Financial planning and retirement strategies are crucial, especially in today's economic climate. With global economic fluctuations and uncertainties, it's essential to have a solid plan in place to protect your financial future.
Roth conversions have always been tricky, and technical. the strategies are quite rigorous for the regular-Joe. As a matter of fact, they are mostly successfully carried out by pros who have had a great deal of skills and knowledge
It's crucial for individuals to diversify their portfolios, seek professional financial advice, and stay informed about market trends to navigate these challenges effectively.
And let's not forget how the global economy plays into all of this. Economic instability, inflation, and market fluctuations can further complicate matters and add to people's financial worries.
Changes in tax policies, both domestically and internationally, can have significant implications for investors. It's crucial to work with financial advisors who understand these complexities and can help navigate them effectively.
The life expectancy ages you used are way off, at least for those approaching retirement. You used life expectancies for a newborn baby. Each day a person lives, their life expectancy gets a little higher. For people who reach age 60 it’s more like males 82, females 85. For those who reach age 65 it’s more like males 83, females 86. I'm worried that you're not aware of that, and are giving bad advice.
Yeah he doesn't inspire confidence in his financial planning capabilities when he uses blatantly wrong data to make his point. He also messed up the Roth conversion discussion by calculating the conversion as a withdrawal against the portfolio. The conversion wasn't necessarily spent that year, it could/should have been reinvested.
@@jerrylabat550 He was not using the conversion as a withdrawal. The increase in the withdrawal rate were due to the taxes paid on the conversion which is indeed a withdrawal, whether it comes from the conversion itself or a taxable account, it is still money that goes to the IRS and maybe your state too.
Great points about Roth! I would submit until you achieve a $1M portfolio conversions shouldn't be considered, and even then you had better do the math. In conversions no one ever considers opportunity of money cost. If I pay $100,000 tax today to potentially save taxes in 20 years, that $100,000 could grow to more than $300,000! I can pay a LOT of taxes with $300,000!
It depends on how you look at it. If you had to pay $100k for the conversion in one year, that means you converted about $400k in full, paying the $100k from another source. Using the return you suggest for 20 years, the $400k will triple to $1.2M inside the Roth, all tax-free. If you don’t convert, you will have $300k in taxable where you will owe LTCGs to withdraw, and also $1.2M in your pre-tax IRA where you will owe regular income taxes to withdraw it, and you will be forced to start withdrawing it at RMD age. I agree with you that it all depends on your pre-tax balance, but also on your rate of return and time horizon for growth before SS and RMDs. If you have say $750k invested with 7% average growth for 20 years before RMD age, you can expect those RMDs to be quite substantial, which could be a problem if they are significantly above the amount you need for expenses.
You do a Roth conversion a little bit different. First you see your tax bracket. Lets say you have $20k room left before you move to the next tax bracket. Than you use this $20k this year. Next year it could be $10k. Year after it could be $25k.
I appreciate questioning conventional wisdom, particularly as relates to recommendations which benefit advisors. Some of tge concepts discussed here are interesting
The 4% rule is not "broken", it's just misunderstood; it was the result of analysis that resulted in non-depletion of savings over a 30-year retirement using historical data as a backdrop with a 60/40 mix of stocks and bonds. Bengen has indicated that this might be low, and certainly, modern guardrail approaches allows the safe withdrawal rate to be in the 5% range. The 25x annual spending rule is no more arbitrary than the 4% rule; they are, in fact, the same rule. It's disturbing that you don't acknowledge that and that you call these "internet" rules, as if there was no factual nor analytical basis for these. Bengen has pretty much made the analysis of safe withdrawal rate as his life's work.
Your "half of all men will die by age 75" is blatantly wrong. If you said, "half of all male newborns will die by age 75" it is at least notionally correct. By the time of reaching adulthood, the expected or average male lifespan is well past 75. By age 65 (or maybe it was 67, my FRA) the expected lifespan is another 18 years for men, 20 years for women. Also, your "25x" is merely the inverse of the 4% rule. Same thing.
The 4% rule to me is a mere guide if you look at it critically, its got all the workings.
Financial planning and retirement strategies are crucial, especially in today's economic climate. With global economic fluctuations and uncertainties, it's essential to have a solid plan in place to protect your financial future.
Roth conversions have always been tricky, and technical. the strategies are quite rigorous for the regular-Joe. As a matter of fact, they are mostly successfully carried out by pros who have had a great deal of skills and knowledge
It's crucial for individuals to diversify their portfolios, seek professional financial advice, and stay informed about market trends to navigate these challenges effectively.
And let's not forget how the global economy plays into all of this. Economic instability, inflation, and market fluctuations can further complicate matters and add to people's financial worries.
Changes in tax policies, both domestically and internationally, can have significant implications for investors. It's crucial to work with financial advisors who understand these complexities and can help navigate them effectively.
I’m surprised that you didn’t mention that the 25 times income rule of thumb is really just the 4% rule in reverse.
The life expectancy ages you used are way off, at least for those approaching retirement. You used life expectancies for a newborn baby. Each day a person lives, their life expectancy gets a little higher. For people who reach age 60 it’s more like males 82, females 85. For those who reach age 65 it’s more like males 83, females 86. I'm worried that you're not aware of that, and are giving bad advice.
I like the video, but I agree the life expectancy is an error and should be corrected.
Yeah he doesn't inspire confidence in his financial planning capabilities when he uses blatantly wrong data to make his point. He also messed up the Roth conversion discussion by calculating the conversion as a withdrawal against the portfolio. The conversion wasn't necessarily spent that year, it could/should have been reinvested.
@@jerrylabat550 He was not using the conversion as a withdrawal. The increase in the withdrawal rate were due to the taxes paid on the conversion which is indeed a withdrawal, whether it comes from the conversion itself or a taxable account, it is still money that goes to the IRS and maybe your state too.
Great points about Roth! I would submit until you achieve a $1M portfolio conversions shouldn't be considered, and even then you had better do the math. In conversions no one ever considers opportunity of money cost. If I pay $100,000 tax today to potentially save taxes in 20 years, that $100,000 could grow to more than $300,000! I can pay a LOT of taxes with $300,000!
It depends on how you look at it. If you had to pay $100k for the conversion in one year, that means you converted about $400k in full, paying the $100k from another source. Using the return you suggest for 20 years, the $400k will triple to $1.2M inside the Roth, all tax-free. If you don’t convert, you will have $300k in taxable where you will owe LTCGs to withdraw, and also $1.2M in your pre-tax IRA where you will owe regular income taxes to withdraw it, and you will be forced to start withdrawing it at RMD age. I agree with you that it all depends on your pre-tax balance, but also on your rate of return and time horizon for growth before SS and RMDs. If you have say $750k invested with 7% average growth for 20 years before RMD age, you can expect those RMDs to be quite substantial, which could be a problem if they are significantly above the amount you need for expenses.
You do a Roth conversion a little bit different. First you see your tax bracket. Lets say you have $20k room left before you move to the next tax bracket. Than you use this $20k this year. Next year it could be $10k. Year after it could be $25k.
I appreciate questioning conventional wisdom, particularly as relates to recommendations which benefit advisors. Some of tge concepts discussed here are interesting
If you are 64+ in age, a Roth conversion may also cause a IRMA effect, causing high costs for Part B Medicare payments.
It actually starts at age 63, as there's a two year look back.
There is no 4% rule it was simply a study to determine a safe withdrawal rate using past US historical returns.
Can’t really estate or a business be a part of the 25x? A “bucket “ of value?
The 4% rule is not "broken", it's just misunderstood; it was the result of analysis that resulted in non-depletion of savings over a 30-year retirement using historical data as a backdrop with a 60/40 mix of stocks and bonds. Bengen has indicated that this might be low, and certainly, modern guardrail approaches allows the safe withdrawal rate to be in the 5% range.
The 25x annual spending rule is no more arbitrary than the 4% rule; they are, in fact, the same rule. It's disturbing that you don't acknowledge that and that you call these "internet" rules, as if there was no factual nor analytical basis for these. Bengen has pretty much made the analysis of safe withdrawal rate as his life's work.
Your "half of all men will die by age 75" is blatantly wrong. If you said, "half of all male newborns will die by age 75" it is at least notionally correct. By the time of reaching adulthood, the expected or average male lifespan is well past 75. By age 65 (or maybe it was 67, my FRA) the expected lifespan is another 18 years for men, 20 years for women.
Also, your "25x" is merely the inverse of the 4% rule. Same thing.
Bitcoin fixes this.