Super good points! We have no kids and if one of us passes, the other will have plenty of retirement to live on, so no need for Life Insurance. Ditto with Long Term Care: Just self-insure. We're also doing that with car insurance: Self-Insure for collision.
Roth conversions are not always a suitable strategy! But I have a question about backdoor Roths, which are different than conversions. Neither of us have a Roth because high income MFJ. No workplace Roth tax-deferred options. Neither of us have any other IRAs re: pro-rata tax exposure. Would you recommend backdoor Roth? 1. Open traditional IRA account. 2. Fund to annual nondeductible contribution limit. 3. Immediately convert to Roth.
Thank you for these pointers. Managing our retirement spending is my part time job. Planning our retirement travel is another part time job that has kept me very busy lately. Will need to get my Roth conversions figured out after our trip to France. Just filling up the 12% bracket this year.
LTC is just your living expenses for one month. If you have $6000 in monthly expenses, that’s the same amount to stay at an assisted living facility in a studio suite with full boarding and some additional services.
Wow, these mistakes hit home! Especially the bit about rushing into Roth conversions-definitely something to watch out for. I started using My Digital Money for my crypto IRA, and it’s made things so much clearer for me. Anyone else here taking a deeper look at crypto for their retirement?
Thank you Ari for your useful and thoughtful content. You should add “Sanitation Engineer” as your informal job title - as you definitely help us “clear the head trash,” as you say. Your videos have helped me get rid of unnecessary worry about all the scary early retirement issues - RMDs, LT health insurance and taxes - oh my! We’re going through your Early Retirement Academy and really find it useful. Thank you again for the time and intentionality with your content!
I'm not sure why so many people love bonds, as they CAN also rise and fall in value, like stocks. Vanguard bond fund, BND, fell from $92 to $70 a share, in 2021-22 as interest rates rose. That's a 22% drop. BND is still in the low $70's. Who knows how long it will take to recover from that loss, even with the interest payments.
Not a big fan of Roth conversions, I really think there is a very limited window where they make sense. on the next subject Advisors can be very helpful if they are used more holistically and not just for tax and investment planning. Now as to LTC, I really don't know how you came up with 20k unless major health problems exist. I am 64 married and we both have LTC policies from almost 20yrs ago. These policies cost about 6k a year total and are extremely good and flexible. We purchased LTC after dealing with aging parents. Now to come full circle (or weave), one of the nice aspects of taxable IRAs is that they are more protected from health events and potential creditors than having a Roth. Now with LTC policies layered in, you have a saleable asset and peace of mind that you won't burden your loved ones.
Roth conversions feel like a fad. What I mean by that is, everybody nowadays thinks they must do it, and they rationalize a bunch of reasons to do it, when the reality is that it's a very minimal benefit. I suspect many people are going to continue their lifestyle and they're going to be using almost as much from their 401k as their RMD would be, anyway. Even if they're not, the break even point is probably very close to their expected mortality date. You can't escape the taxes, only hasten or delay them.
I'm thinking roth conversions are not the ticket Necessarily. I'm hoping the wife And I'll just stick under that 92k Or whatever it's gonna be, Stay in the lower tax bracket anyway. Huh. We have a good roth, And then the bulk of our retirement is in a 401/403 after twenty five years of saving quite well and doing quite well I believe. In long term care insurance for my ninety six year old in laws Didn't go Well, Is when they failed and passed quickly. They paid for Years.. what a waste. They fought the little bit.We thought they'd cover at the end And didn't end up paying. Ridiculous
What part don't you understand? You can convert any amount from an IRA to a ROTH any time. Lookup "backdoor ROTH" - if you make too much to contribute to a ROTH, you can open an IRA, fund it, and convert it the same day. Disclaimer: I've never done this and I am not a tax accountant, but I have done ROTH conversions. Income is reported on a 1099-R, and there's some code indicating it's a conversion and not a distribution.
@@linneasimchah1621 There are annual *contribution* limits, but if you have a 401(k) with 1 million dollars you can roll it over into an IRA and then convert that to a ROTH (there may be a way to do that directly, but this is what I did with an old 401k). The conversion amount shows up as regular income that you have to pay at your marginal rate in that tax year. There are limits if you want to keep the taxed amount in the 10%, 15%, or 22% brackets, but I believe you can convert the whole thing if you wanted. You'll be paying 39% at the top rates, so that really only makes sense if you would have been taxed at the same (or higher) rate when you withdraw it from the ROTH. Again, search for "backdoor ROTH" - google is a little more trustworthy than random youtube commenters.
@@linneasimchah1621 I wrote a long reply but it disappeared. There are annual contribution limits to an IRA (traditional or ROTH) but I'm not aware of any conversion limits. Again, search for backdoor ROTH, don't trust random comments on youtube.
หลายเดือนก่อน
@@ChristopherCurtis After Tax dollars means they are NOT on a traditional IRA. You already paid the tax on the money!
หลายเดือนก่อน +2
Ari, I know these are all not examples but if you reach 60 there is no way someone is paying $1000 a year ($83 month) for $500K in life insurance. Life insurance skyrockets every 5 years. When I turned 60 my life insurance tripled to almost $500 a month for Term life insurance. When I reach 65 it doubled or more again. I canceled my insurance and put that money into a brokerage account.
@@GuySkellenger I agree. I got a 20 yr term when I was 29, before I turned 30, that would take me to 49, before I turned 50, it was $700K for $37/mo. Then I got another 20yr term at 49 that will take me till I'm 69, its $400K for $66/mo. approx. $800/yr, pretty close to Ari's estimate. I probably don't need it anymore, but for the cost there is no reason not to keep it. I still do a lot of the work around our place that saves us a lot of money. If something were to happen to me, my wife would have to start hiring contractors at a greatly increased cost to take care of things, so I look at the life insurance as that extra cushion for her should something happen to me.
@@BrierPatch94 You know that's what should be marketed 30-50 year olds .Crazy cheap and then try to do the correct things to your group. For me term insurance and LTC are the way to go. The rest has too many bells and whistles.
I'm 63, retired, and I've had my money in S&P 500 funds (100℅ stock) since I started investing. I have made a great deal of money with my FA Kathie and I see no reason to change. The S&P 500 has made an average of 9.8% returns over the past 100 years. International and Bond funds are losers in my opinion because they don't make much money. This is just my amateur opinion which may not work for everyone
Finding FAs like Kathie Daisy Bosco who can assist you shape your portfolio would be a very creative option. There will be difficult times ahead, and prudent personal money management will be essential to navigating them.
Thanks for sharing, I just looked her up on the web because this is equality important to me, and I would say she really has an impressive background in investing. I will write her an e-mail shortly.
Super good points! We have no kids and if one of us passes, the other will have plenty of retirement to live on, so no need for Life Insurance. Ditto with Long Term Care: Just self-insure. We're also doing that with car insurance: Self-Insure for collision.
You need car liability insurance especially if you caused the accident.
@@finned958 That's why I specified 'Collision'. Liability is required by law, for all the states I know of.
Roth conversions are not always a suitable strategy! But I have a question about backdoor Roths, which are different than conversions. Neither of us have a Roth because high income MFJ. No workplace Roth tax-deferred options. Neither of us have any other IRAs re: pro-rata tax exposure. Would you recommend backdoor Roth?
1. Open traditional IRA account.
2. Fund to annual nondeductible contribution limit.
3. Immediately convert to Roth.
Thank you for these pointers. Managing our retirement spending is my part time job. Planning our retirement travel is another part time job that has kept me very busy lately. Will need to get my Roth conversions figured out after our trip to France. Just filling up the 12% bracket this year.
LTC is just your living expenses for one month. If you have $6000 in monthly expenses, that’s the same amount to stay at an assisted living facility in a studio suite with full boarding and some additional services.
That is the way I look at it as well.
Wow, these mistakes hit home! Especially the bit about rushing into Roth conversions-definitely something to watch out for. I started using My Digital Money for my crypto IRA, and it’s made things so much clearer for me. Anyone else here taking a deeper look at crypto for their retirement?
Thank you Ari for your useful and thoughtful content. You should add “Sanitation Engineer” as your informal job title - as you definitely help us “clear the head trash,” as you say. Your videos have helped me get rid of unnecessary worry about all the scary early retirement issues - RMDs, LT health insurance and taxes - oh my! We’re going through your Early Retirement Academy and really find it useful. Thank you again for the time and intentionality with your content!
Thank you so much!!
I'm not sure why so many people love bonds, as they CAN also rise and fall in value, like stocks. Vanguard bond fund, BND, fell from $92 to $70 a share, in 2021-22 as interest rates rose. That's a 22% drop. BND is still in the low $70's. Who knows how long it will take to recover from that loss, even with the interest payments.
can HSA help pay for long term care?
What is considered early retirement? Anything before full retirement for Social Security (67)?
I'd say any time before 59 1/2 due the early distribution penalties, but opinions differ.
Not a big fan of Roth conversions, I really think there is a very limited window where they make sense. on the next subject Advisors can be very helpful if they are used more holistically and not just for tax and investment planning. Now as to LTC, I really don't know how you came up with 20k unless major health problems exist. I am 64 married and we both have LTC policies from almost 20yrs ago. These policies cost about 6k a year total and are extremely good and flexible. We purchased LTC after dealing with aging parents. Now to come full circle (or weave), one of the nice aspects of taxable IRAs is that they are more protected from health events and potential creditors than having a Roth. Now with LTC policies layered in, you have a saleable asset and peace of mind that you won't burden your loved ones.
How much does a 2nd opinion cost ?
Health care, health care, health care.
th-cam.com/video/BykvoxJEWGo/w-d-xo.htmlsi=85S0TR6CZ-m3Wc33
Roth conversions feel like a fad. What I mean by that is, everybody nowadays thinks they must do it, and they rationalize a bunch of reasons to do it, when the reality is that it's a very minimal benefit. I suspect many people are going to continue their lifestyle and they're going to be using almost as much from their 401k as their RMD would be, anyway. Even if they're not, the break even point is probably very close to their expected mortality date. You can't escape the taxes, only hasten or delay them.
Here’s when NOT to do them: th-cam.com/video/l4P3Biq74g8/w-d-xo.htmlsi=GCl1RQvYpVkFm6q3
I can pay 15% on conversions before SS or 22% (24% if TCJA is not renewed) on withdrawals after SS, I know which I prefer.
I'm thinking roth conversions are not the ticket Necessarily. I'm hoping the wife And I'll just stick under that 92k Or whatever it's gonna be, Stay in the lower tax bracket anyway. Huh. We have a good roth, And then the bulk of our retirement is in a 401/403 after twenty five years of saving quite well and doing quite well I believe.
In long term care insurance for my ninety six year old in laws Didn't go Well, Is when they failed and passed quickly. They paid for Years.. what a waste. They fought the little bit.We thought they'd cover at the end And didn't end up paying. Ridiculous
Here’s when NOT to do it: th-cam.com/video/l4P3Biq74g8/w-d-xo.htmlsi=oTpyu6VUw3Tke1K8
Hoping? RMDs are mandatory, it is easy to calculate if conversions are appropriate.
I don’t understand. In your example you state the guys $2M is in after tax dollars - SO HOW could he even do a r
Roth conversion?
What part don't you understand? You can convert any amount from an IRA to a ROTH any time. Lookup "backdoor ROTH" - if you make too much to contribute to a ROTH, you can open an IRA, fund it, and convert it the same day. Disclaimer: I've never done this and I am not a tax accountant, but I have done ROTH conversions. Income is reported on a 1099-R, and there's some code indicating it's a conversion and not a distribution.
@@ChristopherCurtis Convert any amount? I thought there were annual limits.
@@linneasimchah1621 There are annual *contribution* limits, but if you have a 401(k) with 1 million dollars you can roll it over into an IRA and then convert that to a ROTH (there may be a way to do that directly, but this is what I did with an old 401k). The conversion amount shows up as regular income that you have to pay at your marginal rate in that tax year. There are limits if you want to keep the taxed amount in the 10%, 15%, or 22% brackets, but I believe you can convert the whole thing if you wanted. You'll be paying 39% at the top rates, so that really only makes sense if you would have been taxed at the same (or higher) rate when you withdraw it from the ROTH. Again, search for "backdoor ROTH" - google is a little more trustworthy than random youtube commenters.
@@linneasimchah1621 I wrote a long reply but it disappeared. There are annual contribution limits to an IRA (traditional or ROTH) but I'm not aware of any conversion limits. Again, search for backdoor ROTH, don't trust random comments on youtube.
@@ChristopherCurtis After Tax dollars means they are NOT on a traditional IRA. You already paid the tax on the money!
Ari, I know these are all not examples but if you reach 60 there is no way someone is paying $1000 a year ($83 month) for $500K in life insurance. Life insurance skyrockets every 5 years. When I turned 60 my life insurance tripled to almost $500 a month for Term life insurance. When I reach 65 it doubled or more again. I canceled my insurance and put that money into a brokerage account.
Superhero!!
Going with 20 year term insurance in your 40s was the ticket. 20yrs can take you thru the real risky years for your heirs in most cases.
@@GuySkellenger I agree. I got a 20 yr term when I was 29, before I turned 30, that would take me to 49, before I turned 50, it was $700K for $37/mo. Then I got another 20yr term at 49 that will take me till I'm 69, its $400K for $66/mo. approx. $800/yr, pretty close to Ari's estimate. I probably don't need it anymore, but for the cost there is no reason not to keep it. I still do a lot of the work around our place that saves us a lot of money. If something were to happen to me, my wife would have to start hiring contractors at a greatly increased cost to take care of things, so I look at the life insurance as that extra cushion for her should something happen to me.
@@BrierPatch94 You know that's what should be marketed 30-50 year olds .Crazy cheap and then try to do the correct things to your group. For me term insurance and LTC are the way to go. The rest has too many bells and whistles.
I'm 63, retired, and I've had my money in S&P 500 funds (100℅ stock) since I started investing. I have made a great deal of money with my FA Kathie and I see no reason to change. The S&P 500 has made an average of 9.8% returns over the past 100 years. International and Bond funds are losers in my opinion because they don't make much money. This is just my amateur opinion which may not work for everyone
How did you manage to succeed? I want to invest more wisely because I have a lump sum that inflation is slowly depleting
Finding FAs like Kathie Daisy Bosco who can assist you shape your portfolio would be a very creative option. There will be difficult times ahead, and prudent personal money management will be essential to navigating them.
Thanks for sharing, I just looked her up on the web because this is equality important to me, and I would say she really has an impressive background in investing. I will write her an e-mail shortly.
The thoughts and ideas here are remarkable
Be careful, that lady is broke