Not missing the point

I’m planning my first course correction 2.5 years into retirement. I thought I was going to write about Roth conversions, bucket strategies, asset location, and so on. And I am. But it turns out that that’s not the point.

I came late to the HumbleDollar/Bogleheads way of thinking. I’ve been absorbing it all for about 4 years. Thanks to Jonathan, Adam Grossman and all here. I’ve learned a lot, put the advice together into what I think is a coherent plan, and have not made any huge mistakes. I think.

In the past 2.5 years I have:

• Navigated the decision to retire
• Researched and signed up my self and my wife for ACA insurance
• Immediately used that insurance when my wife was diagnosed with cancer. She’s in remission now.
• Started my wife’s Social Security
• Transitioned her to Medicare
• Managed income to stay below ACA and IRMAA thresholds
• Planned a “bridge” to Social Security

Retirement is simple, right? There’s a possibly apocryphal Einstein quote:

“Everything should be made as simple as possible, but not simpler.”

With life happening and all these moving parts there were still 3 questions I had not completely resolved:

• Is My Floor Funded? The “floor” question was really just arithmetic: =annual expenses × years= where “annual expenses” is our “must spend” amount/year and “years” is how long I expect a bad market to last. I track expenses closely with a program called “HomeBank” so I just pulled the numbers and multiplied by 5 years. Presto. My total cash + bonds were almost 2× my “floor”. Stop worrying.
• Does the location of the floor matter? Does it matter if the floor is in a taxable account or inside an IRA? Short answer — not a lot. The best case is it’s all in taxable account — spending does not trigger taxes. Worst case: it’s all in IRA — distributions are taxed as ordinary income. Turns out I have a 2 to 3 year “base” of cash in taxable plus 2 to 3 years more in taxable stocks + several more years in cash & bonds inside the IRA. Stop worrying.
• How Do I Manage the Sequence of Withdrawals? Stop worrying. There are options. One is probably optimal. Several are OK. Probably spend from taxable cash first, then evaluate the tax impact of selling taxable stocks vs. IRA withdrawals. I’ll cross that bridge when I come to it.

In the end, it’s not about the mechanics of managing a retirement portfolio; it’s about getting to a point that I can stop thinking as much about the money. It’s about knowing that I can ride out the consequences of bad markets, it’s about being able to give “early inheritance” gifts to my children to remove some of the financial stress from their lives as they try to get established, it’s about knowing we have the freedom to do some of the things we enjoy as long as health cooperates too.

I finished the Appalachian Trail last year after 18 years and am leaving in a week to go hike the “Kungsleden” trail in northern Sweden with family. “Enough” financial planning lets me forget about financial planning for a while. I’m really hoping to focus on the reindeer, the midnight sun, the natural beauty, and time with my family for the next month.

Where will you focus once you’re sure all the financial ducks are in their assigned rows?