How Much Do You think You Need to Retire? What Age Will You/Spouse Retire? Investment and General Retirement Issues (Part 3)

Parent Cafe
3262

I agree with you. We are at least 9 years away from retirement. My wife and I discuss what we want our retirement to look like. We want little to no responsibility. We don’t want to have to jump through any hoops for much of anything. Basically we want to do what we want when we want. I don’t want to juggle things like we have had to for 30+ years.

Here is a an example. My brother retired to Key West. He went a bit early and has taken a job as a manager at a restaurant/bar. He probably does need some spending money, but not that level of responsibility. My point is what happened earlier this week. His wife was in a car accident and hit a woman on an e-bike. It wasn’t her fault. The woman was seriously injured. My SIL called me about 4 hours after it happened as her nerves were shot. Early in my conversation with her I asked where my brother was at. She said he was at work and wouldn’t leave. I don’t want that in retirement at all.

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3263

That’s exactly why I am planning to sell my house within the next few years and rent an apartment in my neighborhood. I’m also considering selling my car and leasing one.

3264

Yes, you are correct. I believe it was in 2023 that this was changed. Prior to then, once an estate’s value exceeded $1 million, it was fully taxable other than a $40K deduction. Now, the first $2 million is free of estate tax and if the estate value exceeds $2 million, the tax is only assessed on the amount in excess of $2 million.

Hopefully I explained that correctly. I looked into it on behalf of the parents of friends who live in Massachusetts.

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3265

@FallGirl, as a general rule, I agree. I try not to let the tax tail wag the dog.

There are exceptions, I had a friend/client who knew that he was going to get about $12 M from a deal that we were helping him on. I suggested that he move to Florida the year before the deal would close. He didn’t. Paid MA taxes and then moved to Florida. Somehow, he could not see that once he had cashed in, he was going to move to Florida.

I would not feel unhappy if I stopped paying MA taxes – we pay over $40K (I think) for property taxes to our town and have paid tons over the years in income taxes. Even if we were to switch domiciles, if we were to sell our house, we would have to pay the recently enacted millionaire’s tax.

@Colorado_mom, you are correct and @CT1417, your explanation is correct. One pays MA estate tax on the size of the estate less $2 M threshold (which is supposed to go up with inflation). If you are a resident of the state and die with money in your 401k, your 401k balance is part of the estate. Your home and any other real estate in the state is also part of your estate unless it has been transferred to an LLC that has a business purpose other than tax avoidance. So, as a resident, if you have a big 401k and real estate not in an LLC, you could easily be paying a 10% to 16% estate tax. Even here, this is not life-changing money. I enjoy solving problems like this as a hobby, but I am not going to reorganize my life to make it happen.

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3266

@shawbridge -why should someone who is going to make $12M on a deal be an exception? Am I missing something? That’s more money than most people will have their entire lives. Just pay the taxes!

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3267

What shaw is saying if they moved the year before and set up residency and when the deal hit the person wouldn’t be subject to MA taxes. Not sure if you get that, but sorry for repeating if you do.

But it irks me overall that there are ways to avoid taxes. There is a whole cottage industry around that. While shaw is well off I am sure he doesn’t scratch the surface of the people who move money offshore to avoid taxes. Corporations also do it. The US tax code is so messed up. I can’t stand it. Especially after I saw the doc about the Panama Papers. That was sick.

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3268

I am a CPA, and yes I get it. My point is just that I am tired of people who have a lot and live to avoid taxes. I grew up very middle class, but when I was in my early 20’s my dad started a business which did very well (much better than expected). He was adamant about paying his share. My dad and I disagreed about a lot of things (politics, social issues) but we both believe that you should pay more if you have more. That’s just how we roll. Maybe that guy was like that, too.

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3269

Considering taxes is an important part for middle- and lower-income families - as said, so many wealthy people have tax attorneys and accountant staff to IMHO not pay their fair share of federal taxes (and state tax) - but due to having additional employees, those people do pay taxes so there is something to be said for that. What they spend money on is also tax-generating.

Some of the state and local taxes can be a bit over the top, and I would agree if someone was planning to move to FL anyway, I would have done it earlier. The tax avoidance money could perhaps then be better spent helping charitable organizations, which we conscientiously do.

DH and my top earning years were meager to some on this thread (especially with our credentials), but where we lived, and how we budgeted our money, along with our retirement investing, we seem to be OK in our retirement years and that is confirmed with our FA. Our second DD finished college two years prior to DH retiring, and the funds we planned for their college, along with their scholarships and a college plan we had in place for their in-state university carried them through w/o any college debt. Neither wanted to pursue advanced degree, and they both have been self-supporting and doing well in their careers.

There are changes going on where some areas may get hit with higher property taxes, which will adversely affect many retirees.

I may have mentioned on this thread, that a single woman who worked her final career years in FL, found that she could sell her home in FL, purchase a home in our area - single family place with not much upkeep (and the home had been updated), and due to low income (essentially her SS), she could purchase a home in our area, have some savings, and be exempt from property tax in our area. She had rising property tax in FL and it was spending down her retirement nest egg too much. She has happily adjusted in our community. She knew about our community from work travel. IDK why she didn’t have a pension, but she might have had some kind of lump sum. She had a comfortable enough for her nest egg.

Time will tell for us on a move to another state - that transition will take effort and time along with emotional energy. For now, I am following the song phrase “don’t worry, be happy”.

3270

Estate tax can be a hard thing when a family business or property has gained significant value and is left to heirs who have to sell things off to pay the taxes. You inherit a nice family house that you would love to keep, but because it is now worth millions, you may have an large state estate tax burden. In this situation, it is not about rich people not wanting to pay their fair share.

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3271

There is a strategy that may meet your approval for minimizing taxes, practiced by a relative of mine after retirement age. She gave very large donations to several vetted charitable organizations -enough to make a real difference for some of them and their beneficiaries. After itemizing deductions, including all the charity donations, her reported income was very low, and her income taxes low. Some were gifts of stocks. I know of other people who do this, too. She preferred to make the decisions about how her money was used, rather than have the government do it. She did pay the income taxes she owed as well as all property taxes and sales taxes.

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3272

My point, which you understand, was that the guy was likely to move to Florida anyway. He had had largely retired. He was doing a little consulting. He was handicapped and Massachusetts winters were not kind to him. If he was going to move to Florida anyway, why not do it a year sooner and save $600K in taxes (MA tax may have been higher then). I am not a fan of letting the tax tail wag the dog, but given that he was probably going to move there anyway, I thought he should have pulled the trigger.

I have paid a lot to the state in taxes. If I believed that the state of Massachusetts was going to do something productive with my tax money, I would be much more inclined to your view, which I respect. I once wrote an op-ed piece in our local newspaper arguing that property taxes should be higher and that we should as a town invest the taxes in having the best school system in the state. That was not an especially popular view.

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3273

Only on CC could there be threads about selling your plasma to make ends meet and how to retire/relocate to minimize the tax burden of a 12 million dollar profit.
Earlier in the thread I expressed my discontent with my financial advisor. I wish I felt more interested in managing my own funds, but I’m not. H probably is, but his cognitive function is not quite what it once was and I cannot be looking over his shoulder all the time. I reached out to two different financial planners and had a very promising phone conference with one of them. We have an in person meeting scheduled in a few weeks. There was no immediate push to move assets, which I appreciated. Their approach is to develop a financial plan for us and how our investment strategy might change to meet our goals. It is a good fit for someone who is as anxious as I am about money.

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3274

@deb922, is your disinterest because the advisor is not engaging? Our first FA was really only about managing money and talked very technically. ShawWife did not feel part of the conversation.

That was why I sought a female FA as I thouht that might help but it turned out that her young male assistant was the one who would set up separate time with ShawWife and explain stuff to her. This FA was very holistic. Not touchy-feely (what is your relationship with money) but how do you want your money to support your life goals. For us, that included building in weddings, fully funding for college and grad school if necessary, support for ShawWife’s art career, a desire to leave our kids money for downpayments on houses and for education for grandkids (if and when they arrive), and a vacation house where our kids/grandkids would feel happy to join us. We made choices not to replace term life insurance on me and not to pay for LTC insurance. We have not thought about the potential need to support my brother if he needs LTC. For ShawWife, the focus on goals and a clear explanation of some of the investment choices we were making was very helpful.

At our most recent call with that FA, we talked about the question of whether we should move some of our money out of the country (in our case, to Canada) in case a) we felt we needed to move; and b) before capital controls were imposed (with some probability). The question was how to do it. Our FA introduced us to a Canadian FA that they have worked with but also suggested that an alternative was to buy a house or real estate. We also talked about the problem I’ve been thinking about, which is a combination of a) what will we do with ShawWife’s unsold but high quality artwork so that our kids don’t have to deal with it; and b) how to support ShawWife’s artistic legacy. The FA team is going to come back to us with thoughts about that problem. ShawWife still glazes over at the technical details – I have been shifting to more dividend-based equity holdings and have invested some in a strategy for making money ahead of when we as a society/economy realize that water is a scarce resource and is being sucked up by AI data centers.

I have found it helpful to articulate our goals. It does require also estimating your expenses, which I find difficult to do, expected changes in expenses, and making guesses about the future. Goals do change.

Last week, I interviewed an FA who is very dividend focused. Makes sense to me in the current financial environment. I am going to go down the path with them to see if we want to switch one or both of our advisors.

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3275

Very clearly thought out.

We are getting along better with our FA John and our meetings are now a lot more productive - we got moved to him a few years ago when our FA Don (President of the group) - needed to have less clients for his company leadership responsibilities. It was a little rough start because John was new to working with clients (although not new to financial concepts). He needed to ‘catch up’ and make our time with him meaningful. There were other changes going on with their information system, other transitions. John also was burning the candle on both ends - having to catch up with certifications/education, he has property investments that he spends time. Over time, he has improved. At first, when we walked in, he asked if we had any questions - and we were looking for him to have analyzed our stuff and gotten to know us better - perhaps review our risk assessment. Now he knows how to prepare for our meeting, and we use our time together well. We get weekly or every other week little one or two minute ‘updates’ via a email link; all 5 advisors rotate on this presentation.

3276

What is it with guys and their chainsaws and tree cutting? My husband is working out this plan to cut some precariously located larger trees (due to power lines) on a forest property. It involves some sort of plan with a chainsaw, rope, ladder and excavator. Wait, a ladder? He’s really good at downing trees, but it doesn’t always work out as you want, especially with cottonwoods! :flushed_face:

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3277

Our friends in WI have a 5-acre property that they have owned for over 30 years. They had a commercial company harvest the black walnut trees - they only would take trees that had at least 12-inch diameter - but had 75. Our friend then harvested himself maybe 100 ones that were just a bit smaller than 12-inch diameter for projects. Not sure what he will do with all of that, but the suggestion is that they will use it making floors. Making their home and property one that will be kept generationally.

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3278

Dh, the boys and I took out a cottonwood near our house by ourselves. DH and I were much younger and the kids were probably too young for this to be safe, but we had such a blast doing it. Involved ropes and a bow and arrow and a long-handled saw. :rofl:

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3279

Okay, I can see the long-handled saw and ropes, but a bow and arrow? I’m not going to give my husband any ideas.:grinning_face:

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3280

@gpo613, I completely agree. If you have time/skill and/or money to hire really good people and are not a salaried employee so have the flexibility about how and when to get paid, one can reduce taxes legally. The offshore stuff is illegal – US taxpayers are legally required to declare it and pay income on all worldwide income. On the other hand, Brits and others can park stuff offshore and only pay when they bring the income back home, so they have latitude to do this stuff legally.

I find taxes an intriguing puzzle. Three partners (all from different countries) and I are starting a new venture that is designed to solve a major world problem. We realize that it can only work if we harness the profit motive for the actors in question. We are going to create a mission-locked foundation so that most of the returns get reinvested in the desired cause. But where the foundation is domiciled, where the company is domiciled, whether there is a holding company, how the investments are structured all have massive and different tax implications for the partners. I enjoy solving these puzzles.

I would prefer a world where taxes were simple so that one did not have the incentive to spend time and resources on what is essentially an unproductive exercise for society (even if it is an intriguing puzzle). But, they don’t listen to me.

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3281

My wife and I are both CPAs but we gave up public accounting a long long time ago. We both came from blue collar union families. I wish the tax code wouldn’t have so many loopholes for people to avoid and delay taxes. I am not a believer in trickle down economics at all. I don’t believe business owners create jobs. I believe when there is a market for goods and services jobs will be created. If one company doesn’t fulfil the market need someone else will come along and do it.

I can’t stand private equity firms. If I company I was working for got bought by a PE firm I would start looking for a new job immediately. They are not in it for the long-term.

Over my 30+ years of working I have seen so many things that aren’t fair and I have seen so many companies take advantage of people.

Probably the appalling thing I have seen recently were the PPP loans which for a large % of companies was just a gift/welfare funds for ownership. I personally witnessed 3 firms receive those funds that did not need it. One company wouldn’t even spend the funds to help distance people in the office.

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