Now what? How to plan for drawdown

[Focus]

I was hoping to figure out what to do in the drawdown phase with the CPA who does my taxes, since I trust and respect him. I told him I wasn't looking for investment planning -- I just wanted to figure out how to best deal with all the moving parts in a tax optimized fashion when I entered retirement (a year or two from now, hopefully).

I put all those moving parts down on paper, along with my ORP results, and handed it over. He said, "It's not for me -- you should take it to a financial planner." And he recommended a specific investment planner associated with a firm not spoken of too kindly here (it starts with an "A"). Back to square one.

Anyone know anything about this company: Retiree Inc.? They seem to be trying to meet exactly this need, but I'm afraid to find out what they charge. From their site:

Belief 1: We will not focus on product sales. We focus on helping you realize your goals through applying best practices in wealth management and implementing a tax-efficient withdrawal strategy.
Belief 2: You deserve a true retirement fiduciary and client advocate. We sign a contract with you that says your interests will always be placed before ours. Every step of the way, we will keep you informed about what is happening with your plan. And because there are no hidden fees, you will know exactly what you are paying for.

 

[Gotadimple]

This is a firm is a financial planner and a financial advisor. The planner product is fee-based. You would have to contact them to find out what their fee for their "Benchmark" product is. It also sounds like you don't get a face-to-face with them.

Any fee based planner will cost a few bucks ($1,000+). You may want to search for fee-based financial planner and your state to generate a list. You'll need to call a few and get quotes. Be clear in your own mind about what you want the planner to help with, as that will guide you when you screen for one you think you want to work with.

-- Rita

 

[Lisa99]

The retirement planning calculator i-ORP will do something similar for free.

It will produce a report that shows which accounts to draw from and when. It will also tell you whether you should be converting from IRA to ROTH IRA and if so when and how much to convert each year.

The link is Retirement Calculator - Parameter Form

And stay away from the planner that starts with an "A". I asked ours for a plan that would get us TO early retirement and he said "don't worry about it just yet, you're not even close. We'll start talking about retirement planning when you're 55 - 60." That was one of the moments when I realized this guy didn't have a clue.

Next week I turn 52 and will likely retire in the next year so "A" can go pound sand!

 

[travelover]

..........
Next week I turn 52 and will likely retire in the next year so "A" can go pound sand!

Gee, and after he let you fund his kids' braces, too.

 

[Focus]

The retirement planning calculator i-ORP will do something similar for free.

Right. I noted (but not clearly enough, I realize) that I used ORP and presented the results to my tax advisor as a start. Although ORP is certainly a help, I think it only gets me part of the way there.

 

[haha]

Right. I noted (but not clearly enough, I realize) that I used ORP and presented the results to my tax advisor as a start. Although ORP is certainly a help, I think it only gets me part of the way there.

Perhaps you have reached the level of diminishing returns?

There really isn't much to this, although fiddling Ob-Care can get complex.

Ha

 

[LOL!]

So your tax advisor refused to provide tax advice? Folks are always being told to consult their tax advisor. Is that like trying to consult their unicorn?

 

[urn2bfree]

Avoid anyone who charges a percentage of your assets. Their incentives are not aligned with yours. An hourly fee advisor seems the way to go.

The key things to realize are the thresholds--what levels of income will push you into higher brackets or disqualify you for health care subsidies. This is especially costly at the 15% to 25% Federal tax bracket because it makes you suddenly have to pay tax on cap gains and dividends. Also for Obamacare subsidies there is a steep and sudden drop off above the 400% poverty level figure.
Your tax deferred accounts all come out as ordinary income, your taxable accounts are likely to be a mixture of your principle on which you owe no taxes, and cap gains and dividends which depending on how much your income tax bracket will be are more favorably taxed in these taxable accounts than tax deferred since the tax rates (for now) are at least capped below 20% on these. Ordinary income tax brackets can get up over 40% if you take out a lot each year. Knowing the brackets should allow you to see if you can convert some of those tax deferred to Roth tax free accounts without moving to higher brackets.


Much of this stuff your accountant should know and do if you ask me. No doubt things can get very complicated, especially with bigger portfolios. Mo' money, mo' problems, fo' sure. One example: Imagine you have $90,000+ in dividends generated a year in your taxable account.. (The numbers get squishy for different deductions etc. so this is not exactly correct as the threshold for everyone) That is going to have you knocking on the door of having to pay 15% instead of Zero percent in dividend taxes. So maybe it makes sense to position your investments to generate some of those in the tax deferred space, this now could leave you some room to pay tax on a withdrawal from the tax deferred, and only pay taxes on that smaller withdrawal at the low 15% income rate and keep your qualification for ZERO% dividend rate- then convert some of that withdrawl to Roth where you never pay taxes on it again. I don't know if any calculator takes all this into account.

 

[pb4uski]

I woudl suggest that you search for a local CPA who is also a PFS (Personal Financial Specialist).

AICPA - Find a CPA PFS Near You

 

[Focus]

Much of this stuff your accountant should know and do if you ask me. No doubt things can get very complicated, especially with bigger portfolios.

All that information you shared, urn2bfree, is very helpful. Luckily (or unfortunately!), a bigger portfolio is not the issue here.

Thanks to you, I'm starting to think that maybe I can wrap my own head around this by attempting to simplify things. I'll study this some more, pick up a copy of "Retirement Income Redesigned," and perhaps be able to trim my tax-related questions down to the point where my CPA is comfortable helping me with this. I probably scared him off by presenting too full a write-up of my situation.