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

[mongo]

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.

You can price plans online Blue Cross in Michigan starts around $600 a month for medical for 55 male nonsmoker. HSA are pretax (and you can invest in them).
Routine colonoscopy are usually 100% covered.
To really max out benefits, you might be able to stay with your employer another year, sign up for maximum FSA, use it up, then retire (you get full FSA access Jan 1 and don't repay it if you leave).

 

[dmunjal]

Reading all these posts, I have no idea how anyone can survive on $110K a year in a HCOL city in the US even assuming all debts are paid off. Looks like I have no easy way to avoid taxes even if I have enough savings to cover my expenses.

 

[colettimj]

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?

TD (soon to be Schwab) told me you can transfer stock from an IRA to a Roth IRA. You would, of course, need to pay the taxes owed on the conversion. Not sure if all brokers allow this.

 

[mongo]

Reading all these posts, I have no idea how anyone can survive on $110K a year in a HCOL city in the US even assuming all debts are paid off. Looks like I have no easy way to avoid taxes even if I have enough savings to cover my expenses.

Buy a foreclosed and abandoned house during the 2008-2009 meltdown, never move...

Depending on specific individual and curcumstances, part time self employment is handy in that health insurance premiums are deductible.

 

[dhanson865]

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

So I get to log it on f5329 and pay or not pay taxes but other than that it's just like any other finacial transaction. Just a different line on the tax forms.

 

[mongo]

So I get to log it on f5329 and pay or not pay taxes but other than that it's just like any other finacial transaction. Just a different line on the tax forms.

Yep. All transactional.
If you want to pull money early, you can do that too, just incurs a 10% penalty. Another line on a form. They call it a penalty, but when looking at 10% tax rate jumps, is there a difference?
Due to external circumstances, I've had to pay late penalties on my taxes. Surprise, no one cares, there's a formula, there's a number, pay it and move on with life.

 

[dhanson865]

Yep. All transactional.
If you want to pull money early, you can do that too, just incurs a 10% penalty. Another line on a form. They call it a penalty, but when looking at 10% tax rate jumps, is there a difference?
Due to external circumstances, I've had to pay late penalties on my taxes. Surprise, no one cares, there's a formula, there's a number, pay it and move on with life.

I agree, I'm not worried about every possible optimization as long as I have funds to do the F you to my boss in a year or two.

I won't sweat a tiny difference turning millions of dollars into also millions of dollars.

 

[dhanson865]

I still have ~2 years until I get access to the 401k that I want to pull from, that gives me two more years of savings, and I need TSLA at all time highs by then also.

* At ~300 share aka ~1 Trillion market cap in 2025 I'd have to take a big leap of faith that TSLA would hit all time highs and stay higher than my retirement date. I'd be stuck taking out half portions waiting for even higher all time highs. I'd be surprised if I have to deal with this scenario but I'll have 2 more years of savings and I could revisit then with more accurate math. Looking at it 2 years out this is a scary scenario.

* At ~$433 share aka ~1.5 Trillion market cap in 2025 I can retire taking out my half portions waiting for even higher all time highs. I could withstand pullbacks just pulling out half portions every year as long as it takes for the new all time highs to come back. It wouldn't be stressful like the $300 share scenario but it wouldn't be comfortably rich either.

* At ~$580 share aka ~2 Trillion market cap in 2025 I can retire taking full portions (twice as much money per year vs the scenarios above) and possibly have to scale back if TSLA retreats from all time highs. I still have to watch the math but I'd be optimistic as long as my funds stay over the 90% start mark from the table in the prior post.

* If TSLA is above $700 a share aka ~2.4 Trillion market cap or higher in 2025 I don't even have to be careful about the math. I just pull enough to max the tax bracket I'm looking at and go on. The higher the stock goes the more I blow past the prior tax bracket. I'll pay the taxes with a smile.

 

[SageBrush]

Part of my decision to save in a 401k/IRA rather than Roth through my working years was based on the idea of passing on my savings to my kids, who would then have a few decades to withdraw the money. It seemed at the time like a tax efficient strategy. Now that the law has changed and IRA beneficiaries have to empty the inheritance within 10 years the taxes will ~ double.

Certainly a first world problem, but I think a couple take-home lessons have been learned:

• If a savings plan is "too" successful, the Gov will find a way to give it a haircut
• Solid planning and savings makes comfortable retirement achievable, but a social barrier puts a ceiling on affluence for the middle class. My younger self estimation that disciplined generations leads to riches is not likely.

 

[tivoboy]

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.

Get a colonoscopy done, endoscopy maybe? Get a cardiac fitness or stress test done.. everything that will give you a baseline and or a 5-7 year run till the next tests are required.

 

[tivoboy]

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, you’re actually PLANNING for a 105 year expiration?

 

[tivoboy]

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?

Are you taking RMD’s or just IRA withdrawals. If its RMD in any way, make sure that ANY AND ALL charitable contributions you make are coming from the account with the RMD’s, and even things like next generation educational expense can be distributed and satisfy the distribution but don’t count as income.

I THINK with some IRA, you can take out loans against it, and then you have to pay it back with interest within different periods of years. That might be an option.

 

[tivoboy]

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

My top of the line Blue Cross Blue Shield PPO on CA Bay Area is 2K a month. I’ve had it several years as a consultant when it was all deductible at least, but now that I’m semi retired, I don’t have enough 1099 to deduct it against. But, I still roll it into itemized deductions, but still 24K a year is a lot.

 

[mongo]

I THINK with some IRA, you can take out loans against it, and then you have to pay it back with interest within different periods of years. That might be an option.

Using it as collateral makes it instantly taxable.
With a 401k at a current employer you may be able to take loans against it.

 

[Unpilot]

Thanks for all the reply's. I thought I would clarify a few points that I must not have made clear.

I am 67 so no RMD's yet.

I bought my son his M3 for his college graduation/bday in 2020. I had several other large purchases in 2021 and 2022.

My tax bill for 2021 was $120,000, for 2022 my tax bill was $68,000.

All purchases funded by TSLA. I am retired, do not have any other income besides sales of stock from a rollover IRA (401k that rolled to IRA when I retired) and Social security.

I was wondering how to reduce the tax hit, as I am at an age where I want to spend my earnings and make memories.

My understanding of capital preservation is weak. I have rolled some into my Roth IRA and continue to do so as much as I am able to.

However, loans against a IRA are not an option AFAIK. So it seems the best and only option is to try and stay under the next tax bracket.

 

[mongo]

All purchases funded by TSLA. I am retired, do not have any other income besides sales of stock from a rollover IRA (401k that rolled to IRA when I retired) and Social security.

I was wondering how to reduce the tax hit, as I am at an age where I want to spend my earnings and make memories.

My understanding of capital preservation is weak. I have rolled some into my Roth IRA and continue to do so as much as I am able to.

Re Roth conversions in retirement.
If you are living off IRAs (living expenses guaranteed to be higher than social security) and over 59-1/2, the critical factor toward whether it's a good idea is tax rate.
Transferring from traditional to Roth incurs an income tax hit, that reduces your appreciating balance going forward. So the only time Roth is better is if the tax rate you pay now is lower than the tax rate you would pay later. This can be the case if planning for a big purchase.
Key is to view things as percentages, not dollars.

 

[dhanson865]

So, you’re actually PLANNING for a 105 year expiration?

I'm doing the math at 52 for retiring at 55 and not running out of money until I'm 105 (even if I'm dead). Keep in mind there are others in my life younger than me.

I could die before then or for all I know there could be medical advances and I'd need funds for decades after I turn 100. For now I'm just using 50 years as a round number long enough that I can adjust later if my health fades or medical advances make me have to adjust the other way.

 

[UkNorthampton]

I'm doing the math at 52 for retiring at 55 and not running out of money until I'm 105 (even if I'm dead). Keep in mind there are others in my life younger than me.

I could die before then or for all I know there could be medical advances and I'd need funds for decades after I turn 100. For now I'm just using 50 years as a round number long enough that I can adjust later if my health fades or medical advances make me have to adjust the other way.

I'm hopeful for intergenerational wealth, trust fund etc. Planning for a safe withdrawal rate that allows investments to grow at inflation+ over the long term seems possible. I'll leave it for others to moralise whether it's healthy for the next generations or not. In my case it is (in my opinion/family circumstances). It also provides for extended existence if medically possible and desired. I think aiming to use it all is a bit daft really. I'm not materialistic, so my greatest happiness will be for providing for my family (and others probably).

It's a hope at the moment, but realistically could happen. Stunning really.

 

[elasalle]

This can be the case if planning for a big purchase.

?
Can you explain this. Thanks

 

[mongo]

?
Can you explain this. Thanks

Round numbers for convience:
Annual expenses: 80k
Tax bracket jump from 24% to 32%: 100k
Note, if living off pretax accounts, the effective cost is 1/(1-tax rate) for gross vs net
24% : need to pull 32% more funds than you need
33% : need to pull 49% more funds than you need
So the 8% tax rate change results in 13% higher effective costs for funds pulled above that threshold.

Each year, roll 20k (gross, say 15k net) into a Roth
If 59-1/2 or older, that money can be pulled penalty free at any point. If < 59.5, it needs to sit 5 years.
Either way, at some point down the road you can pull those contributions out tax and penalty free.
So say you've done that for 5 years are now 60, and want to buy a Cybertruck with cash. You pull the usual 20k from the IRA (15k net) plus 5 years of 15k contributions: 90k total savings 8% in taxes (and potentially 10% in penalties) versus just waiting until the money was needed.

Also, by doing conversions vs widthdrawls, the funds grow tax free.