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Hello from paradise
Old 01-11-2017, 08:41 AM   #1
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Hello from paradise

I am age 64 and live in an area I consider to be "a vacation location".

Married with two children and two grand children. Wife retired in 2010.

Assets include tax sheltered accounts (401ks, traditional IRAs), rental property and a little in after tax accounts.

I am new to retirement and am trying to sort out the relative priority of several areas to address including (in no particular order):

1) When to take SS
2) Withdrawal rate and from which source(s)
3) Whether to rollover existing 401k to IRA
4) Whether to rollover existing IRAs to Roth IRAs
5) When and how to disposition rental properties
6) Replacing traditional FA (1%) with robo-adviser

And maybe more important: What is omitted from the list above.

I look forward to learning from this forum.
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Old 01-11-2017, 09:29 AM   #2
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Welcome!

As you probably already know, there are many threads discussing those topics. You probably can get educated to your heart's content on all of them by searching the forum and reading the posts (and links). Always can post individual questions on them if any remain.

I'd personally rank your areas of inquiry according to the following priority:
  1. get rid of 1% FA [robo-advisor optional...];
  2. everything else.
Again, welcome to the forum--it's nice to hear from someone already in paradise, as opposed to those of us making plans to spend time there!
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Old 01-11-2017, 09:36 AM   #3
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Originally Posted by 2017ish View Post
Welcome!

As you probably already know, there are many threads discussing those topics. You probably can get educated to your heart's content on all of them by searching the forum and reading the posts (and links). Always can post individual questions on them if any remain.

I'd personally rank your areas of inquiry according to the following priority:
  1. get rid of 1% FA [robo-advisor optional...];
  2. everything else.
Again, welcome to the forum--it's nice to hear from someone already in paradise, as opposed to those of us making plans to spend time there!
+1 because the 1% you pay your FA is probably 25% of the retirement income you'll have
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Old 01-11-2017, 10:28 AM   #4
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1) When to take SS Depends on if it's required to meet ends. It pays to put it off as long as possible if you're in great health and can get by without the $.
2) Withdrawal rate and from which source(s) Many live by the 4% rule on 401K's/IRA's. Depends on if you've got substantial funds in the accounts, too.
3) Whether to rollover existing 401k to IRA Does your ex-employer have your 401K setup in really good, productive accounts? Are they paying the service fees? Sometimes you're required to get'tem out of 401K's--and then you'd rollover to an IRA.
4) Whether to rollover existing IRAs to Roth IRAs. You don't want to rollover to Roth if it kicks you up into a higher tax bracket.
5) When and how to disposition rental properties ? ? ?
6) Replacing traditional FA (1%) with robo-adviser Time to figure out what risk you're willing to put up with and what funds to diversify into to get to those goals. 1% is a lot to pay as you can study fund performance on the internet for free. Get rid of them.
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Old 01-11-2017, 10:36 AM   #5
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Ref your #6: If your FA has you invested in mutual funds (which is likely) you are paying more than 1% - maybe double that number. A majority of us on this forum are DIY investors who do not pay a FA or robo-advisor to do something we can do as well (probably better) for far less $. Become a Boglehead and reap the savings/benefits.
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Old 01-11-2017, 11:06 AM   #6
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Originally Posted by Bamaman View Post
...
4) Whether to rollover existing IRAs to Roth IRAs. You don't want to rollover to Roth if it kicks you up into a higher tax bracket.
...[/B]
Unless by doing so now, your projections consistently indicate that you'll avoid even higher tax brackets after age 70. (We will be going from 0 and filling the 25% bracket for this reason.)
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Old 01-11-2017, 01:10 PM   #7
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Originally Posted by mghandyman View Post

1) When to take SS
2) Withdrawal rate and from which source(s)
3) Whether to rollover existing 401k to IRA
4) Whether to rollover existing IRAs to Roth IRAs
5) When and how to disposition rental properties
6) Replacing traditional FA (1%) with robo-adviser
1) As late as you can for the highest benefit
2) 3% or less for sustainability if you can swing it
3) Depends on the investment options available
4) Depends on your tax situation
5) No experience here
6) YES!!!!!! I would even pass on the robo and DIY
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Old 01-11-2017, 06:06 PM   #8
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Welcome,

So what State is paradise ??

3) Whether to rollover existing 401k to IRA
I did because mine was with small company which had high fees on every investment, if yours is with a large company that has low fee investments, you might want to keep it there as it is protected against lawsuits and you can still take out $$$ much like an IRA.

4) Whether to rollover existing IRAs to Roth IRAs
You Cannot.
You can do a conversion which is similar in effect but has advantages, depends on your tax bracket if you want to do it or not, most folks want to do it, but not if you are already taking SS.
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Old 01-11-2017, 07:27 PM   #9
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Welcome,

So what State is paradise ??
Oak Island sounds like NC. Our boat is nearby in Southport (I guess we're CLOSE to paradise!).
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Old 01-12-2017, 08:04 AM   #10
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Yes. It is NC.

Sunset why does SS affect do a conversion to a Roth?

You can do a conversion which is similar in effect but has advantages, depends on your tax bracket if you want to do it or not, most folks want to do it, but not if you are already taking SS.
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Old 01-12-2017, 09:49 AM   #11
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Originally Posted by mghandyman View Post
Yes. It is NC.

Sunset why does SS affect do a conversion to a Roth?

You can do a conversion which is similar in effect but has advantages, depends on your tax bracket if you want to do it or not, most folks want to do it, but not if you are already taking SS.
Conversion from tIRA to Roth makes the tIRA amount become taxable income. High taxable income when taking SS can result in receiving less SS.

Quote:
In 2017, the annual earnings limit is $16,920 if you’re under full retirement age. If you will reach full retirement age in 2016, the limit on your earnings for the months before full retirement age is $44,880.
Income in excess of those limits result in a $1 reduction in your SS pay for every $2 of income over those limits, so many people don't want to have income exceeding those limits if they can avoid it.
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Old 01-12-2017, 10:09 AM   #12
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First - welcome to the forum mghandyman. You've got a good set of questions - but as you're probably figuring out based on the responses - everyone has different circumstances...

Here are my answers to your questions:


1) When to take SS
Lots of factors go into this decision. Does your wife have SS on her own account or will she be taking spousal SS? Is there a big difference in the amount of you and your wife? (If there is - many will opt to have the higher earner delay to provide a larger survival benefit for the spouse.)

2) Withdrawal rate and from which source(s) Again - lots of discussion on these boards. You'll have to weigh you and your wive's family history of longevity, whether you want to leave an inheritance to the kids/grandkids, etc... But the starting point should be - how much do you *need* to withdraw to meet your spending goals after other income sources (rental income, SS, pension, whatever) are accounted for. You need to know how much you spend each year.

3) Whether to rollover existing 401k to IRA
One reason to keep a 401k if it gives you access to funds you wouldn't have access too otherwise... for example some 401ks have decent stable value funds - which pay better than a CD and are a good cash/fixed income investment. Other 401ks might offer super low cost institutional index funds. (My former employer had this... super low expense ratios).

4) Whether to rollover existing IRAs to Roth IRAs
You'll need to look at your taxable income to determine if this is right for you... You mention you have a rental - so that effects your AGI. Many people will roth convert up to the point they either 1) go into a higher tax bracket; 2) increase their taxation on SS; 3) lose their ACA premium tax credit.... All of those things need to be figured out. I just started Roth converting this year - in hopes to reduce my taxes when I take RMDs at age 70.

5) When and how to disposition rental properties
That is something that is entirely up to you. If it's more work than it's worth - sooner than later... If it's no trouble and brings good income... later. We have a rental unit on our property (granny flat)... we can't sell it without selling our primary - so no plans to "get rid of it" in the near term... But we have awesome tenants and can manage the maintenance easily since it's in our backyard. If your rental is providing more benefit than hassle - keep it. If not, sell it.

6) Replacing traditional FA (1%) with robo-adviser
Do a bit of reading. Google the term "lazy portfolio" for some ideas. You don't need to rush this before you know what you want... but paying 1% if your withdrawal rate is 4% is giving away 25% of your withdrawal.... Yikes. I also recommend checking out the book "The millionaire teacher" from the library (I'm cheap - so I do library books rather than purchases)... It is an easy read and will teach you the basics of index fund investing and the math behind why FAs are usually not a good deal.

Again - welcome to the forum.
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Old 01-12-2017, 11:10 AM   #13
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Originally Posted by exnavynuke View Post
Conversion from tIRA to Roth makes the tIRA amount become taxable income. High taxable income when taking SS can result in receiving less SS.



Income in excess of those limits result in a $1 reduction in your SS pay for every $2 of income over those limits, so many people don't want to have income exceeding those limits if they can avoid it.
To clarify, the SSA does not consider withdrawals from any type of IRA to be earned income, and such withdrawals--for whatever purpose--don't affect calculations for the earnings test. However they are taxable income, and conversions can easily increase your total taxable income to the point that some of your SS benefits are also taxed. The additional tax you have to pay (on both the conversion and your SS benefit) will almost always make the conversion uneconomical. See Rodi's point 4.2 in post #12.
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Old 01-12-2017, 05:56 PM   #14
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To clarify, the SSA does not consider withdrawals from any type of IRA to be earned income, and such withdrawals--for whatever purpose--don't affect calculations for the earnings test. However they are taxable income, and conversions can easily increase your total taxable income to the point that some of your SS benefits are also taxed. The additional tax you have to pay (on both the conversion and your SS benefit) will almost always make the conversion uneconomical. See Rodi's point 4.2 in post #12.
OP - I could have structured my sentence better but this is what I meant.
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Old 01-13-2017, 06:45 AM   #15
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Wow, the infamous Oak Island!

If you can find the Money Pit, all your financial problems will be over!
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