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

[dhanson865]

10% is still close to the 12% calc
1000/.9 = 1,111
1000/.8 = 1,250
12.5% higher cost



Trading doesn't matter, just the $ you contributed.
Any contributions can be withdrawn at any time without penalty. Conversions each need a 5 calendar year cooling off period.
So, yes, you can sell shares and pull out up to your total contribution tax and penalty free (it was all post-tax money to begin with)
However! Because it is tax free, you may want to consider leaving it for big purchases that would push you into higher tax brackets.

About that 5 year cooling off, If I'm putting in new funds every January do I need to worry about tracking that or keeping it separate if it's all post tax money. Or are you saying in year 6 of the account I can take year 3 post tax contributions back out without penalty?

On the topic of keeping it for big purchases some of those shares were bought at $103 a share, if I sell at $1,000 (a guy can dream), I'd be keeping almost 90% of it in until later anyway.

In that scenario I could sell say 20 shares at $1,000 ($20,000 as cash inside the roth), extract the percentage that is contribution (say 14% and withdraw that ~$2800) then buy shares 17 shares with the gains, or can I skip the steps and just sell 3 shares at 1,000 and extract the contribution form the 20 shares in concept?

 

[CarlS]

OK so I have x shares of TSLA in a roth that has been open for several years. Last time I added to that roth was Jan 2023. I bought shares with all the funds I could so there is less than $200 cash left in the fund. In 2028 if I want to pull funds out and I'm still under the age of 59-1/2 I can sell shares and leave the profits in and pull the initial cost of the shares back out? Or did I lock that money in there by buying stock?

If I didn't lock it in, can I sell shares from an over 5 year old account as each tranche of shares becomes 5 years old?

Do the age of the shares matter and the age of the account and the date it was last added to, or is it just a 5 year old or older account even if it has newer funds?

Either way when I turn 59-1/2 I have access to other funds in much larger accounts so it's just a question of if I can have the flexibility to pull from it penalty free or not in that window between the 5 year mark and when I turn 59-1/2.

I also can create additional roth accounts for later use, I'm just trying to make sure I understand how I can use them so I know how granular I need to make future accounts.

I was totally wrong. You can always withdraw your contributions at any time. You don't have to wait 5 years (if it's just regular contributions

About that 5 year cooling off, If I'm putting in new funds every January do I need to worry about tracking that or keeping it separate if it's all post tax money. Or are you saying in year 6 of the account I can take year 3 post tax contributions back out without penalty?

On the topic of keeping it for big purchases some of those shares were bought at $103 a share, if I sell at $1,000 (a guy can dream), I'd be keeping almost 90% of it in until later anyway.

In that scenario I could sell say 20 shares at $1,000 ($20,000 as cash inside the roth), extract the percentage that is contribution (say 14% and withdraw that ~$2800) then buy shares 17 shares with the gains, or can I skip the steps and just sell 3 shares at 1,000 and extract the contribution form the 20 shares in concept?

Right. The number of shares is irrelevant. What matters is the dollars contributed. If you put in $2,000 and bought 20 shares that have gained value and/or split it doesn't matter. You can take out the $2,000 at any time. If that means only selling one share (for example), then that's all you need to do.
Also, I was mistaken about waiting 5 years. Further reading shows that you can take out contributions at any time.

 

[mongo]

About that 5 year cooling off, If I'm putting in new funds every January do I need to worry about tracking that or keeping it separate if it's all post tax money. Or are you saying in year 6 of the account I can take year 3 post tax contributions back out without penalty?

On the topic of keeping it for big purchases some of those shares were bought at $103 a share, if I sell at $1,000 (a guy can dream), I'd be keeping almost 90% of it in until later anyway.

In that scenario I could sell say 20 shares at $1,000 ($20,000 as cash inside the roth), extract the percentage that is contribution (say 14% and withdraw that ~$2800) then buy shares 17 shares with the gains, or can I skip the steps and just sell 3 shares at 1,000 and extract the contribution form the 20 shares in concept?

5 year cooling off is only for conversions from IRAs/ 401ks, not contributions. If conversions (a Roth ladder), you need to track individual amounts.

If you put 3k in you can pull it out whenever you want (so you only need to sell 3 shares at $1000 each). If you put money in and pull it out the same year, it doesn't get counted as a contribution (cancels itself out).

 

[dhanson865]

5 year cooling off is only for conversions from IRAs/ 401ks, not contributions. If conversions (a Roth ladder), you need to track individual amounts.

If you put 3k in you can pull it out whenever you want (so you only need to sell 3 shares at $1000 each). If you put money in and pull it out the same year, it doesn't get counted as a contribution (cancels itself out).

Do people really do roth ladders in a single account? Brokers have no qualms with making extra accounts for me so if I did a roth ladder I'd make 5 or more accounts.

My thoughts aren't so much that I'd roth ladder for the purpose of pre 59 1-2, more so to move money around on years I don't need to spend 100k. So instead of pulling it out of a 401k and putting it in checking, I'd move some of it to a roth just to get the taxes out of the way in a year where I need less money and at the same time stay invested in TSLA.

 

[Oil4AsphaultOnly]

Do people really do roth ladders in a single account? Brokers have no qualms with making extra accounts for me so if I did a roth ladder I'd make 5 or more accounts.

My thoughts aren't so much that I'd roth ladder for the purpose of pre 59 1-2, more so to move money around on years I don't need to spend 100k. So instead of pulling it out of a 401k and putting it in checking, I'd move some of it to a roth just to get the taxes out of the way in a year where I need less money and at the same time stay invested in TSLA.

Having a single Roth is easier to manage your investments, because the point of having a Roth is to let your investments grow tax free. To many little accounts means your investment options get severely truncated.

 

[mongo]

Do people really do roth ladders in a single account? Brokers have no qualms with making extra accounts for me so if I did a roth ladder I'd make 5 or more accounts.

My thoughts aren't so much that I'd roth ladder for the purpose of pre 59 1-2, more so to move money around on years I don't need to spend 100k. So instead of pulling it out of a 401k and putting it in checking, I'd move some of it to a roth just to get the taxes out of the way in a year where I need less money and at the same time stay invested in TSLA.

Dunno, keeping contributed vs converted accounts separate might be useful, but beyond that the only critical separation is for accounts you set up a 72(t) on. Which is a way to get your money without 10% penalty.
And with the new optional 5% interest rate, widthdrawl amounts are more reasonable.

 

[adiggs]

I see that 72(t) aka Substantially Equal Periodic Payment (SEPP) IRA withdrawals are showing up in conversation now and again.

My not-advice, that is as close to actual advice as I am willing to provide, is that whether you work with a professional financial planner or not, you need to do a lot of reading and study. I would specifically suggest that you learn enough that you could set it up on your own, whether you use a financial planner to actually set one up for you or not. There are nuances and details that matter a lot - enough so that its not hard to find stories about financial planners that miss and/or don't understand things.


I've read a lot, from a lot of different sites, and the one that provided me the most information is New 72t Guidance for 2022 and Beyond – 72tNET. The key differentiator for this site is implementation details, and not just a primer on SEPP and the powerful option they provide for early retirees.

 

[ReddyLeaf]

Having a single Roth is easier to manage your investments, because the point of having a Roth is to let your investments grow tax free. To many little accounts means your investment options get severely truncated.

Don’t forget, that to the IRS, you only have ONE Roth and ONE non-Roth. It doesn’t matter how many accounts, banks, brokerages, etc. Remember this when filing Form 8606. Also, doesn’t matter if you are married or not, the accounts are yours and not jointly owned. I’m not sure about SEP, Keogh, or other types, but I think they are essentially regular IRAs (or Roth depending on how they were created). Definitely the 403(b) for nonprofits are the same as 401(k). YMMV, but definitely read and understand before you leap. I learned lots about the 72t withdrawal method years ago, but decided that I could easily wait until 59.5 by creating a multi year CD ladder. This gives the added benefit of having x-years (I chose 5yr) of risk-free, non-stock savings just in case the market crashes.

 

[MP3Mike]

Don’t forget, that to the IRS, you only have ONE Roth and ONE non-Roth. It doesn’t matter how many accounts, banks, brokerages, etc.

I don't think that is true. At least not for 72t plans, where you have to plan your withdrawals on the balance of the specific account you want to take the 72t withdrawals from. Splitting one large account up is how you can control how much your 72t plan will force you to withdraw. (At least that is my understanding.)

 

[tivoboy]

SEP, Keogh, or other types, but I think they are essentially regular IRAs (or Roth depending on how they were created).

Keogh and the more recent versions of Individual 401K are definitely not essentially regular IRA’s and have some very significant reporting requirements for the owner, admin. So definitely do that homework and stay on top of the ANNUAL filing requirements that can come into play as the plans grow in value or risk paying VERY significant penalties while holding the plans.

 

[Oil4AsphaultOnly]

I don't think that is true. At least not for 72t plans, where you have to plan your withdrawals on the balance of the specific account you want to take the 72t withdrawals from. Splitting one large account up is how you can control how much your 72t plan will force you to withdraw. (At least that is my understanding.)

And just as a point of clarification, in case anyone else mis-read like how I did initially:

Form 8606 is mainly filed for the IRA to Roth conversions, which does NOT apply for rule 72t distributions.

From IRS instructions for Form 8606:
Use Form 8606 to report:
• Nondeductible contributions you made to traditional IRAs;
• Distributions from traditional, SEP, or SIMPLE IRAs, if you have a basis in these IRAs;
• Conversions from traditional, SEP, or SIMPLE IRAs to RothIRAs; and
• Distributions from Roth IRAs


I wish our tax code wasn't so friggin complicated!!

 

[adiggs]

I don't think that is true. At least not for 72t plans, where you have to plan your withdrawals on the balance of the specific account you want to take the 72t withdrawals from. Splitting one large account up is how you can control how much your 72t plan will force you to withdraw. (At least that is my understanding.)

This is one reason to spend some time on 72t.net. The term that they use (which I'm sure is their own made up descriptor, not something official) is one's SEPP "universe". I.e. the balance of a group of 3 (or whatever) IRA type accounts is the balance being used to calculated the periodic payment - where you take the payment (among those) is up to you.

They also recommend splitting out a big account into an account of exactly the right size to support your SEPP, so you don't have extra retirement savings subject to the SEPP constraint (I believe that is primarily that you can't deposit new money into IRA accounts that are within your written SEPP plan).


(I'm still not a financial planner, and I still only know enough to support my own decisions in my own situation. We still all make our own decisions and experience our own consequences)

 

[juanmedina]

For the people that have retired, do you still have a large portion of your portfolio in Tesla? It just seems too stressful. Up and down by huge amounts with a few days.

 

[UltradoomY]

For the people that have retired, do you still have a large portion of your portfolio in Tesla? It just seems too stressful. Up and down by huge amounts with a few days.

Right now I have converted ($275-$280 sells) a ton of shares into 4 week treasuries - I'm doing 4 week rollers - each week one batch expires and rolls to the next 4 week expiration -
Currently paying over 5%
Also loading up on SCHD (for market exposure and dividend) and VTI - both low expense

Down to around 30% of portfolio in TSLA - no leaps either - shares only
50% cash in treasuries
Remaining 20% in SCHD and VTI - some odd lots to play with 1% or so for buying puts and calls on SPY

Using my remaining TSLA position for CC's and what nots for sushi money

 

[adiggs]

For the people that have retired, do you still have a large portion of your portfolio in Tesla? It just seems too stressful. Up and down by huge amounts with a few days.

Yes.

I've shifted away from 100% TSLA, but that shift is into cash rather than some other company or an index fund. I do have some money in an income oriented REIT (www.fundrise.com) and plan to be shifting towards 20-40% over time (probably will take me years). Right now its a trivial % - this will be my diversification, as I consider the point of diversification to find something that has as little correlation as possible; different companies, and even stock index funds, are still correlated with TSLA, while real estate does a better job of moving randomly relative to stock.

 

[CHGolferJim]

For the people that have retired, do you still have a large portion of your portfolio in Tesla? It just seems too stressful. Up and down by huge amounts with a few days.

At 66 and retired, I’m willing to commit up to 50% of net worth to TSLA shares, not counting LEAPs, until we reach $300 SP, then will place a value cap on shares and reduce risk in options strategy. Hope and expect SP from 2024 onwards will exceed $300 (even with continued volatility), so will prune at every $50 SP increase to generate funds to diversify/spend. General plan is to pay off mortgages, begin Social Security, and shift a portion to a bonds ladder to augment corporate pension and investments harvesting.

 

[tivoboy]

At 66 and retired, I’m willing to commit up to 50% of net worth to TSLA shares, not counting LEAPs, until we reach $300 SP, then will place a value cap on shares and reduce risk in options strategy. Hope and expect SP from 2024 onwards will exceed $300 (even with continued volatility), so will prune at every $50 SP increase to generate funds to diversify/spend. General plan is to pay off mortgages, begin Social Security, and shift a portion to a bonds ladder to augment corporate pension and investments harvesting.

Just a thought.. but I’ve been planning and starting to build my bond ladder sooner than I had expected. Say you planned to start building something in 3-5 years…well my expectation is that yields will be quite a bit lower then. Any bond bought TODAY or soon, is going to have a coupon much higher than a bond sold in 2024-2026. And of course bonds bought today, soon are going to appreciate. So what I have been telling ppl to do is think about how much in FI they would want to have starting in 2+ years, and bring SOME of that forward, capture these really great yields AND have the possible bond appreciation to boot. To sum it up, think about the fixed income bond portfolio you WANT to have starting in 2025+ and consider putting some of that in today.

Just a thought.

 

[CHGolferJim]

Just a thought.. but I’ve been planning and starting to build my bond ladder sooner than I had expected. Say you planned to start building something in 3-5 years…well my expectation is that yields will be quite a bit lower then. Any bond bought TODAY or soon, is going to have a coupon much higher than a bond sold in 2024-2026. And of course bonds bought today, soon are going to appreciate. So what I have been telling ppl to do is think about how much in FI they would want to have starting in 2+ years, and bring SOME of that forward, capture these really great yields AND have the possible bond appreciation to boot. To sum it up, think about the fixed income bond portfolio you WANT to have starting in 2025+ and consider putting some of that in today.

Just a thought.

Excellent point, I’m thinking that but your post reminds me, thanks.

 

[Oil4AsphaultOnly]

For the people that have retired, do you still have a large portion of your portfolio in Tesla? It just seems too stressful. Up and down by huge amounts with a few days.

Yes. But I had sold 1/3 of my holdings into cash when I "retired" (2021) and had been selling put options to generate the cash for my RMD payments. Unfortunately 2022 killed that strategy and forced me to buy back some shares at ~$300!! Painful lesson, but because my RMD payments were cut to 1/3, I've been able to rebuild the cash pile this year. It's not back to the original yet, but what didn't kill me made me a more nimble options trader.

But once TSLA reaches back to $300, I'll trim out the shares that were force-put to me to try to rebuild my cash position so that I can sell more puts.

 

[ReddyLeaf]

For the people that have retired, do you still have a large portion of your portfolio in Tesla? It just seems too stressful. Up and down by huge amounts with a few days.

This got me thinking: retirement begins at an initial point, but continues for decades beyond (hopefully) when useful salary-generating work is no longer feasible. There is the classic “sequence risk” that is always a major problem (e.g., selling assets into a sinking market, and not having income to buy instead). That is “retirement “ in the current, classical sense.

Everyone must make choices to spend what is necessary to survive, and/or spend what is only discretionary. So where are we now? Has there ever been a generation that has retired into a global pandemic, rising interest rates, economic stagnation, and world war (or at least close to world war)? Certainly not identical to today, but possibly 1918+/- and 1958+/- (Hong Kong flu, Korean War).

So what’s my point? Stress is what you make of it. In the past, people have dealt with REAL life or death situations, not just portfolio numbers or “cutting back if the market crashes.” I’m sitting here, on vacation at the beach, with my feet up and drinking a nice glass of wine, wondering about my retirement portfolio, while my great grandparents struggled through REAL winters without heat, running water, plumbing, or electricity. They only had adequate shelter and food because they made it themselves.

So, to eventually answer your question: having any portion of my retirement portfolio in TSLA is not stressful at all. Stress, would be to, absolutely and completely, depend on my ability to generate enough food, water, and shelter to keep my family alive. Fortunately, I, and hopefully you, are no where near that level of requirement.

I hope this gives you perspective. Wishing you the best. Good luck with your journey.