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re: Need a second opinion from the MT board!
Posted on 1/17/25 at 4:31 pm to TorchtheFlyingTiger
Posted on 1/17/25 at 4:31 pm to TorchtheFlyingTiger
quote:
Thats over $2.5m (4% SWR=$100k)
Plus second/rental home which either can generate income or be sold.
Yep. I feel like we have cushion and we definitely have SHTF measures we can take selling a house or both and moving somewhere cheaper to live if we decide to live out our final years in the USA.
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Posted on 1/17/25 at 5:10 pm to Joe D Grinder
Consider capital gains harvesting while taxable income is low and you can potentially pay zero LTCG instead of Roth conversions.
Your $650k 401k balance isnt huge so RMDs may not be a big issue (although withdrawals later could trigger tax on SS income and IRMAA if on Medicare not sure how that works for expats)
Is it possible FA biases to Roth conversion to get more assets under management thus higher fees?
Have you considered how foreign taxes on withdrawals if you change to EU residency may or may not factor in? Will new residence country honor tax free Roth withdrawal, tax brokerage or rental income?
I would caution against bonds and TIPS in taxable brokerage where they will generate taxable income tying your hands for tax optimization, ACA subsidies etc
If previous employer.(or a.future.one) supports Rule of 55 withdrwals from 401k you might consider temporarily going back to work later just to gain penalty free 401k access after 55.
Selling house while you can take advantage of the capital gain exclusion as your primary residence is probably a good idea regardless of the plan to potentially change residency for tax purposes.
Your $650k 401k balance isnt huge so RMDs may not be a big issue (although withdrawals later could trigger tax on SS income and IRMAA if on Medicare not sure how that works for expats)
Is it possible FA biases to Roth conversion to get more assets under management thus higher fees?
Have you considered how foreign taxes on withdrawals if you change to EU residency may or may not factor in? Will new residence country honor tax free Roth withdrawal, tax brokerage or rental income?
I would caution against bonds and TIPS in taxable brokerage where they will generate taxable income tying your hands for tax optimization, ACA subsidies etc
If previous employer.(or a.future.one) supports Rule of 55 withdrwals from 401k you might consider temporarily going back to work later just to gain penalty free 401k access after 55.
Selling house while you can take advantage of the capital gain exclusion as your primary residence is probably a good idea regardless of the plan to potentially change residency for tax purposes.
This post was edited on 1/17/25 at 5:39 pm
Posted on 1/17/25 at 5:31 pm to Joe D Grinder
What do you spend dining out? We spend a crap ton each month.
Posted on 1/17/25 at 6:13 pm to TorchtheFlyingTiger
quote:
Consider tax gain harvesting while taxable income is low and you can potentially pay zero LTCG instead of Roth conversions.
Hadn't heard of that before and just did a quick read. I can see it makes sense selling a stock I like and then buying it back effectively resetting the cost basis of it which will lower to CG in the future. Wouldn't I want to do Roth conversions first though since those funds will grow tax free? Plus not having to deal with RMDs.
quote:
Is it possible FA biases to Roth conversion to get more assets under management thus higher fees?
you're likely not wrong. However, I've been very clear and up front my 401K funds that I convert are going into my Vanguard account. I have $450k with NWM that they're getting 1% on and again, i was upfront about selling those non-quals first because I don't want to keep paying 1%. Regarding living circumstances and taxes, we plan on coming back home to Hawaii too, so we're not going to be doing permanent EU residency for me for a while, if ever. Wouldn't sell our actual primary for a while since it allows for us to have a home waiting in Hawaii and everything covered even if we don't rent our portion out. We may only switch classification of primary to a non tax state if we sell the condo. Still can wrote off the mortgage on our second home if we do change the primary.
Thanks for the advice on TIPS and everything else. Let me know if anything I'm saying doesn't make sense.
Posted on 1/17/25 at 6:16 pm to Billy Blanks
quote:
What do you spend dining out? We spend a crap ton each month.
We eat at home a lot but with traveling that will obviously change and be a big part of expenses. We will plan to do more long-terms stays where we go and rent places with kitchens so we don't have to eat out every night. And especially because we're foodies so eating out isn't cheap for us
Posted on 1/17/25 at 7:33 pm to Joe D Grinder
quote:
Wouldn't I want to do Roth conversions first though since those funds will grow tax free?
Maybe, but you'll need to draw from brokerage pre 59.5 to live on anyway so may be good to lock in basis w zero LTCG instead of paying 15%+. Also, once basis is reset you'll be able to reallocate in brokerage without realizing larger capital gains. You have decades to manage the 401k balance down to avoid massive RMDs. I wouldnt be surprised if the zero LTCG rate gets closed at some point in future. I suspect the lower income tax brackets will still be around even if they shrink gradually. Just read that Hawaii taxes LTCG at 7.5% so perhaps best to wait until you move states. Looks like maintaining Hawaii residency is gonna be a big tax drag just for a convenient place to drop your bags. Another consideration, if you didnt have other income from rentals etc a sizeable Roth conversion could be done at zero tax rate using the standard deduction then you'd still have space to harvest +$90k LTCG tax free. Rental income, interest income etc are consuming that tax free conversion space provided by standard deduction so you may want to plan to convert when you no longer have those income streams. Roth conversion vs taxable warrants a much closer look just offering it up for consideration.
Posted on 1/17/25 at 9:24 pm to TorchtheFlyingTiger
quote:
Roth conversion vs taxable warrants a much closer look just offering it up for consideration.
planning on doing a thorough look into thisPosted on 1/17/25 at 10:13 pm to Joe D Grinder
Looked up Hawaii income and capital gains taxes. Ouch, that's gonna be a real drag on efficient withdrawals if you dont change residency. Have you thought about 1031 exchanging the rental for a property in a tax friendly state and eventually making it your primary? That might buy you a few more years to use your home in Hawaii as primary then occasionally while renting it but sell just before losing the primary residence exclusion meanwhile you establish residency elsewhere for tax purposes and after few years (think you have to rent 1031 for 2 years then live in it for 3) you can sell that w gains exclusion too if you ever.choose.
Posted on 1/18/25 at 5:22 pm to TorchtheFlyingTiger
My condo was my primary and then I bought a house and made it the primary. Been renting my condo off the books. So 1031 would require me to report it as a rental first to do an exchange into another investment property. But I'm not sure that would work if I want to make that property my "primary" in a non tax state right? But yes Hawaii loves its taxes 
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