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Old 01-12-2022, 08:57 PM   #61
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I am now faced with having to take my 1st RMD this year. I sure don't need it and will just put the balance after taxes into my taxable account. My income this year will literally double due to the RMD. I understand tax deferred but it still bugs me I have to "spend" some of it when I don't need it. I try to think of something to spend it on, but as strange as this may sound, there is nothing I want or need. I realize this isn't a bad situation but I clearly am an outlier in a country of people who are in debt and can't make ends meet.
The purpose of RMDs is not to force you to spend the money, but to start making you pay taxes. You don't get to defer the income forever. RMDs have always been a part of IRAs and 401Ks, so this should not be a surprise to you.
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Old 01-12-2022, 09:21 PM   #62
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Nobody says you have to spend it. Save it all for a rainy day.
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Old 01-13-2022, 10:13 AM   #63
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Speaking of rebalancing, I should be moving around 6% of our TIRA $$ from stocks to bonds. I have been hesitant to do so due to bond performance, etc. But should I hold my nose and move forward? This would change our AA in the TIRA's from 60/40 to 54/46.
When stocks have outperformed and bonds have under performed is the perfect scenario for re-balancing. Remember that your allocation is the most important thing to control risk.

Best to you,

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Old 01-13-2022, 08:35 PM   #64
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Originally Posted by RunningBum View Post
The purpose of RMDs is not to force you to spend the money, but to start making you pay taxes. You don't get to defer the income forever. RMDs have always been a part of IRAs and 401Ks, so this should not be a surprise to you.
I know that. I knew it 35 years ago when I first started to contribute to my 401k. My perspective is I now need/am required to reduce the balance when if the age was say 75 I'd have 3 more years to not touch it. This is not a surprise, I have been counting this down for a few years, now it is here.
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Old 01-13-2022, 08:56 PM   #65
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Lobby your rep to raise the age to 75.
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Old 01-13-2022, 08:58 PM   #66
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Speaking of rebalancing, I should be moving around 6% of our TIRA $$ from stocks to bonds. I have been hesitant to do so due to bond performance, etc. But should I hold my nose and move forward? This would change our AA in the TIRA's from 60/40 to 54/46.


Or you could put that 6% in bitcoin! It could do better or worse than bonds at this point, who knows?
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Old 01-13-2022, 09:04 PM   #67
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I just sold a hundred and sixty grand of equities. It was easy. Just like always -
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Old 01-14-2022, 05:18 PM   #68
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We are 61/59 years old and retired in Oct 2020. We have a good budget and are hitting it and are at 100% on all the calculators that I have run, etc.

We are using our after tax brokerage account as our financial engine until we start drawing SS (at age 70) and taking RMD's (at 72). So drawing $$ from our brokerage account requires selling off investments in that account (currently 75/25 AA in that account). We are getting an ACA subsidy, so that requires managing which assets get sold for capital gains management.

ANYWAY, my personal issue is that I've spent the last 30 years or so putting money into those accounts and managing them to grow. Taking money out seems backwards and wrong. I know I put it in there so I could take it out later.

Just trying to rationalize to the inner saver in me.....
I've often here it referred to as the “Decumulation Paradox”. Very common feeling as you say, it feels counterintuitive.

Back in the mid 90's in my early 30's when I was working and planning an early retirement before the acronym FIRE was used, I thought it was as simple as going to any bank in town and opening 6% long term safe CD's which weren't that hard to find. The thought of $60K annual income at the time with FIDC made me feel safe and secure. The only complication in my mind then was spreading out the CD's among various banks for the then $125k FDIC limit. Of course that's spread out quite a few.

As I approached ER in 2019, I like others had to adapt to current times of now 0.50% 5 year cd's rates, I quickly realized spending down principle is the only realistic scenario. It's a constant reminder of what's on every prospectus "Past Performance Is No Guarantee of Future Results".
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Old 01-14-2022, 06:03 PM   #69
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Someone here once wrote this (sorry, unable to remember who):

"You are no longer in a savings mode
You are now in a slow spend down mode"

I have that written and placed by my desk as a reminder. It helps quite a bit.
After all, what did you save it for but to live in your retirement ?
I went to a retirement seminar as part of our “lunch & learn” series at work about a year before I retired. What stuck out was when the facilitator said “you spent all your working years accumulating money, retirement is the time to spend it”.
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Old 01-14-2022, 06:21 PM   #70
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I always sell equities, never bonds. The equities grow back like a Dogpatch Ham and the bonds just sit and do nothing (almost, really slow), but they are the 20% rock in my 80-20 AA
Same here. My strategy has been to look for investments that are at or near a 52 week high and then unload a percentage of them. So far they’ve grown back nicely over the 7 years I’ve been retired. Even in a down market our portfolio will have a couple of decent performers I can pick from.
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Old 01-14-2022, 10:29 PM   #71
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We're less than a year into RE, also balancing our income for ACA PTCs. We began retirement 5-years earlier than planned, so I hadn't been preparing (beyond saving for retirement).

As someone else mentioned, The Retirement Answer Man podcast (Roger Whitney) has great episodes on the mental side of shifting into decumulation mode.

The toughest thing for me so far has been needing to pay attention to our cost basis in the after tax account. We have some holdings where the basis is less than 30% of current value of those funds. I thought it would be more simple to spend-down my after tax account!

That said, we're in the middle of embracing our go-go years and converting almost 10% of our investments into a vacation home. In doing so, I'll be touching/moving/selling from after tax, money market, ROTH, and tIRA accounts. Part of it feels scary, but the other part is amazed that We'll still have more money in those accounts than we did this time last year.

Two things that are helping me sell equities:
1) A 60-year old peer died of cancer this time last year. This isn't our only time seeing someone robbed of opportunities, but it hit close enough to home to justify moving away from Plan A. Tomorrow isn't guaranteed.
2) I spent years in the tech industry where stock options where a major opportunity for maximizing your earnings. I watched colleagues who didn't collect on those opportunities because they were afraid of the taxes due. Stocks went down in value, and their options sometimes became worthless. It taught me to see the importance of selling shares so I could put the money to use (e.g. down payment on a home), or into something less volatile.

Good luck with your adjustments!

Best regards,
Chris
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Old 01-14-2022, 11:06 PM   #72
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Great Discussion.

I had the same trepidation as many have expressed at transitioning to the decumulation phase. After doing all my own personal finance and investing for 25 years to retire at 50, I decided to hire a wealth managment company. I found one that has the same values and goals as I had, and we decided to bite the tax bullet and transition all of our after tax assets over to their portfolio over two years.

Huge tax bill, but now we just allow them to invest, re-balance, and send us a monthly paycheck with no worries and no hassels. In addition, I have some experts to consult with on any topic - taxes, Roth conversions, ACA, when to take SS, etc. Part of the sell-off of our hugely appreciated FAANG stock when into a donor advised fund, so we took the write-off during the big tax years and have many years of contributions to be able to give without any further complications or tax concerns - love it!
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Old 01-14-2022, 11:07 PM   #73
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Long term cap gains are tax favored, don't be afraid to sell.
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Old 01-15-2022, 02:58 AM   #74
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I just sold a hundred and sixty grand of equities. It was easy. Just like always -
Heh, heh, it just about killed me to sell 60 grand worth recently! But, I'll have to admit, it DOES get easier as you get older. YMMV
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Old 01-15-2022, 03:07 AM   #75
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What I find helpful/consoling is to only spend my dividends.

Admittedly, it is a bit of mental gymnastics but you can rationalize it that you're not 'selling your investments', you're just taking the 'profits' they generate. Same amount of shares being held, year in, year out.

You might try that for a few years until you get more comfortable.
I do that. Will siphon off some or all of the net income from dividends and interest and move that to checking. Other income from real estate or side hustles goes into checking or MMA too. Haven’t touched investment principal in 9 years now and it has grown handsomely. Don’t expect it will grow much in the near term but income is stable enough…
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Old 01-15-2022, 01:49 PM   #76
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I try to impose sell discipline, taking capital gains and paying taxes now instead of later, topping up my tax bracket. Look at rebalancing also, which forces selling of overpriced securities.

Build more of a cash allocation to force selling and restrict buying. If you do it inside of an allocation strategy it won't be so painful.
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Old 01-15-2022, 09:58 PM   #77
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Long term cap gains are tax favored, don't be afraid to sell.
Yes they are, but they also count towards MAGI. And since I'm relying on ACA premium tax credits, it makes harvesting those gains a bigger move.

Later in the year I may decide to max out our 12% income tax bracket and tax-favored capital gains for the year because of the 8.5% cap on healthcare premiums (in the American Rescue Plan Act of 2021). It would allow us to coast well into 2023.

Too many moving pieces for me to try it last year as a rookie retiree.

Best regards,
Chris
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Old 01-16-2022, 02:01 PM   #78
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Yes they are, but they also count towards MAGI. And since I'm relying on ACA premium tax credits, it makes harvesting those gains a bigger move.

Later in the year I may decide to max out our 12% income tax bracket and tax-favored capital gains for the year because of the 8.5% cap on healthcare premiums (in the American Rescue Plan Act of 2021). It would allow us to coast well into 2023.

Too many moving pieces for me to try it last year as a rookie retiree.

Best regards,
Chris
Yeah, there seem to be a lot of land mines in this field of ER. The gummint giveth and the gummint taketh away! You have to watch every step. YMMV
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Old 01-16-2022, 02:55 PM   #79
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Yeah, there seem to be a lot of land mines in this field of ER. The gummint giveth and the gummint taketh away! You have to watch every step. YMMV
Yes, and at least the ROI on self-education and paying attention seems to be quite high.

Had I not heard about premium tax credits on an RV board, I'd still be working because we were too afraid of medical insurance costs before Medicare.

Best regards,
Chris
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Old 01-16-2022, 05:52 PM   #80
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Yes they are, but they also count towards MAGI. And since I'm relying on ACA premium tax credits, it makes harvesting those gains a bigger move.

Later in the year I may decide to max out our 12% income tax bracket and tax-favored capital gains for the year because of the 8.5% cap on healthcare premiums (in the American Rescue Plan Act of 2021). It would allow us to coast well into 2023.

Too many moving pieces for me to try it last year as a rookie retiree.

Best regards,
Chris
Yes, the ACA aspect makes managing the sales much more interesting then just managing taxes.
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