, 06:48 AM
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#12
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Thinks s/he gets paid by the post
Join Date: Nov 2013
Posts: 1,049
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Quote:
Originally Posted by Grimelowe
I'm trying not to do SEPP due to the long (15 year) window. I'm looking towards Roth conversion ladder filled up under 12% bracket limit. I like the idea of keeping flexibility...
For healthcare, I plan to go on the open ACA market... Right now it looks like I can get a bronze plan for $500/mo.
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What I don't get from your Roth ladder plan is how to bridge the first five years. You don't have enough in taxable or the Roth to last you the first five years. Are you planning to withdraw extra from the tIRA and pay the 10% penalty?
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11-21-2019, 07:05 AM
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#13
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Dryer sheet wannabe
Join Date: Sep 2019
Posts: 21
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Quote:
Originally Posted by marinauser
Maybe I don't understand fully your plan Grimelowe. Where do you plan to get your $40,000 per year from? Is this the total expenses for the two of you or are you planning on a combined higher total? Or do you only need to come up with some portion of the $40K? What about significant periodic expenses like replacing the van/other transportation?
Regarding NUA, what percentage of your 401k is company stock and what is your basis that will be treated as ordinary income? How confident are you that there will actually be any net unrealized appreciation when you have to do the complete conversion? How much of your nest egg will you lose when you have to pay regular income tax on the stock basis and the LTCG or STCG tax on the NUA? If I understand this correctly, you will have to do all of the NUA capture within a year of your retirement. I did not think that you could do this periodically over a longer time frame.
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Marinauser: The 40k is my share. My partner is contributing per her means ($350k nest egg) about 12k/year. We have a separate "house fund" (Not mentioned) from the sale of our house with about 112k in it for a future permanent domicile. We believe this will be only a large downpayment, and we will likely carry some mortgage. If we needed to replace the RV before we were done being transients, it would come from that fund.
For the NUA, I have about $530K in company stock. A third of that is preffered shares with a basis that is about 5.5% of the current price. I have only one shot to do the NUA (doesn't need to be within a year of separation, but it has to be the first time I intervene in my PST - this includes when I do a roll-over). I would need this money 'released' from retirement accounts into my taxable account in order to cover expenses for the next ten years. I wouldn't necessarily sell those shares immediately when they went into the taxable account...
I'm planning to do the NUA on the Preffered shares only. By selling at LTCG only, and keeping my selling amounts low each year, I'm planning to keep the LTCG tax at 0%.
Do you know of any good tax forecasting models? (I've tried to create my own spreadsheet model, but it is clunky and doesn't work well for the changing pots of monies...)
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11-21-2019, 07:19 AM
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#14
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Dryer sheet wannabe
Join Date: Sep 2019
Posts: 21
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Quote:
Originally Posted by NgineER
What I don't get from your Roth ladder plan is how to bridge the first five years. You don't have enough in taxable or the Roth to last you the first five years. Are you planning to withdraw extra from the tIRA and pay the 10% penalty?
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The NUA of my preffered shares in PST would free up a chunk of about 140K (moved to taxable). The combined with the 85K I already have gives me 225k to sell in small chunks at LTCG over the first 5 years.
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11-21-2019, 10:10 AM
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#15
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,371
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Quote:
Originally Posted by Grimelowe
.... Do you know of any good tax forecasting models? (I've tried to create my own spreadsheet model, but it is clunky and doesn't work well for the changing pots of monies...)
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I just have my own in Excel, but another good one is the What-If worksheet in Turbo Tax.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
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11-21-2019, 11:22 AM
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#16
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gone traveling
Join Date: Jan 2019
Location: NW Ohio
Posts: 1,156
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Congrats on an exiting new life about to be lived. It is kind of my dream also to travel frugally in a small RV, and boondock on BLM land, and just see the country.
I have no financial advise for you other than having a sizeable emergency fund, and holding some $$ back for a future retirement home.
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11-22-2019, 06:34 AM
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#17
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Dryer sheet wannabe
Join Date: Sep 2019
Posts: 21
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Quote:
Originally Posted by ckelly78z
Congrats on an exiting new life about to be lived. It is kind of my dream also to travel frugally in a small RV, and boondock on BLM land, and just see the country.
I have no financial advise for you other than having a sizeable emergency fund, and holding some $$ back for a future retirement home.
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Thanks! Partner and I sold our home this summer and put the shared amount (112K) into a joint account for future home purchase. If we ever separate, wwe'd each get half...
What would you consider a good sized emergency fund to be?
I'm thinking having enough for both a full OOP max for healthcare and a major vehicle repair will be enough.
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11-22-2019, 07:08 AM
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#18
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2009
Posts: 6,695
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Grimelowe, one approach some of us, including me, take when it comes to emergency funds is to have a layered, or tiered setup.
I keep $700-$1,500, depending on the time of the month, in my local bank's checking account. This is the most secure and most easily accessible account if I need some fast cash or to cover a small, unforeseen expense. I often have to tap into this first tier of funds. This is an amount over the minimum balance requirements of the checking account to avoid monthly fees.
My next layer of emergency funds is about $40k in an intermediate-term muni bond fund. This $40k earns in the 2%-2.5% range annually, and is mostly tax-free. I hate the idea of having a large amount of money in some account earning nothing or nearly nothing. This account also has checkwriting privileges, making it more quickly and easily accessible on a moment's notice. This account is also part of my overall AA (on the bond side). I also consider it a "slush fund" to cover a large expense I can't cover with recurring funds.
How large your layers of emergency funds should be depends on your own situation. I live in a large co-op apartment complex, so my exposure to something big related to co-op itself is very small, unlike individual homeowners.
__________________
Retired in late 2008 at age 45. Cashed in company stock, bought a lot of shares in a big bond fund and am living nicely off its dividends. IRA, SS, and a pension await me at age 60 and later. No kids, no debts.
"I want my money working for me instead of me working for my money!"
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11-22-2019, 08:15 AM
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#19
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Recycles dryer sheets
Join Date: May 2010
Location: Cincinnati
Posts: 390
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Congrats and best of luck on your new venture.
Great conversation and advice, thanks.
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11-22-2019, 09:07 AM
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#20
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gone traveling
Join Date: Jan 2019
Location: NW Ohio
Posts: 1,156
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An emergency fund should be able to easily handle any health issue co-pays, vehicle problems, or replacement if necessary (it will be your home), any unforeseen expenses that arise from traveling. It will have to up to you how much you want to have in reserve, but I do like the layered thoughts that scrabbler1 put forth.
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