Looks like you are doing well. We are missing a few pieces of information: annual expenses and marginal tax bracket (effective tax bracket doesn’t tell us much).
Thanks so much for your detailed response! I really appreciate it. Annual expenses, including mortgage, are about $160k. Marginal tax bracket is 24%.
1. Couple of things, you have VT in both your taxable account and a tax deferred account. It’s best not to hold identical funds in both places. Have a slightly different fund in taxable to avoid any wash sales if you happen to be selling something for a loss. If you are going to have international in taxable it’s best to use VTI/VOO + VXUS instead of VT, with VXUS, you get the foreign tax credit vs. no foreign tax credit for VT. Not sure how big your cap gains are in taxable in VT, but it might make sense to exchange it or not.
Thanks! I am not that well versed in the various Vanguard ETFs, so this is really helpful. To explain a bit more about this, I recently sold all of the individual equities in my wife’s IRA and purchased VT. In the taxable account, I also recently sold all of the equities that I had a loss on and purchased VT. It sounds like after 31 days, I should think about maybe moving from VT to VTI/VOO + VXUS in the taxable account, as you mentioned. I will look into that. As far as LTCG in the taxable account on the remaining holdings, the gain is about $94k, so struggling with having to pay that huge bill in 2026 if I sell.
I would pay off that car loan immediately, that’s a high rate, above any MM or CDs I’ve seen.
Thanks! I hate debt, so this is interesting to me. Don’t have a ton of cash on hand, but are you thinking it would make more sense to take the money out of the emergency savings account or taxable and pay it off and then just invest the monthly payment going forward?
ETA: have you checked what the best social security claiming strategy is? This is the Boglehead recommended tool for that: https://opensocialsecurity.com/
I have used some different ones, can’t recall if I did this one or not. I will check it out. From my recollection, the difference in waiting was somewhat small and I thought the earlier we took it, the less we would have to dip into our other accounts.
2. Not sure what your goal is because we don’t know what your expenses are and whether your pensions and eventually social security will largely cover them or not.
The pensions and social security will cover about half of the expenses at 62.
I don’t see Roth IRAs for either of you. I would open one up for him and divert $8k from your taxable contributions to “his Roth IRA”, not sure what your AGI is, but you could do a backdoor Roth IRA if it exceeds the threshold for direct Roth IRA contributions. Use a stock fund in Roth like VTI or VOO (just make sure it’s not one you are using in taxable). For her, I’d also open a Roth IRA, but hers is trickier if you exceed the Roth contribution threshold because she has that rollover IRA. She is prevented from doing a backdoor Roth IRA because of that rollover IRA. If she has access to a 401k or 403b at her work, she might be able to roll the Rollover IRA into it to clear the way for her to also do a backdoor Roth IRA. If she is currently prevented from backdoor Roth IRA contributions, you still might want to open one up and backdoor $1 contribution, so she can get that 5-year clock started on it.
Yes, we are ineligible or at least mostly phased out of a Roth, but will definitely look into doing the backdoor Roth for me. That’s an interesting thought about hers. I will look into whether or not whether her 457b allows for rollovers.
In my opinion Roth > taxable, because you never pay taxes again. You can withdraw Roth contributions at any time (even before 59.5), just not the gains.
This is a good point and we definitely need income to bridge the gap for when we can tap into the qualified accounts.
Since you are retiring under 59.5, do you know where/how you will pull income needed above what you’ll receive from your pensions? I assume you can pull money from “her 457”, usually can pull from 457s after separation (no min age requirements). You can obviously pull from taxable too. Are you planning to do Roth conversions? What will you do for healthcare till you reach Medicare age (65)? Do your expenses factor in healthcare and taxes?
Yes, I think we will use both taxable and the 457 because as you said, once she separates from service, she will be able to use that. I have also considered the rule of 55, but that would mean I have to leave my 401k at my employer for a bit instead of rolling it to an IRA. As far as health insurance goes, we can both purchase from our places of employment and I can even go on hers at that time. I do have $28.8k in our plan for pre-Medicare insurance premiums. That may be high, but I tend to really make my numbers conservative.
3. On the individual stocks, I also have some from pre-Boglehead days, which I’m slowly selling off. You may be able to sell them in the 0% CG bracket once you retire.
Yes, was thinking this too. Depending on how much our income is when we retire, we could definitely take advantage of the 0% LTCG.
ETA: for those individual stocks with small positions (<$10k), it might make sense to go ahead and pay the small amount of taxes and move them toward your desired assets…
Thanks. Keep the comments coming. I love it.
