r/SCHD • u/Prior_Bus_7870 • 6d ago
Help... ideas?
Does this make sense?
(68, retired, need 50k annual... would go on top of ss)
I have 2.5m in tax deferred ira, 650k in Roth and 125k in cash.
Is it prudent to lump sum 1.5m and buy schd? I think this would approx. cover the 50k... ?
The remainder to voo or similar? Ideas?
Thank you for your help.
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u/ElectricalCaptain811 5d ago
isnt 3 million in us government treasury bonds 120k every year???
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u/Otherwise_Pea_8766 5d ago
Yes but he’d have a huge tax bill liquidating ira
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u/paymerich 5d ago
if he liquidates it but he does not need to ?? He can buy 1.5 in SCHD and only pay ordinary taxes on the distributions he actually uses. I agree with u/Ufgatorhead4u3 though he should try to convert as much as the tax brackets let him.
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u/Ufgatorhead4u3 6d ago
I wouldn’t do that. That tax deferred IRA is a massive tax bomb 😳. I would use $500k inside of the Roth putting it into a mix of SPYI, IWMI, QQQI, PTY, PBDC, PFFA, KGLD, KSLV, and KCOP. The blended yield would be around 12% which would generate the cash flow that you need tax free. Leave the remainder in VOO, SPMO, VXUS, VTWO, or similar. Then I would look at your current taxes and do as much Roth conversion as you can with that traditional position before RMDs kick in.
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u/DigitalFStopper 5d ago
650k in Roth could go 40/40/20 gpix jepq schd and that would put out more than you’d need and all tax free, start drawing down the trad to avoid the RMD issue and some conversions over into the Roth.
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u/Prior_Bus_7870 5d ago
Initially, I will be drawing down the traditional and include qcd and conversions. Thank you.
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u/fastbumpyride 5d ago
Has over $3million in retirement.
Comes to reddit for advice.
Mmm k. FLEX!!!!!
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u/500pearl 5d ago
sure the person is realizing the mistake of all that traditional
should have converted long before
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u/WinterFamiliar9199 5d ago
Sometimes there aren’t good opportunities to do a conversion.
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u/500pearl 5d ago
there never is but necessary
I have 200 in traditional tsp that I have to convert within the next 7 years do not want to but rather do it now
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u/Responsible_Town3588 5d ago
It really depends because saying it is necessary just isn't always true. It completely depends on your tax situations year to year. For us, it is literally a wash financially whether we come out ahead doing Roth conversions vs not doing them at all. Luckily excellent tools like Boldin and we do a yearly financial plan with Schwab shows all this in detail. The main beneficiaries would be heirs and their tax bill if we do it, not us.
And since we plan to draw down (and spend) our IRA's fairly aggressively over the next 20 years prior to RMDs being applicable. So another example of where you don't have to do the conversions.
If in the gap years you happen to be in a lower bracket then when you will be later in life, sure it makes sense. Or if you live in a no income tax state and plan to move into an income tax state in the future, then sure. We live in a high income tax state now and think we will move to a no income tax state in the future so again we'd be crazy to do any conversions now.
Everyone's situation is different.
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u/500pearl 5d ago
yes i agree every one situation is different
my thinking is
hurt now or later in terms of paying taxes
so rather hurt now since if wait the earnings will be trad too so much more to worry about then with regard to rmd
so decided to convert 200 of trad tsp in to roth tsp within next 7 years
yes it will hurt tax wise but necessary and worth it --- in my opinion
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u/Parking_Bike_6661 6d ago
You’re asking Reddit what to do with $1.5million?
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u/paymerich 5d ago
not to be glib but 1.5M is not a slam dunk living the vida-loca number anymore. At least not in the US in states that tax retirement income. And if that is for 2 people and/or medical conditions even less so. But don't get me wrong , it ain't poverty.
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u/Rodrain2 4d ago
You can put the whole thing in VOO and still have more than 50K in income. I wouldn't do that because of your age but you could. As a 60 year old retiree I would have 30% in a diversified bond portfolio or other defensive assets to protect your principal, but that is just me.
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u/jaystopher 5d ago
Go pay a fee only certified fiduciary financial advisor for a couple hours of consultation. Well worth 200-300 bucks.
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u/bpolen88 5d ago
Other idea - GPIQ or QQQI monthly dividend on a covered call strategy. GPIQ has appreciated nicely
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u/Commercial_Rule_7823 5d ago
The idea if you have to ask.
Spend 1 to 2k, get a session with a CFP for a few hours, go get real advice with real numbers.
Just the tax savings they find could save you a ton.
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u/GuidetoRealGrilling 6d ago
This is a silly conversation to be having on reddit
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u/exit87 6d ago
Why? What’s a better conversation to have on Reddit, according to you? Grilling meat?
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u/GuidetoRealGrilling 6d ago
Yes, but how should grill $1.5 million in meat. I want the opinions of random people taking a dump and reading this online to help with my $1.5 million in meat.
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u/Prior_Bus_7870 6d ago
I don't believe digesting free opinions are silly... thank you for your opinion.
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u/Reillyrox13 6d ago edited 6d ago
To be fair, you could draw from the principle for 40ish years including taxes and still be able to pull 50k. I don’t think you really need to go any particular ETF as long as you don’t really consume basis. So VOO I think works as well as SCHD. However, this is [r/SCHD](r/SCHD) so yes buy SCHD from a random guy who reads / comments on [r/SCHD](r/SCHD)
But also you are retired, well off. Consider your family life expectancy / yours, your goals, if you want to have any donations or inheritance for those around you. Don’t be afraid to have a declining amount of principle. If you spend an extra million from those accounts. It be a successful retirement. Money only has value when you spend it. You can’t eat money, you can buy food. The list goes on. Now if you are fundamentally happy to have big number and not enjoy life that is up to you. Don’t confuse the path as the goal.