Transition from saving to spending
 

Hi all. My husband and I are recent arrivals in TV. We’re looking for a professional to advise on taking withdrawals from our savings to fund retirement. We’ve always made our own investment decisions and feel pretty comfortable with that. But we have a few big-ticket items coming up with the house, as well as day-to-day expenses, and I’m struggling to figure out when and from which accounts to take money to minimize tax impacts. There seem to be plenty of people around that will sell you an annuity or manage money for an ongoing fee, but surely there must be people that specifically advise on the withdrawal side of things. Can anyone recommend a good fee-based advisor who can help guide us through this, or even identify the type of professional I'm looking for to better target my google search? Thanks.

If you've been comfortable managing your own investments, I'm pretty sure you can do this on your own too. You can find everything you need to know at Bogleheads Investing Advice and Info

Read the wiki to start. It will explain exactly what you are asking. Then post any questions you have. It's a wonderful resource. John Bogle was the founder of Vanguard.

Hope that helps.

BGirl, excellent question.
The answer needs to be customized to you and your portfolio make-up (pre-tax vs after tax dollars) and your age and your SS benefits and and and.
Good Luck on receiving some recommendations.

Agree on Bogleheads, a great place to start. You can do this on your own. Look for topics on laddering your investments. It is basically having funds you need in the first five years in safe investments and taking a little more risk as you move out (or up the ladder). On taxes the main thing is to know where you are in your marginal tax bracket and trying not to go above that marginal bracket. Breaking up big ticket items between two tax years is another way to try and reduce the tax burden. If you have Roth IRA’s that is a good place to look for big ticket items since there is no tax impact.

Financial advisors can look at your portfolio and provide withdrawal, investment, and tax advice but a good advisor can cost several thousand dollars for a complete review. Personally, I would try it on my own before I took this route.

Good luck. Find someone who gets you to do what the "rich" do. You borrow against your assets, leverage it and hold those assets in trusts for your kids or whoever you're passing it on to. When you go, the cost basis adjusts to the value at the time of death so no massive taxes for the inheritors. Its the Buy, Borrow, die strategy. You're past the Buy phase :).

Perhaps, projection from my thoughts. The first thing to face is we will not live forever.
That is a hard thing to face. Assuming you have an accountant they should be able to advise you.

Annuities are often pushed. Not because it make financial sense for all but because the commission is huge. For many I must have an income of ????? per week, per month.
My income was never like that, so I do not think that way. If, you have a brokerage account, you can instruct them to send you ?????? per month. There is no fee for doing that.

How much risk are you willing to take? Everyone has a high risk tolerance when things are up. That changes rapidly when things are down. There are investments with essentially zero risk. A ten year treasury pays last time I looked 1.6%. You pay your top federal tax rate on that. The CPI consumer price index has recently hit 5.6%. That too is paid after taxes.

Before seeking advice be sure to understand how that person is paid. Paid to manage your money? Would you trust anyone to do this? They will charge you a percentage of your portfolio. That is whether you make money or not. They will likely put your money into stock, bond funds and ETFs (exchange traded funds). You will pay the regular fund fees plus the manager fee. We went to a presentation for this. I could not believe people were filling out forms with their name address, phone, e-mail NET WORTH social security number etc. We had a nice lunch and turned in a blank form. If, I recall they charged .5%.

Major home expenses? What needs to be done now? If, roof is leaking, it needs to be done now. A pool? I neither have a pool or want one. I've had several boats. The old joke is a hole in the water that you pour money into. A pool is a hole in your backyard that you fill with water and pour money into it.

Mistakes happen when you allow others to rush you or you rush yourself.

I would suggest contacting Vanguard Investments. They have advisors who will design a retirement withdrawal strategy for you. I don't know where your investments are currently located, but you cannot do better than Vanguard in terms of cost and advice. If you have money in a 401K, I would suggest that you transfer it into an IRA account. But, I wouldn't spend much money for advice on how to withdraw your retirement funds. It's not rocket science. Typically, you want to withdraw money from taxable accounts first, and keep your money in tax deferred accounts for as long as possible. If you have stocks or stock funds with capital gains, you want to withdraw that money last. Do not buy an annuity.

Swap 'til you drop. Section 1031.

Welcome to TV.
You definitely came to the right place for advice...

:ho::bigbow::bigbow:

Biden’s myriad tax proposals include the elimination of this step up provision.

Well said! There are so many articles about changing the portfolio as we age to less risk and more bonds and all. Instead, I keep my retirement funds in a mid-cap growth fund that gets five stars from Morningstar for both growth and safety. Thanks to that, since fall of 2016 my investments have nearly doubled. Riding the 30% market crash last year was scary, but it came back up. If I had followed the standard advice I was given, I wouldn’t be here in The Villages because I wouldn’t be able to afford it. Now I’m worry free, and my retirement funds are up 15% for the year.

Speak with at least thee financial advisors.

If not allready, speak to an attorney about living will and trusts

You didn't say your ages, but assuming you are in your 60s, there are many questions you need to answer.

One is if you plan to leave money to your kids. If you do, then one thing to think about is converting any IRA (or 401K) to a ROTH account over time. Except for the spouse, any inherited IRA or ROTH has to be withdrawn within 10 years. The ROTH could be taken in the 10 year since there are no taxes. The IRA (or 401K) should be taken out every year to reduce the tax bite

Just something to think about.

Just spend it - that’s what they made vacations for…

Always keep the big picture of assets, taxes, longevity etc etc in mind, but good advice posted above to see at least 3 financial planners, if you don't want to go on this journey alone but appreciate professional advice - you also would do yourself a favor to include Parady Financial (no fee for consultation or management afterwards) among the three.

Seek a certified financial planner -- if not, Vanguard does have financial planners who can assist.

Parody is known for pushing annuities very hard.

Good recommendation on Vanguard for investments.
If you have handled your investments during your savings phase, why wouldn’t you be comfortable handling your $$$ during your spending years?
What a lot of people don’t realize is that you need to keep making money during your retirement years but you have to be a little more cautious on what you invest in. Buy and hold good index funds in good and bad times, since you can’t time the market. If you look at history, recessions only last a couple of years at most and usually the market comes back to be higher than before the recession.
I don’t understand why people look at annuities. You have high fees, and when you start receiving your annuity payout, you are also receiving social security payments and starting to make your RMD’s. You add all of this up, you will be in a high tax bracket and probably have much more disposable income than what you need.
I use a modified bucket system: a cash bucket that I can live on for a couple of years that gets replenished by dividends, and another bucket of investments (diversified index funds). If the market goes down like last year, you don’t need to sell anything to live on. Without selling, you don’t need to try to time the market for when it’s a good time to get back in.
I use Schwab to make my trades, I don’t pay Schwab for any brokerage services, I do my own trades. I have been using Schwab for over 25 years and get access to a lot of free services that you normally pay for. I have had questions in the past about tax harvesting, social security, annuities, and others and Schwab gave me access to their specialists.

Far as investments, there is no shortage of advice, plans etc. For most people, including me, it is tough to pick a plan and stick to it in up and down years. So many great quotes are out there. One that I remember is no one is right all the time. To make money you just need to be right more often than you are wrong.

Five star mid cap growth funds? I am not qualified to give investment advice but I am regularly discovering things that I don't know. A five star midcap growth fund earns five stars compared to other mid cap growth funds. It does not show how it compares to other funds.

Retirement funds up 15%. This has been a good year for stocks. I am up more than that.
Neither of us are up as much as the S&P 500. The rude wake up for all-if you have 10,000 and make 10% one year and loose 10% the next year you are not even 10,000+10%=11000
11000-10%=9900.

Call Blackston Financial on Rt.466 and ask for an appointment with Travis. He is a fiduciary, and I have done extremely well with him. He listens well and gives great information. No pressure whatsoever. It's worth your time, and you won't regret it.

Thank you all for these great suggestions! It feels a bit less daunting now.

:beer3:

Assets, Income and Expenditures
 

If your income comfortably exceeds your expenses, a Line-Of-Credit might work for you.
The interest rate might be high, but the actual cash outflow is (relatively) minimal
Pledge your assets as collateral.
'Borrow' 75-80% with an LoC.
Pay Monthly Interest Only on any cash/advances you take on the LoC. from your excess income.
Pay off the principal over time with your excess income or the sale of any non-producing assets.
Over time, you owe nothing and have retained your assets and your income.
=====================

Ohiobuckeye
 

Like your comment! You’re exactly right about theirs always someone wanting to manage our money but they only want to manage your money because that’s what they do to get their pay checks. Not that you shouldn’t invest but I worked & retired after 38 yrs. now it’s my turn to enjoy the money I worked so hard for. Investments aren’t like they use to be where you get the biggest share of our royalties, not the investor. But I understand everybody wants to make money so if you have lots to invest, invest but I want to enjoy my yrs. of work I did to enjoy what I made!

Do a search on something like this - bucket retirement plan.
Basically split your money into buckets. First basically cash to cover say 2 year of living expenses. Second assets to cover say 8 to 10 years of expenses and the third long term. Then an emergency/big exp bucket. This would pick up your home repairs, new car etc. Do some reading and you will get the idea and should be able to do it yourself. For withdrawal consider using the IRS RMD (required minimum distribution table) if you do not come up with something better. It considers life expectancy and the value of your portfolio. Also search for safe withdrawal rates. This will get you educated on the subject. Remember that interest rates are lower than what they were for most of the studies, and that bonds will lose value as interest rates increase.
You might try a CPA. Ask if they have experience in the area you need help.

I'm finding out in my retirement to stay healthy, enjoy this time in our lives, and do all this while keeping our
retirement funds pretty much intact.
Why? Because we are/were the generation of savers and my financial adviser keeps telling my wife and I to start
spending down our retirement next egg.
I receive our SS every month and a RMD payout every year and it's more then enough to live on.
I'm always asking myself what would happen to our savings in a medical emergency.
Maybe I shouldn't worry about that as much as I do.

We have one adopted son that makes more money today per month then my wife and I made together.
He lives 5 mins. away and says he don't expects a dime from our estate, also has his $450,000 house pay for.

The Move From Delayed Gratification to Distribution is Difficult
 

The type of professional you need is a FEE ONLY FINANCIAL PLANNER. However, be prepared to do A LOT OF WORK to aid them in doing their job. Do you have a good handle of your fixed and variable monthly expenses ? Do you have an agreement on how much more you are willing to spend year ? Have you thought about segmenting your new spending goals into the three stages of retirement ? GOGO, SLOWGO, and NOGO ? Is your end goal to spend your last dime at the moment of your last breath, or are you planning to leave a lot of money to kids, grand kids, charitable causes.. etc. All of that comes before you get into asset allocation, risk tolerance, expected returns .. A previous poster mentioned a bucket strategy, which I am a proponent of. Do a search on retirement bucket strategy. Christine Benz from Morningstar writes regularly on that, as does Kiplinger. Most describe a three bucket strategy to buffer yourself from market downturns. All that comes AFTER you do all the hard work above

Add this contact to your research... excellent free advice from one who is well informed from years of financial experience. Dan is on the radio at 720 AM... not FM every morning.

Contact Us - Financial Issues

From this website, you can choose to listen to any of his radio programs:
Radio Program - Financial Issues

Best of luck to you in whatever you do!

Agree with the Bogle approach. The key is to educate yourself. And this subject is quite interesting!

Financial Help
 

Camarda Wealth Advisory Group <j@camarda.com:

Fee only group (1-1.5% of monthly portfolio. Have used them for years and trust them implicitly.

Do It Yourself. No one loves your money as much as you love your money.

You've got a lot of homework to do. The good news is you are retired and have time to do it. Knowledge is power. Trust no one. Learn from everyone.
YouTube.com will give you access to a lot of junk and some real gems. You should be able to tell the difference. Search some of the following terms on the internet and at YouTube.com.

Homework assignment: Research the following terms, bucket retirement strategy, index mutual fund, ETF, RMD, IRMAA, Roth conversion, widow's tax trap, fiduciary and eldercare attorney.
If you achieve a full understanding of these terms you will be well ahead of the average retiree. Also, it will spur you to investigate other retirement issues. You will learn a lot along the way.

One guy that I like is a guy at YouTube.com Heritage Wealth Planning. Warning, you will have to get past some of his political rants, he has some very valuable retirement planning content. He also does fee only planning and is a fiduciary. He used to work at USAA doing planning. He wrote a book that you can get at Amazon.com called the Tax Bomb in Your Retirement. It's worth reading. Once you get the concept, you are off to the races.

Like I said, knowledge is power. Even the knowledgeable had to learn it somewhere.

Jean Ann Dorrell is the woman for you! Helping seniors use and enjoy their retirement mony while paying less taxes is almost her mission statement.
Search for her facebook page by typing "Senior Financial Security" in the search bar or go to: Jean Ann Dorrell - Certified Estate Planner, Estate & Retirement Advisor, Owner & Founder of Senior Financial Security, Inc.

I hope you know that the changes coming in 2022 that make every bank transaction you make worth over $10,000 in total annually will be under scrutiny by the IRS/Federal government. They had wanted it to be a $600 threshold but got a lot of push back, so they are "considering" changing it to $10,000.

Yes, this includes all savings and investments. The only earnings that are exempt are social security and wages (but no one knows how they will determine what are "wages"). If I were you I'd spend my money on home improvements or purchase assets like real estate, gold, jewels, art etc. They might eventually come after those, too, but for now they are looking at banking transactions (and cryptocurrency too, they're not let off the hook either).

On a piece of paper write down the left side your expense categories: Mortgage, Food, Amenities Fee , Entertainment, Car, Property Tax, Income Tax, Donations, etc.

Then make four columns one for each quarter of the year and enter the amounts known from the prior year or estimated. Add up the totals for each quarter. This is the amount of money you need for that quarter.

Then on another page list your income sources including RMD down the left side for each quarter and compute the totals. If the income is less than expenses you will need to withdraw from savings. Plan one quarter ahead for withdrawals.

Withdraw from taxable accounts first starting with the shortest maturity (money markets) then non-taxable accounts. A good portfolio would be 30% in an S&P Index fund, 50% in CDs and 20% in money market accounts.

AARP has some free software and pamphlets on budgeting. Vanguard also has some planning tools. But I would not trust any person to have control of our money post Madoff.

jewelry is a bad investment
 

Don't think that jewelry is a good investment. We settled my step mother's estate a few years ago and she had MANY rings and necklaces with diamonds and other precious stones. We had them all appraised by a jeweler. After the family bought what we wanted we took the rest to the jeweler. They wanted to pluck out all of the sapphires, emeralds, diamonds, tanzanite and rubies and give us the value of the weight of the gold only. Unless you have major stones of over a carat or more they are not interested and even those do not hold as much value as you might wish. I found receipts for many of the rings and it was shocking and sad to have them melted down but we did not want to pay the estate for more than we really wanted so that is what happened.

Thanks for the jewelry update as I have not sold any jewelry in awhile. I'm surprised at the attitude as emeralds are very costly and coveted as well as other precious stones. My mother had a large, yellow Topaz ring and it was worth a lot because they are hard to come by nowadays as everyone sells the less expensive citrine or even yellow zircon, and passes it off as Topaz. I was just making a point about putting your money in assets rather than leaving it in the bank to get scrutinized by the IRS.

usually your kids are experts on spending.

Whatever you do, make sure your advisor has a fiduciary role, which means they are responsible to you and not their company. You should Google this term to understand what it means better. There are three people to talk to a CPA, a tax lawyer, and of course an investment advisor that is related to a stock brokerage company and definitely not an insurance broker . Well many people say you can do it yourself, and of course you should educate yourself as best you can, there are many intricacies of tax laws to concern yourself with that you may not know or learn about in Reading.

Is everyone May understand your situation is totally different than anyone else's and only you can decide best for yourself. I will say that retirement is not as expensive as you are thinking especially if you're not one to take vacations and spend on new cars every year. You can certainly get by very reasonably even in The villages with the uprising housing costs. Good luck and enjoy your retirement

PARADY Financial
 

We highly recommend you sit down with PARADY Financial, across from Colony shopping center @ no cost or pressure to you! We feel this is 1 of another blessings in moving to The Villages! They offer classes & learning sessions to make sure you understand what you are doing & can make the right decisions before investing! Sometimes this takes weeks or months for some people to decide as you question what they offer is too good to be true! There are no fees ever & they immediately saved me $3000/yr as Edward Jones was charging me in fees, unknown to me as I didn’t see the hidden fees! Anyhow, they review what you have & want in your future, & to make it last till approximate death. Everyone is extremely helpful, friendly, and really get to know u personally……as Greg says we become family! They have their own tax services, accountants, Greg, as well as lawyers who can help & meet with you! PARADY was a big part of our social life as well……….till Covid hit! Dinners, entertainment, golf outings, & a short film presentation were offered twice a month for clients to bring friends to see if they might like to meet with their consultants for more info. PARADY supports so many local organizations like Veterans, Cancer, Alzheimer's, Food pantry, School supplies, Women shelters, After school programs, etc, by having functions for the clients where we can gather for fun, food, drinks, entertainment & make a donation to these organizations, which are tax write offs! You owe it to your future to make an appt as you have nothing to lose and should you join, you will have peace of mind knowing your money is safe and future secure! We even received a several thousand dollars bonus for signing up……they paid us! Tell them Jan and Suchy sent you! Can’t say enough about this business and how they have improved our lives!

I'm working on spending my kids inheritance.