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SteveDH March 2013 Net Worth

This article was written by in Naked With Cash. 4 comments.

Naked With Cash is the year-long series on Consumerism Commentary where seven readers’ households share their financial progress on a monthly basis. I’ve partnered with financial planners who will offer some guidance along the way. Read this introduction to learn more about the series. This month, the participants and experts will be discussing tax planning as part of their analyses.

SteveDH is retired, and he and his wife have two grown kids. By the time he retired in 2008, he had reached his retirement asset goal of $500,000. His goal now is to ensure his savings last as long as he does. Read his bio to learn more about SteveDH. SteveDH is on Team Roger, with Certified Financial Planner Roger Wohlner.

This is Insurance Month at Naked With Cash, so each participant has been encouraged to share details about their coverage, and the experts will provide their perspectives on the topic.

Keep reading to see his net worth report, updated for March 2013. For SteveDH’s progress over the past year, read his 2012 summary. Following the analysis from SteveDH, Roger Wohlner will offer his own thoughts and guidance from his planning perspective. Jacob Wade, a budgeting expert who publishes from iHeartBudgets, will also provide commentary.

Roger Wohlner, CFP appears courtesy of The Chicago Financial Planner.

Analysis from SteveDH

After the cruise and trip last month, March proved a bit boring (I’m not a fan of basketball) but it was the end of the quarter so the accounting looked better.

March was a long month and since we had previously reduced our staples we spent more on groceries than normal. Otherwise, spending was down overall, despite having the garage door done and paying the other half of that bill from our general spending account. Cash flow was great, aided by the quarterly dividends and spring weather that included over a foot of snow. I told my wife that the snow should have waited a week or so then I could have hidden Easter eggs and candy in the driveway and given the grandkids shovels.

We spent 71% of our fixed income and only 58% of our total income thanks in part to the quarterly dividends. I should note here that April dividends will also be a little higher than normal because not all of the March dividends made it to the books. Because of the month ending on a Sunday and Good Friday, some of my dividends won’t be posted to their accounts until after April. This month’s topic is taxes so here goes.

  • Taxes are good. I like the infrastructure and services they provide.
  • Taxes are bad. They come out of my pocket. Too many laws make the process a total mess. We can do better, but we won’t –- at least not in my lifetime.
  • Taxes will get worse. Social Security means-testing is a broken promise that should have never been approved and there is more to come. I think that our political system has a growing depth of corruption that can’t be blamed on either party or any affinity group and our tax system reflects that growing corruptness.

I worked for 42 years and planned a retirement based on promises and programs as they existed during that time. They included free medical care for life (in return for 20 years military service) and Social Security benefits based on prior earnings — not diluted by other income sources. Neither promise was kept entirely.

Although my means are sufficient to maintain my retirement, I’ve had to make adjustments and commitments along the way to compensate for the lack of integrity within government. Maybe I deserve a nice piece of cheese with this whine but my doctor’s diet recommendations prevent that.

I can sympathize with all who try to plan for retirement not knowing which promises, either by government or by employers, will be kept and which ones won’t. I will have to fork over another $1,300 in taxes in April (most of it to the feds) because of my selfish under-withholding. Just kidding; the tax bill was actually the result of some sloppy estimating on the IRA conversion last year as I failed to include a stock sale that added over $2,600 of capitals gains to my income. The whole idea of the conversions is to avoid the 25% marginal tax bracket for as long as possible but this year I will pay 25% on $2,049 –- my bad.

Feedback from Roger Wohlner, CFP

Overall your situation looks good. My one question surrounds the continued IRA conversions. Have you ever sat down and calculated what the ultimate advantage in doing this is? You are saving some amount in taxes at some point down the road, but can you quote me a number or a range of numbers that will quantify your anticipated tax savings (presumably from not having to take required minimum distributions from your Traditional IRA)? Also what is the net present value of these savings once you factor in the amount that you have to take from your cash to pay the taxes now? I’ve never felt that an IRA conversion makes sense in your age range, but I’d love to see the numbers and be proven wrong.

Feedback from Jacob Wade

Up $6,000, nice work! Aren’t dividends a wonderful thing? As a tax professional myself, I totally hear you on the taxing issues. Let’s hope they don’t start taxing gains on the Roth IRA!!! And here’s to hoping April has some better weather heading your way.

Not much to add here except to keep doing what you’re doing. It’s awesome to see someone retired living frugally and having their net worth grow month over month instead of being depleted. Well done!

Published or updated April 29, 2013.

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About the author

Luke Landes is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View all articles by .

{ 4 comments… read them below or add one }

avatar 1 Anonymous

Roger: My plan to convert traditional IRA dollars to Roth IRA dollars was based on an article by William Reichenstein, of Baylor University, published by Kiplinger. His article challenges the tradition thinking on which assets to use first in retirement. In it, he suggest withdrawing the funds necessary to reach the ceiling of your present tax bracket (in my case 15%) each year; spending them if you need to or converting them to a Roth if you can. With my level of taxable income and modest rate of growth within my deferred savings, RMD will push me into the 25% bracket at 71. Although my plan only pushes that out 4, maybe 5 years, there will be a sum of ROTH deposits and more importantly, ROTH earnings that will be free of any tax burden. My conversions are accomplished by moving present investment shares to the Roth and paying the 15% taxes on that. So far I’ve converted almost $42k, paying about $6300 in taxes (15%). My Roth balance is over $52.5k today – that’s $10,000 I’ll never pay taxes on. If I wait until RMD the tax burden would be 10% higher on the $42k and 25% on the $10,000. RMD will push us into the next tax bracket eventually but I’m trying to delay that and save a few bucks. Trust me when I say, we are very very fortunate that we can do the things we want to do and live comfortably on 70% – 80% of our annual income. We have not entered the decumulation phase and hope to delay it as long as possible. I’ve looked at “Constant Dollar”, “Constant Percentage”, “Constant Failure Percentage”, “Mortality Updating Failure Percentage” and always come away utterly and completely confused.

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avatar 2 Anonymous

Jacob: Thanks. I also hope they don’t change the rules on ROTH assets or at least grandfather us old folks for a long long time. We don’t see ourselves as frugal per se. 100% of our needs are being met and all of our wants are too – except for those off-the-wall ones like the $100k+ private jet trip with National Geographic photographers… ;-(

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avatar 3 Anonymous

It’s great to see both needs and wants met at around 75% of your income. Bummer about the private jet trip, but maybe the prices will come down in a few years?? ;-)

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avatar 4 Anonymous

You’ve done a great job with your finances (as you already know). Congratulations on paying attention and saving for retirement. I’m glad to see you are taking a cruise and enjoying the fruits of your labor! Congratulations again!


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