Principle Preservation Is WRONG When You Retire

[disneysteve]

I would love to find a FA/CPA/Estate planner that would be able to take over in case 1. I became incapacitated (or died) or 2. both DH and I became incapacitate (or died)--for the sake of our heirs.

This is another really good point if you are married. If one of you manages the finances, which is pretty common in most relationships, you don't want to leave a mess when you die. If your system involves selling holdings to access cash to pay the bills, you had better make sure that your spouse knows exactly how you do that so that he or she can continue to do it after you're gone. And if you do it frequently, like monthly, even more so since they'll need to start making those transactions within days or at most a few weeks of your death.

On the other hand, if you have set up a portfolio from which you primarily live on the income it throws off in the form of interest, dividends, and capital gains distributions, those payments will continue uninterrupted after you die and your spouse won't need to change anything, or at least not right away. They'd have time to figure it all out and get some trustworthy help if necessary.

Of course, in either case, it's critically important to keep your partner fully informed of what you both have, where it all is, and what the plan is moving forward.

At this stage, as we're still in the accumulation period, my wife has a copy of our portfolio spreadsheet with an attached list of all of the account information and how to access it. Once I'm retired and we start drawing from our nest egg, I'll make sure she understands how to do that if something happens to me.

[disneysteve]

On the other hand, if you have set up a portfolio from which you primarily live on the income it throws off in the form of interest, dividends, and capital gains distributions, those payments will continue uninterrupted after you die and your spouse won't need to change anything, or at least not right away. They'd have time to figure it all out and get some trustworthy help if necessary.

I realized this isn't entirely true. Investments that are held jointly or by your spouse individually would be fine, but things held in your name like your IRA or 401k wouldn't keep paying out after you die. They have to be processed over to your spouse's name.

[LivingAlmostLarge]

taking the risk off the table? I agree. Of course it's hard to picture doing that when you are in the midst of accruing your savings. But maybe you get there you have a different opinion because you are staring in the face of no income but what you generate on your own.

[Like2Plan]

I realized this isn't entirely true. Investments that are held jointly or by your spouse individually would be fine, but things held in your name like your IRA or 401k wouldn't keep paying out after you die. They have to be processed over to your spouse's name.

And darned if there are decisions to be made about how to do that, too. Does your survivor spouse keep it in your name as an inherited IRA (or 401k--if the plan rules allow it) or transfer the assets over to their own IRA/401k account (there are pluses and minuses to each choice).

https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-beneficiary

[LivingAlmostLarge]

And darned if there are decisions to be made about how to do that, too. Does your survivor spouse keep it in your name as an inherited IRA (or 401k--if the plan rules allow it) or transfer the assets over to their own IRA/401k account (there are pluses and minuses to each choice).

https://www.irs.gov/retirement-plans...cs-beneficiary

depends on if you are well off enough for the spouse to not need it and maybe hand it to your children to boot!

[Like2Plan]

depends on if you are well off enough for the spouse to not need it and maybe hand it to your children to boot!

Sure, but my point is that it isn't a straight forward decision. And, the answer might be different at different points in your life. And, the tax law might change--as it did back in 2019 where the non-spousal beneficiaries no longer get the stretch IRA (with a few exceptions). Non-spousal inherited IRAs now have to be emptied within 10 years--(I believe the penalties are pretty stiff if you don't). So, it would be nice for the survivor to be able to talk to someone (who isn't going to fleece them) about best options.

[LivingAlmostLarge]

Sure, but my point is that it isn't a straight forward decision. And, the answer might be different at different points in your life. And, the tax law might change--as it did back in 2019 where the non-spousal beneficiaries no longer get the stretch IRA (with a few exceptions). Non-spousal inherited IRAs now have to be emptied within 10 years--(I believe the penalties are pretty stiff if you don't). So, it would be nice for the survivor to be able to talk to someone (who isn't going to fleece them) about best options.

fully agree what works now may not work in 10 years! It's very subjective to tax laws which appear to be changing a little constantly.

[corn18]

This is a good article that just popped up on the white coat investor site. Very relevant to this discussion.

[disneysteve]

This is a good article that just popped up on the white coat investor site. Very relevant to this discussion.

Great article. I think point #6 is really the main one for me. Don't take risks you don't have to. Yes, I could probably earn more over time with a higher stock allocation, but why? If a lower, less volatile, less risky allocation gets me to my goal, I'm good with that.

[Fishindude77]

We are pretty well diversified, so I don't have any plans to change anything quickly. However, in discussions with others, I've heard a fair amount of concern regarding their investments and what might happen with their 401k's, etc. with the change of administration.

[LivingAlmostLarge]

We are pretty well diversified, so I don't have any plans to change anything quickly. However, in discussions with others, I've heard a fair amount of concern regarding their investments and what might happen with their 401k's, etc. with the change of administration.

I also think people try to get better returns to make up for having saved too little.

[MollyClarkson]

It seems to me that the crisis is a rather unpredictable phenomenon that is sometimes impossible to predict in advance ( as it was with the coronavirus). Therefore, at this point, I don't agree with you. Otherwise, I think you're right.