Yikes! This "cliff" thread scared me ...

[SoReadyToRetire]

Reading through the thread called "Almost Went Over the Subsidy Cliff" really worried me. The older I get, the more "confused" I feel, or at least unable to grasp things as easily as I would have in the past. Here's a link to that thread: http://www.early-retirement.org/for...8.html?utm_source=newsletter&utm_medium=email

There seem to be a TON of things to pay attention to when you retire with some money, and I don't know if I'd be able to handle it all.

To that end--how do others do it? Do you need an accountant? A particular type of financial advisor? And does it cost a lot to have someone manage this sort of thing for you?

I know--this isn't an easy question to answer.

 

[audreyh1]

Reading through the thread called "Almost Went Over the Subsidy Cliff" really worried me. The older I get, the more "confused" I feel, or at least unable to grasp things as easily as I would have in the past. Here's a link to that thread: http://www.early-retirement.org/for...8.html?utm_source=newsletter&utm_medium=email

There seem to be a TON of things to pay attention to when you retire with some money, and I don't know if I'd be able to handle it all.

To that end--how do others do it? Do you need an accountant? A particular type of financial advisor? And does it cost a lot to have someone manage this sort of thing for you?

I know--this isn't an easy question to answer.

Well in terms of getting older once you reach 65 you don’t have to worry about the ACA cliff anymore.

There are Medicare IRMAA cliffs to deal with but they are at much higher income levels and not nearly as drastic.

 

[walkinwood]

I'm in my late 50s and don't find investments, withdrawals and taxes hard to handle on my own. This forum brings a lot of details to light & I then read up so I understand them. I probably spend 2-3 hours a week on this forum. That's not too much in my opinion and the returns are well worth the time. The Fire & Money, and the After FIRE forums are worth keeping up with. I also find a lot of good stuff on the Travel forum. In time, you'll find things to contribute too.

It is a lot when you get started, but things change only intermittently (like tax law). So once you understand a wrinkle, you're good till some new law changes it.

Keep checklists, cheat sheets, ask questions here - the forum is always helpful. Use Turbo Tax or some other tax software - usually available by the end of November - to make sure you're not overlooking something that needs to be taken care of by 12/31.

Besides - this mind work will keep you from going senile

 

[SecondCor521]

I do it all myself.

I read. A lot. I try to stick to authoritative, non-biased sources. Sometimes new things, like the ACA, are confusing, but I keep reading and asking questions about small parts of it until it all sinks in and I can evaluate whether and how to apply it to my life.

I try to stay ahead of the curve. I was reading about college topics when my kids were in middle school, which gave me time to learn about a lot of aspects. I started them thinking about careers and colleges in junior high. So now, when they are in the thick of things, I don't feel pressured or harried to ingest a bunch of stuff about selecting, applying, and financial aid, and all that.

Likewise I've put my estate in order even though I am only 50. It's not perfect, but it's 90% there. Again, I don't have the pressure of trying to set up beneficiaries while I'm on hospice - there's time to investigate strategies and options and such, let it all sink in, and then make decisions and implement those.

I use a to do list / organizer on my PC to keep track of things I need to do, especially those items with due dates. These lists are supplemented by specific project lists that are in Word or Excel. I also use sticky notes which eventually funnel their way into one of the other lists.

It's "free", although it costs time, and there's some chance that I'm making mistakes that an expert/accountant/CPA might catch. But I can do things as I like, when I like, and I'm pretty much wholly responsible for the outcome. I also sometimes run things by local experts like my Dad's attorney and CPA. For some things I'll ask on this board.

I suspect when I get older I may start making more mistakes. At some point I will have to hand things off to someone - either my kids or a CPA or something. Haven't gotten that far yet.

Overall I think there are a fair number of people who do it themselves, although there are some who hire this stuff out as well. There are arguments on both sides of the coin, although I think it is true that nobody will care about your life and your finances than you. While that isn't the be all end all - one also cares about competence and efficiency - it goes a long way towards success IMHO.

 

[RunningBum]

If you're not yet retired, or not yet on an ACA plan but will be, it may be a good idea to see a tax specialist for a plan to set your accounts up to position yourself. For example, you may not want to keep that mutual fund that throws unpredictable capital gains at the end of the year.

The biggest issue is overlooking something. An accountant isn't going to help if you forget to tell them about a CD generating interest, a stock sale, or something like that. I don't know how much one would charge.

I keep a spreadsheet for my taxes that includes all of the accounts I have that could generate taxable income, and monthly amounts for each. This helps me make sure I get everything and I can go back and verify. As long as I know I've got everything accounted for, I don't see why I should pay someone to do it too, as long as you don't get confused about what your 400% FPL is. I know not everybody is into spreadsheets but one way or another you need to have all the information available and easily verified, and then you need to add it up. To me, that's a spreadsheet. Paper and calculator work fine too, or any other number of ways.

I assume a financial advisor could do this but I'm not interested in turning over control. And you'd have to give them access to everything, including bank accounts. And then trust them to do it right.

Another issue is the timing. Many/most of us get our largest dividends in mid/late December. You can get estimates a little earlier, but if you're fine tuning a Roth conversion, you really want to get the final, actual numbers. So this means you'd have to go to your accountant or financial advisor in late December to find out how much you can convert by Dec 31, or if you have to harvest a stock loss to stay off the edge. Will they be available over the holiday season? Will they be rushed and perhaps miss something? Again, this is why I do it myself, because I've got it all ready, waiting for the year end dividends and also putting in a 12/31 estimate for any monthly interest income, and ready to do my Roth conversion.

The biggest issue I have is foreign taxes on international funds. With Vanguard (and others?) the year end estimates you get are for the distributions. You don't find out how much they pay in taxes to foreign countries until mid-January, too late to do anything now that recharacterizations aren't allowed on conversions. It's usually about 7% but that's not a given. I multiply my total international dividends by 1.08 to give me a little buffer. One could alternatively hold international funds in an IRA (Roth or otherwise) but then you lose the foreign tax credit.

And by the way, if I'm going over the cliff, I'm going way over, to convert more and perhaps set myself up better for the next year. I may not decide that until I see the year end dividends. Would an advisor understand those instructions and make a big move like that quickly?

What I really wish is they'd bring back recharacterization, maybe with a cap of $5K or $10K to make the Roth conversion horse race not worth while. That way if I'm over the cliff by a few hundred I can just dial back my conversion until I'm safe.

It's all a headache but I feel best managing myself because I'm the one who gets burned if I go over the cliff so I'm motivated to keep very close tabs of all taxable income.

 

[ivinsfan]

OP just start thinking about one thing at a time and work your way through the list. That's how we all started. Even if you get an advisor you need to know all the basics anyway.

Have you done a Hi I am ..post it's a good place to start and give a few details about specific problems or questions you have.

 

[Jerry1]

This is a great place to be. There is a lot of help here to do things yourself by people who do things themselves. However, if you’re overwhelmed or not able to handle your affairs, there’s no shame in getting help. Help can range from meeting with a financial planner once a year to having an accountant, lawyer and a certified financial planner on “retainer”. If you’re feeling like you need help, start here with questions and see if you feel like you can handle your affairs. The caution is that there are times in your financial life where making a poor decision can cost you way more than professional help so don’t overreach if you’re not comfortable. You can also miss out on things you didn’t even know about. For example, I didn’t realize that you can generate income through capital gains that under certain conditions is tax free. That may not make you rich but it’s good money if it works out for you.

It is a lot to learn and understand. If you can’t do it or just don’t want to, start with a fee only Certified Financial Planner. Personally, I threw my hands up and have a financial planner handling everything. It’s not for everyone and not for many on this DIY forum, but it is an option.

 

[rk911]

OP...we do everything ourselves. only investing in mutual funds since 1982 on a buy and hold strategy with a 70/30 diversification. fully funded IRAs while we were working even though we were covered by a pension plan. no 401k but had a 457b just for the last couple of working years. had no credit card debt since 1972, no auto loans after 1990 and paid off the mortgage before we retired in 2005.

we recently had a living trust established and had two chats with a fee-only financial advisor (first time ever) to get some strategy ideas for consolidation of retirement accounts and re-structuring our taxable holdings. the odds are that my wife will be a widow and we want to make things more manageable for her should i go first. i've been the trustee/executor of three estates..good learning opportunities.

i knew diddly when we started investing. i read, listened to others and evaluated what they had to say and developed my own strategy, limits and risk levels. i learned.

best advice i ever received...never invest in anything you don't fully understand. so..pay off all debt as quickly as possible, live beneath your means, keep investing simple, plan for what comes after you're gone and most of all...enjoy your life. you'll be fine.

 

[joeea]

There seem to be a TON of things to pay attention to when you retire with some money, and I don't know if I'd be able to handle it all.

There's no need to be scared. Terms like "Subsidy Cliff" or "Tax Torpedo" are meant to be scary. But that doesn't mean the situation is fatal, just possibly a bit more expensive than hoped.

If you have prepared adequately for retirement, you'll be able to handle whatever comes your way.

To that end--how do others do it? Do you need an accountant? A particular type of financial advisor? And does it cost a lot to have someone manage this sort of thing for you?

If you aren't confident that you know what you need to know and that you can handle what you need to handle, then get some help.

Find a fee-only fiduciary financial planner. Find one that is hourly, and spend a few hours going over your financial situation, your goals, your worries.

The financial planner should be able to help you come up with a plan that works for you. Some folks choose to execute the plan on their own. Others need ongoing help.

Either way, the cost depends on what you need.

 

[VanWinkle]

OP just start thinking about one thing at a time and work your way through the list. That's how we all started. Even if you get an advisor you need to know all the basics anyway.

Have you done a Hi I am ..post it's a good place to start and give a few details about specific problems or questions you have.

+1

 

[steelyman]

Well in terms of getting older once you reach 65 you don’t have to worry about the ACA cliff anymore.



There are Medicare IRMAA cliffs to deal with but they are at much higher income levels and not nearly as drastic.

These are good comments and point to something that contributes to making planning seem so complex/confusing: the barrage of acronyms/programs out there!

I was following the discussions here (e-r.org) during the time when the ACA was being enacted and found them interesting and educational (especially the costs to individuals). Eye-opener for sure but never affected me due to employer (now retiree) coverage. So it’s not a direct concern in my situation.

I think part of the process is wading through things, paying attention to what does or will affect you or not.

The forums here, especially health, can really help in increasing your awareness.

Personally, the recent discussions covering Medicare supplements and Advantage plans are helping me prepare for decisions.

Also, remember you’re not alone in this. People hopefully sort it out either on their own or with the assistance of a well-chosen professional who knows the ropes (discussions here can help on finding such resources too).

 

[steelyman]

Yikes! This "cliff" thread scared me ...

After reading what I replied earlier, I want to clarify that my suggestion to look at health discussions refers to health insurance, not health conditions.

 

[Walt34]

To that end--how do others do it? Do you need an accountant? A particular type of financial advisor? And does it cost a lot to have someone manage this sort of thing for you?

What I did was marry the accountant. Well, she's not exactly a CPA, but her pencil is sharper than mine.

That can be either cheaper or more expensive, depending on how you look at it.

 

[pb4uski]

Reading through the thread called "Almost Went Over the Subsidy Cliff" really worried me. The older I get, the more "confused" I feel, or at least unable to grasp things as easily as I would have in the past. Here's a link to that thread: http://www.early-retirement.org/for...8.html?utm_source=newsletter&utm_medium=email

There seem to be a TON of things to pay attention to when you retire with some money, and I don't know if I'd be able to handle it all.

To that end--how do others do it? Do you need an accountant? A particular type of financial advisor? And does it cost a lot to have someone manage this sort of thing for you?

I know--this isn't an easy question to answer.

I do it myself. I am an accountant.... but was not a tax practitioner (more corporate reporting).

What I find really useful is to create a spreadsheet with my tax calculation... for example for 2018... then I make a copy for 2019 and populate with 2019 estimates and update 2018 brackets and deductions with 2019 brackets and deductions... I then update it periodically and get more invoved in refining it in December.

Luckily our taxes are pretty simple so I can put the whole calculation on a single 8x11 page on a spreadsheet.

 

[scrabbler1]

I do it myself. I am an accountant.... but was not a tax practitioner (more corporate reporting).

What I find really useful is to create a spreadsheet with my tax calculation... for example for 2018... then I make a copy for 2019 and populate with 2019 estimates and update 2018 brackets and deductions with 2019 brackets and deductions... I then update it periodically and get more invoved in refining it in December.

Luckily our taxes are pretty simple so I can put the whole calculation on a single 8x11 page on a spreadsheet.

I also create a skeleton version of the tax forms in a spreadsheet which I can update as the year progresses. I begin with estimates of various amounts and replace them with the actual numbers. This becomes useful when I have to figure out how much to pay in estimated taxes at the end of the year.

But most importantly, I can create what-if scenarios so I can determine hypothetical outcomes if I make certain decisions.

My skeleton tax forms won't fit onto a single sheet of paper, but then again I don't print it out until it's tax time the following April.

 

[Sunset]

We do all our planning, I have a spreadsheet to track things.
And then we get surprised by our mutual fund holdings declaring a capital gain which pushes up our income.
Note: we don't get the cash in our pockets, it's just the fund saying to report this amount to the IRS.

One year it was a shocking amount from 1 fund of: $70,000

Having a bunch of mutual funds has been a planning problem, so we've been closing them down.

 

[ziggy29]

We do all our planning, I have a spreadsheet to track things.
And then we get surprised by our mutual fund holdings declaring a capital gain which pushes up our income.
Note: we don't get the cash in our pockets, it's just the fund saying to report this amount to the IRS.

One year it was a shocking amount from 1 fund of: $70,000

Having a bunch of mutual funds has been a planning problem, so we've been closing them down.

Yeah, I think there is a moral to the story here -- if you are using an ACA Marketplace policy with a subsidy, do NOT hold managed funds in a taxable account, as you have no control over the capital gains distributions. (Many fans of indexing would say to steer clear for other reasons, too.)

 

[NW-Bound]

Reading through the thread called "Almost Went Over the Subsidy Cliff" really worried me. The older I get, the more "confused" I feel, or at least unable to grasp things as easily as I would have in the past. Here's a link to that thread: http://www.early-retirement.org/for...8.html?utm_source=newsletter&utm_medium=email

Ah, don't let yourself get scared. If you fell off the ACA cliff, it only cost you some money, which while it might be substantial it should not bankrupt you. Then next year you know what to do.

I save my scare for when I get diagnosed with a terminal disease that even billionaires couldn't buy a cure.

 

[sengsational]

As others have mentioned..."it's only money".


For me, playing these money games is just kind of a fun activity. I can certainly identify with a different person's view that understanding all the nuances is nothing but a form of mental torture. I'm feeling a little bit that way about my latest escapades in maximizing credit card perks. But occasionally I'll step back and realize that even though I might not do "everything right", the difference is usually a relatively small amount of money, so, "no sweat". That, balanced with my nature to get the most, keeps me playing the game personally (as opposed to hiring someone). But, as others have mentioned, if it's too many details, seek out a by-the-hour planner to help.

 

[bingybear]

The thing to sort out first is which of these things are most important to you. ACA subsidy, Roth conversions, medicare cost.
There is legislation (the Secure act) that may change some of the parameters of your decision (or not). For some it may be better to bypass one savings topic for a latter/bigger one.

I don't find it too hard to sort out. Most changes get discussed here a number of times.

 

[Big_Hitter]

good song!

 

[pb4uski]

... Note: we don't get the cash in our pockets, it's just the fund saying to report this amount to the IRS. ....

I think that you mean that you "receive" it and choose to reinvest it.... if it bothers you then change your elections and take it in cash.

 

[FANOFJESUS]

Reading through the thread called "Almost Went Over the Subsidy Cliff" really worried me. The older I get, the more "confused" I feel, or at least unable to grasp things as easily as I would have in the past. Here's a link to that thread: http://www.early-retirement.org/for...8.html?utm_source=newsletter&utm_medium=email

There seem to be a TON of things to pay attention to when you retire with some money, and I don't know if I'd be able to handle it all.

To that end--how do others do it? Do you need an accountant? A particular type of financial advisor? And does it cost a lot to have someone manage this sort of thing for you?

I know--this isn't an easy question to answer.

I stay 3k under the cliff so when making a move I have some spare room. Don't go to the edge of the cliff that's when you fall over. Just like in real life.