Gyroscopic Investing

Posted: **Sat Oct 24, 2015 5:59 pm**

fidelity has updated and revamped the RIP planner (retirement income planner ) . you can access that tool on line .

they also have a new when to take social security tool which is not available on line .

we are going friday for a consultation and to run the scenarios in the new tool .

they told me it is quite sophisticated and requires a social security expert to be with us as well as our regular rep .

i will report back .

you may need an account to access the rip tool . i am familiar with the first version and that and fiirecalc are my two favorite .

Posted: **Sat Oct 24, 2015 9:47 pm**

Yes, please let us know how that meeting goes. I may want to do the same.

Posted: **Sun Oct 25, 2015 4:01 am**

it will be interesting to see how the social security tool integrates with the over all investment plan .

dr pfau had an interesting article last week on the subject of "bridge portfolio's "

that is a very conservative way of having a separate little portfolio to bridge you 62-70 that is mostly immune to sequence risk and lots of volatility while the rest of your portfolio is invested normally how ever you would normally do it .

so if you needed 60k in income "

you could take ss at 62 and get 22,500 from ss and 37,500 from the portfolio .

that is a 4.69% withdrawal rate .

or taking ss at 70 would have 39,600.00 coming from ss and only 20,400.00 coming from the portfolio .

so if you set a side 316,800 in a conservative bridge portfolio , at 70 withdrawals on the remaining balance drop to only 4.22% so you can actually increase to 4.69% if you wanted and draw more money by waiting .

you do not have to keep as much dry powder now for sequence risk since withdrawals are less and the ss is guaranteed .

of course in my case i doubt i would want to wait until 70 but fra is possibly an option . i am already retired and 63 . my wife took hers at 62 but so far i am waiting ..

by the way if you are delaying that does not mean you can't take extra money day 1 at 62 from your portfolio . you can , because with the just about guaranteed additional income coming in at 70 you can refill with a check that is 76% larger plus colas down the road . .

the flip side is wile delaying does give you a bigger check at the end of the day it is only a little bit bigger and you did take a bet on longevity so the pay off isn't that great.

the low rates and low inflation has made delaying a better deal then it was since with zero real return on bonds and cash a dollar next year is worth just about a dollar this year

Posted: **Sun Oct 25, 2015 8:41 am**

actually in all the years we have been doing business with fidelity i can say they never tried to sell us a thing .

we did a consultation 2 years ago and i was quite surprised no products were pitched . what was a bigger surprise was our local branch threw a gala customer appreciation dinner and had zero seminars or sales speeches . they were awarded the fidelity best voted branch so they get a prize from fidelity of a cash allowance to do a nice dinner for their private access clients .

lots of sites like social security solutions have been cropping up where they have actual knowledgeable people who depending how much you spend can run all sorts of complex scenario's for you .

navigating ss is likely going to be the biggest financial decisions most of us make and those clerks at ss are only scripted to know what they know .

integrating ss in to your own strategy and investments can get quite complex once tax implications , spending down invested assets and spousal benefit choices are involved .

it would be nice if fidelity can provide this service and integrate it right in to your actual investments .

the way effective tax rates work with ss , because you have two moving targets a single who takes just 1k extra from an ira over the threshold for getting ss taxed can see a 47% effective tax rate on that extra 1k .

so the less you have the more important it is to get things correct .

Posted: **Sun Oct 25, 2015 10:04 am**

At what age should people get serious about social security planning?

I'm 49 and I suspect the "rules" are going to change substantially as the money dries up, so right now I'm more focused on generating enough savings to survive without it if necessary.

Posted: **Sun Oct 25, 2015 10:29 am**

not so much the social security planning as much as 2nd half of the game planning .

my answer is decades before .

had i known back then what i know now i would have done things very differently , especially if i had roths available .

there are so many things linked to retirement income that even if tax rates didn't go up you would still be a head with roths .

i woul have done more roths early on , i would have over funded a life insurance policy i have . i didn't know as long as i stay under the mec limit i could have over funded it with no charges or commissions , i could have got a 4% interest floor on money sitting in a bank at 1% and borrowed it out now in retirement tax free rand never paid it back

so had i had more roth income , had i borrowed out the over funding and had i had more of my equity's in my deferred money instead of my taxable account today i would be in the zero capital gains brackets , i would be getting fully subsidized medical coverage from 62 to 65 . i would have had a lot less rmd's increasing taxes and medicare paymenst would be cheaper down the road .

once the rmd's start if i reinvest the money in my taxable acount that money is taxed forever , had it been in roths no rmd's and starting from 70-1/2 on, that money would still be never taxed unlike the reinvested rmd money . .

it takes a lot of pre structuring and knowledge to get the building blocks in place early .

if you save your ss from being taxed that is really a big bonus .

your fair share of taxes is whatever you can figure out you have to pay legally

Posted: **Sun Oct 25, 2015 10:45 am**

mathjak107 wrote: it will be interesting to see how the social security tool integrates with the over all investment plan .

dr pfau had an interesting article last week on the subject of "bridge portfolio's "

that is a very conservative way of having a separate little portfolio to bridge you 62-70 that is mostly immune to sequence risk and lots of volatility while the rest of your portfolio is invested normally how ever you would normally do it .

so if you needed 60k in income "

you could take ss at 62 and get 22,500 from ss and 37,500 from the portfolio .

that is a 4.69% withdrawal rate .

or taking ss at 70 would have 39,600.00 coming from ss and only 20,400.00 coming from the portfolio .

so if you set a side 316,800 in a conservative bridge portfolio , at 70 withdrawals on the remaining balance drop to only 4.22% so you can actually increase to 4.69% if you wanted and draw more money by waiting .

you do not have to keep as much dry powder now for sequence risk since withdrawals are less and the ss is guaranteed .

of course in my case i doubt i would want to wait until 70 but fra is possibly an option . i am already retired and 63 . my wife took hers at 62 but so far i am waiting ..

by the way if you are delaying that does not mean you can't take extra money day 1 at 62 from your portfolio . you can , because with the just about guaranteed additional income coming in at 70 you can refill with a check that is 76% larger plus colas down the road . .

the flip side is wile delaying does give you a bigger check at the end of the day it is only a little bit bigger and you did take a bet on longevity so the pay off isn't that great.

the low rates and low inflation has made delaying a better deal then it was since with zero real return on bonds and cash a dollar next year is worth just about a dollar this year

The PP could be a good bridge portfolio. That's the mission I'd put it into.

Posted: **Sun Oct 25, 2015 10:53 am**

it could be a good choice for a bridge , my choice would be the fidelity insight capital preservation model with the growth and income model for the rest of the dough .

Posted: **Sun Oct 25, 2015 1:15 pm**

I actually went so far as to convert a parent's TIRA to RIRA last year but the increase in overall taxes was not worth it, so I undid the conversion and the IRS got confoosed (what else is new). You need to do the RIRA decades ago to get the proper bang for the buck. Once its too late you're paying a high price to avoid the RMD. At least the RMD is minimal!

Posted: **Sun Oct 25, 2015 5:23 pm**

MachineGhost wrote: I actually went so far as to convert a parent's TIRA to RIRA last year but the increase in overall taxes was not worth it, so I undid the conversion and the IRS got confoosed (what else is new). You need to do the RIRA decades ago to get the proper bang for the buck. Once its too late you're paying a high price to avoid the RMD. At least the RMD is minimal!

Or you could use the money to buy an annuity, which avoids the RMD issue entirely.

Posted: **Sun Oct 25, 2015 5:34 pm**

Only certain types of annuity products are exempt from rmd's . New ones
that are approved for use in a deferred retirement account are exempt and have limitations.

All others are counted and are complex calculations

Posted: **Sun Oct 25, 2015 8:21 pm**

mathjak107 wrote: Only certain types of annuity products are exempt from rmd's . New ones
that are approved for use in a deferred retirement account are exempt and have limitations.

All others are counted and are complex calculations

Not if you convert all the contents of an IRA or 401K to an immediate annuity. That amount will no longer be counted as needing any RMDs, and there is no limitation on the amount.

Posted: **Mon Oct 26, 2015 12:01 am**

The RMD isn't really all that bad since it can be an exchange of stocks from a TIRA to a regular account. There's no forced selling and incurring capital gains.

Posted: **Mon Oct 26, 2015 2:44 am**

Libertarian666 wrote:
mathjak107 wrote: Only certain types of annuity products are exempt from rmd's . New ones
that are approved for use in a deferred retirement account are exempt and have limitations.

All others are counted and are complex calculations
Not if you convert all the contents of an IRA or 401K to an immediate annuity. That amount will no longer be counted as needing any RMDs, and there is no limitation on the amount.

in that case you can convert everything to a roth or brokerage account as well . i thought you were referring to the new approved QLACS these are annuity's you can buy now that are approved for use in an ira where they are exempt from rmd's ,

THEY DO CARRY SPECIAL RULES THOUGH :

The amount of retirement savings invested in a QLAC can’t exceed 25% of all your IRA account balances combined and 25% of each separate non-IRA account.
The 25% threshold is capped at $125,000 for all IRAs and non-IRAs combined. Under the final regulations, this $125,000 limit will be indexed for inflation in multiples of $10,000.
The QLAC must provide distributions beginning no later than the first day of the month following annuitization, with a maximum specified age of 85. The IRS may adjust this age limit in the future to reflect mortality changes.
The QLAC can’t include a variable, indexed or a comparable annuity contract or allow any cash surrender value or other similar features (subject to future changes by the IRS).

http://www.cpapracticeadvisor.com/news/ ... -rmd-rules

Posted: **Mon Oct 26, 2015 12:43 pm**

mathjak107 wrote:
Libertarian666 wrote:
mathjak107 wrote: Only certain types of annuity products are exempt from rmd's . New ones
that are approved for use in a deferred retirement account are exempt and have limitations.

All others are counted and are complex calculations
Not if you convert all the contents of an IRA or 401K to an immediate annuity. That amount will no longer be counted as needing any RMDs, and there is no limitation on the amount.
in that case you can convert everything to a roth or brokerage account as well . i thought you were referring to the new approved QLACS these are annuity's you can buy now that are approved for use in an ira where they are exempt from rmd's ,

THEY DO CARRY SPECIAL RULES THOUGH :

The amount of retirement savings invested in a QLAC can’t exceed 25% of all your IRA account balances combined and 25% of each separate non-IRA account.
The 25% threshold is capped at $125,000 for all IRAs and non-IRAs combined. Under the final regulations, this $125,000 limit will be indexed for inflation in multiples of $10,000.
The QLAC must provide distributions beginning no later than the first day of the month following annuitization, with a maximum specified age of 85. The IRS may adjust this age limit in the future to reflect mortality changes.
The QLAC can’t include a variable, indexed or a comparable annuity contract or allow any cash surrender value or other similar features (subject to future changes by the IRS).

http://www.cpapracticeadvisor.com/news/ ... -rmd-rules

I know about the longevity annuities, but am referring to standard immediate life annuities.
If you convert everything in a tax-deferred account to a Roth or brokerage account, you have to pay taxes on the whole converted amount immediately.
If you convert the balance in a tax-deferred account to an immediate life annuity that you leave inside the tax-deferred account, you have no RMDs and pay taxes only on the amount paid out every year.

Posted: **Mon Oct 26, 2015 12:55 pm**

the difference between the new QLAC ANNUITY'S and the immediate annuity when in a retirement account is unlike the immediate annuity which you have to start taking at 70-1/2 you can delay taking the QLAC for up to 15 years and the premiums do not count towards having to take rmds

Posted: **Mon Oct 26, 2015 1:51 pm**

mathjak107 wrote: the difference between the new QLAC ANNUITY'S and the immediate annuity when in a retirement account is unlike the immediate annuity which you have to start taking at 70-1/2 you can delay taking the QLAC for up to 15 years and the premiums do not count towards having to take rmds

Right, but as you have pointed out, there are also stringent limits on how much you can put into a QLAC. This is not true for an immediate annuity.

Posted: **Mon Oct 26, 2015 2:05 pm**

yeah , there are all kinds of restrictions on the qlac . not enough can be put in it for me to even consider it . depending though how much you put in the immediate annuity an the interest rates and ge the draw rate may actually be higher then the rmd's would have been .

Posted: **Mon Oct 26, 2015 2:10 pm**

mathjak107 wrote: yeah , there are all kinds of restrictions on the qlac . not enough can be put in it for me to even consider it . depending though how much you put in the immediate annuity the draw rate may actually be higher then the rmd's

Yes, the immediate annuity will probably pay more than the RMD, but it will remain at that rate rather than increasing as the RMDs do. So in later years the draw will be lower than the RMD, and you won't have to worry about increasing taxation on the ever-higher amounts.

Posted: **Mon Oct 26, 2015 2:14 pm**

the fidelity planner used to do a nice comparison of with and without the annuity and the effect on taxes and rmd's .

i have not played with the new one yet being we have a full consultation friday with fidelity as well as integrate the new social security tool which is only available through consultation .

i heard grumblings that comparison may be gone . i would tend to think not being fidelity does sell them and the effect down the road on rmd's does show a big difference .

taxes were higher early on with the annuity but lower later on .

Posted: **Mon Oct 26, 2015 4:18 pm**

MangoMan wrote: There are no capital gains taxes on stock that has appreciated within a TIRA or 401k anyway, so that's a moot point.

Its not a moot point if the RMD transfers shares out of the TIRA. I didn't know that they were not going to actually sell what was in the TIRA for cash incurring the ordinary income tax liability. But when shares are instead transferred out of the TIRA, not only do you pay cash on the transfer as an ordinary income tax liability, you have to pay future capital gains taxes when you also sell the shares. Right?

And you better have cost basis records for this also even if you thought you didn't need it because it was tax deferred. What a nightmare.

Posted: **Mon Oct 26, 2015 4:39 pm**

MachineGhost wrote:
MangoMan wrote: There are no capital gains taxes on stock that has appreciated within a TIRA or 401k anyway, so that's a moot point.
Its not a moot point if the RMD transfers shares out of the TIRA. I didn't know that they were not going to actually sell what was in the TIRA for cash incurring the ordinary income tax liability. But when shares are instead transferred out of the TIRA, not only do you pay cash on the transfer as an ordinary income tax liability, you have to pay future capital gains taxes when you also sell the shares. Right?

And you better have cost basis records for this also even if you thought you didn't need it because it was tax deferred. What a nightmare.

You won't need historical cost basis records. The cost basis after transferring the shares is the value when they were transferred, because you have already incurred taxes on that amount when you do the transfer.

That is, if you transfer $1000 worth of shares in XYZ corp. from a traditional retirement account to a brokerage (or Roth), you have to pay taxes on that $1000, and $1000 is your basis afterwards. Of course with a Roth you don't have to pay taxes on later gains (theoretically, if they don't change the laws), but either way that is your basis.

Gyroscopic Investing

fidelity revamped the RIP and they offer a new social security tool

fidelity revamped the RIP and they offer a new social security tool

Re: fidelity revamped the RIP and they offer a new social security tool

Re: fidelity revamped the RIP and they offer a new social security tool

Re: fidelity revamped the RIP and they offer a new social security tool

Re: fidelity revamped the RIP and they offer a new social security tool

Re: fidelity revamped the RIP and they offer a new social security tool

Re: fidelity revamped the RIP and they offer a new social security tool

Re: fidelity revamped the RIP and they offer a new social security tool

Re: fidelity revamped the RIP and they offer a new social security tool

Re: fidelity revamped the RIP and they offer a new social security tool

Re: fidelity revamped the RIP and they offer a new social security tool

Re: fidelity revamped the RIP and they offer a new social security tool

Re: fidelity revamped the RIP and they offer a new social security tool

Re: fidelity revamped the RIP and they offer a new social security tool

Re: fidelity revamped the RIP and they offer a new social security tool

Re: fidelity revamped the RIP and they offer a new social security tool

Re: fidelity revamped the RIP and they offer a new social security tool

Re: fidelity revamped the RIP and they offer a new social security tool

Re: fidelity revamped the RIP and they offer a new social security tool

Re: fidelity revamped the RIP and they offer a new social security tool

Re: fidelity revamped the RIP and they offer a new social security tool

Re: fidelity revamped the RIP and they offer a new social security tool