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We sat down this afternoon and did an end of the year sort of recap of this year and started working on our end of year net worth. I wasn’t sure how things would go, but so far my estimates of how much we would spend were pretty close to actual spending. I was especially happy that the balances in our regular bank stayed pretty constant from last year to this. And all our investments grew. I think that means we didn’t over spend, right?
It was a tough year to try to decide when to turn on our various income streams since Spouse was still working part time, but I think we did ok. I read on HD about when to turn on SS for our particular situation and found articles and calculators to help. I also read about how to get more interest from our everyday savings and we opened our very first money market account last January. It is easier than doing CDs for us. I also read about how to keep our income low for long term capital gains. Heck, for a long time, I didn’t even know what they were b/c we didn’t own any stocks until the Great Recession.
We are just regular, middle class people, and I want to encourage any of you reading this who are like me, that there is a place for you in the Forum. Don’t be afraid to ask a question. Jonathan, I hope this post encourages you. You have poured your heart and soul in to HD to help everyone, and I want you to know you have helped Spouse and me to retire with dignity. Chris
This statement caught my attention, “And all our investments grew. I think that means we didn’t over spend, right?” You didn’t overspend for last year, per say, based on this definition (that is your investments grew). However, remember stock did well last year (2024). For example, vanguard total stock market index fund (VTSAX) total return was around 23%. If all you had in your retirement accounts was this one fund (not at all recommending this at your age, but it makes for an easy example), you could have withdrawn 15% or more from your retirement accounts and still seen a growth in your investments. So, whether one has overspent shouldn’t be based solely on whether one’s investment grew (not saying you are, just pointing it out). Of course, a person can and should adjust one’s spending to some degree based on their investment’s performance (e.g., using a dynamic withdrawal strategy), but I wouldn’t solely (not that you are) base overspending on investment performance. For instance, VTSAX total return in 2022 was -19.53%. Thus, if your retirement accounts included just this one fund (VTSAX), you would have seen a loss of 19.53% (add 0.04% for expense ratio) from your retirement accounts and thus overspent in 2022 when actually you may have spent $0.
Good point
Good thought, Fred, thanks. Chris
Just curious regarding this statement. “I also read about how to keep our income low for long term capital gains.”
You sound like you put in a lot of effort into this. Have you consolidated your investments? You would not need to calculate your net worth if everything was in one place.
Many financial companies allow you to link your assets from outside to calculate net worth. Though I use Quicken for this.
I use Fidelity and all accounts are linked. Net worth is always available. The only thing I need to update once a year is home value.
Don’t forget your cars, they change net worth yearly also.
My favorite way is by spreadsheets, which I developed over the lasts 20 years. That way I get to solve the issue My Way.
I am a Morningstar premium member ($240/yr) and use their portfolio tracker, and portfolio x-ray which provides in-depth information about allocation and much more. Even though they have two factor identification I enter my portfolio manually (as I am a little paranoid about security of my portfolio), but you can download. Since I use a fee only financial advisor only on occasion the information I obtain about my portfolio is invaluable.
Thanks, Dick, for commenting. I learned that if you keep your income < around $100k you pay 0% federal taxes on long term capital gains this year. Idk about state taxes, though. We were able to do this. We sold some stock with a low basis for part of our living expenses this year. I had also saved some cash and Spouse worked part time. We live in a lower cost area than you, I think, and that makes a difference. For instance, I am thinking our property taxes are lower than yours.
And the second part of your comment, do you mean something like having all of our accounts (401k, IRA, HSA, stocks, regular bank), at one place like Vanguard or Fidelity? We are working towards that and have consolidated some already. We are finding it takes awhile. <sigh> I agree with you about keeping things simple. Chris
I’m not sure what the income limit was to avoid capital gains last year, at this time it’s a moot point.
To show you the benefit of a Morningstar premium membership I knew Christine Benz had addressed the government’s ‘25 limits (for IRS, Medicare IRMAA etc) in the past month or so as they do annually towards the end of each year.
In regards to income limits in order to avoid long term capital gains for ‘25 this is what Morningstar published:
These are taxable income limits after standard deduction is applied.
Thank you, David. Chris
The income limit is even higher once you figure in the standard deduction:
https://humbledollar.com/money-guide/income-vs-capital-gains/
Thank you, Jonathan, for that link. It was helpful. Chris
You do an amazing job keeping all the money guide articles up to date. Appreciate all that you do for the HD readers!
Yes, I was thinking that kind of consolidation. Net worth is updated daily. All transaction I find very easy.