I recently helped a relative with this situation and here's what we did: We stopped all dividend/capital gains reinvestments for those funds and had them directed to the settlement fund, so they could be used to buy low-cost index funds (e.g., VOO or VTI).A couple of the funds had losses, so we sold those to help lessen the hit from the funds we sold that had gains.Accepted that his taxes were going to be expensive that year, but that it was worth the one-time hit to get out of funds that had high expenses and that were throwing off distributions that were causing a yearly tax hit.We did the selling over 2 tax years, to avoid being bumped into a higher tax bracket.We also consolidated his tax-deferred holdings, but as they were within his tIRA there was no tax implication.I'm guessing that in the long-run you'll be saving money in reduced fees and lower taxes, but there's no question that there was an up-front cost to doing it.
Actually, some did just roll 'out of bed and poof they had a new business and were wealthy' And for some, their ability to accumulate more wealth is inextricably tied to their dangerous influence.
My partner is retired (not drawing SS yet). I'll be working for another year or so, at which point I'll draw a small pension - I won't draw SS until 62, which is 7 years off. The calculators take into account when SS and pension kick in, so the amount we draw from the portfolio will change. Right now we are drawing ~1.5% from the portfolio; it will likely bump up to 3% when I retire, but will drop to closer to 2.5% when SS kicks in. I'm not super concerned about the stock market - certainly not in comparison to the concern, disbelief, and horror that grips me when I scan the headlines. One of the cool things in the VPW worksheet is that it gives you a withdrawal amount based on your numbers, and also a 'required flexibility' amount that assumes a 50% drop in the market. It's certainly possible that the amount we withdraw could vary - that's a built in feature of both methods. The key for my peace of mind is to know that the potential required flexibility, based on a drop in the market, poses no hardship, as we don't draw down anywhere close to that number now. I have read extensively about both methods, and am comfortable with the assumptions. Have you played around with either of them? If not, you should! They are pretty nifty.
I have an investment portfolio with a targeted asset allocation of 70:30 - it's actually more like 85:15 at the moment due to laziness with respect to rebalancing. I determine my withdrawal amount for the year by using 2 calculators:
TPAW Planner - created by Ben Mathew (I also found it on Bogleheads)
I pop in my numbers - portfolio balance expected SS and pension and when I expect to start drawing them - and look at the recommended amount to withdraw. I set up an automatically monthly transfer to my (one) checking account and that's it. Super easy. Super simple. I have never actually withdrawn as much as the calculators say I can, as it would far exceed my monthly expenses, but I like knowing that if there is something I want to splurge on, I can. This approach requires minimal effort (30 minutes/year?), my withdrawal rate is low, so I feel very secure, and I feel zero stress about it. In fact, since I started using this approach, my worry about funding retirement has all but disappeared.
Here's one of my favorite calculators: Rich, Broke, or Dead https://engaging-data.com/will-money-last-retire-early/ You can customize to add extra income (SS or pension) or future expenses. You can toggle off the 'death' wedge, but I like to leave it. It's a good reminder that the future is uncertain...
I don't find this any more judgmental than the original post...in fact, I find it less so. And the point about the changed expectations of women is an important, and often overlook, perspective.
"Filling out the spreadsheet together gave and continues to give us the opportunity to ensure that we are both equally aware of where our money is going and talk about anything that might be out of the ordinary in either our expenses or income. This has uncovered some differences in perspective in the past which has led to some lively and enlightening conversations!" My partner and I do this every month, as well! We have one spreadsheet for our net worth and one for tracking our expenses; at the end of the month we review them over a cup of coffee. These chats help make sure we are on the same page and have sparked some wonderful conversations about priorities for spending in the future. I do track our expenses by category, and have done for years. Initially, it was helpful in making sure our spending was aligned with our priorities. We've got that pretty dialed in at this point, so it's not really necessary, but I'm scientist and long-term data sets are the sea I swim in!
My AA has drifted from my target 70:30 to more like 80:20, so it's past time to re-balance, but I've been feeling a bit paralyzed. Over at the Bogelheads Forum I learned about having an investment policy statement (IPS) as guidance and I really see its value - it's helping me take the emotion out deciding what to do. Mine says to re-balance quarterly (which I've ignored recently), so at the end of the month I'm going to do see where things stand and re-balance accordingly. Of course, if things continue as they are going, my need to re-balance might be taken care of...
Comments
I recently helped a relative with this situation and here's what we did: We stopped all dividend/capital gains reinvestments for those funds and had them directed to the settlement fund, so they could be used to buy low-cost index funds (e.g., VOO or VTI).A couple of the funds had losses, so we sold those to help lessen the hit from the funds we sold that had gains.Accepted that his taxes were going to be expensive that year, but that it was worth the one-time hit to get out of funds that had high expenses and that were throwing off distributions that were causing a yearly tax hit.We did the selling over 2 tax years, to avoid being bumped into a higher tax bracket.We also consolidated his tax-deferred holdings, but as they were within his tIRA there was no tax implication.I'm guessing that in the long-run you'll be saving money in reduced fees and lower taxes, but there's no question that there was an up-front cost to doing it.
Post: Actively Managed Mutual Funds
Link to comment from March 20, 2025
Actually, some did just roll 'out of bed and poof they had a new business and were wealthy' And for some, their ability to accumulate more wealth is inextricably tied to their dangerous influence.
Post: Care to join me on my yacht cruising the Mediterranean? Do you envy the super wealthy? RDQ
Link to comment from March 18, 2025
My partner is retired (not drawing SS yet). I'll be working for another year or so, at which point I'll draw a small pension - I won't draw SS until 62, which is 7 years off. The calculators take into account when SS and pension kick in, so the amount we draw from the portfolio will change. Right now we are drawing ~1.5% from the portfolio; it will likely bump up to 3% when I retire, but will drop to closer to 2.5% when SS kicks in. I'm not super concerned about the stock market - certainly not in comparison to the concern, disbelief, and horror that grips me when I scan the headlines. One of the cool things in the VPW worksheet is that it gives you a withdrawal amount based on your numbers, and also a 'required flexibility' amount that assumes a 50% drop in the market. It's certainly possible that the amount we withdraw could vary - that's a built in feature of both methods. The key for my peace of mind is to know that the potential required flexibility, based on a drop in the market, poses no hardship, as we don't draw down anywhere close to that number now. I have read extensively about both methods, and am comfortable with the assumptions. Have you played around with either of them? If not, you should! They are pretty nifty.
Post: RDQ considers: A lump sum in lieu of a pension, withdrawal strategies, annuities and other mundane decisions – good luck.
Link to comment from March 15, 2025
I have an investment portfolio with a targeted asset allocation of 70:30 - it's actually more like 85:15 at the moment due to laziness with respect to rebalancing. I determine my withdrawal amount for the year by using 2 calculators:
- Variable Percentage Withdrawal - created by longinvest over at Bogleheads.
- TPAW Planner - created by Ben Mathew (I also found it on Bogleheads)
I pop in my numbers - portfolio balance expected SS and pension and when I expect to start drawing them - and look at the recommended amount to withdraw. I set up an automatically monthly transfer to my (one) checking account and that's it. Super easy. Super simple. I have never actually withdrawn as much as the calculators say I can, as it would far exceed my monthly expenses, but I like knowing that if there is something I want to splurge on, I can. This approach requires minimal effort (30 minutes/year?), my withdrawal rate is low, so I feel very secure, and I feel zero stress about it. In fact, since I started using this approach, my worry about funding retirement has all but disappeared.Post: RDQ considers: A lump sum in lieu of a pension, withdrawal strategies, annuities and other mundane decisions – good luck.
Link to comment from March 15, 2025
Here's one of my favorite calculators: Rich, Broke, or Dead https://engaging-data.com/will-money-last-retire-early/ You can customize to add extra income (SS or pension) or future expenses. You can toggle off the 'death' wedge, but I like to leave it. It's a good reminder that the future is uncertain...
Post: My Favorite Websites
Link to comment from March 14, 2025
I don't find this any more judgmental than the original post...in fact, I find it less so. And the point about the changed expectations of women is an important, and often overlook, perspective.
Post: An 80 year old reflects. Are things that much harder today than when he was building a life, marriage and career? RDQ
Link to comment from March 10, 2025
"Filling out the spreadsheet together gave and continues to give us the opportunity to ensure that we are both equally aware of where our money is going and talk about anything that might be out of the ordinary in either our expenses or income. This has uncovered some differences in perspective in the past which has led to some lively and enlightening conversations!" My partner and I do this every month, as well! We have one spreadsheet for our net worth and one for tracking our expenses; at the end of the month we review them over a cup of coffee. These chats help make sure we are on the same page and have sparked some wonderful conversations about priorities for spending in the future. I do track our expenses by category, and have done for years. Initially, it was helpful in making sure our spending was aligned with our priorities. We've got that pretty dialed in at this point, so it's not really necessary, but I'm scientist and long-term data sets are the sea I swim in!
Post: Detailed tracking expenses and spending. Is there real value?
Link to comment from March 8, 2025
Good luck! I'm rooting for you!
Post: Meeting Expectations?
Link to comment from March 8, 2025
My AA has drifted from my target 70:30 to more like 80:20, so it's past time to re-balance, but I've been feeling a bit paralyzed. Over at the Bogelheads Forum I learned about having an investment policy statement (IPS) as guidance and I really see its value - it's helping me take the emotion out deciding what to do. Mine says to re-balance quarterly (which I've ignored recently), so at the end of the month I'm going to do see where things stand and re-balance accordingly. Of course, if things continue as they are going, my need to re-balance might be taken care of...
Post: Rebalancing in interesting times
Link to comment from March 7, 2025
It's all about the depth of water in a soaking tub. But yes, it is easy to spend other people's money! :)
Post: Replacing the Replacement
Link to comment from March 6, 2025