mxracer317
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I feel like my friends that golf have a cheap hobby compared to my hunting addiction.Sadly my hobbies are all cost centers not income streams
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Another retirement question
- Thread starter Lawnboy
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ILbowhntr
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having a goal is great. Kudos to you for planning ahead. Best advice I’ve heard is to live a debt free lifestyle and don’t get yourself trapped by the pressure to keep up with the Jones’s. Most Americans are leveraged to the gills. Avoid this and put away as much as you can while living your life and you will likely be fine. Retirement for you might mean fewer hours or a shift in how you spend your time. It doesn’t necessarily mean you never earn money by working another day for the rest of your life. A key part of the math for retirement is to not owe the bank or credit card folks anything. Carrying consumer debt is very expensive over a lifetime. Avoid this and it’s amazing what you can do. Good luck.
+1
It’s amazing what’s possible with an average household income if most of it doesn’t belong to a bank and cc’s. It does mean making some different choices though and not every one wants to pay that price. Damn, it’s hard to not go get a new truck
dcopas78
Well-known member
I think one of the most important things is to he debt free when you retire. One of my friends and former workers retired at 30 years service (public employee) which would have been fine had he not decided to build a new house a few years prior to retire. Poor planning as he neglected to calculate in rises in insurance costs, health issues with his wife, etc. He came back to work part time to work for me for another 10 years because he was struggling so much with the debt he owed. He retired again last June and is doing better this time around as he is debt free. To me that is the most important aspect.
SAJ-99
Well-known member
Am I the only one not interested in creating Generational wealth? I will give my kid the resources she needs to pursue a career, such as fully funded secondary and post-secondary education and a little left over for various expenses. When I die, she will get more, but I don’t want her rooting for that day. I am not creating a quasi-Kardashian without a show. (Kato Kaelin comes to mind.) I have seen and heard of lot of very wealthy families with trust-fund kids that have zero skills. Seems that money isn’t always a positive.
Most insurance products/annuities create generational wealth for the financial advisor. Do your homework before buying.
Most insurance products/annuities create generational wealth for the financial advisor. Do your homework before buying.
BigHornRam
Well-known member
I hear you. Lot of trust funders have been ruined this way. I can think of a few examples. No kids here to pass anything on to, but I do hope there is some value left in the account when I go on the last sheep hunt. Suitable wildlife and conservation org. will be the benefactor.
I think generational wealth for someone raised in the way you described will be a blessing for those around them. They will treat it as a responsibility to manage instead of lottery winnings. If you have significant wealth or questionable heirs you can put guidelines on the money through a trust that helps with the problem. No argument on the annuities and insurance, there are good products but you need to research and compare. There’s a reason insurance companies are among the largest and most profitable businesses in the world
Wildabeest
Well-known member
One of the many benefits of a trust is that the benefactor has quite a bit of control over how funds get disbursed. So rather than a big cash windfall at time of death, the trust can pay out over a much longer time period. I really struggle with the “trust fund kid” issue, and certainly don’t want my kids to become lazy and unmotivated. Having a trust helps mitigate that by allowing me to dictate how money flows from the trust to them (and their descendants) so that it acts as more of a safety net and augmenting income stream to help keep them out of debt vs. fully funding an extravagant lifestyle that they didn’t earn.
One caveat to that is the trust should distribute all of its income each year. Otherwise it gets taxed at trust rates (currently 37% federal) vs. at the beneficiaries’ personal income tax rate. So structuring the trust investments such that they appreciate without generating more taxable income than necessary is important. Capital gains tax is the same 20% for both trusts and personal, so no issues there regarding whether it’s taxed to the trust or the beneficiaries. RMD’s from retirement accounts can also have tax implications, since as was mentioned above those now need to be paid out in 10 years or less vs. over the full life expectancy of the oldest beneficiary. To avoid 37% tax on those distributions, you’d need to distribute those RMD’s to the beneficiaries. If you had a $2M 401k rolled over into a qualified IRA, that would be $200k/yr being distributed - potentially more money than you would prefer to have flowing to them. The Roth IRA strategy mentioned previously can help mitigate this since the taxes have already been paid on the principal.
I’ve also used the trust as a way to help teach my kids about investing and having your money work for you vs. the other way around. So they each have designated accounts within the trust that they have a lot of discretion over how it gets invested. My daughter is risk averse and has been sitting on a bunch of cash for the past few years. Financially, not a great choice. My son elected to buy some property which is now valued at 50% more than we paid for it 3 years ago. They’ve both learned a lot from these different approaches.
I once heard a saying about wealth that resonated with me: “One generation earns it, the next generation saves it, and the third generation spends it”. I think that’s because the more detached you are from the work that earned it, the less you value it. Kids who see their parents work hard to build some wealth will have a different appreciation for that wealth than perhaps grandkids who only knew grandpa after he retired. So the challenge here is to provide each generation with some financial security while also keeping them motivated to keep working hard. It can be a tough balance. At 55, I spend far more time pondering these dilemmas than I do worrying about whether I will have enough money to fund my retirement.
Steiny
Well-known member
My best advice would be; save all you can, get all of your debt cleaned up, then do a detailed budget to try and figure out what your spending will be.
I walked away from work about 3.5 years ago at 57. We are debt free and lived debt free for probably the final 10-15 years of my career. Maxed the 401k for many years and also bought real estate (farms) that generate annual income, as well as invested pretty heavily in a small local business where I now sit on the board and get some income from without having to go to work daily. Was self employed, so get a pretty good chunk selling the business also.
Insurance is a big deal if you are under Medicare age. We (spouse and myself) pay approx. $18,000 annually for ACA health insurance coverage that is so-so insurance with a high deductible and no dental or vision.
Toughest thing for me was trying to figure out my "burn rate" or how much money we spent annually as we were relatively high income and just spent what we needed to do what we want. I built a big Excel spreadsheet and did my best to calculate our annual spending and actually got pretty close first attempt. Shared some of this with my CPA and he said I was the only one he ever saw with line items in their budget for hunting and fishing. Several years in, we now no how much $$ we actually have to work with, what annual income will be coming in and approx. how much we spend, so we've gained a level of comfort.
The stock market and has been pretty wonderful last few years. Rolled the 401k into mutual fund type investments, have been drawing $48k annually and the principal is 20% higher now than when we started using it 3.5 years ago. I'm sure we'll see a downturn at some point. Holding off on drawing social security for a while to get the higher returns.
I walked away from work about 3.5 years ago at 57. We are debt free and lived debt free for probably the final 10-15 years of my career. Maxed the 401k for many years and also bought real estate (farms) that generate annual income, as well as invested pretty heavily in a small local business where I now sit on the board and get some income from without having to go to work daily. Was self employed, so get a pretty good chunk selling the business also.
Insurance is a big deal if you are under Medicare age. We (spouse and myself) pay approx. $18,000 annually for ACA health insurance coverage that is so-so insurance with a high deductible and no dental or vision.
Toughest thing for me was trying to figure out my "burn rate" or how much money we spent annually as we were relatively high income and just spent what we needed to do what we want. I built a big Excel spreadsheet and did my best to calculate our annual spending and actually got pretty close first attempt. Shared some of this with my CPA and he said I was the only one he ever saw with line items in their budget for hunting and fishing. Several years in, we now no how much $$ we actually have to work with, what annual income will be coming in and approx. how much we spend, so we've gained a level of comfort.
The stock market and has been pretty wonderful last few years. Rolled the 401k into mutual fund type investments, have been drawing $48k annually and the principal is 20% higher now than when we started using it 3.5 years ago. I'm sure we'll see a downturn at some point. Holding off on drawing social security for a while to get the higher returns.
brownbear932008
Well-known member
Read on doing a postponed retirement. That is my plan most likely. I will cross that bridge when I get there to fully decide. I wouldn't suggest a deferred retirement option. You lose health benefits forever. Maybe this line will help answer some questions.
https://plan-your-federal-retirement.com/postponed-fers-retirement/#:~:text=A FERS Postponed Retirement is when you separate,from service – you postpone it until later.
VikingsGuy
Well-known member
I agree. One quick caveat for those who might read too literally.
At today’s low fixed rates, mortgage debt on a reasonably price home where you actually pay it off over time and don’t add second mortgages or cash out refi is actually a very prudent way to use leverage to build a lot of equity for the future.
Not all debt is bad. Low rates against assets that appreciate is good debt. Debt against assetless spending (vacations, eating out, etc) is very bad debt, and debt on depreciating assets like boats and cars often (but not always) is bad debt too. For the average person, debt on speculative assets/investments is almost always bad.
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If anyone here is a little more than 50 years old and wants to retire a few years before medicare kicks in you might want to consider a roth conversion. Again, the Obamacare exchange MAGI looks at your adjusted income and ROTH money is not income. My buddy getting health insurance for 150.00 a month is a pretty sweet thing. But all said and done crunch the numbers of what taxes you will pay to convert it VS what you can save in health ins costs. The best time to have converted was in the beginning of the pandemic when the market bottomed out. I had 5k in an old neglected IRA and tried to covert it but once again Wells Fargo sucks balls and did not do it even though I submitted all the proper papers. Hence the reason all my other accounts are with Fidelity.
Pat- under the conversion scenario, do the funds need to be in the Roth for a 5-year minimum before withdrawal to avoid penalty?
I believe normal cash contributions into a Roth do (not positive on that), but not sure on conversions.
I believe normal cash contributions into a Roth do (not positive on that), but not sure on conversions.
D
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I think that’s putting it mildly.
Not sure, That is a good question!
mxracer317
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100% agree with all of this.
VikingsGuy
Well-known member
My wife and I agree. We have an understanding with our kids since they were teens - at 25yo you will be debt-free, have college paid for, a (practical) new car in the driveway, and a home down payment in the bank. After that you are on your own - we will be your biggest cheering section but not your bankers. They know that our will provides for a modest payment to each upon our death and the rest goes to charity. I have seen what "waiting around" for your parent's money has done to others around us and we will have none of that. Frankly, while I have reservations about many taxes, I would have a 100% inheritance tax above $5 million if I were king. Inherited wealth is a disincentive to living a productive life and is flat out unfair to those who didn't win the birth family lottery.
I like your approach with your kids, I’ll have to keep that in mind if we end up with children one day. I’d be ok with the 5 mil but you have to be able to choose where that’s going! And generational businesses could cause some issues. Sending all that to the government makes me sick with their well known ability to handle a basic budget. Can we leave it to a nonprofit for some options with that plan?
I agree 100%. My Wife and I will not inherit much of anything, and we knew that and because of it we pushed harder to build our own 401K. I know others that know they are going to get money when gramps or pops dies and any money they have burns a hole in their wallet. Hey, I admit I wish i was in their situation but I surely do not hold nothing against my relatives for not paying for my future. I just came off a local lake I was fishing on known for high end homes. My buddy asked "where do these people get this kind of money?" I responded it is generational money many times. The average home cost on the lake is 5.5mil
VikingsGuy
Well-known member
You can instruct your estate to sell the company to other investors and then give proceeds to charity. You can give 100% of your estate to charity and pay ZERO taxes - the govt only takes their 37-50% (depending on which state you are in) if you give the money to your heirs (or into a trust).
