Author Topic: Drawdown Strategies + Tax Efficiency tips for FIRE 65 y.o.+  (Read 538 times)

skibuns05

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Drawdown Strategies + Tax Efficiency tips for FIRE 65 y.o.+
« on: December 10, 2018, 05:15:13 PM »
Looking for tax efficiency tips (incl. charitable giving tips) and retirement drawdown strategies for a Virginia FIRE couple (65 + 66 y.o.)

They have TSPs, Roth IRAs, IRAs, regular investment accounts, savings and checking accounts, and 3 owned homes.

Pension AGI ~$180K. Want to get that down to below $170K to avoid Medicare Part B premiums, right? If yes, how?

They need to rollover their TSPs and streamline their investments. Should they have several brokers to ensure SIPC coverage? ~1.35M total investments. They both have Schwab accounts now.

Considering their high retirement income, owned homes, health insurance, and long-term care, what should their portfolio breakdown be? (My thought is growth; they can afford to weather the storms and it will just make more money for charity or heirs. 80/20? The Schwab intelligent profile would be easy to set it and forget it.)

Any reason to do a rothIRA conversion? They will make more money when they start taking ss and other drawdowns and they will likely sell a home soon (too much to manage). Is there a reason to do a conversion to something to maximize assets to donate to charity and / or preserve for heirs?

How should property be titled for best coverage? I know tenants by entirety protects assets from lawsuits if only 1 person is sued but having separate titles for financial accounts ensures more FDIC and SIPC coverage.

Their insurance situation looks good; health, auto, property, long-term care. They have no umbrella liability. Do they need coverage up to their net worth?

Feel free to post links to other articles, discussions, podcasts, etc. where these things were noted. Thanks in advance!
« Last Edit: December 10, 2018, 05:17:14 PM by skibuns05 »

ysette9

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Re: Drawdown Strategies + Tax Efficiency tips for FIRE 65 y.o.+
« Reply #1 on: December 10, 2018, 10:00:34 PM »
That certainly is a nice position for them to be in. What is their annual spending? What are their financial goals?

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Re: Drawdown Strategies + Tax Efficiency tips for FIRE 65 y.o.+
« Reply #2 on: December 11, 2018, 05:39:20 AM »
If their spending is at or below their pension, and their pension is somewhat inflation protected (the additional SS will obviously do a lot of that anyway) I think they need to figure out what they are going to spend their investments on in their lifetime.  If there isn't anything then I would think may as well invest everything but an emergency fund in equities.

$1M in umbrella is cheap, the mere reason you mention getting sued below comes up if enough reason to get it.

skibuns05

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Re: Drawdown Strategies + Tax Efficiency tips for FIRE 65 y.o.+
« Reply #3 on: December 11, 2018, 11:59:19 AM »
Their spending is below their pension.

He has Parkinsons. (And Parkinson's dementia. It's bad. Hence why I'm trying to help. He always handled finances.) Her mom has dementia and is in assisted living but she is very active / primary care-taker. They travel 9-10 weeks a year. They are frugal penny pinchers by nature but very generous with gifts and charitable contributions. Kids live out of state. No grandkids yet. I think her goal is focusing on him and her mom. She's not thinking long-term goals right now. She doesn't even have basic estate planning documents in place.

dude

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Re: Drawdown Strategies + Tax Efficiency tips for FIRE 65 y.o.+
« Reply #4 on: December 11, 2018, 12:59:30 PM »
How important to them is leaving a legacy?  That's a ton of money coming in on the pensions alone. They're gonna pay the taxman sooner or later, whether they do conversions or are forced to take RMDs. Hard to see how they get that AGI down as retirees, and really, how expensive are Part B premiums? And do they really need Part B since I'm guessing they are enrolled in FEHB?

ysette9

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Re: Drawdown Strategies + Tax Efficiency tips for FIRE 65 y.o.+
« Reply #5 on: December 11, 2018, 01:11:41 PM »
If they don’t have basic estate planning in place and he is sick already, I think that is a more pressing concern to address than investment asset allocation, given how much income they have coming in.

If it were me I would do a a quick pass to make sure whatever they are invested in is low-fee, then set that question aside until a will or trust is in place. Then go back and optimize the investments.

robartsd

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Re: Drawdown Strategies + Tax Efficiency tips for FIRE 65 y.o.+
« Reply #6 on: December 11, 2018, 03:45:55 PM »
I don't know how you can call this couple FIRE. FI and retired for sure, but they worked way too long. Reasons to move from deferred to Roth would be to reduce future RMDs. In most cases, RMDs and funds remaining in a traditional IRA at death can go to charity to avoid impacting taxes.

If they donít have basic estate planning in place and he is sick already, I think that is a more pressing concern to address than investment asset allocation, given how much income they have coming in.

If it were me I would do a a quick pass to make sure whatever they are invested in is low-fee, then set that question aside until a will or trust is in place. Then go back and optimize the investments.
Does the pension change if one of them passes? If the pension is tied to his life, she may need (some of) the stash.