All things STOCKS

[Thunder Good-Oil]

Also taking Social Security at 62, 70, or in between is another math problem. For years I’d always thought that deferring to the max at 70 was the best choice. But a couple things have me leaning to taking SS at 62. Chose age 70, die at age 69 and 364 days and you receive zero. Also, down the road the “benefits” (as they like to call them) could be slashed as the trust fund surplus disappears. and possibly most importantly though, the money that is accumulated over the 8 years could be invested and the returns on the amount accumulated could more than offset the additional payout at age 70. Of course there are unknowns. Benefits will be taxed as they accumulate. Average returns over the 8 years and on the amount accumulated beginning at age 70 is unknown. Also the payout that the SSA gives in their model for comparison is probably in today’s dollars and may not include the 8 years of COLA. Is an extra $1,000/month in 8 years going to actually become $2,000/month more at age 70? But also, how much does the age 62 amount increase in the 8 years. Nothing is easy.

 

[walkenvol]

1. I doubt you see tax rates lower than they are now for many years.
2. Money has to be in a Roth for a minimum of 5 years before withdrawals.
3. If you are concerned about stocks going down move the money from money markets. At some point you'll likely want it in something else.
4. If married filing jointly the 22%bracket starts around 80k.

Probably the big question is do you expect to have more income or less when you retire?

Plenty of help on the internet. No one can predict the future though.

Please provide the link that explains the optimum times / tax rates in which one should ROTH conversions as I’ve looked hard and not found it yet.

I agree strongly that tax rates are headed higher long term.

As for your questions, I completely retired mid 2020 and the mrs will be retiring mid 2022. I’m starting ROTH conversions this year up to that $80K (plus the $25,100 standard deduction) and will continue to do so until SS at 70 (the plan right now). I’m trying to determine if it’s financially wise to expand those conversions up to the 22% max ($171K) or maybe even the 24% max ($326K). I think it would be within reason for 401K balances to continue to grow such that large RMD’s could trigger high tax bills down the road which we all would like to avoid.

Thoughts?

 

[walkenvol]

Also taking Social Security at 62, 70, or in between is another math problem. For years I’d always thought that deferring to the max at 70 was the best choice. But a couple things have me leaning to taking SS at 62. Chose age 70, die at age 69 and 364 days and you receive zero. Also, down the road the “benefits” (as they like to call them) could be slashed as the trust fund surplus disappears. and possibly most importantly though, the money that is accumulated over the 8 years could be invested and the returns on the amount accumulated could more than offset the additional payout at age 70. Of course there are unknowns. Benefits will be taxed as they accumulate. Average returns over the 8 years and on the amount accumulated beginning at age 70 is unknown. Also the payout that the SSA gives in their model for comparison is probably in today’s dollars and may not include the 8 years of COLA. Is an extra $1,000/month in 8 years going to actually become $2,000/month more at age 70? But also, how much does the age 62 amount increase in the 8 years. Nothing is easy.

Excellent points on SS. Personally, I’m leaning towards 70 based on the longevity of both my and spouses parents and grandparents and to be more diversified down the road. I find it a huge responsibility to have so much of our future financial support dependent on me making good decisions in such volatile times. The predicted numbers on ssa .gov if we wait till 70 are enough to cover our basic expenses which is comforting. All plans are off if Congress starts trying to monkey with the SS rules. I know Dave Ramsey and others recommend starting at 62 and invest the money is the better option but I don’t feel as confident as Dave that I can count on 12% returns in the future.

 

[Thunder Good-Oil]

Nice afternoon reversal. I was possibly facing my biggest single day paper loss ever and recovered about half late. But it is also disconcerting knowing that a near term bottom was missed as an opportunity to buy more.

I hate days when my biggest holdings also have the biggest percentage losses. But **** happens. There are days when the opposite happens as well.

 

[Go aeiou]

Please provide the link that explains the optimum times / tax rates in which one should ROTH conversions as I’ve looked hard and not found it yet.

I agree strongly that tax rates are headed higher long term.

As for your questions, I completely retired mid 2020 and the mrs will be retiring mid 2022. I’m starting ROTH conversions this year up to that $80K (plus the $25,100 standard deduction) and will continue to do so until SS at 70 (the plan right now). I’m trying to determine if it’s financially wise to expand those conversions up to the 22% max ($171K) or maybe even the 24% max ($326K). I think it would be within reason for 401K balances to continue to grow such that large RMD’s could trigger high tax bills down the road which we all would like to avoid.

Thoughts?

The Ultimate Roth IRA Conversion Guide for 2021 | Rules + Taxes
Here's a decent article. Optimal depends on The Individual. What you are expecting to do should work. But, I planned and did things similar to you. We have not needed to make any withdrawals in the last two years, but I have to get to the 22-24%? Marginal rate. Now we have more cash than I want. You can drive yourself crazy trying to make perfect financial decisions. Things change.

Only you know what you want to do and how you want to spend your money. At least most medical expense is capped with Medicare, Rx (plan D) being the exception
you can plan. Save your money to give away. Live in a retirement community. New home, most people downsize. Travel.
It sounds like you can do pretty much what you want.
Many of the questions and plans people have is determined by age and health. We travel, but few people do over the age of 75 and very few after 80. Live well while you can.

 

[walkenvol]

This pandemic has thrown a monkey wrench in travel plans recently. I’ve read about the 3 travel stages as one ages; go go, slow go, no go.

 

[Go aeiou]

This pandemic has thrown a monkey wrench in travel plans recently. I’ve read about the 3 travel stages as one ages; go go, slow go, no go.

We are going to Paris next month. We are vaccinated so France welcomes us. To go to restaurants, museums and tourist sites you have to have a health pass which we have applied for. Masks required indoors.
But if we get Covid we can't fly home.
But this and a trip to London might be our last foreign travel except for cruises. Just too much work to get around cities on your own, especially if English isn't spoken. We've had to cancel both trips 2 times.

 

[walkenvol]

We bought a Viking river cruise 2 years ago for a trip last September that was canceled and rescheduled for 13 months from now. I’m still not confident that it will happen as scheduled. Viking’s had our money a long time without providing the service!

 

[Firebirdparts]

I don't want to insult anybody's intelligence, but for example, married people could have ordinary income up to $81,000 and pay incremental 12% right now. So maybe it goes to 15%, but it's low no matter what. Your capital gains rate is 15% up to $500,000 and change. If you have any sort of Roth at all, you probably shouldn't worry too hard. Withdrawing/converting 81,000 every year for 15 or 20 years would cure a lot of people from ever having an RMD. It's important to know how it works, but there's an awful lot of room there out of the rain.

 

[walkenvol]

You’ve got to subtract 85% of your SS and any pensions from that $81,000 correct to remain in that 12% rate correct?

 

[DancingOutlaw]

Converting now just removes the deferral of the taxes, not the actual taxes. Tax rates will probably be raised in the future. The future gains in the tax deferred plan will be taxed whereas they will not be taxed if they are made as a Roth. The pain is immediate, but the rewards should be substantial in the long run. The case against converting is that current assets will be a smaller base to invest. But counter that with there’s no slam dunk ideas on where to invest cash right now. I’m pretty sure that I will convert, but not how much in 2021, 2022, etc.

Call me crazy but I don't totally trust Congress to keep their hands off our Roths. I feel like means testing and some sort of taxability could happen in the future.

 

[Thunder Good-Oil]

Call me crazy but I don't totally trust Congress to keep their hands off our Roths. I feel like means testing and some sort of taxability could happen in the future.

I think that there are enough participants that they would be crazy to change the rules. But you never know if the bottom 50% of a democracy is allowed to attack the other 50% (minus one vote) which won’t happen as long as we are a constitutional republic. But we now have socialists holding seats in Congress so anything could happen. These are the people that think EVERYBODY deserves a $15/hour minimum wage, free health care, and student loan forgiveness. Wealth redistribution of the bottom end of the “wealthy” and even the middle class is far from being off the table. However I’m not quite ready to live off the grid and convert every investment to lead, gun powder, and canned food. I think that currently around 50% pay zero FIT. Coincidence?

 

[Thunder Good-Oil]

I don’t want to get too deep into politics (tax policy is relevant so it’s about impossible to completely avoid touching on politics), but the last 3 POTUS’s (and other leadership) have been absolutely hated by the other side. Ds and Rs used to actually work together to solve problems. Now the divide is a huge ravine that seems to be getting wider.

Stock ownership, equity ownership is fundamental capitalism. Socialism and communism does not co-exist with it.

The fight over the taxation of Roth style, defined contribution plans is blazing in here:

Billionaires and Roth IRAs: the case for tax reform

 

[Go aeiou]

You’ve got to subtract 85% of your SS and any pensions from that $81,000 correct to remain in that 12% rate correct?

Benefits Planner | Income Taxes And Your Social Security Benefit | SSA

 

[Go aeiou]

If you turn 72 soon you can expect a RMD of about 4.5% of your traditional IRA. So $1,000,000 is $45k.
Explains why so many wealthy people put their money in a Roth.

 

[walkenvol]

Benefits Planner | Income Taxes And Your Social Security Benefit | SSA

Unless you’re basically living on just SS it appears it’s nearly impossible to avoid paying Income tax on 85% of it?

 

[Go aeiou]

Unless you’re basically living on just SS it appears it’s nearly impossible to avoid paying Income tax on 85% of it?

Yep. Sadly, many people do live on just SS.

 

[Thunder Good-Oil]

Yep. Sadly, many people do live on just SS.

Most because of their own decisions. But they are still very well off relative to most humans on Earth.

 

[Go aeiou]

We bought a Viking river cruise 2 years ago for a trip last September that was canceled and rescheduled for 13 months from now. I’m still not confident that it will happen as scheduled. Viking’s had our money a long time without providing the service!

We have ocean cruises booked for March and August, 22. Toss up on both.

 

[Go aeiou]

Most because of their own decisions. But they are still very well off relative to most humans on Earth.

Most people are clueless when it comes to finance. If they work at a job with a plan that can be cashed in they will. And they will pay a 10% penalty. Often the money is spent on boats, clothes and vacations.
Even worse was the home equity loan. People borrowed thousands for frivolous things, and could never pay off the loans.

 

[Thunder Good-Oil]

Most people are clueless when it comes to finance. If they work at a job with a plan that can be cashed in they will. And they will pay a 10% penalty. Often the money is spent on boats, clothes and vacations.
Even worse was the home equity loan. People borrowed thousands for frivolous things, and could never pay off the loans.

It’s difficult to be empathetic. It’s not really that big of a deal to live within your means and to save something. I used to eat a lot of 25 cent, frozen bean burritos and saved as much as I could. Now my frozen burritos are 50 cents. I’ll eat Taco Bell when I feel like treating myself to something nice.

It’s certainly not everybody. There are a lot of people that were born into a bad situation and simply cannot get enough breaks in life. But those should be a small fraction of the population and they are the reason that social programs should exist. Not to support a huge percentage of the population that are simply deadbeats. Entitlements have unfortunately been breeding poverty for nearly 60 years.

Looks like a pretty mild down day today. Acceptable after getting hammered yesterday.

 

[Go aeiou]

It’s difficult to be empathetic. It’s not really that big of a deal to live within your means and to save something. I used to eat a lot of 25 cent, frozen bean burritos and saved as much as I could. Now my frozen burritos are 50 cents. I’ll eat Taco Bell when I feel like treating myself to something nice.

It’s certainly not everybody. There are a lot of people that were born into a bad situation and simply cannot get enough breaks in life. But those should be a small fraction of the population and they are the reason that social programs should exist. Not to support a huge percentage of the population that are simply deadbeats. Entitlements have unfortunately been breeding poverty for nearly 60 years.

Looks like a pretty mild down day today. Acceptable after getting hammered yesterday.

Ha, you're living like a king. When I got a divorce I bought a large paper bag of turnip/mustard greens(.39 per lbs) and a large bag of dried beans. I made that 2-3 times a week, and ate leftovers the other days. Probably the healthiest I've ever eaten.
I also drove a car that had been hit on the driver's side door, and I had to get in on the passenger side.

 

[mrorange211]

I'm gonna pick up a few TGT today, but still staying 80% cash rn.

 

[walkenvol]

I'm gonna pick up a few TGT today, but still staying 80% cash rn.

In all your investments?

 

[walkenvol]

It’s difficult to be empathetic. It’s not really that big of a deal to live within your means and to save something. I used to eat a lot of 25 cent, frozen bean burritos and saved as much as I could. Now my frozen burritos are 50 cents. I’ll eat Taco Bell when I feel like treating myself to something nice.

It’s certainly not everybody. There are a lot of people that were born into a bad situation and simply cannot get enough breaks in life. But those should be a small fraction of the population and they are the reason that social programs should exist. Not to support a huge percentage of the population that are simply deadbeats. Entitlements have unfortunately been breeding poverty for nearly 60 years.

Looks like a pretty mild down day today. Acceptable after getting hammered yesterday.

I had a good family that provided an example of hard work and living within their means. Unfortunately, I don’t think that is nearly as common these days.

What I grow weary of hearing is the 20-40 y o crowd bemoaning how much harder they have it today vs their parents generation which is bs. There’s way more money floating around than there was 40-50 years back. Folks paying grown men $50 for an hours work to mow their lawn today. 50 years back you mowed it yourself (or told the kids to) or payed a neighbor kid $2-3. If your young and don’t like your financial situation then start a side hustle and change it.

Also, all the folks with small children crying about the expensive of day care and how they both have to work - more bs. They expect to have the wealth and lifestyle of a 60 year old at 30. Twice the house we had when kids were little, 2 car payments, etc. it’s a spending problem - they want to spend money on stuff more than they want to spend time raising their children. When our kids were small there was one car later adding a beater I found broken and repaired, no cell phones, no cable tv / internet, no eating out excessively, working 6 days a week, etc. We made it work till kids were in school and we both look back at those being the best times ever. Now that appears to be viewed as the impossible dream?

Now get off my grass!