We too are buy and hold on the market, but I do look most every day. I get stressed, but I do nothing about it. I’m happy with my asset allocation, and I hope not to need to touch the money I have in the market for many years.
IF the market goes much lower it may actually be worth thinking about ROTH conversion.
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I’d rather see Congress mandate Social Security enrollment for all US workers, and the WEP would eventually disappear. Continuing to exempt ~6% of workers doesn’t make much sense to me. (Yeah, I get that they have their own government pension plans, but it wouldn’t be that difficult to transition, it would just take years for folks to roll off…)
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It takes quite something to make that kind of a change to SS IMHO.
I do think people are taking a better look at their finances and making sure they have a very stable retirement plan.
I think we’ll wait to 70 to claim SS. Think it will mainly be used for taxes. I don’t know what offset and windfall provisions are in terms of SS.
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You would know what they are if they applied to you. These generally apply to public employees who do not contribute to SS, but get a public pension. Note…this isn’t in all states because in most, these folks also contribute to SS.
Do a Google for “offset and windfall provision social security” and you will get all the info you need.
Roth Conversions are a double edge sword. The theory is that you convert now, pay taxes and when assets rise, you will have tax free income.
But what happens if you convert and assets go down another 20%?
Example: You convert $100k and pay $25k in taxes. Investments fall to $80k. Your conversion rate of $25k on $80k would be much worse. It’s great when assets rise and not so great when assets go down.
How much do you convert and what is your marginal tax bracket once you convert. It essentially layers in additional income tax liability the year you convert.
Nothing financial. But to reduce missing out of a lower number, if you believe those to be coming, dollar-cost average on the way down. (But if you really believe teh market is going lower, wait until it hits bottom to convert.)
“How much do you convert and what is your marginal tax bracket once you convert.”
Actually, it’s your marginal rate today vs. marginal rate in the future. If you expect that your marginal rate will be the same, there is little value to convert.
btw: Conversions also reduce RMD’s.
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That’s when you have to put on your long term hat. You can also convert more when the market is down. I always convert the beginning of the year. I might do more toward the end of the year, but only incremental. Investment for retirement is long term, you will have to pay tax on your traditional IRA anyway, there’s no way around it. Either you or your heirs.
Yesterday, one of my daughters said she wished it could go back to the level she had before, I had to gently tell her, when you’re young and in the buying mode, you don’t want to pay more. Just like when you go shopping, you want to buy stuff on sale. That certainly helped her. I don’t look at my account when my account is down, why, it’s like self inflicting pain, why do it.
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Im skeptical that most people 50+ whose marginal tax bracket is over 25% would benefit from a Roth conversion. Im sure there are individual circumstances where it might make sense.
That’s just my personal opinion and everyone should make their own financial determination.
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Reaching upthread a bit - thanks for the discussion about descent citizenship. Fascinating. Seems I and both my kids would qualify for Canadian citizenship. Still trying to figure out the pros of that - although my son has pointed out that climate change risks my be mitigated by moving north…
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Canada is also affected by climate change. A vicious storm hit Ottawa over the weekend uprooting trees and electricity poles. Major damage in some places and no electricity for three days
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You may want to compare the cost of medical care and assisted living in each country if you are considering locations for retirement.
Oh… moving north to Canada to mimimize impact of possible future global warming. That’s an interesting thought, for those who qualify.
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@Colorado_mom, it is on our radar as ShawWife and my kids are dual citizens. And we own a house there.
@Jolynne_Smyth, for retirees, taxes are higher in Canada but healthcare is free. Per @ucbalumnus s, I don’t know about the relative cost of assisted living. LTC is not covered by health insurance there. So, there is a tradeoff. Pay higher taxes but get free healthcare. May be a good deal. But, unless you go to parts of BC, you will have to deal with snow and winter.
I think that real estate prices have gone extra crazy there in the pandemic.
The US is the best country to live in if you want to be the best in the world at what you do, and especially if you think you are becoming rich. For the average person who just wants to do a good job in a career but is not seeking to be great, I think the quality of life in Canada is much better. Lower risk (healthcare covered), long maternity and paternity leave when you have kids, less competitive environment generally, generally more civil. But, if you want to be great and are driven, the US is better.
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I think water in various states and locations is a bigger concern than global warming in our lifetime. Interesting about at least one past movie having Canada being the place to live after global warming making US arid/unlivable/no water/too hot climate - the movie was about a group of people making it to Canada/life and death situation.
IMHO when thinking about retirement locations, and amount of travel one wants to do - what has been going on with a look back (maybe 5 years), what is going on now, and reasonable expectations or views on what may be going on in the future - positive and negative/pros and cons listing out. Sometimes things are not put into perspective - things that may bother you on living day by day versus being at a location a shorter time. Vacationing somewhere - maybe a different mind set and budget; living there for longer periods, 6 months, or year round most likely will have much different variables to consider.
Some people really want to travel/visit a particular place - and how feasible it may be once they are retired. I know a few friends that did travel with their kids before their kids were finished with college - where they could travel coordinating schedules and also parents not having medical issues that could hamper travel. One never knows as one ages what their medical situation will be.
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Agree 100%. Also dual citizens.
Thanks. Yep, we’ve worked for a lot of companies and been self employed but never worked for a non-private company. I was getting worried as I’d never heard of it.
Where GPO/WEP gets problematic is when someone worked in a system where SS was paid in, then changed to working for a public school system (for example) that provided a pension with no SS pay-ins. (1) Their pension is reduced due to working for fewer years in the system and (2) their SS is reduced due to WEP.
I had colleagues who got into teaching in their mid thirties as a second career who get screwed as a result—smaller teacher pension + reduced SS.
Wouldn’t’t the diminished pension plus the SS benefits be about equal to what they would have gotten by just doing one or the other. In our area, people who get pensions often do very well compared to those who have saved in 401K’s.
SS benefits aren’t that great, IMO unless you can defer taking it, live in a low cost state
But the SS is decreased due to the WEP, so those second career folks do not get a full pension, nor do they get a “full” SS benefit either.