A Retiree's Portfolio Review,

[ncbill]

Thanks for your input, have learnt from your prior posts.

Gifting at present each year -
-$30k from our taxable to our unmarried 29 yr old son (MBA), transfer some to his Vanguard Account & some to him in cash
-$30k to our daughter (She & her husband are MDs) some in cash, but mostly to her kids (our grandkid's) 529 plans.

We paid for our kids education & they did not have any students loan. So far they have not asked us for any money, although they do know we have millions worth in investments. Hopefully they do not start expecting or depending on us. We will leave the kitty to them when we pass

Making baby steps from the Fidelity Donor Advised Fund -
1)Last yr to a Scholarship at the State Uni., our kids graduated from
2)Started a pledged Endowed Scholarship at a local Community College
3)Local Temple, few other causes here & education of poor (501c) in India.

Will look up Perkins "Die with Zero",

Thankyou

IIRC, annual gift limit has increased to $16k/person for 2022.

 

[rkser]

Thanks Dawgman & Ncbill,

I appreciate your input.

 

[rkser]

Need help with Draw Down/ Monthly Paycheck.

Thanks above for your feedback on our above Investment Portfolio, need help with setting up simple withdrawal system from the kitty on an auto pilot.

I am planning regular paychecks for the first time, it is as much a psychological undertaking as it is a financial.

Although we will probably not outlive our money, I am reading up on various ways /methodologies /calculators to find out simple optimal ways of doing this.

In 2021 we had taxable & tax exempt Dividends, Cap gains & interest of around $117k now being directed to the bank this year.
We did Roth Conversion of $150k,
Rebalanced in taxable with Cap Gains of $65k
Will file MFJ in 24% Tax Bracket with taxes payable of around $45k.

In this year, we project we will need need -
$120k -$10k/monthly for living expenses
$45k Taxes,
$35k Gifts for kids/grand kids in addition to some from 529 Plan
$200k Total Need in 2022

We need $83 k to be withdrawn in addition to above mentioned dividends of $117k. The essential question is whether to draw $83k from Taxable or Tax Deferred or a combination. ??

Schwab & Fidelity have articles which suggest withdrawing in proportion to the Taxable/Tax Deferred totals in the portfolio.
In our case the taxable money is 5.4 times the tax deferred. i.e.. 5.4 : 1
From Tax Deferred $13000
From Taxable Brokerage $ 70200
Total withdrawal of $83200

Christine Benz has the 3 Bucket Strategy where Cash + Bonds to spend for next 8 to 10 yrs, then go Equities in the final leg giving more time for equities to appreciate.

Yes it is more involved, but do not want to go to a 1% asset under management Advisor & nor take an annuity.

I will appreciate any critiques or help/suggestions to our withdrawals, monthly pay check strategy. Many members here I am sure, have gone through such an exercise in retirement.

Thankyou in advance for your feedback.

 

[target2019]

$117K annually from cap gains, interest and dividends pays the $120K annual for baseline expenses.

You need $45K to pay taxes on the above. That is best to come from taxable.

You desire $35K for discretionary gifts. That would come from Roth if it doesn't hurt your down-the-road projections.

 

[rkser]

Thanks Target , I agree

 

[Exchme]

We are looking at doing gifts to the kids in kind rather than selling first. In the long haul, it greatly cuts our capital gains taxes.

I've totaled up the amount of assets we are likely going to need to sell from now until RMDs start, looked at the cost basis of everything and will give them shares that have a bit more gains in them than the highest gain stuff we would ever need to sell. The idea is to save the stuff with the smallest gains for us and the stuff with the largest gains for our estate to get the step up basis.

 

[pb4uski]

$117K annually from cap gains, interest and dividends pays the $120K annual for baseline expenses.

You need $45K to pay taxes on the above. That is best to come from taxable.

You desire $35K for discretionary gifts. That would come from Roth if it doesn't hurt your down-the-road projections.

How are you coming up with $45k for taxes on $117k of income?

If a married couple in 2022 had $117k of ordinary income then their federal tax would be only $11k... if $117k of preferenced income (qualified dividends and LTCG) then their federal tax would be $1k... not anywhere near $45k. And from what the OP wrote it sounds like it would be closer to $1k than to $11k.

See https://www.irscalculators.com/tax-calculator

 

[rkser]

We are looking at doing gifts to the kids in kind rather than selling first. In the long haul, it greatly cuts our capital gains taxes.

I've totaled up the amount of assets we are likely going to need to sell from now until RMDs start, looked at the cost basis of everything and will give them shares that have a bit more gains in them than the highest gain stuff we would ever need to sell. The idea is to save the stuff with the smallest gains for us and the stuff with the largest gains for our estate to get the step up basis.

I had read about that kind of gifting, but how do you execute that gift ?

Both of our kids do have Vanguard accounts, so how do you go about doing that ?

Thanks

 

[rkser]

How are you coming up with $45k for taxes on $117k of income?

If a married couple in 2022 had $117k of ordinary income then their federal tax would be only $11k... if $117k of preferenced income (qualified dividends and LTCG) then their federal tax would be $1k... not anywhere near $45k. And from what the OP wrote it sounds like it would be closer to $1k than to $11k.

See https://www.irscalculators.com/tax-calculator

pb4uski,

I had $150k of Roth conversion too in 2021, in addition to dividends + bank interest + rebalancing Cap Gains with our MAGI just below $340k, from the post # 28.

 

[pb4uski]

Got it.... now.

 

[rkser]

Got it.... now.

pb4uski,

Given above, how would you set up the monthly pay check ?

Thanks

 

[pb4uski]

What account do your dividends and interest go into? ST Bond fund in the taxable brokee account? What account do you pay your bills and autopays from? Bank savings?

We have an online savings account that is part of our retirement portfolio that pays 0.5%. I keep about a year of spending in there and refill it in the 4th quarter each year. My monthly paycheck is an automatic monthly transfer from that account to a credit union checking account that we use to pay our bills, auto pays, write checks on, etc. Happens like clockwork each month.

It makes it easy for me to track withdrawals from our retirement portfolio because all withdrawals go out from that online savings account.

If you don't want to add another account you might use your Vanguard taxable brokerage account or that bank savings account.

 

[rkser]

What account do your dividends and interest go into? ST Bond fund in the taxable brokee account? What account do you pay your bills and autopays from? Bank savings?

We have an online savings account that is part of our retirement portfolio that pays 0.5%. I keep about a year of spending in there and refill it in the 4th quarter each year. My monthly paycheck is an automatic monthly transfer from that account to a credit union checking account that we use to pay our bills, auto pays, write checks on, etc. Happens like clockwork each month.

It makes it easy for me to track withdrawals from our retirement portfolio because all withdrawals go out from that online savings account.

If you don't want to add another account you might use your Vanguard taxable brokerage account or that bank savings account.

Nice setup you have there,

Our Online Savings has a transaction restriction of 6 a month, we have 6 month worth expenses in there.
I am thinking of directing the dividends to a checking account & have a set $ amount transferred monthly to another, on your lines.
Any thoughts on our withdrawal from Tax Deferred/Taxable accounts ?

 

[pb4uski]

Definitely taxable IMO, I prefer to have more control over tax-deferred withdrawals... in fact, other than HSA withdrawals we don't do any tax-deferred withdrawals other than Roth conversions... been living off of taxable accounts since I retired in 2012... my pension and DW SS came online later.

Reg D withdrawl limits of six per month have never been an issue for us, so using the online savings account as the gatekeeper between our retirement portfolio and spending bank accounts works well for us.

 

[target2019]

Nice setup you have there,

Our Online Savings has a transaction restriction of 6 a month, we have 6 month worth expenses in there.
I am thinking of directing the dividends to a checking account & have a set $ amount transferred monthly to another, on your lines.
Any thoughts on our withdrawal from Tax Deferred/Taxable accounts ?

See below for a graphic that shows how I did the planning for in-laws a while back. I made the diagram generic for sharing. It has inputs on the left, output on the right, and exchanges in the center. It is quick and easy to do this on an 11x17 sheet of paper.

There are several benefits to this type of flow chart. You can define the accounts and show how linked to sources. You can find places where accounts and payments can be simplified. You can note account totals to help with further planning for a 'paycheck'. Others can understand what is going on in your head...and so on.

The drawing was done with draw.io.

 

[sengsational]

Nice diagram! I've done a scratch pad version of mine. This example might get me motivated to make a nice one.

 

[target2019]

Nice diagram! I've done a scratch pad version of mine. This example might get me motivated to make a nice one.

I think with a variety of stickies in different sizes and colors you could do a very good job too. If you have a white board it would help also.

 

[rkser]

Thank you !!

See below for a graphic that shows how I did the planning for in-laws a while back. I made the diagram generic for sharing. It has inputs on the left, output on the right, and exchanges in the center. It is quick and easy to do this on an 11x17 sheet of paper.

There are several benefits to this type of flow chart. You can define the accounts and show how linked to sources. You can find places where accounts and payments can be simplified. You can note account totals to help with further planning for a 'paycheck'. Others can understand what is going on in your head...and so on.

The drawing was done with draw.io.

Thanks Target !
I think this will be very helpful to me,
I will need to go in more detail to name our accounts in the diagram & set it up & am sure will help DW too.
Thanks again