How much $ to retire and how to fund your lifestyle in retirement

[dhanson865]

I lIke this guys financial calculators and models. Gives the option for a lot of variable tweaking and alternatie projections. READ the instructions for each financial calculator, like the FIRE model or Will my money last calcs.. one can easily put in something like SS and pension or alternate income streams to add to the modeling.

Disclaimer: no interest or relationship whatsoever

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Engaging Data is a virtual workshop/gallery of javascript tools, data visualizations and maps of stuff that I find interesting and fun. Enjoy and Learn.

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Rich, Broke or Dead? Post-Retirement FIRE Calculator: Visualizing Early Retirement Success and Longevity Risk - Engaging Data

A FI/RE early retirement calculator visualizing longevity risk in early retirement and enables you to compare the probability success, failure and mortality.

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I'm liking this one. Until TSLA goes sky high I can skirt the 0% capital gains limit (~ $25,900 standard deduction + $83,350 long term capital gains married filing jointly bracket top = ~$109,250), for simple math call it $110,000 on good years and $55,000 anytime my funds drop below $1.7M (when TSLA price drops).

With that strategy in mind I can start at 1.9M when I turn 55 and not run out in 50 years if TSLA somehow stagnates and just ramp it up if TSLA takes off.

$110,000 is ~5.8% at the start and would basically fall back to $55,000 or about 3% if TSLA goes south (and yes in flyover country I can live on $55K no problem).

 

[SageBrush]

I can skirt the 0% capital gains limit (~ $13,850 standard deduction + $83,350 long term capital gains married filing jointly bracket top = ~$97,200)

The Standard Deduction is ~ 27k for a 'married, joint return' tax return

If e.g. you take ~ $27k from an IRA or from W-2 wages, then (~ $89K - $27K) = $62k of Cap gains is in the 0% tax bracket and the remainder is likely in the 15% tax bracket

 

[dhanson865]

The Standard Deduction is ~ 27k for a 'married, joint return' tax return

If e.g. you take ~ $27k from an IRA, then (~ $89K - $27K) = $62k of Cap gains is in the 0% tax bracket and the remainder is likely in the 15% tax bracket

good catch, edited post, now need $1.9M instead of $1.7M to skirt that new higher line.

Oh and this might all be a moot point. I have time before I turn 55 and if TSLA goes up enough I might have more than either of those 2 numbers.

If I have less it's a goal number, if I have more it's a higher line to skirt the tax bracket.

 

[SageBrush]

good catch, edited post, now need $1.9M instead of $1.7M to skirt that new higher line.

I reviewed Cap gains taxation yesterday for what feels like the umpteenth time. It sticks for a few days.

I was reviewing my options to fulfill a tentative plan to buy a Tesla in 2024 and to take advantage of the federal EV tax credit. Between W-2 wages, Cap gains, and ACA health care for one of us (the other will be eligible for Medicare), it gets downright tricky.

 

[adiggs]

good catch, edited post, now need $1.9M instead of $1.7M to skirt that new higher line.

Oh and this might all be a moot point. I have time before I turn 55 and if TSLA goes up enough I might have more than either of those 2 numbers.

If I have less it's a goal number, if I have more it's a higher line to skirt the tax bracket.

Having retired early, in the US, I've discovered that we're not really well set up for retirees that are pre-medicare (mostly).

The big deal I've run into is with health care. At least in my state, I no longer have employer health care; all of the available health care plans I have been able to find are strictly in-network. Since most of me and my wife's health care is not in-network, or otherwise restricted in quantity (acupuncture, stuff like that), its been a significant shock to see how little or new health insurance covers.

Though that's still better than the retiree health care I have access to through my previous employer. Annual spending limits are also a lot higher than we grew accustomed to while I was still working.


Mostly I say that, to say this - there are many things that become a lot cheaper in retirement. Like the annual 401k contributions - that's money we're not spending any more . Taxes can easily be lower. Health care -- my own mental model has shifted to we're paying $1200/month for disaster coverage, and we pay the rest of our medical expenses ourselves. At least for us, with a similar or lower level of actual health care to pay for, our health care expenses are up a lot.

Something to account for.

And congratulations on needing to do planning like this!

 

[SageBrush]

Health care -- my own mental model has shifted to we're paying $1200/month for disaster coverage, and we pay the rest of our medical expenses ourselves

ACA ("obamacare") not an option ?

 

[Unpilot]

Just jumping in to ask....has anyone found a way to avoid the tax hit from taking money from an IRA.

My situation is I am 67 retired have 33,000 a year in Social security income.

The rest is from sales of TSLA in my IRA.
When I need a large amount of money (bought a M3 for my son last year) the tax hit can get painful.

Anyone in my situation have ideas?

 

[mongo]

Just jumping in to ask....has anyone found a way to avoid the tax hit from taking money from an IRA.

My situation is I am 67 retired have 33,000 a year in Social security income.

The rest is from sales of TSLA in my IRA.
When I need a large amount of money (bought a M3 for my son last year) the tax hit can get painful.

Anyone in my situation have ideas?

Non advice:
Only way I know is to average it out to max out the lower tax brackets.
Long term, pull from IRA every year, roll excess into Roth where it grows tax free (but has 5 year cooling off period for tax free earnings) and you can pull contributions at any point (due to being over 59-1/2).

Short term: pull from IRA late in a tax year without withholding, pull tax payment at beginning of next year and submit as estimated payment. File taxes with when-recieved/ when-paid method to reduce/ avoid penalties.

Short term: use loans or credit card offers to cover expenses over year boundaries. Taxes can be paid via new 0% credit cards with <2% transaction cost. In some cases, credit card rewards gained can exceed the transaction fee.
2023: pull funds
2024: cover taxes with 12 month 0% credit card, minimum or higher monthly payments
2025: pull funds to pay off credit card

Even higher interest loans can be preferable to increased taxes. There is a step change from 12% to 22% at $45k + deductions for single, $95k for married.
Incremental cost per $10k net ignoring state tax:
10k / (1-12%) = $11,364 withdrawn
10k / (1 -22%) =$12,821 withdrawn
12821/11364 = 13% increase in principle cost

To risk reduce: turn the required payments into cash at time of obligation creation, and leave in account.

 

[SageBrush]

Anyone in my situation have ideas?

Spread it out, either by planning ahead or paying off the car over time.

I take out of our IRA the maximum I can and still keep within the 12% marginal tax bracket. The money I do not spend ends up invested in an account that is taxed by Capital gains. In our case most of the excess money is funneled to our kids IRA where it offsets their 22% federal tax bracket income and high state income taxes.

The "problem" you may have run into is a desire to get the EV tax credit. Are you complaining about the tax hit, but forgetting about the EV credit you received ? If my arithmetic the other day is correct, when I buy a Tesla in 2024 I'll net ~ $5,000 of the EV credit -- meaning I'll pay about $2,500 more in taxes in order to get $7,500 in EV credit.

Honestly, one way I think about the EV credit is that it lets me take money out of my IRA tax free over and above the standard deduction.. That is a non-trivial perk since in most years I'm pretty happy to pay 12% on the taxable amount (after deductions.)

 

[juanmedina]

Non advice:
Only way I know is to average it out to max out the lower tax brackets.
Long term, pull from IRA every year, roll excess into Roth where it grows tax free (but has 5 year cooling off period for tax free earnings) and you can pull contributions at any point (due to being over 59-1/2).

Short term: pull from IRA late in a tax year without withholding, pull tax payment at beginning of next year and submit as estimated payment. File taxes with when-recieved/ when-paid method to reduce/ avoid penalties.

Short term: use loans or credit card offers to cover expenses over year boundaries. Taxes can be paid via new 0% credit cards with <2% transaction cost. In some cases, credit card rewards gained can exceed the transaction fee.
2023: pull funds
2024: cover taxes with 12 month 0% credit card, minimum or higher monthly payments
2025: pull funds to pay off credit card

Even higher interest loans can be preferable to increased taxes. There is a step change from 12% to 22% at $45k + deductions for single, $95k for married.
Incremental cost per $10k net ignoring state tax:
10k / (1-12%) = $11,364 withdrawn
10k / (1 -22%) =$12,821 withdrawn
12821/11364 = 13% increase in principle cost

To risk reduce: turn the required payments into cash at time of obligation creation, and leave in account.

When you roll from a traditional IRA into a Roth and wait 5 years to withdraw without penalty, are supposed to leave that money alone and not trade it or anything? Can you rollover stock or does it have to be cash?

 

[mongo]

When you roll from a traditional IRA into a Roth and wait 5 years to withdraw without penalty, are supposed to leave that money alone and not trade it or anything? Can you rollover stock or does it have to be cash?

Roth activities are (largely) the same as IRA activites, you can trade in a Roth (no tax deductios nif you do that poorly though).
You can roll in the form of cash or current holdings (at least with some institutions when converting within the institution).

 

[SageBrush]

Roth activities are (largely) the same as IRA activites, you can trade in a Roth (no tax deductios nif you do that poorly though).

Examples please. This is something I should learn

 

[elasalle]

just a thought, but these days we can get back 4-5% of tax penalty by putting the proceeds back in a money market fund
So if you withdraw just enough so you remain in same Tax bracket, you pay 10% Fed, but if you factor in Money market returns (these days) you can practically think it is more like 6%

My goal per year is to withdraw just enough so I don't jump to the next tax bracket(big surprises if you get moved up to another tax bracket). For me this is around 50-80K pre tax, per last 2 years taxes. Extra $$ (mainly from CC sales) to have extra pocket money for leisure, food, travels ...
mentally I think i am semi-retired .... Covered Calls are like my Credit Card
cheers!!

 

[SageBrush]

Extra $$ (mainly from CC sales)

How so ?

 

[mongo]

Examples please. This is something I have to learn

As in, "your reason for existence may be to serve as a warning to others"?

Did big rollover to have tax free funds available five years. Mistimed converting shares to calls. Mistimed selling the calls. Account now worth less than the amount in taxes paid to roll it over. On the upside, the original rollover amount does still count, so after 5 years I can pull up to that much (via growth or other conversions) without the 10% penalty.

 

[elasalle]

How so ?

Sell annual leap based CC's against all my shares ... and manage accordingly.
Since I want to remain in same tax bracket, my upper ceiling for yearly withdrawal is like 50-80K, so easily achievable based on # of shares i have and selling far OTM calls.
(Prior years I was using all CC proceeds to buy more shares/calls. Now I am satisfied with where I am and am OK with taking some proceeds even with paying tax penalty for early withdrawal)
*to meet goals, I just need to sell CC's for 2$ premium, but I try to be more opportunistic

Selling CC's has it's own risks .. with main one being shares being called ... so pls do due research. cheers!!

 

[dhanson865]

Rich, Broke or Dead? Post-Retirement FIRE Calculator: Visualizing Early Retirement Success and Longevity Risk - Engaging Data

A FI/RE early retirement calculator visualizing longevity risk in early retirement and enables you to compare the probability success, failure and mortality.

engaging-data.com

I'm liking this one. Until TSLA goes sky high I can skirt the 0% capital gains limit (~ $25,900 standard deduction + $83,350 long term capital gains married filing jointly bracket top = ~$109,250), for simple math call it $110,000 on good years and $55,000 anytime my funds drop below $1.7M (when TSLA price drops).

With that strategy in mind I can start at 1.9M when I turn 55 and not run out in 50 years if TSLA somehow stagnates and just ramp it up if TSLA takes off.

$110,000 is ~5.8% at the start and would basically fall back to $55,000 or about 3% if TSLA goes south (and yes in flyover country I can live on $55K no problem).

View attachment 956094

So in the years I choose to pull out $55k instead of $110k I'd have room to convert some shares from non roth to roth.

The next question is are there any special procedures for this or I'm I good with moving it over so long as I hit all the rules.

As in 5 year rule (say I make a new account for this), I get the broker to make a new account, I move shares or (cash and then buy shares, if they won't move shares). I'll know I did it and I'll pay attention to the rules but do I need to fill out any extra paperwork other than tracking it for my own sake to make sure I did it right in case of an audit?

anything not obvious in the actual creation of the account(s)? anyone I have to notify? Or just do it and do it right.

 

[mongo]

So in the years I choose to pull out $55k instead of $110k I'd have room to convert some shares from non roth to roth.

The next question is are there any special procedures for this or I'm I good with moving it over so long as I hit all the rules.

As in 5 year rule (say I make a new account for this), I get the broker to make a new account, I move shares or (cash and then buy shares, if they won't move shares). I'll know I did it and I'll pay attention to the rules but do I need to fill out any extra paperwork other than tracking it for my own sake to make sure I did it right in case of an audit?

anything not obvious in the actual creation of the account(s)? anyone I have to notify? Or just do it and do it right.

Nothing special to make the account nor to do rollovers. If staying with same broker, can potentially do it online in under an hour. The transfer may not happen immediately and will likely occur after market close.
As to withdrawing contributions vs earnings, the broker may track it, but you report it on your 1040.
Retirement Plans FAQs regarding IRAs Distributions Withdrawals | Internal Revenue Service

 

[⚡️ELECTROMAN⚡️]

Having retired early, in the US, I've discovered that we're not really well set up for retirees that are pre-medicare (mostly).

The big deal I've run into is with health care. At least in my state, I no longer have employer health care; all of the available health care plans I have been able to find are strictly in-network. Since most of me and my wife's health care is not in-network, or otherwise restricted in quantity (acupuncture, stuff like that), its been a significant shock to see how little or new health insurance covers.

Though that's still better than the retiree health care I have access to through my previous employer. Annual spending limits are also a lot higher than we grew accustomed to while I was still working.


Mostly I say that, to say this - there are many things that become a lot cheaper in retirement. Like the annual 401k contributions - that's money we're not spending any more . Taxes can easily be lower. Health care -- my own mental model has shifted to we're paying $1200/month for disaster coverage, and we pay the rest of our medical expenses ourselves. At least for us, with a similar or lower level of actual health care to pay for, our health care expenses are up a lot.

Something to account for.

And congratulations on needing to do planning like this!

How much do you think a single person in their 50s would have to pay for monthly health insurance? I was definitely thinking I should get some tests done, like colonoscopy etc… before I take the plunge. I’m getting more and more disgruntled with my job.

 

[adiggs]

How much do you think a single person in their 50s would have to pay for monthly health insurance? I was definitely thinking I should get some tests done, like colonoscopy etc… before I take the plunge. I’m getting more and more disgruntled with my job.

I'm in Oregon. My wife and I are spending $1200/month for $9k each deductible, and strictly in-network care. As I mentioned originally, the deductible is high enough that I just think of this as medical disaster coverage. I'm in my 50s as well.

I do have my company's retiree medical plan available, but that's over $2500/month for the 2 of us.


I'd guess 2/3rds of that if you're single, but that's really a guess; I haven't spent any time investigating solo health plans