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Tax deferred help

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BW
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Tax deferred help  Reply with quote  

Retiring in Dec. at 62 with 900K tax deferred account. My wife is 58 with 700K that has already been taxed and plans to work several more years. She has an emergency fund, but I do not simply because we keep our accounts split. I know, in a perfect world we would spend down the taxed account, before we touch the tax deferred account. She looks at things as yours and mine and not ours.

In any case, I need an emergence fund, car replacement and I feel the market is going to have a correction and /or bonds will take a hit when the Fed rates go up sooner rather than later. My thoughts would be to change my managed fund to a Fidelity/Ameritrade or whoever with 50% stocks-40% bonds Ė 10% cash realizing that I will take a tax hit on the 10% withdraw on the cash. Perhaps ladder some CDís or something short term. Any thoughts/advice would be helpful.
Post Sat May 16, 2015 2:07 pm
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oldguy
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Your plan to move closer to a 50/50 stocks/bond mix is good at age 62, it mitigates the high/low extremes of 100% stocks, and the possible corrections that you are concerned about.

But I wouldn't (and don't) mess with CDs, money markets, etc - their returns are near zero. We never keep $90,000 in dead money, $5000 is enough, we keep it in savings. And if you do have a major emergency, sell from your 50/50 funds to cover it.

In 8 yrs, you'll need to sell about $40,000/yr to meet your RMD - so, no hurry to sell extra now.

New car. I finance the entire cost - tax, license, zero down payment. And make payments for 5 yrs. My own money stays invested at 11%/yr (the SP500 Index) where it usually doubles in about 6 or 7 yrs (the Rule of 72).
Post Sun May 17, 2015 1:03 am
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BW
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Thank you sir! So let me see if I understanding you correctly since, Iím new to this retirement stuff. When Iím 70 I will need to withdraw 40K out of my account each year for my RMD ?
On a different note, Iím getting mixed advice from my advisor and my accountant on annual withdraw rates on my funds. My advisor is saying about $2400 per month after taxes and my accountant is saying he is being way to conservative, as the average person last about 16 yrs. after retirement. My health is not the greatest, but Iím not on deaths door or anything like that at the moment. My wife and I are no interested in leaving a pile of money to realitives and she should be fine when Iím gone so what is your take on it? And please donít tell me about eating cat food when we get old.
Smile
Post Sun May 17, 2015 12:42 pm
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oldguy
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That $2400/m 'net' appears to be about the same as the $40,000/y that you'll sell for your RMD beginning in 8 yrs. So you could just start selling $40k per yr now.

As for lasting 16 yrs - if you keep your $900k invested at an 8%/yr average return - and sell only 4%/yr, it will keep growing at 4%/yr -ie, you won't run out, it will keep growing.
At least that's how mine has worked, my account has more than doubled in the 16 years since I retired.
Post Sun May 17, 2015 5:24 pm
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Wino
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The adviser probably gets a "cut" of your account each year, so he's telling you to take out the minimum. The accountant is correct that you can expect to live only into your early 90s or less, so you could take out more. Per normal, the "financial adviser" is looking out more for his interests than yours.

I would take out up to 6% per year, but no more. Oldguy's original advice about covered it, but I'll be leaving more money in equities when I retire. Over 30 years, I can reasonably expect to make around 8% per annum after inflation, so that's where I'll leave my money.

The only step left on my list is to start buying rental properties. I plan to have four, at which point I'll retire. The rentals are my inflation hedge (if inflation goes up, rent goes up), and the savings (only Roth and after-tax investments) will be my income source. I don't even consider social security in the mix, so that money will be icing on the cake, assuming I get it.

I have NEVER found a financial adviser who was more interested in my account than his own. DW still has a financial adviser, but I don't. My accounts are up over 20% so far this year. Hers are up about 3%. I think that at least for the nonce, I'm winning this argument. (She also has money in "my" accounts, so she's doing OK on that side, and that is not counted in her 3%).
Post Mon May 18, 2015 4:04 am
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BW
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I went the rental property root. I just got tired of the hassles assonated with them even being in the mechanical trades. It takes a good rental lease and hopefully you get good people renting them. Good luck with that.

Thanks for the advice! I think you are right about the advisor.
Post Mon May 18, 2015 6:13 pm
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