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How much $ to retire and how to fund your lifestyle in retirement
- Thread starter dl003
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Buckminster
Well-Known Member
Buckminster
Well-Known Member
My situation is very similar to yours. Many on this forum can't understand why someone in retirement would be "all in" on TSLA.
Your comment "Even if we lost 3/4 of our investment, we would still be able to live comfortably" nails it.
Many retirees have done so well with buying and HODLing TSLA, that they will never spend all of their wealth in their lifetime.
TSLA could drop to $250 and I would still live comfortably. Your mindset changes from "how do I attain wealth?" to "what am I going to do with this wealth?". I am sure there is another thread that discusses this question.
Also working in the auto industry your entire life likely gave you the insight that Legacy auto was not going to catch up to TSLA and with that the confidence to go all in. I worked at 3 different Legacy organizations within Consumer Products, Pharma and Retail and it was this experience that gave me the insight that Legacy Auto would never catch TSLA due to resistance to change, failure being penalized, wrong skill set, weak middle management, yes men, internal politics, quarterly earnings pressures, senior management with the incorrect vision, etc.
Congratulation on your successful retirement.
Buckminster
Well-Known Member
Not sure where to post this topic, hopefully this is appropriate. Our 2013 Nissal LEAF was totaled yesterday when another driver ran a red light because they were fiddling with the radio. No one was seriously injured, so, so very fortunate. We invested in Tesla in 2013 and have done well. Would have bought a Tesla vehicle by now, except for my frugal and eco-conscious nature. I retired early 5 years ago and was hoping to ride some cheap LEAF miles for a couple more years and then buying a Tesla. Obviously, right now is not the best time to be in the market for a new/used car. Good news is we have two other vehicles (2012 Odyessey and 2008 Highlander Hybrid), so we don’t need to run out and buy a car immediately, though it’ll kill me to not be driving most of our miles electric like we’re accustomed.
So, here is my question to the board’s collective knowledge. If you were in my shoes and knowing the $7500 credit is coming back in Jan, how would you go about ordering a new Tesla? Goal would be to get a new Model 3 as soon as possible, while still qualifying for the credit and getting best price possible. Thought I read Tesla will need to lower Model 3 prices to qualify for the federal credit. Noob questions I suspect, but any advice appreciated.
So, here is my question to the board’s collective knowledge. If you were in my shoes and knowing the $7500 credit is coming back in Jan, how would you go about ordering a new Tesla? Goal would be to get a new Model 3 as soon as possible, while still qualifying for the credit and getting best price possible. Thought I read Tesla will need to lower Model 3 prices to qualify for the federal credit. Noob questions I suspect, but any advice appreciated.
roblab
Active Member
Yup, bought heavily into Tesla years ago. Now it's worth about 8 mil. We live simply, house is paid for, we don't do lots of traveling unless it's to Phoenix to see our new granddaughter, in the Tesla, of course. It helps to be in agreement as to entertainment, travel desires, and wifey handles the money. Retirement would be hard if all we did was worry about money. You gotta plan ahead, and then STICK to your plan.
RIP Leafy. I sold my 2011 to a friend this Spring and still miss it for in town driving. Honestly, in CO I would continue bicycling (as I always did, though now I might go for an electric). Definitely wait on the order until things are settled a bit. Tesla is well-known for adjusting production levels, trims and locational delivery in order to help maximize credits.
Congrats...ill be 49 in a week...although retirement is an option with all the TSLA gains, i am still working 2 projects as i enjoy what i do (For now). Now, if TSLA 2-3x in a few years...i will seriously considering spending more 'time' in leisure and entertainment.
I think it is an interesting time to share some perspective on being retired in such times. My hope is to share what seems to be wisdom for those not yet retired, considering retirement, or retired and worried.
The situation as I post this is the market is in shambles, classic technicians are short or out of the market. Many big picture market indicators say bear market. Unfavorable world political climate exists. Oil supply a concern. Inflation a concern. Tesla stock price on pause and heavily painful for many!
I think earlier in this thread we suggested that it is important to be specific in choosing a retirement method that will work for you and your individual makeup, tolerance, and desire. Withdrawal methods - Bogleheads
We chose the VPW: Variable percentage withdrawal - Bogleheads.
In good years we "take out" extra funds, in bad years we take out less money. In order to tolerate this, we advocate for having TWO years of living expenses saved apart from market exposure. For us, this is a checking account. So, prior to quitting work, we paid off all our debts and built up two years of base level living expenses not covered by other income streams (for us a pension and an annuity). A couple years back we retired. We were taking withdrawals out monthly, based upon monthly asset totals. But, near the start of 2022, it looked like things could be rocky. We had a lot of expensive lifestyle creep plans! So, we withdrew from long term accounts, sold off some TSLA, and put the money in our checking account. Share price was much higher and the account size was kind of crazy high! We have continued to keep our spending plans intact, comfortably so.
So how are we feeling and what do we think about the future? We feel pinched and we are worried, tough to not be worried. But, the emergency fund account will finish 2022 with more than five years worth of base level expenses. We have a CT on order and that is the only big outlay planned for many coming years. Our desire to be good to others financially is being reeled in. If the market stays low, we will consider cancelling CT when time to finalize our order. If the market stays low, we have no need to take money out of long term accounts (ROTH, IRAs) for several years and we can just take out the smaller amounts according to the VPW formula if we desire. With what is known now, we will limit withdrawals in 2023 and spend down the emergency fund. This is uncomfortable but rational. Our asset level is still crazy high though we tend to not add up the numbers as often not wanting to feel the pain. We are sleeping well.
So key points for retirement consideration that have led to our comfort.
1. Annuity and pension income streams monthly regardless of what happens.
2. We are delaying SS but one of us can turn it on any time.
3. Two years of emergency funds.
4. Sticking to a withdrawal plan that makes sense for us. We built up our Efund further when times were good, this helps to tolerate the bad.
5. No debt!
I hope you are comfortable through such times. There are likely many that have made poor decisions that are suffering great emotional angst.
The situation as I post this is the market is in shambles, classic technicians are short or out of the market. Many big picture market indicators say bear market. Unfavorable world political climate exists. Oil supply a concern. Inflation a concern. Tesla stock price on pause and heavily painful for many!
I think earlier in this thread we suggested that it is important to be specific in choosing a retirement method that will work for you and your individual makeup, tolerance, and desire. Withdrawal methods - Bogleheads
We chose the VPW: Variable percentage withdrawal - Bogleheads.
In good years we "take out" extra funds, in bad years we take out less money. In order to tolerate this, we advocate for having TWO years of living expenses saved apart from market exposure. For us, this is a checking account. So, prior to quitting work, we paid off all our debts and built up two years of base level living expenses not covered by other income streams (for us a pension and an annuity). A couple years back we retired. We were taking withdrawals out monthly, based upon monthly asset totals. But, near the start of 2022, it looked like things could be rocky. We had a lot of expensive lifestyle creep plans! So, we withdrew from long term accounts, sold off some TSLA, and put the money in our checking account. Share price was much higher and the account size was kind of crazy high! We have continued to keep our spending plans intact, comfortably so.
So how are we feeling and what do we think about the future? We feel pinched and we are worried, tough to not be worried. But, the emergency fund account will finish 2022 with more than five years worth of base level expenses. We have a CT on order and that is the only big outlay planned for many coming years. Our desire to be good to others financially is being reeled in. If the market stays low, we will consider cancelling CT when time to finalize our order. If the market stays low, we have no need to take money out of long term accounts (ROTH, IRAs) for several years and we can just take out the smaller amounts according to the VPW formula if we desire. With what is known now, we will limit withdrawals in 2023 and spend down the emergency fund. This is uncomfortable but rational. Our asset level is still crazy high though we tend to not add up the numbers as often not wanting to feel the pain. We are sleeping well.
So key points for retirement consideration that have led to our comfort.
1. Annuity and pension income streams monthly regardless of what happens.
2. We are delaying SS but one of us can turn it on any time.
3. Two years of emergency funds.
4. Sticking to a withdrawal plan that makes sense for us. We built up our Efund further when times were good, this helps to tolerate the bad.
5. No debt!
I hope you are comfortable through such times. There are likely many that have made poor decisions that are suffering great emotional angst.
I decided to post this question here vs the main thread. There are a couple of posts there at the moment discussing the merits of converting a 401k to a Roth. Most are premised on the value of taking lesser gains now vs later, and therefore paying less tax now. In our case we didn’t buy in before the share price run-up. More specifically we started accumulating in May/June of 2021 and have continued through the current period. Now down across various accounts by about $100k or so. We are in our relatively early 60’s and still working and thinking of retiring in the next 1-1.5 years. Our income at that point will be substantially lower than what it is now, though comfortable. Importantly we should likely be in a better tax bracket. So, a few questions. Apologies if they show ignorance around what some might consider basics for a 401K or Roth.
1. Is it possible to do a partial conversion, where we move part of the assets to a Roth? Am guessing answer is “no.”
2. If the overall 401k has a loss based on cost basis (Tesla loss is pretty significant), would converting incur no taxes? If so, that seems appealing as subsequent growth would not be taxed once in a Roth?
As an aside we have no plans to get out of Tesla overall. I see it as our primary growth investment, and if all goes well, it will replenish and increase the overall value of our principal, if we need to draw it down.
This thread is very helpful in giving deeper insight into our retirement planning. So, thank you.
1. Is it possible to do a partial conversion, where we move part of the assets to a Roth? Am guessing answer is “no.”
2. If the overall 401k has a loss based on cost basis (Tesla loss is pretty significant), would converting incur no taxes? If so, that seems appealing as subsequent growth would not be taxed once in a Roth?
As an aside we have no plans to get out of Tesla overall. I see it as our primary growth investment, and if all goes well, it will replenish and increase the overall value of our principal, if we need to draw it down.
This thread is very helpful in giving deeper insight into our retirement planning. So, thank you.
1. Yes, you can move however much you want, when you want. Unless your broker has additional restrictions.
2. Not how it works. 401k is pre tax money, Roth is post tax, any rollover gets taxed as income. No capital losses can be claimed from an IRA/ 401k (typically, since post tax contributions are rare).
You can claim a loss on a Roth, but only after all the money has been pulled out and that total is less than the basis.
What if my 401(k) drops in value? | Internal Revenue Service
Attorney learns the wrong way to deduct IRA losses - InvestmentNews
In the simple case, it's the tax rate that matters:
X after tax * Y growth is the same as Y growth with X after tax.
$100 on a stock that goes 10x and a 20% tax bracket
Roll first:
$100*(1-20%)=$80 * 10 = $800 net and $20 in tax
Stay IRA
$100*10=$1000 * (1-20%) = $800 net and $200 in tax
Though the taxes paid are higher in the second case, the net take home is the same.
However: graduated tax brackets, retirement target, and desired annual income all come into play.
Non-advice: if you are retiring in a few years and your income will be lower, don't do a rollover now. Maybe do it once you are at a lower income to max out your tax bracket IF you don't need the money from earnings for 5 years.
Largely agree with what Mongo posted, although there is a small nuance that is hard to briefly explain (especially at this hour) that causes only a portion of the Traditional IRA Roth Conversion to be taxable. In my experience depleting a Traditional IRA down to zero via Conversion over about a 10-year period, the taxable portion ranged from 60% to 85%. A cogent explanation is available by an online search of IRS publications.
Many thanks. I forgot that all the money is taxable in a conversion, and I did not know capital losses could not be claimed. Definitely no advantage to rollover now.
I will take the short-cut - I will ask our accountant. I try to understand stuff first, but I really struggle to understand IRS publications, lol.
One caveat to add. If you think TSLA will 10x over the next 10 years, and the RMD (required minimum distribution) will put you in a higher tax bracket in year 10, then it would indeed make sense to rollover some shares (just a small portion of your 401k holdings) while the market is in the duldroms.
So mostly stick with Mongo's answer, but know that exceptions exist.
Another nuanc: Money going into a ROTH cannot be removed for at least five years without consequences. It might just be a small logistical issue, especially if the account has other funds that have been there beyond five years, but you should review the IRS guidance. Also, I have been told that social security and Medicare co-pay (or whatever it’s called) is a function of income in a few years before retirement age. I haven’t investigated this issue yet, but the person who told me, recently had a large lump-sum payment while working at ~65. It dramatically increased the annual cost of Medicare cost. If you’re planning a large conversion into ROTH, tread carefully and get good council. FYI, as a way of tax planning/minimization, I have been doing small, 20-30K, conversions on an annual basis, increasing my AGI just enough to reach just below the next tax bracket. Hope this helps.
House paid off, got rid of your credit cards, fund your IRA's every year, have a pension, savings, vehicles paid off? Start there....
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