Advice: Review of my Financial Plan

[Wincherr]

Good morning. Would love a little advice here.

55 YO still working full time. I will probably pre-tire Over the next five years by going part time at my current employer. We are fortunate that we get full benefits as long as we work at least 50%.

My job is to perform financial analysis and long-term capital planning with some pretty big numbers. I’ve used those skills to lay out a pretty comprehensive plan for retirement. I’m pretty confident in my model and it’s ultra conservative. I am also ultra conservative and the investment world.

I have a few accounts at Northwestern Mutual and I’m very happy with what I’ve done there. I don’t have a lot of investable money right now as things are in various accounts doing their job. I really want someone to look over my planning and help me make decisions about what accounts I should plan to liquidate first, Roth conversions, etc.

Given that I really don’t have any investable money right now, what type of person would people on this forum suggest that I find to help me with this type of review? I have attended a few seminars but I’m the end they are selling something too.

Thank you in advance for any advice you may have.

 

[GravitySucks]

Post your plan and info here and you will probably get better advice from Forum members than you would from an FA.

 

[SumDay]

I'd recommend a fee only financial planner. We found ours here: https://www.napfa.org/

We only pay ours a modest fee every other year, if and when we ask her for a tune up. She's also a CPA.

 

[OldShooter]

This organization: https://www.xyplanningnetwork.com/ was recently recommended to my by a couple of CFPs whom I consider to be pretty solid citizens.

Regardless of how you find them, be sure to interview at least two or three advisors before making a choice. Familiarity with your potential issues (I am thinking insurance/annuities here based on your mention of Northwestern Mutual) and just general chemistry are important.

Edit: Oh, and check every one of your candidates out at : https://brokercheck.finra.org/ If they are not listed or if they have serious customer disputes don't bother to interview them.

 

[Finance Dave]

I think a fee-only planner is what you want as others have said. You'll get some good advice here too, but the issue is you may get enough different options that it may confuse you even more lol.

Congrats! Your history sounds similar to mine...I did financial analysis and M&A models for a fortune 500 company for 24 years before I FIREd.

 

[corn18]

Where are you located? I found a great CFP in Cincinnati but then moved away.

Other than that, the folks over on bogleheads.org are a whiz at evaluating portfolios. Just be prepared if you are not a low cost index funder.

 

[SumDay]

Where are you located? I found a great CFP in Cincinnati but then moved away.

Other than that, the folks over on bogleheads.org are a whiz at evaluating portfolios. Just be prepared if you are not a low cost index funder.

I thought about bogleheads too. Here are a couple of links to get you started. And, as corn18 said, be prepared for honest answers. They love their low cost index funds. Heck, I do too.

https://www.bogleheads.org/forum/viewtopic.php?f=1&t=6211

https://www.bogleheads.org/forum/viewtopic.php?f=1&t=6212

 

[Wincherr]

Thanks

Thanks for the advice thus far. I’ll summarize my plan and post back here. And I’ll visit the sites above.

 

[target2019]

Thanks for the advice thus far. I’ll summarize my plan and post back here. And I’ll visit the sites above.

What is most important is the amount as a percentage of total in each account. As an example:
50% in IRA
10% in Cash
30% in taxable brokerage
10% in Roth

Knowing this is first step.

 

[Retiree_Having_Fun]

What is most important is the amount as a percentage of total in each account. As an example:
50% in IRA
10% in Cash
30% in taxable brokerage
10% in Roth

Knowing this is first step.

Also add your goals, spending and tolerance for risk.

For example,
1. I plan to work x more years at 100% while saving approximately y per year.
2. I then plan on working for the next z years 50% and having employer provided health care.
3. My expenses are x but I would like to up that to y as I travel more during the 50% work time.
4. I will finally retire in the year x and plan to further travel and up my expenses even more to y.
5. I will fund healthcare expenses from age y to 65 by following this plan.
6. I plan on taking social security at age y
7. My tolerance for risk is low so I just want to use muni-bonds and cd's.
8. My current assets and debts are x and y.
9. Wife most likely will get an receive $y when her mother passes.

 

[Wincherr]

Here goes....thank you!!

I am single.
Pension/SS: $75K (Pensions fixed)
Current Investments
$755K (55%) IRA/401K
$130K (10%) Cash
$143K (10%) Taxable Brokerage
$70K (5%) Roth
$282K (20%) Fixed Non-Qualified Annuities (maturity dates ~ 5 years)
Beyond the above, I have $500K equity in my home (I will put this equity to work at some point), no debt, a known ‘cash infusion’ of about $800K, and I currently stash about $40K annually in savings. I think I have a pretty good handle on future expenses including inflation.
I am converting IRA to Roths (only about $10K per year now, but will get more aggressive with this once my incomes starts to drop) and have planned for those taxes in my model. I plan to have all this converted to Roth before age 70.
Success would be for my last check to bounce.

1. I plan to work 1 more year at 100% while saving approx $40k year cash (beyond 401k contributions of about $31K)
2. I plan to work the next four years at 50% having employer paid health care.
3. My expenses are about $100K per year but include projected taxes on my Roth conversions. This includes projected increases in travel expenses.
4. I will finally retire at age 60 (2024) and up my travel expenses even more to $30k per year.
5. I will fund health care expenses from age 60 to 65 with cash and/or limited consulting that I know I will do once fully retired. This should also fund even more travel.
6. I plan to take social security at age 67.5.
7. My tolerance for risk is very low so CDs, bonds, and fixed annuities are fine by me.
8. Current assets and debts (see above).
9. The $800K cash infusion above is inheritance and is probably grossly understated but I don't want to plan on that. If it's a lot more, I will start flying first class.

 

[pb4uski]

....My job is to perform financial analysis and long-term capital planning with some pretty big numbers. I’ve used those skills to lay out a pretty comprehensive plan for retirement. I’m pretty confident in my model and it’s ultra conservative. I am also ultra conservative and the investment world.

I have a few accounts at Northwestern Mutual and I’m very happy with what I’ve done there. I don’t have a lot of investable money right now as things are in various accounts doing their job. I really want someone to look over my planning and help me make decisions about what accounts I should plan to liquidate first, Roth conversions, etc. ...

With your skills this is something that you can do yourself. A key metric is determining what marginal tax bracket you will be in once SS, RMDs and any defined benefit pensions will start. If that marginal tax bracket is low (say 12%) then there probably isn't much to be done that will have a big impact. If that marginal tax bracket is 22% or higher, then there is likely some things that you can do between when you retire and when SS or any pensions start.

Typically, there is a period of time from ER to when pensions and SS start that one is in a lower tax bracket than you will ultimately be in and you can do low cost tIRA withdrawals or Roth conversions which will also have a benefit of reducing RMDs later in life when you are in a higher tax bracket. For many of us with significant tax-deferred balances, before SS starts there is a period of time where our income is low... in fact in many cases just income from taxable account interest, dividends and capital gain distributions.... and in aggregate lower than the standard deduction so our federal taxable income would be zero and we would have no federal income tax. In such situations, it is usually an easy decision to use tIRA withdrawals for living expenses (assuming penalty free because over 59 1/2 or ending service in the year you turn 55 or older with a 401k) or Roth conversions (no age restrictions).

Also, this period of low income is a good time to do no cost capital gains trading while managing your income to the 0% preferenced income tax bracket.... you sell appreciated taxable assets at a gain and buy them back the same day but since the gain is taxed at 0% you have just effortlessly increased the basis so there is less of a gain if you sell the asset later.

You'll find numerous threads on these topics on the forum. Let us know any questions that you have.

Here is one current thread on the topic.... http://www.early-retirement.org/forums/f28/retirement-tax-planning-income-optimization-99854.html

 

[Wincherr]

Thanks pb4uski. I have planned on a pretty steady tax rate of about 27% (I live in NC and unless I change that we have a 5.25% income tax (but SS is not taxed here). That is factored in. My Roth conversions will keep my income up until I get that knocked out.

 

[pb4uski]

So I assume your 27% tax rate you are planning on is 22% federal and 5% state?

When you first retire but haven't started SS or any pensions, what will your tax bracket be? Or IOW, if you quit on Jan 1 and lived off of savings, what would your marginal tax rate be? 22%? or 12% or 10% or 0%?

For example, we retired at 56. Once my pension and our SS starts we expect to be in the 22% tax bracket. But at this point, even with my small pension online, ourordinary income is less than the standard deduction and our preferenced income is 0% so we would pay no tax. So currently I can do ~$67k of tax-deferred account withdrawals or Roth conversions each year and only pay about 11% in tax (a blend of 0%, 10% and 12%)... much lower than the 28%+ tax I avoided when I deferred that income and much lower than the 22% that I would pay later if I didn't take it out now. I can do that from when I retired at 56 to when I start SS at 70, so I can take a lot of money out of tax-deferred savings at a low tax cost.

 

[Wincherr]

pb4uski, yes on the assumed tax rates. During that inbetween stage, I assumed my tax rate would be about the same as I plan to do about $100K per year in Roth conversions. And I will most likely be doing consulting work. I had rather plan on that..if it in fact lower even better.

 

[Retiree_Having_Fun]

Since you are numbers person, you might want to download the Retiree Portfolio Model from the Bogleheads wiki. Then enter all of the above data and you can play "what if"

 

[Wincherr]

Since you are numbers person, you might want to download the Retiree Portfolio Model from the Bogleheads wiki. Then enter all of the above data and you can play "what if"

You may have just released a monster! Thank you!