@SOSConcern, good idea if you can smooth out some of the taxes to reduce the rates you will pay in the first few years of the RMD. I have not figured out how to do that.
Using the AARP calculator, it seems like the RMD payment I get increases each year until I hit 95 and then starts to decline. I thought it would make me take most of it out in the first few years. I’m OK with declining income after age 95 – hard to imagine living that long (though my mom died just a few weeks before her 98th birthday). I just heard on the radio that the former CEO of the Boston Red Sox, Larry Lucchino, died yesterday at 78.
Oh, would that I were done with US taxes. The corporate ones are all done, but I think we are probably still awaiting K-1s from a couple of investments. For some reason, the K-1s almost always come late and so we have to extend our filing of our personal return.
I also noticed that the RMD increases each year. I guess that’s because each year, we’re one year closer to no longer needing that money (if you get my drift). Of course, if our nest egg declines as we withdraw, our RMD will decline accordingly.
If you are getting K-1s from a company that say more than $10M in annual revenues there is a lot that needs to be done to get your K-1. In-house accountants need to close out the year. Then an accounting firm will need to do an audit or review and then a separate group needs to get the corporate tax return done. Our tax accountants for the company I work for told me we were their only client that they got the tax return done by 3/15. Everyone else had to file an extension.
I usually have some private investments. At the moment, I have an investment in a private equity fund, a private credit fund, and a VC fund. The PE fund has $2.2 billion in assets (alas, I am only a tiny, tiny sliver of that fund). The private credit fund is also pretty big (in excess of $1 B, alas also a tiny, tiny sliver). The VC fund is small (assets of about $25 M, I think). They all come late.
The same accountants have done our returns for years. There is some complexity (a Schedule C for my wife, income from various countries, royalties and now construction and solar panels etc.), but their overall familiarity means the personal returns just require them to crank the knob (click the key?). So the delay is the private investments. When the K-1s come in, they can file the next day.
RMD is based on your life expectancy in the year you make the distribution. The amount is 1/life expectancy * the amount in the account, so the percentage never goes down because your life expectancy never goes up.
The amount could go down if you are depleting the account, but the percentage never decreases.
ETA: I guess life expectancy isn’t entirely accurate, the IRS calls it a “distribution period” but it never goes up, so the percentage never goes down.
IDK if the average life expectancy remains around age 78/79 for men and perhaps a little older for women in the US.
DH has some good longevity on both sides of his family - and I am helping him prevent accidental and other medical things as best I can – I have come up with a new term for him (AMA is against medical advice, mine is AWA against wise advice) – he recently broke his leg on ice (went out AWA for a walk) in January (roads shut down due to ice/snow), so now he is taking a daily multivitamin that he has always resisted doing – now I told him he needs the calcium for stronger bones. Have him following with PCP and other MDs regularly, he is active with exercise and hobbies/interests. He sets weight goals for his cardiology visits, as a few appointments ago he says he was ‘fat shamed’ - MD was just instructive on needing to lose X lbs. (DH had gained 12 lbs from his prior visit maybe 3 months earlier) - at his next appointmen 6 months later he had lost quite a bit of weight (and then was about 12 lbs above his desired weight but easily at a decent weight, 6’ 3" and weighed 212). DH had a prior home accident mid-last year due to doing something that takes two people but he did not want to wait until 2nd person was available a few short hours later (stitches with tip of finger almost lost, then fighting infection so more involved injury than it should have been, but was a totally avoidable accident).
My parents died at age 64 (dad,cancer) and 77 (mom, dementia) so not great longevity. Maternal grandfather died in auto accident at age 56, maternal grandmother died in her 70’s. Paternal grandfather died in his 60’s, and paternal grandmother in her mid-80’s. I already survived a bad cancer ‘bout’ at age 53, Stage IIIa with cancer in systemic lymph system.
You couldn’t pay me enough to work for private equity people. They buy a company and eventually get to the point of trying to squeeze juice from a turnip. I could tell you stories of the last company I worked for that was PE owned. It was a revolving door in C-suite and Mgr levels.
I’m pretty good at arithmetic and can do decent approximations of inverse calculation (example: RMD life expectancy factor or 25 same as 4%). But I far prefer a table that also shows the RMD as percentage of balance
PS - I found this link on google, can’t vouch for its accuracy, but it seems right
@eyemgh, I agree that they have to do a lot more as the assets have grown and we have matured. They did figure out which years we should start taking SS. It was a relatively involved calculation. They periodically evaluate our insurance coverage and answer questions from our kids on benefit plans, asset allocation, etc. Or a calculation on whether we could afford to buy a house in Florida (under the assumption that it does not become our tax residence, under the assumption that it does, under the assumption that the house gets submerged with rising oceans, etc.). So the activities are more complex than just simple asset allocation and the managing of the money has become somewhat more complex as the assets have grown. And, the fees have definitely gone up over time as AUM increased.
I’ve seen good and bad. The good ones invest to grow the business. The bad ones squeeze and leave the business undercapitalized and underinvested for the future but sell it before the XXX hits the fan.
Early on, big companies had a lot of fat and unproductive assets and PE firms could easily buy them, cut out the fat and remove the unproductive assets (or make them more productive, though that was not the mode of early PE) and then sell them at a higher multiple. Now much of that is done by the big companies so PE firms can’t make money from doing the obvious fixes.
PE usually don’t put up much of their own money and a company becomes highly leveraged and if they do put up money then they just turn around and charge the company mgt fees to recoup the original investment. Most of them today are short-sighted much like fortune 500 CEOs only worried about pumping up the stock price.
Too bad workers end up feeling the pain of their leaders bad decisions more often than not.
They way to think about fee only advice is that they’ll have to spend more time answering more complex questions.
The thing I don’t like about charges based on AUM is that they could do nothing and still take a chunk. Worse yet, they can and do underperform and still take a big chunk.
The article says you need 63K p.a. to retire in NJ vs 85K in MA and 83k in NH. That doesn’t make much sense to me. Unless you are living in a shack in the Pine Barrens I think you are going to need more than 63K p.a. to retire comfortably in NJ.
Well maybe Cumberland and Atlantic counties, where cost of living is more akin to Delaware. But these places are comparatively low-populated for the densest state in the US.
The state categories can be misleading. For example, I once lived near Binghamton,NY…. so much more affordable than NYC. (Yes, pay scale is there is less too. But that is usually not part of he COL analysis, varies so much by actual job)
LINK - Binghamton, NY Cost of Living
We are working with an FA and trying to forecast out when we can retire. We don’t have pensions but have a 401k and a 403b. We are tranferring part of DH’s 401K funds to a deferred joint annuity (essentially buying us a pension). I will probably do the same with some portion of my 403b. Our NJ house will be paid off shortly. We want to move to Essex County MA or Rockingham County NH in 7 years or so to be near our daughter and her family. We want to buy outright a condo or something; I don’t want a mortgage or rent in retirement. NH has horrific property taxes compared to MA. I looked at some 2 BR/2BA condos in Portsmouth NH or Exeter NH and property taxes are more than what we are paying on our house in NJ. Crazy.