Thanks for the great feedbackCongrats from me too. Your story was certainly interesting to follow. I'm glad you got out.
An AA is only ever going to be approximate, not exact, because it's always a moving target. It's something to aim for. Some folks use rebalancing bands, so if one area grows or shrinks by more than 5%, it's time to rebalance. Others rebalance once a year or on some other schedule, not too frequently.
What I do, since I'm living off investments, is see which asset I'm overweight in when I need money for living expenses, and then sell that thing to rebalance. So far it's always been stock.
- How does everyone do their Asset Allocation? Do you exclude Annual Liabilities or money needed in the next 6 months?
- Ex: If I have a 10m Portfolio today. Do I simply allocate 75% (7.5m) to VTI, 20% (2m) to BND, and 5% (0.5m) to Cash. As I spend down the cash, do simply rebalance then. Or
- Ex: If I have 10m Portfolio, but have 250k in Tax liability and $300k in annual spend, do I allocate the % against Portfolio less liabilities: $9.450m 75% (7.0875m) to VTI, 20% (1.89m) to BND, and 5% (0.475m) to Cash?
I don't see anything wrong with starting out by your allocating your 75/20/5 in just the way you say, bearing in mind that you're allocating across your portfolio as a whole, not in each separate account. A lot of folks, me included, prefer to keep bonds in tIRAs, stocks in Roths, and then whatever's leftover just wherever it fits. In terms of whether or not to deduct the $250k for taxes before setting your AA, that's really up to you. It's unlikely to make a big difference either way.
- Has anyone used a SEPP to reduce future Required Minimum Distributions (RMD’s)?
- So I plan on not touching my Brokerage account and letting that grow since long term Capital Gains is currently taxed at 20% rate. I can withdraw up to $319k/annually via Substantially Equal Periodic Payments (SEPP) on an amortization schedule from my IRA with no penalty at a tax rate of 24%. That beats the future 37% tax rate of RMD’s.
No, but I see your logic there. From what I can tell, it really does all come down to the tax rate, so a plan that lands you a 24% rate does seem more advantageous than a 37% rate. The issue I see is that you're losing that much tax-advantaged space each year. If it were me, I'd look into doing Roth conversions of the same amount annually, and see which works out better. That way, the money ends up in a Roth and grows tax-free. I don't know if there are upper limits to how big a Roth conversion you can do each year; someone else might be able to speak to that.
I've done Roth conversions to reduce future RMDs, though my RMDs will be much smaller than yours. I'm a big fan of Roth accounts & conversions; some aren't. YMMV.
Statistics: Posted by roguewarrior0 — Sat Oct 12, 2024 11:32 pm — Replies 25 — Views 2042