Maricar19 Account Talk

[Maricar19]

How much and when did you buy the following stocks?
[TABLE="width: 273"]
[TR]
[TD]AAPL[/TD]
[TD] $ 113.81[/TD]
[TD="align: right"]2016[/TD]
[/TR]
[TR]
[TD]TSLA[/TD]
[TD] $ 78.75[/TD]
[TD="align: right"]2019[/TD]
[/TR]
[TR]
[TD]AMD[/TD]
[TD] $ 43.74[/TD]
[TD="align: right"]2020[/TD]
[/TR]
[TR]
[TD]MRNA[/TD]
[TD]$63.95;$71.3[/TD]
[TD="align: right"]2020[/TD]
[/TR]
[TR]
[TD]ALGN[/TD]
[TD] $ 152.00[/TD]
[TD="align: right"]2020[/TD]
[/TR]
[TR]
[TD]PLUG[/TD]
[TD] $ 4.30[/TD]
[TD="align: right"]2020[/TD]
[/TR]
[TR]
[TD]WMT[/TD]
[TD] $ 57.60[/TD]
[TD="align: right"]2008[/TD]
[/TR]
[TR]
[TD]GOOGL A[/TD]
[TD] $ 1,660.00[/TD]
[TD="align: right"]2020[/TD]
[/TR]
[/TABLE]

 

[flalaw97]

[h=2]Which TSP option/s did or will you choose upon Retirement? Other[/h]

I am hoping to retire at MRA (57) with 30 yrs and looking at initially moving small amounts from TSP to a Roth IRA, trying to keep in lower tax bracket, at least until 62. Want more money in tax free bucket growing. Not sure what will happen at 62 when my and spouse SS income will bump it up to next bracket? Moving some into an IRA and leaving some in L-income fund to use for monthly payments. At least that is the current plan if it will work.

 

[Bullitt]

How much and when did you buy the following stocks

My cost basis in WMT is $60.25. It's been a core holding for over a decade.

 

[Maricar19]

Which TSP option/s did or will you choose upon Retirement? Other



I am hoping to retire at MRA (57) with 30 yrs and looking at initially moving small amounts from TSP to a Roth IRA, trying to keep in lower tax bracket, at least until 62. Want more money in tax free bucket growing. Not sure what will happen at 62 when my and spouse SS income will bump it up to next bracket? Moving some into an IRA and leaving some in L-income fund to use for monthly payments. At least that is the current plan if it will work.

We planned to do that, too, during our retirement...move small amounts from Traditional TSP to a Roth IRA.

Unfortunately, we found out the expensive way that no matter what, taxes will always be a killer.
If you can start (NOW) your Roth IRA, the better. We underestimated our tax situation.
When we were in pre-retirement, majority were saying that we will be in the lower tax bracket when we retire.
So far, it's not true. Almost a third to a half of our income is on the 22% tax bracket and a few in the 24% bracket.
We have two FERS pension (taxable), one SS pension(85%taxable), 1 military pension (taxable), and SS disability pension (taxable).
That's why we can't even touch our TSP(mostly in traditional) because of taxes- good thing that we don't need it (yet).
Contribute directly now to Roth or be sorry later.

PS. Don't forget that conversion from TRAD TSP to Roth IRA is a 2 step process (Trad TSP to Trad IRA and then Roth IRA).
If you convert your TSP during retirement and still stay in the 12% bracket, that is good.

 

[Bullitt]

Having to pay more in taxes is sometimes a good problem to have. Hope you get to spend that 401k you've saved for all these years because the RMD's could be painful too if you haven't spent any of it yet. Who knows, maybe we'll look back two years and wish 22% was all we were paying in taxes.

What % of your income have you replaced?

 

[PessOptimist]

We planned to do that, too, during our retirement...move small amounts from Traditional TSP to a Roth IRA.

Unfortunately, we found out the expensive way that no matter what, taxes will always be a killer.
If you can start (NOW) your Roth IRA, the better. We underestimated our tax situation.
When we were in pre-retirement, majority were saying that we will be in the lower tax bracket when we retire.
So far, it's not true. Almost a third to a half of our income is on the 22% tax bracket and a few in the 24% bracket.
We have two FERS pension (taxable), one SS pension(85%taxable), 1 military pension (taxable), and SS disability pension (taxable).
That's why we can't even touch our TSP(mostly in traditional) because of taxes- good thing that we don't need it (yet).
Contribute directly now to Roth or be sorry later.

PS. Don't forget that conversion from TRAD TSP to Roth IRA is a 2 step process (Trad TSP to Trad IRA and then Roth IRA).
If you convert your TSP during retirement and still stay in the 12% bracket, that is good.

Yes taxes are higher than I expected. A lot of that was that FEHP and FEDVIP premiums used to come from pretax income. Now I pay income tax on that amount. About $6200/year. So moving small amounts to a ROTH for later turned out to be not easy.

Having to pay more in taxes is sometimes a good problem to have. Hope you get to spend that 401k you've saved for all these years because the RMD's could be painful too if you haven't spent any of it yet. Who knows, maybe we'll look back two years and wish 22% was all we were paying in taxes.

What % of your income have you replaced?

I suppose Bullitt. I should be grateful. I hope you are not right about that tax rate but…

In answer to the %, about 2/3 based on prior take home pay. Which had health insurance premiums taken pre tax.

PO

 

[Maricar19]

...
What % of your income have you replaced?

Almost 90%. We didn't expect my spouse to be disabled (due to previous military injuries) prior to retirement. So the SSDI and Military Disability were a big plus to our income.
Without the military disability pay, approximately 75%-80%, close to PO's estimate.
The only difference is we don't pay as much medical insurance due to our military service. I only pay $30 a month (Tricare).
From this website (TSP Talk), we learned that we can suspend our medical insurance and re start it again if Tricare doesn't work for us.

 

[Maricar19]

Hope you get to spend that 401k you've saved for all these years because the RMD's could be painful too if you haven't spent any of it yet. Who knows, maybe we'll look back two years and wish 22% was all we were paying in taxes.

We already planned for the RMDs. We still have 10 years to slowly work on it. We expect our RMD to be 25% or 27% when we turn 72 (per RMD2021Table). There is a so called qualified charitable contribution also that we are looking into. It takes a lot of planning..

 

[Bullitt]

I suppose Bullitt. I should be grateful.

Hi. I was responding to Maricar but good luck with your situation. I think the whole Roth conversion is an effort by the industry to get their hands on walled off 401k account money. There are pros and cons of course, but it's not a decision without consequences. Health insurance is always a good point. I don't understand why premiums in FEHB aren't based off physical exam results. Many of us would be paying a lot less.

Maricar, Sorry, nobody (especially private sector) is going to shed a tear for someone who's replacing 90% of their income with pensions alone. Nowadays the wrong person hears 90% of your pay is being replaced by pensions they could organize a peaceful protest in front of your house. (Don't worry, I'm not one.) The fact that you're considering charitable contributions down the road is commendable. Do you use a financial planner to map out scenarios or are you doing it yourself?

 

[Maricar19]

Maricar, Sorry, nobody (especially private sector) is going to shed a tear for someone who's replacing 90% of their income with pensions alone. Nowadays the wrong person hears 90% of your pay is being replaced by pensions they could organize a peaceful protest in front of your house. (Don't worry, I'm not one.) The fact that you're considering charitable contributions down the road is commendable. Do you use a financial planner to map out scenarios or are you doing it yourself?

Not asking for sympathy here, but just stating the fact that taxes will always be the KILLJOY in the retirement phase.:laugh:
I was just trying to clarify with flalaw97 that IMHO (not as an expert financial adviser),
it is better (tax wise) to contribute directly to Roth now than to convert Traditional to Roth later on
because one cannot really know what tax bracket you'll be when you retire.
One can forecast/predict, but unforeseeable situations arise.

Bullitt, as I mentioned earlier, we were pushed to the higher tax bracket because of my spouse's unexpected :02:military disability.
Without the SSDI, we would be in the 80% bracket (with spouse also claiming SS at 62).

The private sector can protest as much as they want to, but truth be told that when I was working I was earning only 75% of what they were earning.

Just curious, do you work for the private sector? The reason I am asking is because you keep calling the retirement plan as 401K.
Federal employees call it TSP.:scratchchin:

On your last question: "Do you use a financial planner to map out scenarios or are you doing it yourself?"
We are doing it on our own through research and membership to this website, TSP Talk. There are a lot of knowledgeable members here.
Lately, we have been thinking that we should avail the services of a tax advisor. They know more loopholes in the tax system:laugh:

 

[Bullitt]

I mean 401k as a more universal term for a defined contribution plan. You're right, I should probably just call it TSP here.

I've considered switching completely to the Roth TSP option and these past few posts seems to make it seem like a good deal, hence I was drawn to the comments. Even if rates stay the same, I don't see my tax bracket going down in retirement. So, yes, I agree with your words in bold.

I also believe we are in a twilight phase of lower tax brackets for income, capital gains, and dividends. It always starts with targeting the rich, but somehow we are all affected in the end. Taxes are a nightmare and one positive with a conversion is you pay up for a financial/tax advisor, do the conversion, pay the taxes and fees, and be done with it for the rest of your life. The upfront cost is a hit, but there's less headache down the road when you withdraw money. The Roth option is also less headache for anyone inheriting it down the road.

Sorry for your husbands disability.

 

[PessOptimist]

Maricar, since you mentioned Tricare, when you turn 65 Your Tricare Prime will automatically convert to Tricare for Life which is free for life. You do have to enroll in Medicare part B to keep it which will cost $148.50 per month. $158.50 in 2022 and it has gone up every year. So plan on a 500% or so increase in health insurance.

PO

 

[waltj]

We already planned for the RMDs. We still have 10 years to slowly work on it. We expect our RMD to be 25% or 27% when we turn 72 (per RMD2021Table). There is a so called qualified charitable contribution also that we are looking into. It takes a lot of planning..

Maricar,
What you show as a "%" is actually the number of years that your RMD needs to support, based on your age. That works out to roughly a 4% draw down.
See this link for more clarity. https://www.irs.gov/pub/irs-tege/uniform_rmd_wksht.pdf

 

[Maricar19]

Maricar, since you mentioned Tricare, when you turn 65 Your Tricare Prime will automatically convert to Tricare for Life which is free for life. You do have to enroll in Medicare part B to keep it which will cost $148.50 per month. $158.50 in 2022 and it has gone up every year. So plan on a 500% or so increase in health insurance.

PO

Very true. My spouse is receiving SSDI and Medicare B is part of the automatic deduction. In 2 years, I have to start paying for Medicare B, if not, Tricare for Life will not cover me.

Some say that since spouse was approved 100% DIS, we can convert from Tricare to ChampVA. We are still researching the pros and cons of Tricare vs ChampVA. Thanks PO.

Anybody on ChampVA as medical insurance? Does it cover dental? or do we still go to FEHB dental?

 

[Maricar19]

Maricar,
What you show as a "%" is actually the number of years that your RMD needs to support, based on your age. That works out to roughly a 4% draw down.
See this link for more clarity. https://www.irs.gov/pub/irs-tege/uniform_rmd_wksht.pdf

Waltj - very enlightening. Thanks for elucidating on this topic.
This just confirms what I knew a long time ago since joining this website - TSP Talk has a lot of knowledgeable members.
Correct me if I am wrong - if my TSP balance is $100K, I only have to withdraw at least $3906 for the year I turn 72 and so on and so forth
per https://www.irs.gov/pub/irs-tege/uniform_rmd_wksht.pdf?
For the sake of simplicity, I assumed a $100K balance every year even after withdrawals.


[TABLE="class: grid, width: 100, align: left"]
[TR]
[TD]Age[/TD]
[TD]Distribution Period (DP)[/TD]
[TD]TSP Balance (TB)[/TD]
[TD]RMD =TB/DP[/TD]
[TD]RMD due in $[/TD]
[/TR]
[TR]
[TD]72[/TD]
[TD]25.6[/TD]
[TD]$100,000[/TD]
[TD]=100000/25.6[/TD]
[TD]$3906.25[/TD]
[/TR]
[TR]
[TD]73[/TD]
[TD]24.7[/TD]
[TD]$100,000[/TD]
[TD]=100000/24.7[/TD]
[TD]$4048.58[/TD]
[/TR]
[TR]
[TD]74[/TD]
[TD]23.8[/TD]
[TD]$100,000[/TD]
[TD]=100000/23.8[/TD]
[TD]$4201.68[/TD]
[/TR]
[/TABLE]

 

[Maricar19]

https://www.tsp.gov/publications/tsp-775.pdf

We were reading TSP PUB 775 and quoting from it, "If you don’t make anywithdrawals or if your withdrawals fall short of the requiredamount, we will automatically send you the amount that'sstill required." If my understanding is correct, I really don't have to worry about RMDs with TSP because TSP will take care of my RMD? So, all I have to worry about is the IRA?

 

[flalaw97]

I was just trying to clarify with flalaw97 that IMHO (not as an expert financial adviser),
it is better (tax wise) to contribute directly to Roth now than to convert Traditional to Roth later on
because one cannot really know what tax bracket you'll be when you retire.
One can forecast/predict, but unforeseeable situations arise.

It is always a guess when you are talking about the future of the tax system but my current forecast goes like this: I am currently in the 24% bracket (married, filing joint). If I retire in 2023 (age 56 & 4months) as planned, my pension plus FERS supplement will be a total of $68k which is the 12% bracket. Even if I take a big chunk from TSP I can stay in 22% bracket so better to transfer TSP to IRA to Roth IRA at 22% tax, rather than 24%. If I can arrange it that one or more of those years I can survive without taking any from TSP, I could transfer 12k at the 12% rate. Still looking at it, but we will see. I appreciate Bullitt's sentiment that if you take the hit now, you at least have certainty and less hassle down the road. I am currently frontloading money in my Health Savings Account as it is and always will be tax free (as long as used for healthcare) and I am pretty sure I can count on having healthcare costs until the end. Great conversations. Best of luck to all.

 

[Tsunami]

Flalaw,

Your plan mirrors what I've been doing in part. Since I retired at the end of 2018 I've been withdrawing a monthly amount from my TSP that pushes me right up to the very tippy top of the 12% (married) tax bracket each year. Each December I calculate what that exact amount will be for the next year and make the adjustment to the TSP withdrawal. Next year I turn 62 and will lose the FERS Supplement, so will adjust the TSP withdrawal upward again mid-year to cover that shortfall. That's when it gets a big dicey since I'll be withdrawing more like 6%/year instead of 4%/year, up until I decide to collect SS benefits, and I have no illusions that the stock market is going to have positive returns every year in the 2020s. No way will that happen and there could be some downright terrible market years. Since my wife will be getting the 50% spousal benefit it will be important for me to wait at least until age 67 before I collect SS, in order to maximize her benefit. So the goal is to make at least 6%/year in my TSP on average, and if possible I plan to go to age 70 to collect SS (I have a good pair of 505 genes and expect to live into my 90s, so that should pay off since the ~8% increases in the SS benefit from age 67 to 70 are so attractive). I also have a separate Roth IRA to use mostly as play money, for travelling mostly...I've got an 84-day road trip planned for next summer. :smile: One regret I have is not paying more attention to that Roth IRA and building it up more during my working years.

Of course the best laid plans can go awry if tax or inflation rates soar, if SS cuts benefits, the market crashes, etc., but all you can do is plan per the existing rules and account balances each year, and hope you have enough cushion to make it to the finish line.

 

[DreamboatAnnie]

It is always a guess when you are talking about the future of the tax system but my current forecast goes like this: I am currently in the 24% bracket (married, filing joint). If I retire in 2023 (age 56 & 4months) as planned, my pension plus FERS supplement will be a total of $68k which is the 12% bracket. Even if I take a big chunk from TSP I can stay in 22% bracket so better to transfer TSP to IRA to Roth IRA at 22% tax, rather than 24%. If I can arrange it that one or more of those years I can survive without taking any from TSP, I could transfer 12k at the 12% rate. Still looking at it, but we will see. I appreciate Bullitt's sentiment that if you take the hit now, you at least have certainty and less hassle down the road. I am currently frontloading money in my Health Savings Account as it is and always will be tax free (as long as used for healthcare) and I am pretty sure I can count on having healthcare costs until the end. Great conversations. Best of luck to all.

I like HSA concept, but not sure if it is something I can afford. I had been looking into it. Here is a good comparison link.

https://www.opm.gov/healthcare-insurance/healthcare/health-savings-accounts/comparison-chart/

 

[flalaw97]

Tsunami,

Thanks for the detailed explanation. I am hoping to do the same, although my spouse has a decent salary base for social security so 1/2 of mine (even if I wait to 70) will never be more than hers (even if she starts collecting at 62). Do you have your TSP set up in a special way to be pulling money each month? I have heard some move their money to G and L income for the withdrawals and put the rest in a separate IRA since the withdrawals come out proportionately from all funds you have invested. I agree I wish I had some visibility on Roth IRA much earlier in my career. Plan, revise spreadshet with every change in rules, and replan....