Excellent summary! About marital bypass trust, I believe there are ways to do that without setting up a trust. One just has to indicate it on the final tax return or something. For most of us, many advantages don’t apply. If your kids are grown up and responsible, I don’t see the need to control the assets from the grave. However well meaning, it can turn into an unnecessary nuisance that heirs have to deal with. I am not sure how it works in case of incapacity. No opinion on that. Privacy and multi-state property ownership may be the most common reasons to set up a trust. For anyone privacy is not a great concern or doesn’t own a property in multiple states, setting a trust may not pay off. JIMO of course.
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My understanding is you can’t split IRA. If your spouse is working, you could set up your own IRA and start contribute to it using the spouse’s earning.
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Very helpful discussion @ChoatieMom.
As the politics of the country changes, ShawSon asked about what kind of threshold we would need to see before moving to a new country. As a Jew, his point of reference was Kristallnacht. His question was whether we should consider moving assets outside of the US (not hidden – we’d still file form 1120-F and pay US taxes) and what would we need to see that would cause us to take that step. His fear is that at one point, the US might institute capital controls. Have any of you given thought to this question?
In our case, we have an irrevocable trust whose trustee is authorized to change the domicile of the trust to ensure asset protection. Current domicile is in NJ I believe, but the trustee could move it outside the US. Qualified plans clearly cannot be moved (and we have a very large slug in qualified plans). Similarly with real estate.
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Have not, as we have no reason to be moving funds across border. And no plans to retire elsewhere. All investments are USD-denominated.
@shawbridge -that question has indeed crossed my mind.
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Today’s drop in the market was pretty rough. Big dips are tough to see in the spend-down years, even if you realize it happens & are positioned to weather it. It’s just harder to see when you don’t have time on your side.
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It depends on your perspective. The S&P 500 had a 2.7% drop today. While 2.7% is a much larger change than typical day-to-day swings, it is a small percentage of overall portfolio value. Furthermore, the index is up for nearly any duration longer than 1 month, including a 25% increase over past 6 months. Today’s 2.x% decline is not something I am stressing over.
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I think the fact that the variability of the stock market is tied to the unpredictable whims of the president and the market conditions he is creating is what is causing many of us anxiety. While some may have a very comfortable cushion, there are many in the US who do not. As I was stressing yesterday, H reminded me that the market is high and that the drop is relatively insignificant. That doesn’t stop me from worrying about what is next.
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But this is why diversification into other classes, especially fixed income, is key at a time when you are retired or close to.
My biggest worry is if we isolate China into depression, they will provoke militarily in Taiwan. Then all bets are off.
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China is doing fine, they’ve expanded their markets (import and export) everywhere. If anyone is getting hurt economically, it is basically just us right now.
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Its important to have a mix of asset classes that allows you & H to sleep well at night despite the know ups and downs of the market, which will happen.
Indeed.
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Let’s steer clear of the political discussion!
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The drop in the market was directly attributable to tariff threats. I would love to know who knew about it in advance and financially benefited from it. I’m tired of regular investors getting jerked around so that rich people can get richer.
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I am glad to work with an advisor and a firm who has taken care of my family for many, many years. I am confident I have an appropriate mix of investments for both my age and risk tolerance. However, I am working on building up a cash cushion from my required distributions (inherited IRA). Market volatility doesn’t impact me nearly as much as it might others.
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The original tangent related to the stock market. Market indexes beyond just the US had a comparable decline yesterday in response to the perceived risk of changes to international trade. Some example numbers are below:
Total World (VT) – 2.6% decline yesterday, up 22% past 6 months
Total US (VTI) – 2.7% decline yesterday, up 23% past 6 months
Total Non-US (VXUS) – 2.3% decline yesterday, up 20% past 6 months
China (MCHI) – 5.7% decline yesterday, up 24% past 6 months
Emerging Markets (VWO) – 3.6% decline yesterday, up 22% past 6 months
Emerging Markets Except China (AVXC) – 2.6% decline yesterday, up 26% past 6 months
Pacific (VPL) – 3.2% decline yesterday, up 23% past 6 months
Europe (VGK) – 1.2% decline yesterday, up 16% past 6 months
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If I was going to stress about the stock market, it wouldn’t be about tariff threats, presidential whims, or market declining by 2.x% on any particular day. Those tend to be relatively short-term. Look at what happened with nearly every other Trump tariff threat for an example.
Instead I’d be more concerned about the US stock market being propped up by speculation to what many perceive to be unrealistically high levels centered around several large tech companies, many of which are well correlated with each other. For example, NVDA currently composes ~7% of the total US stock market. Microsoft composes ~6% of total US stock market and has a high 0.74 correlation NVDA. When one crashes, the other usually does as well. A similar statement could be made for countless other US companies. This much of the market well correlated with each other and propped up by what some would consider a speculative bubble, increases risk of a Dot Com like crash. This type of risk is reflected in measures like CAPE, which is pictured below. CAPE is higher than any other point for which records are available, except for the year preceding (and a few months after start of) the Dot Com crash.
The market lost ~half of value during the Dot Com crash, with severe losses continuing for years. A decade later, investors who invested a lump sum at peak still had a loss. It was very different from any recent events, and that’s the kind of risk I’d be more concerned about. As noted earlier, one can mitigate this risk somewhat with diversification, allocating a portion of portfolio in to assets that are not well correlated, such as fixed income.
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I would add that a trust creates a fiduciary duty between the trustees. Even if there is a cost, ensuring honesty and integrity among co-trustees is an important safety mechanism. Once bitten, twice shy is my motto.
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I am also the low wage earner in our household; for a number of reasons (including battling aggressive cancer) I was out of the workforce for 18 years. My sunset career I was able to jump in at better than bottom wage because I am a licensed RN/BSN, and a benefit besides the cash flow was that I earned enough to have my own SS instead of the amount as spouse of DH’s. I started drawing SS before DH did (I retired right at age 65 and started drawing SS then, as the cash flow was a bit more important than having a slightly larger amount with the wait). I also am the CFO of our household, including our investments (using my graduate business degrees) - and now in retirement I do need to do some additional dabbling in this area - we look at the long term, but one particular 401k investment has been underperforming, and we need to make that adjustment/change. DH’s 401K is our largest single asset - although we have spun off purchasing 4 annuities to add diversification and we use cash flow off of the annuities. When we added a Financial Advisor 13 years ago, it took several meetings of the FA saying to us that I managed our funds well for DH to realize that my abilities with our funds was very good – over time now DH is becoming more aware and versed with our investments.
Aging/long-term care/needing skilled care - it is a bit of a roulette wheel. Funds can get spent down pretty quickly. We each have a long-term care policy and hope we never need to use it. We plan to move near DD1/family - perhaps in 2027; DD1 is BSN and would know how to help us navigate care if we would need it down the road (we are still in go-go years). We can help with the 5 grandkids over the coming years (oldest grandchild is seven).
When we retired five years ago, DD1/family lived only 100 miles from us. The only thing getting us to move is for family, and it will be a ‘big move’ for us, as we have lived in our community since 1983 and built our current home in 1992.
I did have one relatively low-cost group travel within the US this year, and don’t know if I will take the time or have a good opportunity to travel to a few places overseas. DH traveled extensively for work (nationally and internationally) and he has no desire for non-family travel. Some people really like to plan for travel and budget for that in retirement.
DH has longevity in his family, but he also is taking care of his health and allowing me to advise him on some good health aspects. We have good health providers here and know how to navigate this, including changes over the years - and try to have MDs younger than us as much as possible. We will have a lot of changes if/when we do move including our health care providers and possibly our supplemental insurance policy.
IDK the answers to the spouse with most of the retirement assets needing skilled care and how to handle when that situation ‘happens’. I do know some people divorce specifically in this kind of situation to divide the assets and have the better-health individual be able to retain half of the assets.
The typical recommendation is to only have one Trustee, not co-… (excluding the Trustors, of course)
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Does anyone know where to get some cheap money? We are borrowing a bunch on our HELOC to buy a property, and it’s at 7.75%, yuck. Trying to find a HELOC with low teaser rates, but I haven’t found anything yet.
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