CharlesUFarley

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eternally grateful

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I don't believe this part

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It is the reality that the modern Republican Party is an authoritarian cult.

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Joel Lieberman is holding on line 2.

He should state how much of that $12000 is Federal and how much is state and local.

A single person making $75K and taking the standard deduction only pays about $7K Federal. If he's including SS, State and Local in his 12K he's being dishonest.

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Yes, I'm pretty sure this is what will be happening during those initial 4.5 years. Rule of 55.

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Withdrawals from 401K have a mandatory 20% Fed withholding. It looks like most of your income will be in the 12% or less brackets. You will be overpaying your taxes, which means you will have to withdraw more than you need to to meet your income goals.

If you roll that 401K over to an IRA you can't use Rule of 55, but you can use 72t. The IRA doesn't have mandatory withholding, it is optional and you can set the rate. 72t is more rigid and has more gotchas. I have been doing it since 2022. Read up on the rules.

My Obamacare would have been $1100/month if I hadn't started work again. I am 60 and single. After a 4 year retirement, a former coworker contacted me about a work from home job with his company that builds on what I used to do, and so far, everything is great. Job includes health insurance. Works out great.

I see most of these types of questions to be about tax efficiency. Taxes are in some ways a bigger threat to your portfolio than inflation. Always look at the tax implications, from multiple sides.

In an old edition of Jane's Fighter Aircraft of World War 2 there is an awesome color photo of an FW-190 in action at low altitude and high speed in a camo scheme like the one below, but more vivid. It is flying over what looks like desert and the camo blends is great with the background, the photo is from above.



IF I ever find it, I'll send it. I don't have the book.

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Honestly, how many people fall into the category of earning enough where the traditional is more beneficial than the Roth?

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The sweet spot is to have enough traditional so that your trad withdrawals + SS + keeps you in the 12% bracket, then Roth after that.

Some people are late starters. They are probably better off in trad.

Sometimes plans change, such as getting married late in life, then all the math changes.

Some people want to retire early and use 72t withdrawals. If you draw your assets early, even without penalty, some of the Roth tax benefits go away. You can get by this in a Roth IRA by converting trad to Roth, but you have to have trad first.

A Roth Ladder might be very useful if you retire early, but you have to convert from trad.

Some people want to do trad now then convert it to Roth when they are retired and have lower income, therefore paying lower taxes on the conversion.

Some people want to use trad contributions to lower their taxable income to get a more favorable tax outcome, maybe to try to avoid IIRMA when they retire.

I think you'd do better to separate what you need for the first three years until your pension starts, keep it in cash, and build an allocation for the rest of your life with the rest.

If I had a pension, I would allocate my portfolio as something like:

Some amount of cash set aside somewhere for an emergency, such as a new roof or AC or having to dig up the yard and redo all the pipes.

Figure out what you want to spend total the first year total. Subtract the pension from it. Put:

2 x that amount in cash
4-8 x that amount in bonds
Everything else in stocks.

If you feel that's too aggressive increase you bond amount. If you think it's not aggressive enough decrease your bond amount.

Every year, take some money out of the stocks and/or bonds allocation and keep your cash topped off to two years. If you think an AC, new roof, or new car is in your future, those aren't emergencies, you should up your cash allocation a little. Your hurricane deductible is an emergency, but you've got to top that off if you spend it.

To me, the ratio of 25% Roth to Traditional that you already have sounds about right. You will most likely be in a lower tax bracket when you retire, so you don't want to pay 24% taxes now on your Roth contributions to avoid paying 12% later, but there are other considerations, like no RMD's and early access to contributions and conversions before age 59.5

I am 60 and returned to work after taking 4 years off. I used some of my Roth IRA contributions during that time. I am now doing Roth 401K at work even though the math says I might be better off going trad and converting later, I want the flexibility of the Roth to pay for major expenses like roofs, AC, and Moldavian girlfriends.

Edit: Saw the S-Class part later. Probably changes the math. Some Roth for flexibility makes sense, but it sounds like the bulk of your taxes both now and later will depend on the S-Corp income and the only way to get around that may be traditional 401K. Your situation is probably too unique and too complex for this board.

LINK

Read this sometime. It'll give you some ideas. I tried some of his variations and have come to a different conclusion, but the research is ongoing, I just only do it around holidays.

I prefer the Morningstar approach to buckets with a two year short term bucket that is all cash, an intermediate term bucket that is bonds and some stocks if you want, then long term that is all stocks. The way to present it is that you always keep all three buckets and keep refilling the short term bucket from the other two, so always keep two years of cash in the short term bucket.

Another huge thing that gets overlooked is asset allocation. If you buy one or two big index funds, you can't choose where you are getting your money from when you have to sell some of the fund, it is going to predominately come from mega cap stocks, whether they are up or down. If you invest in multiple funds of different market caps and stock styles, you at least have a choice.

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The top 1% of the wealthiest wage earners pay zero tax.

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Wealthiest wage earners?

The highest wage earners pay a lot in taxes. The wealthiest people typically have almost zero earned income, and get their income through investments, which is called unearned income.

Wages are earned income.

Wealth is different than income.

What was your point?