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Late to the Party - Last Minute Retirement Planning

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After going over everything exhaustively, checking for some glaring oversight on my part, over the next few days I'll notify the boss of my imminent retirement. :cool:

Does anyone else get butterflies in their stomach as the moment of transition from contemplation to action unfolds?

Yes. :)

Both leading up to the conversation about retirement, and then leading up to the actual retirement day.

The Monday after retirement was kind of odd - more like a vacation day without an ending date than retirement.


Don't worry - you'll get over it!
 
What happens if you’re wrong and TSLA doesn’t grow/appreciate? What if we have another recession? You could be unemployed and unemployable just because of your age. As a hedge, I would offer to work 50% time or work from home, to assist with the transition and help “train” your replacement. I did that for 3+ years and it greatly reduced my stress level. It also put everyone on notice that I was on the way out and didn’t have to take on any “crap” tasks. I was able to focus on the tasks that I enjoyed. It worked out ok, not perfect. Sometime in the middle, more work came in that couldn’t be deferred, and management hadn’t hired enough staff as a replacement (yes, more than one person is often needed to replace an out-going retiree). Thus, I offered to temporarily go back to full time to help offset the extra work. It was definitely tough, and after a year I went back to half time, but put them on notice that there wouldn’t be a “next” time. No matter where I’ve worked, management is always slow to hire, usually 1-2 years behind, because they don’t want to expend the extra resources (money, benefits, equipment, space, training) until absolutely the last moment.

My version of this was 3 month notice that then got extended by 2 weeks and then 1 more week. And then no more.

I've worked with somebody that dropped down to 3 day/week work schedule for a couple of years, and then finally retired. That seemed to work well for him.
 
Can you wait until April?

I hope I'm wrong, but I have this idea TSLA will come under selling pressure after the one year anniversary of the Corona Dip. Share holders who bought after the dip will start to to realize gains at the Long Term tax rate. I'm no master of the market, and I'm probably wrong, but if I was in your place I'd wait a little bit longer just to see if that pressure happens.

I'm flexible. Giving notice now is as much about getting a feel for how much I'll be missed as anything. My suspicion is I could easily find myself persuaded to stick around until they can conjure a Plan B.
 
Being in the midst of the Big Chill of 2021 combined with TSLA's Q1 Post-S&P Correction, I'm holding off on making the retirement announcement until after the bosses again have power to their homes, can drive to work, and IT services are no longer in crisis mode.

Maybe by then the SP will have made a turn back to a more norminal trajectory.
 
For any who haven't found it, take a look at the FireCalc.com site. I found it invaluable as a second opinion to compare results from the spreadsheet I cooked up. I ran both the spreadsheet and FireCalc using different sets of variables to generate a variety of scenarios, all of them based upon very conservative portfolio gains. (be sure to notice the several tabs in FireCalc where changes can be made)

The final analysis on the spreadsheet calculated account balances into the future based upon:
  • taking up to no more than $30K in margin this year and each of the 2 following years
  • the portfolio earns a flat 10% annual gain for each of the following 3 years (living off margin loan and Social Security)
  • TSLA gains can then accumulate without selling shares to live on for up to three additional years if desired
  • from year 4 to year 19, the balance uses a random annual gain of between 4% and 6% for the next 15 years (age 80)
  • from year 4 to year 11, $30K each distributions are taken from the IRA and Invest accounts to supplement Social Security
  • from year 12 to year 19, what's left of the IRA is only tapped for play money, distributions are taken from Invest (30K) and Roth(15K), plus Social Security
Obviously, these are what most TMC TSLA HODLers would consider "lowball" estimates for TSLA growth. At this stage of calculation I wanted to downplay gains to assure me I could retire today based upon these gain and distribution levels. It was meant to show a poor growth scenario.

Once I ran the same figures in FireCalc the resulting graphs showed all lines calculated against historical data each remaining comfortably above the Red line.

The addition of 30K from a margin loan up front for 3 years was crucial for demonstrating a safe retirement this year.

Because total margin borrowed in year 1 will be less than 15% (of 25% offered) from the IBKR account it seems to indicate quite a bit of wiggle room left to prevent any margin call situation arising.

I'm hoping the SP gains will be better than 10% going forward. If the SP performs well this year and next I may be able to begin distributions earlier, or, have more margin bucks to access from IBKR's 25% limit on an account made up of 99% TSLA and then I could continue to dip from this well in order to preserve the shares for further growth.
 
Thanks to a combined effort between myself and Mr. Murphy I get to test my spreadsheet today putting in the numbers as the SP dives for 700. The formulas still show the plan as good for the next 18 years or so, only based upon today's numbers and the conservative gain percentages.

Gotta love that Murphy, such a kidder. Trying to get my goat. Clearly, he doesn't know I'm a HODLer and this just looks like a reset back a few weeks to the beginning of the year. Tesla Fundamentals are rockin' and demand for their wares is outstripping supply.

 
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Thanks to a combined effort between myself and Mr. Murphy I get to test my spreadsheet today putting in the numbers as the SP dives for 700. The formulas still show the plan as good for the next 18 years or so, only based upon today's numbers and the conservative gain percentages.

Gotta love that Murphy, such a kidder. Trying to get my goat. Clearly, he doesn't know I'm a HODLer and this just looks like a reset back a few weeks to the beginning of the year. Tesla Fundamentals are rockin' and demand for their wares is outstripping supply.

That guy Murphy is renowned for his impeccable timing.
 
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Fortunately, I have a sense of humor when it comes to life. Doubly so regarding the market. Otherwise, I might be fretting inconsolably after HODLing TSLA the past few weeks.

Still, I know the foundation and prospects for TSLA are sound and this presents an opportunity to see what else I might get into to expand what I have so I can buy more chairs.

Things are always more interesting, and life so much more rewarding, when I have complex problems to solve for. I wouldn't want to get all comfy and complacent now, would I?
 
As I am routinely checking my spreadsheet that, among other things, projects future gains based upon selected annual gain percentages it has been a struggle not to dial in the actual percentages we have seen so far.

I have Ranges A, B, and C that can be put in a column for each future year.
Typically, a random choice:

A = between 30 and 45 percent
B = between 15 and 30 percent
C = between 8 and 15 percent

Over a 25 year timeline I tend to select A, usually in the column for the next 2 to 4 years, then B for the following 2 to 4 years, and C for the remaining years. The gain percentages are intentionally conservative as a CYA measure.

Now for the tricky bit...

Naturally, I'm going to change the A and B ranges every now and then to conservatively reflect closer to last year's gains for A (70-80%) and (25-40%) for B. You know, just to see what maintaining higher gains might look like. This produces results that, though seemingly plausible, grow to numbers that are challenging to accept as actually possible. (thank you Elon!)

Granted, when I then look back to 2020 gains, the 2021 gains look to be significantly under-performing. 🤷‍♂️

I simply cannot comfortably use for planning the results these ranges generate. I haven't even begun shopping for islands with mountains, or anything. At least I have a little time for that.

The numbers blow me away. Even if I roll back to A being only two more years and B the following two years with C for the rest it is still fantastic. Too fantastic for a fellow who has lived a frugal life. That is, someone who played enough throughout their lifetime to have pretty much earned about what I have spent along the way. Let's just say that I am totally unprepared for abundance. But, I'll deal with it like I have many other seemingly insurmountable problems I have faced over the years.

What I'm getting at is that I've been suddenly thrust into an environment where in another year or so I'll be planning my first home build/purchase, and buying new Teslas (plural), and trying to figure out how to spend my time and those gains. I have no heirs and this means I'll need to work extra hard finding good causes to support as this boon will be more than I have any reasonable chance of spending in my lifetime. (frugal habits die hard)

Anyway, it seemed like a good time to update this thread and I hope it encourages others to work out the numbers, accumulate TSLA and HODL until you reach the level of gains that suit you.

Best wishes to the long-term investors and many thanks to all in the TMC Investment threads for keeping the light at the end of the tunnel burning brightly!
 
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It has been a while since posting here and I've stumbled into something regarding strategies to increase the size of a ROTH IRA that seems intriguing.

As someone who is receiving a SS (Social Security) check each month and am interested in keeping the Income Tax burden as low as possible, I was looking into how Capital Gains tax rates affect overall taxes on a zero income taxpayer.

This is where I discovered there is a 0% tax on Cap Gains if the amount of Income does not exceed a particular threshold and it got me to thinking whether this offers me any advantages for building up the ROTH.


Scenario 1: IRA (from pre-tax 401K) conversion to ROTH (using the "filing Single" numbers to work through this)

IRS rules say, "Your benefits may be taxable if the total of (1) one-half of your benefits, plus (2) all of your other income, including tax-exempt interest, is greater than the base amount for your filing status."
For example, lets use an annual SS of $20K, so half of that is $10K, which leaves $15K before hitting the threshold that will trigger tax on 50% of SS.​
This would allow a ~$15K IRA to ROTH conversion tax free each year. Over the years I could migrate a portion of the IRA into the ROTH IRA without incurring a tax on the conversion. This is double the $7K I'd be allowed to contribute to the ROTH if I had the cash to do so. This seems like a no-brainer as a strategy to get as much into the ROTH at no cost.​
Next, I want to compare the above scenario to what would be the taxes owed for moving shares from an Individual Account (taxed for Cap Gains) to the ROTH instead. (limited to a value of $7000/year)


Scenario 2: transfer shares from Individual to ROTH

Cap Gains is 0% on profits for up to $44,625 (for 2023) of Long-term assets.​
Using the handy 2022 Capital Gains Calculator at Nerdwallet.com I was able to select the following:​
Purchase Price: $175​
Sale Price: $7000​
Taxable Income excluding the capital gain: $10,000 (half the example SS)​
More than One Year​
Single filing status​
... and the result is an estimated tax of $1000 for the movement of $7K of shares from the Individual Account to the ROTH. Granted, this would require selling shares to cover the $1K of tax.​
Because I can't know the future share price this gets too sketchy to reliably optimize further, I don't know if selling a few shares now would be offset by TSLA shares being sold from the ROTH tax free some years in the future.​


Scenario 3: Do both

Using the Cap Gains calculator to apply both Scenario 1 and 2 in the tax year:​
$15K from the IRA as Income​
$7K from the Individual account into ROTH​
~$1600 Income tax due​
Net result, Scenario increases the amount of ROTH assets by $22K each year. Is that worth selling shares in 2023 to cover taxes? After 2022's volatility it gets challenging to calculate (guess) whether or not this a good long term option to consider.​
Today we are at an SP of $200, so 8 shares to cover that tax at today's price, but, will the SP be higher or lower in April of 2023? There's the rub. Gut feeling is that it would be higher, but the market doesn't follow my gut as reliably as I would prefer. :rolleyes:

If anyone has experience in applying these sort of tactics, or has constructive feedback to offer, it would be appreciated.
 
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Minimize tax on IRA to ROTH share transfer while receiving Social Security benefits with no other income to declare.

Disclaimer: This is not intended to be used as Tax advice. It is simply a lovely story for entertainment purposes only.

For anyone without income, retired, and receiving Social Security benefits here's a tactic I plan to use this year to increase the share count in a ROTH by transferring them from the Rollover IRA.

If I have this figured correctly it should result in a transfer of shares to the ROTH with zero to very little tax owed, depending on how it is played.

At this SSA Webpage they indicate how tax can be assessed on your Social Security benefit if the "combined income" exceeds $25,000.

Combined Income is defined as:

Adjusted Gross Income (value of the shares transferred, and any other income)​
+ Nontaxable interest​
+1/2 of your Social Security benefits​

As an example, let's use $20K as the SS benefit amount received for the year Half of that amount. i.e.: $10K
Subtract that from the $25,000, leaving $15,000
If there is Nontaxable interest, subtract that from the $15,000.
If there is any other income, subtract that as well.

The way I understand it, the remaining number, using the $15K from above is the range left to work in to avoid any SS benefit being taxed.

On the tax form we already know there will be a Standard Deduction allowed. From 2022 let's use the Filing Single deduction of $12,950 for this example.

If my understanding is accurate, the standard deduction is the value of the IRA shares that can be transferred to the ROTH with zero tax when there are no other sources of income to declare.

In this example, if the IRA transfer value is bumped up to $14,950, there would likely be tax on $2000 as income for the year and no tax on the SS benefit. This will be in the 10% tax bracket, so $200 to transfer a few more shares to the ROTH might be worth it.

Go over $15K in this example and an amount equal to the overage from the SS benefit received will be taxed as well. Still in a low bracket, so might be worth it to pack in a few more shares. Use last year's Tax Table and Form 1040 to mock up various scenarios to see how they come out tax-wise.

As expected, worming through the IRS stuff can be convoluted and I'd highly recommend having a tax expert verify this strategy before filing.

For folks with relatively simple tax returns it should be straight-forward to work the numbers. Only, here's the catch, you have to do the transfer before the end of the tax year, and, the IRS won't publish the forms and tax table to calculate the 2023 return until the end of the year. So, leave some wiggle room if you don't like surprises.

Clear as mud, right?

Please feel free to expose any flies in this ointment. Thank you.
 
After working through all the convolutions above, in the end it became clearer that the Standard Deduction is an easy guideline for the share value that can be transferred from IRA to ROTH without incurring tax. Based upon the presumption there are no other forms of reported income to subtract from that amount.

I was able to find the Standard Deductions for 2023 taxes have been published, and for the Filing Single example above it is shown to be $13,850 for 2013.

If I've interpreted this correctly, with the current SP at $207, this would equal about 67 shares which a Filing Single person could add to the ROTH before reaching a threshold that would incur tax.

Do the math for your filing status and consult a tax professional to get a definitive answer about whether this works for you.

I am not a tax professional and offer this merely as speculation, it is not to be taken as financial advice.
 
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The next tier after the above would be consideration of transferring shares valued at or below the $25K Combined Income limit which would invoke tax on 50% of the SS benefit received that year.

Working it using the filing Single example above, after having transferred shares to accommodate the Standard Deduction, and, based on an SP of $207 let's see what we get.

First we divide the annual SS Benefit by half, from the earlier example it was $10K. Subtract this from $25K.
This leaves a $15K difference to calculate for a Combined Income that won't incur tax on the SS benefit. We'll use 67 shares at $207 again.

Next, what is the tax bracket that $15K would fall into for 2013 taxes? It looks like it will be 12%.

Let's see how much gain we would have to see between the time of transfer and April 15 in order to offset the taxes on $15K. (15,000 x 0.12 = $1800 in tax for that transfer) 1800 / 67 = ~ $27 per share for the 67 shares in question.

You can spread this $1800 across total shares held for an even lower gain needed to offset the 12% tax on the transfer. For example let's use 1000 shares. 1800 / 1000 - 1.8, so a buck eighty Gain in SP is all that is needed to sell a few shares and pay the tax on the transfer. Sweet!

The question then becomes, will the SP rise by $27 (base only on the 67 shares, or $1.80 based on 1K shares) at any time between now and tax time? If it does, shares can be sold at that time to cover the tax from gains, and, the shares transferred will be withdrawn tax free from the ROTH at some future date where the SP is even better than now.

Being able to take advantage of a Stock Price as it bumps $234 at some point over the next five months seems like a bet with good odds. The potential loss is fixed at $1800, though if shares must be sold to pay it a hard fall in the SP could result in more shares being sold to cover the tax.

I'll continue to mull this over and apply the formula to my scenario and see if I feel lucky enough to place that bet. The more the SP dips, the better that bet will look. If it went from 67 shares to 100, it would be hard to not jump at the chance. Particularly when considering the potential tax-free gains that shares in a ROTH may provide over time.

As always, these are the ramblings of a madman rather than advice. For financial or tax advice you must consult with someone who is an expert in that field. I am not that person.
 
Another tier of ROTH expansion has revealed itself.

It came to my realization how I have some shares in an Individual account that are in the red. Whoo-hoo, that is fantastic!

Why is being at a loss fantastic?

Well, I can sell the specific shares which are at a loss and there will be no capital gains tax on the sale.

Then, I can use the cash to purchase shares in the ROTH up to the annual limit of $7500 if you have reached Geezerhood (50 years old).
IRS ROTH limits page
 
Found a good resource for retirement planning education. James Canole has a YouTube site with videos on nearly every subject you might want to learn more about.

Of particular interest was a chart he made outlining the ins and outs of a ROTH IRA that breaks down all aspects in an easy to follow flow chart. Attached for download.

1710679987029.png
 

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  • Roth IRA Distribution Order.pdf
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