Retirement Planning - Lessons Learned

[MoKelly]

Some of America's wealthiest such as Gates and Buffet retirement planning is how to give away vast amounts of their fortunes and have advocated more giving across the higher income ranges.

It is estimated these folks have pledged $600 billion to charity.

MoKelly

 

[JethroB]

Some of America's wealthiest such as Gates and Buffet retirement planning is how to give away vast amounts of their fortunes and have advocated more giving across the higher income ranges.

I read an article once on how difficult it can be for the Gates’ to give out the huge sums they have planned. Plenty of worthy causes but finding those that can properly manage and make best use of the funds. I can understand that. The daughters of my last employer manage their deceased dad’s charitable foundation and they struggle to give out a few million each year. They get inundated with requests.

 

[goeduck]

Reading up on this... something to be aware of for your retirement planning....

According to tax foundation, some of the policy changes being supported that will ultimately impact agriculture include reducing the estate tax exemption, doing away with step-up basis, increasing long-term capital gains tax and taxing an asset’s unrealized appreciation at transfer at death whether an heir decides to sell the asset or not.

The tax proposal calls for reducing the estate tax exemption amount all the way back to $3.5 million per person, immediately or retroactively to Jan. 1, 2021. Suggestions also include increasing the estate tax rate from 40 percent to 45 percent.

 

[MoKelly]

Reading up on this... something to be aware of for your retirement planning....

According to tax foundation, some of the policy changes being supported that will ultimately impact agriculture include reducing the estate tax exemption, doing away with step-up basis, increasing long-term capital gains tax and taxing an asset’s unrealized appreciation at transfer at death whether an heir decides to sell the asset or not.

The tax proposal calls for reducing the estate tax exemption amount all the way back to $3.5 million per person, immediately or retroactively to Jan. 1, 2021. Suggestions also include increasing the estate tax rate from 40 percent to 45 percent.

Yes. It’s all in play.

It’s all double and possibly triple taxation.

MoKelly

 

[Larry Caldwell]

Reading up on this... something to be aware of for your retirement planning....

According to tax foundation, some of the policy changes being supported that will ultimately impact agriculture include reducing the estate tax exemption, doing away with step-up basis, increasing long-term capital gains tax and taxing an asset’s unrealized appreciation at transfer at death whether an heir decides to sell the asset or not.

The tax proposal calls for reducing the estate tax exemption amount all the way back to $3.5 million per person, immediately or retroactively to Jan. 1, 2021. Suggestions also include increasing the estate tax rate from 40 percent to 45 percent.

Most likely nothing will be done and the estate tax exemption will return to $5 million in 2025, as the current law says. At current prices, that's about 1500 acres. That tax-free $5 million is not a bad deal.

If you are farming over 1500 acres and haven't incorporated, you really need to talk to an accountant and a tax attorney. There are a variety of ways you can distribute corporate shares to your heirs with minimal tax burden. If you don't own it when you die, no estate tax. If you keep 25% of the shares and your spouse keeps 25% of the shares, you can own as much as 6000 acres with no estate tax liability.

It's a business. Run it like one. The whole US tax code is written to benefit corporations. You can build your own landed aristocracy with a dynasty trust, if your heirs are not wastrels.

 

[MossRoad]

Had to look up wastrels.

 

[RickB]

Had to look up wastrels.

Really?

 

[MossRoad]

Really?

Yes, really. I could guess what it meant but I have never heard that word used in conversation. Ever. Never.

 

[ultrarunner]

5 million doesn't go far when farming Napa Valley grapes...

Kind of ironic... Dad's high school friend built a iconic winery over decades and passed a few months ago...

It gave him comfort to know he had everything planned... Only a few months later the property tax situation would be dire and the timing of his passing avoided it.

In his 90's he was still working the land...

I have no idea what 1500 acres of Napa Valley grapes would bring... but no shortage of homes on a few acres with grapes selling for millions.

 

[Larry Caldwell]

5 million doesn't go far when farming Napa Valley grapes...

Kind of ironic... Dad's high school friend built a iconic winery over decades and passed a few months ago...

It gave him comfort to know he had everything planned... Only a few months later the property tax situation would be dire and the timing of his passing avoided it.

In his 90's he was still working the land...

I have no idea what 1500 acres of Napa Valley grapes would bring... but no shortage of homes on a few acres with grapes selling for millions.

It's a conundrum. Your dad's buddy didn't pay much in income taxes, because he could amortize any purchase and development costs against his taxes, and write off operating expenses right off the top. Essentially he was sitting on a tax free fortune. The 40% rate does seem excessive, but measured against millions of dollars of exemption, it's not that bad. Most really big estates are associated with successful businesses, and like farms, nobody ever paid income tax on a business investment. Heirs with their hand out think that should be a bottomless loophole and they should get the whole wad tax free.

The people who really get stroked are the nonproductive investors who try to cash out before they croak. I think the capital gains basis should be indexed to inflation. If you bought stocks in 1982 when the Dow was 800 and try to sell them today, you are paying capital gains on 265% inflation. The same is true of real estate. My home is worth about 10x as much as I paid for it, but a bunch of those gains are due to the falling dollar. Like the inheritance tax exemption, the homestead exemption will bail me out of some of that, but probably not all of it. It's less upsetting when I realize the CPI has been running 2% to 3%, while real estate has been inflating at 10% to 12%. That's not a bad investment, but I would still get stuck paying capital gains on a million bucks when, in current dollars, the gain has only been about $690k.

 

[Cat_Driver]

Did a search and didn't find any recent threads so here we go......

At 58 with the Good Lord willing my retirement window is 4 to 7 years out. Job is steady albeit stressful at times and hoping I can just ride it out and be happy until it's time to pull the trigger. Finances are in order and almost debt free! Wife and I have been truly blessed.

I hang out here on TBN hoping to buy that subcompact one day for a retirement toy. It will be the Massey GC when that day comes.

One marital debate is will we uproot and move to a retirement dream home we've always wanted or will we stay closer to home and family.

So for the experts:

- What have you learned in retirement?

- What would you have done/planned for differently?

- Did you move away or stay at home and are you happy?

Thanks for your time.

Andy in N.C.

Retire as early as possible. I've heard too many horror stories of couples "waiting" and before they retire one of them dies. They never made it to that "perfect age" get out early and enjoy life because tomorrow is promised to no one.

 

[check]

Retire? Ha! I’m going out feet first. The government forces us to start taking our pension at age 71, but we can remain working and collect both pension and salary.

 

[ultrarunner]

In a family business where all work is anyone really there with a handout windfall?

I've seen it first hand with 4 generations working a family Dairy...

The older ones slow down and the younger ones step up but all working side by side.

Small business is often good at what they do unlike large concerns that have in house legal and top firms on retainer...

My grandparents and dad and uncle on both sides never retired...

Farm records show old farmer retirement written in so many eggs, so many pigs, cows, etc... and bushels...

 

[lman]

My parents retirement plan was to sell the farm and move to a place with only 40 acres and new home.

 

[ultrarunner]

^^^Is it still on schedule?

 

[lman]

^^^Is it still on schedule?

Dad died a couple of years ago in his retirement home at 93, so I guess it worked. Mom is still there. They lived very frugally as they always did. I'm 20 miles from there and wish I could convince mom to move someplace where she didn't have to mow 2 acres at 87 years old. She leases farmland for hay.

 

[ultrarunner]

I do think Americans are more casual with Land Ownership and one stat says we move a lot compared to other industrialized nations.

When I worked in Europe it was common to visit coworkers at the family home often centuries in the same family...

Property tax was seldom a burden and passing title to the next generation taxed at a very nominal tax if done a certain way...

Life Estate is the method whereby one generation deeds to the next but the one deeding has a Life Estate which means the actual value is quite low.

If someone offered you a property but you can only occupy when the giver dies or voluntarily vacates what would you pay realizing the giver could remain for decades...

Another caveat with farms is the land passes to one person but should any land be sold siblings and or others share in the proceeds providing incentive to not sell off portions.

 

[two_bit_score]

Dad died a couple of years ago in his retirement home at 93, so I guess it worked. Mom is still there. They lived very frugally as they always did. I'm 20 miles from there and wish I could convince mom to move someplace where she didn't have to mow 2 acres at 87 years old. She leases farmland for hay.

The mowing maybe one of the things that is keeping her going.

 

[two_bit_score]

I do think Americans are more casual with Land Ownership and one stat says we move a lot compared to other industrialized nations.

When I worked in Europe it was common to visit coworkers at the family home often centuries in the same family...

Property tax was seldom a burden and passing title to the next generation taxed at a very nominal tax if done a certain way...

Life Estate is the method whereby one generation deeds to the next but the one deeding has a Life Estate which means the actual value is quite low.

If someone offered you a property but you can only occupy when the giver dies or voluntarily vacates what would you pay realizing the giver could remain for decades...

Another caveat with farms is the land passes to one person but should any land be sold siblings and or others share in the proceeds providing incentive to not sell off portions.

They have it figured out.

 

[forgeblast]

I am settling in on retiring this summer and I am thinking of investing about 20 to 25% of my liquid assets in Real Estate under a Self Directed IRA to give me some diversification outside of Vanguard and Fidelity. I asked about this earlier and I now know a little more (but not much more). Has anyone done a Self Directed IRA, even if it did not include Real Estate?

Ask at Bogleheads.org - Index page