Looking For Your Advice Please

[db61]

Topic Title: Looking for your advice.

Life Situation: Married filing Joint, Spouse 58, I’m 60, both US residents.

Gross Salary/Wages: $54,204 Ret Pay, $42,204 VA, $14,196 Fed Gov Ret, Total before tax $110,604

Individual amounts of each Pre-tax deductions None at this time, not working.

Other Ordinary Income: None

Qualified Dividends & Long Term Capital Gains: None

Rental Income, Actual Expenses, and Depreciation: None

Adjusted Gross Income:  $68,400 annually (the VA amount above is non taxable) and since I’m retired I don’t pay Social Security. Actually monthly take home after taxes is $8600.

Taxes: Married Filing Joint, take standard deduction $25,100 for net taxable of $43,300.

Current monthly expenses: This is the budget I created and try to stay within;
Groc $1200,
Gas/auto $500,
Med $500 (this is for scrips, deductibles, and copays, Tricare is about $500 a year for us total),
Misc $1,000,
House $1500 Mortgage ($340K payoff), $150 Taxes, $150 Ins:
Phones, Cable, Internet, Car Ins, Elec, Water, $1,000 per month.   
We’ve done fairly well staying within these targets so far.
Total is about $6,000 a month give or take depending upon Elec and Water.   
Misc is high but includes eating out, clothing, trips to Lowes, home repairs, etc…
Yes, the Grocery budget is very high, wife is Gluten free and has terrible digestive issues, had large intestine removed. We eat a lot of organic and non GMO foods for health. We typically only spend about half the budgeted amount on groceries but it’s budgeted just in case. 

Expected ER expenses: None

Assets: 
Wife ROTH $400K,
my ROTH $400K, (15% of both invested in stocks, 85% moved to cash a year ago)
TSP $198K, currently in G Fund (government securities) so is relatively safe from market swings.
Savings $140K in a money market,
Checking $40K
2014 Truck paid off, 2015 BMW paid off, 2018 Challenger paid off.  All very well maintained and none driven more than 5K miles per year.
No other debt other than the house.
Total is $1,178,000. If I subtract the house payoff and add in it’s value it is $1,338,000 But I’d have to buy another!

Liabilities: Home is worth $500K with $340K Payoff. Mortgage is 3.2%.

Specific Question(s): I retired in Nov, somewhat unexpectedly. We live off of my pensions and VA.  We have not pulled from any retirement or savings accounts yet.  Specific questions:
1. How are we doing? As I stated retirement was not planned. I simply became fed up with the govt organization I was employed with.
2. I feel I got lucky with investments, I followed the Motley Fool advice for about 10 years and managed to accrue about $1M. I was completely surprised. As luck would have it I took some profit when the market got silly and moved about 85% of each ROTH into cash and left about $150K invested in AAPL, GOOGL, AMC, DWAC, AMZN, and TSLA. Do you see these as favorable stocks to own at this time? Is there any reallocation I should consider or is a large cash position good at this time (ages 60 and 58)? I do not have any index funds or mutuals, I simply buy and hold stocks.
3. Being somewhat of a dummy when it comes to money, budgeting, and investing Is there any advice you would like to offer?  Would like to shore up my retirement posture and have a solid plan for the future. Your advice would be appreciated.
4. The following is what should play out in the future…  I plan to take Social Security at 62, appx. $1800 a month. The wife will follow 2 years later and claim spousal off my earnings, about $900 a month.  This will give us appx. $11K a month after taxes.  If I pulled $2K a month from my ROTH’s I could get that up to $13K per month. With $800K in the ROTHS the simple math (800K / 24K = 33 years before depleted not taking into account leaving 15% or more invested). And not touching TSP, savings, or checking. Sound or not?
5. What should I do with the $198K in my Govt TSP?  I’ve thought of pulling it out and paying taxes on it and adding it to savings.  Would I be better off rolling it over to my ROTH?  I understand both are taxable events.

This site is amazing, the information I’ve read since finding it only this morning has already helped me. Since I retired I have wanted to share my situation with anyone who could give it an objective look and provide their perspective on my situation, this is the first place I’ve found to do this.  Thank you all in advance!

[MDM]

db61, welcome to the forum.

1. You are doing great!  Your non-investment income is more than your expenses, so any income from investments is extra.
2. Yes, that was somewhat lucky.  Other stocks would not have done so well.  The general advice here and at a forum such as Bogleheads is to avoid individual stocks and use index funds instead.
3. See Getting started - Bogleheads.
4. See Open Social Security: Free, Open-Source Social Security Calculator regarding SS benefit start ages.  Often the lower earner should start earlier, while the higher earner waits until age 70.  Significant Roth conversion plans (btw, Roth is a name not an acronym) could make delaying the lower earner's start date beneficial.  In general, Roth withdrawals would be the last thing to do because the longer tax-free growth in the Roth the better.
5. See Roth IRA conversion.  E.g., in 2022 you could convert $40K into a Roth IRA at a federal tax rate of 12% (assuming no income other than listed in the OP).

Other questions welcome - good luck!

[former player]

Welcome to the forum and congratulations on your financial position.

The investment board might be a good place for you to browse, starting with this thread that distills the general wisdom of the forum on investment order -

https://forum.mrmoneymustache.com/investor-alley/investment-order/

The advice here is definitely that the majority of your investments should be in low-cost index funds such as Vanguard.  (Although please note that there is a continuing debate on the forums on investing vs paying off the mortgage, feel free to get involved in that if you would find it interesting.)

On expenses I don't see you taking account of the one-off big expenses that come up every so often - house repairs and upgrades, new cars and computers, etc., etc.  But there is room in your current income to cover those, over and above your more day to day/month to month expenses.

As to your investment assets as a whole, I guess the question is: what are your long term plans for these?  You can pull income out of them to spend, you can keep them to pay for high-levels of care in old age, you can just let them sit for the rest of your life and leave a substantial legacy in your will, you can make charitable gifts, you can give to family, you can split them between some or all of those options or you may be able to think of something else.  That's more of an interests/values discussion than a purely financial one and one for you and your wife to mull over together.

[lucenzo11]

1. You are in a great position with retirement income exceeding your expenses without even touching your expenses.

2. Your asset allocation is different from what most would do on this forum, but I think to really advise on this, we would need to understand what your goals are as @former player asked. From a financial point of view, you are in a good position and holding it as cash doesn't hurt you and can serve as a backup if anything goes wrong, but it's taking a hit from inflation and not growing at all. On the other hand, you have a half dozen picked stocks that have served you well but could be considered risky as you are now in the wealth preservation stage of life. These stocks have certainly taken a hit in 2022, and history says that the market as a whole should bounce back at some point (might drop first before recovering), but the question is whether these specific stocks will bounce back too. That's why most here will point to index funds as they provide great stock diversification. Do you not want to invest in index funds or have you just not considered them before? You may also want to consider bonds. They aren't as risky or as high performing as stocks, but they should give you some returns. Bonds haven't been the best asset class of recent with interest rates rising, but they still may serve a purpose for you depending on your goals.

3. If you are open to index funds, then I would suggest reading the stock series which also covers asset allocation and bonds: https://jlcollinsnh.com/stock-series/

4. Your math makes sense to me, but do you need $13k a month? It doesn't appear it from your expenses unless you have something else you are looking to do with the money. So once again, this comes back to what your goals are. If you don't need the money from your Roth now, then leaving it invested is your best bet.

5. I'll leave this to others who are more familiar with conversions and withdrawals.

[db61]

Lucenzo11,

Thank you. I agree with your comments on the stock market and appreciate your insight.  Very early on in my investment career I was in some Janus funds...I did not do my homework and paid almost as much in fees as I was investing...dumb move on my part. I subsequently picked up a USAA Brokerage Roth for my wife and I.  There were 0 transaction fees and everything was done with after tax money so all my growth is tax free. I will certainly (as all of you have suggested) read on this forums preferences for investment strategies. I'm just not keen on paying anyone to manage my money.

I do have $198K in Government Securities, granted they don't keep up with inflation, right now very few things do. But, earning something is better than earning nothing, agree!!

Hoping I don't need $13K per month, that's probably too much. I can probably keep from pulling from investments for some time as long as I keep making the monthly bill targets.

Former Player,

thank you for your comments.  I appreciate the comment about the investments being an "interests/values" discussion. I have thought very little about this but have gifted both of my children $5k each this year. That is something that is certainly of value to me. I'd like to do more for them and any future grand children.

I have not locked in a plan on big ticket items like cars.  I keep vehicles for a very long time as I am a novice shade tree mechanic.  Motto is, "take care of it and it'll take care of you!" Regular maintenance is relatively simple and fun for me. It's also a savings.  Deep down I'm fairly tight fisted and hate to pay for someone to do something I know I'm capable of doing.  But, I will work on a strategy for these big ticket items. I do have $1K budgeted for misc that includes a little bankroll for bigger ticket items; appliances, house upgrades, etc..., not much in there right now but your comment helped me see the need to focus on that.

I will also heed your advice on learning more about paying off the mortgage or not.  Quite a big one to ponder over.

MDM,

thank you for taking the time to reply to my post. I agree lucky is the operative word with my stock picks. I was also heavy in NFLX before it started to tank and unloaded it at quite a profit.  Pure luck! Didn't mention it as I was only sharing what I currently have positions in. It's low now, buying opportunity maybe but I'm going to look into the index fund idea. I'm sure I can find some that are suitable for my Roth.

I also took to heart your suggestion for the Roth conversion. Doing a partial would keep me from hitting a higher tax bracket, thanks! I'll certainly plan for that as I don't need any of it now, and certainly not the entire amount.

To all of you,

Thank you for your comments.  Love this forum so far and will take your advice and do much more research.  At the very least I'll be looking into the index funds you mentioned and reading the specific investment forums for insight.  The suggestion on a partial Roth roll-over was also helpful.  And I appreciated the gentle sytax reminder that Roth isn't an acronym! 

[zolotiyeruki]

Welcome to the forum!  Here are a few thoughts:

1) You're way beyond "doing ok," financially.  You're spending $72k/year after taxes, compared to a $110k income before taxes, and probably $100k after federal taxes.  The roughly $1MM you have in equities can support another $40k/year of spending.  In other words, you have twice as much as you need to retire, even on your rather generous budget.
2) I won't make any recommendations about specific stocks, other than to say that you better either know exactly what you're doing by buying individual stocks, or be comfortable with those picks underperforming the general market.
3) You have an awful lot of your assets in cash, and it's costing you a lot of money.  Personally, I'd shift that back into index funds, especially with the market down more than 20% from its peak.  I mean, you don't *need* that money, since your other income already more than covers your spending, but it's a pity to leave money on the table that you could pass to your kids, or a charity, or whatever.
4) That plan should be fine, and it's even super conservative, since you don't account for any growth in your Roth accounts.  I think, though, that you should give some thought to what you'll do with the massive firehose of income you'll have at that point, and make a plan.
5) Even with the standard deduction, you guys are well into the 22% tax bracket, so there's likely not much tax benefit to rolling into a Roth IRA in the short term, and since almost all of your retirement assets are Roth accounts, and your income will be stable, it's just a question of paying taxes now vs later.

[MDM]

5) Even with the standard deduction, you guys are well into the 22% tax bracket, so there's likely not much tax benefit to rolling into a Roth IRA in the short term, and since almost all of your retirement assets are Roth accounts, and your income will be stable, it's just a question of paying taxes now vs later.

Might not matter because the OP hasn't come back in several days, but the VA benefits are non-taxable so they are in the 12% bracket for another ~$40K should they choose to use that room.

[ATtiny85]

Hopefully OP has read the other helpful posts and comes back with more questions.

OP, welcome, great job getting to this point. There are some wonderful folks here who will shine things up for you and really give you confidence in the future.