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A common thread in this thread seems to be that many of us have RMD's coming due and really don't 'need' the money (probably because we've already figured-out how to live pretty well in retirement on what we already have).
[As mentioned, we've already been funding 529's for two of the grandkids and plan on lump-sum annual giving for the other three (in addition to charitable giving).]
Still, I'm trying to figure-out the most advantageous tax approach for us and them <We'll probably annuitize a deferred annuity to cover both RMD's and offset inflation and taxes>. From a strategic perspective, there don't seem to be many good, fee-based independent CFP's or tax attorneys in this area (who aren't trying to sell their own product).
We lived a fantastic life and which included things most people dream about. Sadly, the love of my life passed suddenly. I don't need to use our investments or RMD so they are reinvested. The $$$ will be left to the children to do with what they want.
I vote for the vacation house, mortgage covered by the RMDS.
Look, if you are that age,the funds have been available to you for 11.5 years, right? And you didn’t have any great need for them until you are now forced to do something with the money.
So it’s really not “found” money, but if you want to treat it has such.... satisfy the dual needs of enjoying it and leaving it to the heirs by buying the vacation house and leaving it to the kids.
Might not be the best way to build the biggest inheritance, but it is treating it as “found” money.
A common thread in this thread seems to be that many of us have RMD's coming due and really don't 'need' the money (probably because we've already figured-out how to live pretty well in retirement on what we already have).
[As mentioned, we've already been funding 529's for two of the grandkids and plan on lump-sum annual giving for the other three (in addition to charitable giving).]
Still, I'm trying to figure-out the most advantageous tax approach for us and them <We'll probably annuitize a deferred annuity to cover both RMD's and offset inflation and taxes>. From a strategic perspective, there don't seem to be many good, fee-based independent CFP's or tax attorneys in this area (who aren't trying to sell their own product).
STOP !!!!!! VERY IMPORTANT " never forget these rmd's are still money that is calculated as part of the pile of money developing your income . this is not "EXTRA " money .
because you have to change a tax status on some of your money does not mean it is "extra money" in any way .
if you needed x-amount in a portfolio to be the goose laying those golden eggs up to the rmd's , you still pretty much need the same amount less some tax money after them . nothing changed because you are switching pockets on some of the money .
to many folks screw up here thinking it is bonus spending money they don't need . yet that money was calculated in the size of the total portfolio when setting their draw rate and is part of the income generation end of things and is still needed to safely generate that income .
taking raises because things are better than expected is a different issue than just being forced to shift from one account type to another .
if a balance of 1 million was generating A 40K income pre rmd's , you still need the same million to generate that same income . the fact you have to pull 100k rmd amount out does not make it extra money and you now have a 140k to spend so you think you can blow it or give it away . .. the 100k still needs to do its share and will just do its share of generation from a brokerage account instead of an ira .
don't blow this because of a misconception as to what is happening when you take rmd's .
Last edited by mathjak107; 10-07-2017 at 02:34 PM..
^^^^MJ, I believe the OP is like us living off of pension and SS prior to RMD time. That's why I asked if they were still saving/investing prior to RMD's. If so they still have a cushion of income beyond what they spend prior to taking their RMD's.
Quote:
Well, I do want to treat it as found money. Our SS and pensions are more than enough to cover our living expenses and it would be nice to do something different with this "extra" money.
I have Vanguard make an automatic transfer into a taxable fund and with my other account at Rowe Price, I've put the money into granddaughter's college fund. This year we remodeled our bathrooms.
I like the idea of paying off our kids student loans. I'm also thinking it would be nice to purchase a vacation place, convenient to the whole family, where we could have family gatherings, hubby and I could spend part of the year there, and something to pass on to our 2 adult kids when we are gone. The yearly RMD's would cover the mortgage.
As I said in my OP, not knowing how many "good" years we have left, perhaps it is time to live it up a little. When I said that we live below our means---live frugally--I don't mean that we deprive ourselves. We just don't have expensive tastes. Also we live in a low cost area with relatively inexpensive golf, skiiing, etc.
The above quote is from the OP post #14
Depending on the size of their accounts I would also suggest the give yourself a COLA strategy to help supplement their pension and SS COLA in years where inflation exceeds the given COLA increase. I have written about it before. You identify a part of your portfolio for COLA increases. By that I mean taking multiples of your combined pension and SS total and allow that to provide you a COLA. If you take a 3X factor of your income, everyone 1% increase in that amount is the equivalent of a 3 percent COLA. A 2% increase is the equivalent of a 6% COLA. That can go into a separate fund to be used in the future to provide a self granted COLA.
Ten years into all of this I am of the mind that our nest egg is the subject of a mind game. To be identified as we want for what we want as their is complete flexibility. The OP has already said his after tax account in now a grandkid college account. If needed down the road for their care they can easily adjust. The question is now what to do with their new money/RMD's which for them is like found money.
as always , living off a pension never has the pay check stopping so they are not the traditional retiree generating their own pension living off their savings and investments .
as always , living off a pension never has the pay check stopping so they are not the traditional retiree generating their own pension living off their savings and investments .
You are correct that those of us living on pension income above and beyond SS are not the norm across America but in this forum I think we make up a significantly larger portion proportionally to the population.
I for one will tell you that should DW pass before me. My RMD's will become less important to me as my income will actually rise as opposed to DW if I were to pass her income would be a bit more than half (not including SS in these calculations). For us it is the nature of the beast of my pensions.
pension or not all that matters is that the retirement money is not counted as part of the income generation asset pool when you calculate your portfolio draw rate .
it you counted it then it is still part of that deal and all that is happening is the tax status flag is changing on the account . it is still needed in that case . .
Last edited by mathjak107; 10-08-2017 at 08:39 AM..
as always , living off a pension never has the pay check stopping so they are not the traditional retiree generating their own pension living off their savings and investments .
It is still our reality and like the OP when discussing our personal situation it is the reality at hand. A number of responders while perhaps not typical were being personal.
pension or not all that matters is that the retirement money is not counted as part of the income generation asset pool when you calculate your portfolio draw rate .
it you counted it then it is still part of that deal and all that is happening is the tax status flag is changing on the account . it is still needed in that case . .
The RMD rate for the OP and others is their draw rate. Otherwise there is no drawdown.
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