Chapter 79 [Manage money wisely and retire richly! 】

Source:https://www.facebook.com/100063294665283/posts/727991155987367/

[The Origin and Today of James] Chapter 79 - [Manage money wisely and retire richly! 】(11/01/2023)

Today a friend mentioned his preparation for retirement and how to best arrange it:

The teacher uses this case to illustrate how to manage money wisely and retire richly.

Hello James:

Since I heard about your Clubhouse investment property at the end of 2021, I will definitely listen to it every Saturday morning when I have time. I strongly agree with the teacher’s point of view, and I feel a little bit late for meeting you. At the beginning of 2022, I gradually converted the bonds I bought before to QQQ. The purchase price ranged from $394 to $265, and now I have gained.

I listened to 80%QQQ, 10%QLD, 10%cash last week, and I plan to allocate as well. But I have some questions that I would like to ask the teacher. The following is my background:

1. My husband has retired and his two daughters are doing well in starting a family and starting a career. I will soon have Medicare and plan to retire. Would the above distribution be too aggressive? Want to be more conservative?

2. Most of our money is in 401K (100%s&p500 fund), which is about 1.85 million, and we plan to transfer it to a Roth IRA every year (after retirement at the age of 65 in 2025, we plan to earn 150,000 to 200,000 a year with a tax rate of about 22%). Currently, the two of us have a Roth IRA of about 500,000 (mostly QQQ), about 150,000 cash on hand, and a total net worth of $2.5 million. (Real estate not included). After retirement, the teacher recommends how to collect living expenses from which account first?

3. There is no loan for a self-occupied house with a market value of about NT$3 million (you have to pay a lot of tax when selling it after living there for 28 years). There is also a brand-new health village in Taiwan with a current market price of about NT$18 million. It can be moved in after retirement or rented out. Paid Cash no loan.

4. We plan to start receiving SS when we are 67 years old (FRA). Together, we can receive approximately US$6,000/month (or our teacher recommends withdrawing it earlier). The estimated annual cost is about 100,000.

5. Does the teacher recommend selling the house in the United States? Then deposit into Charles Schwab brokerage account to buy QQQ and apply for PAL? Do I need to apply for a Living trust first? (If you return to the United States, you can rent a house or Airbnb or stay at your daughter’s house).

I have wanted to write this letter to ask the teacher for a long time, but I have been putting it off until now. I hope to hear the teacher’s suggestions. Thank you.

Thank you for your letter. Here is my reply to your question:

your total assets

Traditional 401K 1.85 million (because the tax has not been paid, only 70% can be used to calculate assets, so the net value of 401K assets can only be calculated as 1.295 million)

ROTH IRA 500,000

Cash 150,000

Total current assets = 1.945 million (129.5+50+15)

If fully invested, only 58,000 funds can be used each year. (194.5 times 3%)

You are expected to spend 100,000 a year. The pension reserve of 58,000 is still short of about 41,600.

If you can start receiving social security benefits at the age of 62 1/2, that is a 30% discount on 6,000 per month, 4,200 per month, and 50,400 per year. After adding the previous 58,000, it comes to 108,700. It is possible to retire and live a life of 100,000 US dollars a year.

Now Charles Schwab's PAL does not need to set up a living trust first. As long as the beneficiary beneficiary is specified in the PAL BROEKRAGE ACCOUNT, it can avoid probate.

So, you have several options you can do:

Option 1: You don’t need to sell your house, you can collect social security benefits early, so that you can live a retirement life of $100,000 a month. Otherwise, you may have to save money before receiving full social security benefits.

Option 2: You can sell the house in the United States and deposit 3 million into Charles schwab. In this way, your total assets (129.5+50+15+300) = 4.94 million. Applying for PAL can cost 148,000 per year (494 If you don’t receive social security benefits until you are 67, you can spend 220,000 a year (6000 x 12 + 14.8 = 220,000)

Option 3: I think you have plans to retire in Taiwan. If you have not considered retiring in Taiwan, you may consider renting a house to retire in Taiwan. Only then will the assets in Taiwan worth NT$600,000 plus other (129.5+50+15) assets amount to a total of NT$2.405 million, which can be spent a year at NT$72,000. Adding in the immediate receipt of social security benefits a year (NT$50,400), the total amount can be spent by NT$122,550 a year. (Or you can sell the Taiwan Health Village and rent it instead. It may have more choices and flexibility.)

If you sell Taiwan Health Village for 600,000, plus ROTH IRA 500,000 plus cash 150,000, and put them all together in a brokerage account, you can also apply for PAL if you have 1.25 million. Borrow money to live your retirement life without spending your social security funds. It can be directly deposited into your PAL brokerage account to increase your pledged assets and borrow money to live your life.

Which of the above options you prefer depends on your comfort situation.

Your situation is pretty good. It might be better if you could take the following precautions when you were young:

1. It would be better if you allocated ROTH instead of traditional IRA when you were young. Now your $1.85 million in a traditional IRA can only be calculated up to a maximum of $1.29 million in retirement assets.

二、一般的brokerage account 资金太少，不利退休做 PAL 借钱过日子。变成一定要卖自己的资产过日子（还得缴资本利得税。）。 Loss much of the tax-deferred effect of asset appreciation.

三、购买养生村太偏僻，其实不利养老，有没有弹性。养生村要方便性，台北也有很不错的养生村。 You can move in without spending a lot of money to buy a wellness village.太偏僻养生村 可能会住不习惯，购买之后住不习惯就比较麻烦。

It is best to try to stay in the health village for a year before deciding whether to buy or live long-term. In fact, everyone knows that I do not recommend buying real estate, and health villages are no exception. Renting is enough, and you don't have to live there for a lifetime. The rent remains flexible, and future generations will save a lot of trouble in dealing with overseas assets.

Fourth, it is good if you plan to transfer money to ROTH IRA in batches every year (remember to transfer traditional IRA to ROTH IRA, do not transfer to general brokerage account). If you really need the money, then see how much more money you need to transfer from ROTH IRA to brokerage account to live.

Fifth, it is best to apply for PAL and borrow money to live. This is the best asset management plan. Therefore, regardless of age, everyone should try to reach 1.5 million in brokerage account as soon as possible, apply for PAL quickly, borrow other people's money to spend, and your assets will continue to increase in value.

Sixth, if you have PAL, the sooner you collect social security benefits, the better. You can receive social security benefits and deposit them into your PAL brokerage account to invest in QQQ. You don’t need to spend social security benefits. You can increase your pledged assets and borrow money to live.

Seventh, the general retired group, if the brokerage account assets are sufficient, apply for PAL to borrow money to live. If they need to replenish PAL assets, first transfer from ROTH IRA to PAL brokerage account. There is no need to use IRA expenses by rolling over a traditional IRA to a ROTH IRA every year.

Eighth, if the brokerage account has insufficient funds and cannot apply for PAL, (I believe that the assets of such a retiree's ROTH IRA account must not be high.) The order of using money is to transfer as much as you need from the traditional IRA to the brokerage account for living expenses every year. Do not withhold taxes, at least pay taxes later, and borrow government money for a period of time. Of course, the final taxes still have to be withdrawn from the IRA and paid.

Ninth, if you have a PAL, do not withhold taxes when you transfer from a traditional IRA to a ROTH IRA. Instead, let all the money go into the ROTH IRA. This will have the effect of tax deferral and borrow the tax from the government for at least one year. (Although there may be a small penalty, it is not high.) You can borrow money with PAL to pay taxes. If the brokerage account has sufficient funds to pay taxes, no taxes will be withheld even if there is no PAL. At least pay your taxes later and borrow money from the government for a while.

The above is an answer to the question of this friend who is about to retire. Using this practical case, we can also help everyone understand and clarify how to do asset planning. Start from a young age and do it right from a young age. This will save a lot of trouble and increase a lot of assets when you retire. You can live a more comfortable retirement life.