Cemanuel 2022 Portfolio Thread

[cemanuel]

(06-02-2022, 04:25 PM)rayray Wrote: i know i'll be in this boat one day and will have to transfer funs from traditional ira to roth--read a little but never delved into it

is there a maximum/limit to convert??

Conversions are pretty wide open. As much as you want and as often as you want. But there are the taxes. There are other issues to consider such as income levels impacting what you pay for Medicare. That starts 2 years before eligibility so in 2025 that'll be another thing I'll have to think about.

[rayray]

(06-02-2022, 08:44 PM)cemanuel Wrote:

(06-02-2022, 04:25 PM)rayray Wrote: i know i'll be in this boat one day and will have to transfer funs from traditional ira to roth--read a little but never delved into it

is there a maximum/limit to convert??

Conversions are pretty wide open. As much as you want and as often as you want. But there are the taxes. There are other issues to consider such as income levels impacting what you pay for Medicare. That starts 2 years before eligibility so in 2025 that'll be another thing I'll have to think about.

part of the reason why i haven't done much reading/research, if any, is because still working at 51 i'm in a higher tax bracket, no reason to convert anything from ira to roth, imho. 

but another reason is i keep thinking why bother, the rules might change by the time i do retire

however, whether i work 5 years or 11 years that time will go quick--i really need to understand the process of this conversion process

[cemanuel]

(06-03-2022, 05:41 AM)rayray Wrote:

(06-02-2022, 08:44 PM)cemanuel Wrote:

(06-02-2022, 04:25 PM)rayray Wrote: i know i'll be in this boat one day and will have to transfer funs from traditional ira to roth--read a little but never delved into it

is there a maximum/limit to convert??

Conversions are pretty wide open. As much as you want and as often as you want. But there are the taxes. There are other issues to consider such as income levels impacting what you pay for Medicare. That starts 2 years before eligibility so in 2025 that'll be another thing I'll have to think about.

part of the reason why i haven't done much reading/research, if any, is because still working at 51 i'm in a higher tax bracket, no reason to convert anything from ira to roth, imho. 

but another reason is i keep thinking why bother, the rules might change by the time i do retire

however, whether i work 5 years or 11 years that time will go quick--i really need to understand the process of this conversion process

In some ways it's a bit of a shell game as you're doing something now predicated on what you think will happen in the next however many years. For me it's RMDs at 72 ( a little over 12 years) which will almost certainly catapult me into a higher tax bracket. Heck, if I used my current balances it gets me close and while I expect income levels for brackets to go up I doubt they'll be by as much as the IRA balance or my dividend income grow.

But if you could somehow guarantee that we're about to enter one of those lost decades and my IRA balance in 2034 would be about what it is now I'd say screw it and leave it alone.

[cemanuel]

(06-03-2022, 05:41 AM)rayray Wrote:

(06-02-2022, 08:44 PM)cemanuel Wrote:

(06-02-2022, 04:25 PM)rayray Wrote: i know i'll be in this boat one day and will have to transfer funs from traditional ira to roth--read a little but never delved into it

is there a maximum/limit to convert??

Conversions are pretty wide open. As much as you want and as often as you want. But there are the taxes. There are other issues to consider such as income levels impacting what you pay for Medicare. That starts 2 years before eligibility so in 2025 that'll be another thing I'll have to think about.

part of the reason why i haven't done much reading/research, if any, is because still working at 51 i'm in a higher tax bracket, no reason to convert anything from ira to roth, imho. 

but another reason is i keep thinking why bother, the rules might change by the time i do retire

however, whether i work 5 years or 11 years that time will go quick--i really need to understand the process of this conversion process

BTW, not sure if you're on SA but I think you can read some things without an account. I asked about conversions there and this resulted in quite a thread involving people who know much more about this than me. 

  SA Conversion Discussion:

[fenders53]

Ray

This certainly isn't tax advice and I don't know your finances but I would be inclined to convert some starting now. You aren't going to be happy converting huge money just as you enter retirement. Perhaps if you start now you can crowd the next tax bracket without going over the line. Just a thought and definitely read that SA thread.

[cemanuel]

I just posted this on SA.

Here's my IRA conversion plan. Remember that my Roth and IRA are TR accounts as opposed to my Taxable Account which is for dividend income.


This morning I made my first conversion. All I did was convert $1,700 cash which was IRA dividend income accrued over the past month or so. I did this for a couple of reasons. Number 1 was to see the Fidelity interface/process* and number 2 is to gauge how long it takes for converted cash to become available.^

So here is my plan for converting stocks.

1) Evaluate candidates for in-kind conversions. I have already done this. This is how I'm selecting them:

a) I'm starting with stocks showing a 20% or greater loss since I bought them in late February/early March.

b) From this list I look at those I think are likely to lead the market when it recovers. If I plan to continue holding something, what are the future potential gains and how quickly might they come? Hypothetically I could look at companies I have gains in like DG or ANTM if I thought they'd spike quickly on a recovery but starting with losers is a good way for me to narrow things down.

c) For this reason, none of my spec stocks are candidates at this time. I bought those with (almost) no expectations. LCID is a good example. I'm down 40%. But I have no idea what it will do - the company hasn't proven itself and was bought with the idea that if it went to 0, as my buy was small, it wouldn't hurt me much. No point converting something that could go to 0. So I'm looking at companies that have solid (or better) long-term prospects. If I were doing this today AMZN and NVDA would definitely be converted.

2) Set price targets to do conversions along with amounts. These are:

a) S&P 3500. This will be the first "tranche" and a fairly large one. I'm looking at roughly $70k. This would get my estimated 2022 income to around $130k, leaving me with $40k to stay in the 24% tax bracket.

b) Additional conversions as the market drops further. Right now my next tranche would be at S&P 3200. This would be for $10-20k depending on if the market starts to show signs of setting a floor. Once I make that buy I'll assess further possible levels though if I do $20k I may just sit until c) to leave me some wiggle room for Taxable Account transactions the rest of the year.

c) If the markets have a fairly quick recovery, something I do not expect, while I'll assess things on an ongoing basis, my final conversion will likely come late in the year to get me close to the $170k

I'll be making sure I'm staring at my PC at 3:30 this afternoon. I will be very surprised if today's pre-market rise holds and think there could be a heckuva drop late in the day - twitchy downward market going into a 3-day weekend? I'm as bad a person in the world as there is to pay attention to re this stuff but that sure spells late-day selling to me.

I will post moves as I make them. As a caution - once I decide something I often develop FOMO. Would I convert if the S&P starts bouncing around near the 3550 level for a couple of days? I suspect I'd ask myself what those extra 50 points are worth and do it, similar to when I sometimes buy a stock trading pennies above my target price.

NEW QUESTION: Could an in-kind conversion trigger a wash sale? Here's the possible (not likely) scenario:

I am looking at buying BBY at $65 in my taxable account. This would take me overweight. I have some shares bought in the high 90's which I'd sell after 31 days.

If I decide to convert BBY shares from my IRA inside this 31-day period, would the IRS interpret this as a stock sale? Doubt it happens - BBY is down some and I expect a nice recovery but not on the scale of some others.

*Very simple. The interface lists each holding in the IRA and gives you the option to convert some or all of it. The next point of curiosity is what price it gives me for converted stocks. I THINK it will be the price at the time I make the transfer but I've seen sites saying the actual transfer may execute a day or two later using those prices. I'll know when I know.

^Cash was available immediately. I won't know on stocks until I convert one.

[Dividend Watcher]

(06-17-2022, 06:44 AM)cemanuel Wrote: *Very simple. The interface lists each holding in the IRA and gives you the option to convert some or all of it. The next point of curiosity is what price it gives me for converted stocks. I THINK it will be the price at the time I make the transfer but I've seen sites saying the actual transfer may execute a day or two later using those prices. I'll know when I know.

^Cash was available immediately. I won't know on stocks until I convert one.

TDAmeritrade transfers in the same order as your default sell order. I use FIFO for sales. LIFO is also available.** The basis in the Roth is the same as before for the shares transferred. Fractional shares in the IRA would be split, if needed. For example, if you had 100 shares and the next 2 dividends reinvested for 0.6 shares each (for a total of 101.2 shares), then you transferred 101 shares, the 0.2 shares remaining in the IRA would be valued at the original cost also. You can also transfer fractional shares if you're moving 1 share or more (see NOTE). I don't recall the market value reported to the IRS (open/close/avg/etc.) and I'm too lazy to dig out those statements, the 1099-R, and see what the price action was that day.

(NOTE: That was hypothetical for a simple example. In reality, TDA doesn't allow <1 share balance to remain in the account and it would be sold and added to your cash balance.)

Availability is next business or 2nd day depending on when you entered the order -- after hours or during market normal hours.

Cash available next business day, IIRC.


** Don't know if specific shares ID works any more. Haven't used it in years.

[cemanuel]

June Portfolio Update:


Crazy month on the dividend side and a good sort of crazy. I made a small withdrawal from my Taxable Account to pay for an expense - I let someone talk me into a European River Cruise in December and the balance was due by 6/30. I also made my first IRA conversion. This was a small one of accumulated dividends.

The LYB special dividend messes up all the income comparisons so I tried to include these with and without it. Even without, it was a good month.

I had bought extra shares of LYB at around $113 for the special and sold those shares - as you can see from the $97 sale price, that didn't work out. That's OK, tried something and may or may not try it again if a similar opportunity comes up. But I think this is better to do in a rising market.

The WHR sale was a tax-loss move. Once BBY dropped to $65 I used that cash to make a buy. This is also a tax loss move. I am now overweight Best Buy. I have some shares bought earlier this year in the 90's so some time after August 1 I'll sell shares at a loss and get back to equal weight. That will also give me some cash to work with if I want to repeat it with another stock though I am limited on candidates.

The AOS sale was to buy BLK with higher yield and IMO stronger dividend growth.

The BMO buy in my Roth was with converted IRA dividends.

I received dividend increases from:

• AMAT
  
• LYB
  
• TSCO
  
• UNH
  
• WMS
  

Keep in mind that dividend comparisons to June, 2021 are out of whack as I didn't have the IRA then.

Very solid month though account values took a dive. I own a lot of chip companies in the IRAs and they got blasted but I'll just keep holding.

Bragging Moment: Forgive me for this. Before I ran numbers in April, 2021 my idea for funding my retirement was this:

1. Taxable Account Dividends
   
2. IRA Dividends as needed
   

The idea was simple - live without having to ever sell anything. But once I ran the numbers I realized that filling the 20% (roughly) shortfall between Taxable Account income and my projected expenses would be more efficient from a tax standpoint if I used Taxable Account stock sales. The LT cap gains vs income tax rates came to a decent amount and I own GOOGL and AAPL which are suitable for sales.

So here's the brag: If I had kept to my initial plan, July would be the first month where my combined Taxable/IRA dividends exceed my average monthly expenses. I know it's not the plan any more but it's nice to have another data point confirming that DGI really can work nicely.

I actually exceeded this level - and then some - in June but that was due to the LYB special which is not sustainable.

Plans going forward:

• I will make a large IRA Conversion at S&P 3500. No idea if we get there in July but we could.
  
• I turned off drip in my Roth. As I'm now converting accumulated IRA dividends I'll just add the piddling Roth income when I make a buy.
  
• I could sell the rest of my WHR. Those shares were bought at $175 so it would be another tax loss sale. I could either sit on the cash to re-buy it after 31 days or make a buy. TROW is a possibility.
  

Now for the numbers:


Metric                         IRAs                            Taxable                                   Total


Buys                            1                                    3                                           4

Sells                             0                                   3                                            3

Dividend Increase 
over June, 2021          251.12%              10.32%, 211.10% w/LYB            52.27%, 218.36% w/LYB

Dividend Increase 
over March, 2022        334.78%                7.30%, 202.58% w/LYB             12.34%, 134.88% w/LYB

Change in value 
over 5/31/22              -10.76%                         -7.88%                                    -9.42%

Current Dividend 
Yield                             1.74%                          3.11%                                     2.41%

Change in 12-mo 
projected Dividend 
Income fr 4/30/22          1.49%                          2.02%                                     1.82%

Organic/Internal 
annual DGR                  14.45%                        10.43%                                      N/A
 
 
Taxable Account Transactions:

Sales:

• 6/9/22 – WHR, $171.52
  
• 6/14/22 – LYB, $97.50
  
• 6/14/22 – AOS, $55.34
  

 
Buys:

• 6/9/22 – BBY, $76.00
  
• 6/14/22 - BLK, $590.00
  
• 6/30/22 – BBY, $65.00
  

 
Roth Transactions:

Buys:

• 6/24/22 – BMO, $96.64
  

[cemanuel]

Question for the group:

Should I sell GOOGL or AAPL?

I was always gonna be a bit short of dividend income from my taxable account alone but thought I could wait until 2023 before having to make sales as I had a cash pool before I retired. Two things have happened that are likely to change this.

1) Conversions. I have to pay quarterly taxes on those. I haven't made a big one yet but expect to owe over $10k to the IRS when the time comes.

2) Home Maintenance. This is not really my home but I have two older outbuildings I am doing work on. They're in good shape but have older roofs which I should replace. I'm getting quotes now.

I have an Emergency Fund but IMO neither of these are an emergency. I also have a HELOC but I've been paying it down and with interest rates going up I'm not gonna add to it. In fact if the rate gets above 6% I may just pay it off.

Neither of those two companies are integral to my dividend income. Of course Alphabet doesn't pay one at all though I continue to believe they could easily start paying one at any time. AAPL's yield is miniscule and it's increases the past 3 years have been pathetic for a company with its cash flows. My entire decision re which to sell is deciding which has better cap gains prospects going forward.

I know which I'm leaning toward but I'm interested in what folks here think.

[fenders53]

What's your other idea? Sorry but not a chance I would advise selling either down here. I own GOOGL and intend to own AAPL again if it dips much lower.

[cemanuel]

(07-07-2022, 06:34 AM)fenders53 Wrote: What's your other idea?  Sorry but not a chance I would advise selling either down here.  I own GOOGL and intend to own AAPL again if it dips much lower.

What do you mean other idea - not do conversions? Let the roofs on buildings fall in?

Edit: Maybe I should have repeated the purpose of this account:

Taxable Account: Provide me with sustainable, growing, dividend income. I will use this account to completely fund my retirement. Based on my pre-retirement budgeting I should be able to cover about 80% of my expenses from dividend income. The other 20% will come from a combination of saved cash and periodic sales; at this time those sales will be AAPL and GOOGL shares. I won't be completely passive here but other than these sales expect to do little trading here. I'm reasonably happy with what I own though I'm sure that as I pursue my quest to become the longest-lived Human Being in the history of the planet    that some companies will run into problems. Total return/value is not a primary goal of this account but it's always nice to have.

[fenders53]

(07-07-2022, 07:00 AM)cemanuel Wrote:

(07-07-2022, 06:34 AM)fenders53 Wrote: What's your other idea?  Sorry but not a chance I would advise selling either down here.  I own GOOGL and intend to own AAPL again if it dips much lower.

What do you mean other idea - not do conversions? Let the roofs on buildings fall in?

Edit: Maybe I should have repeated the purpose of this account:

Taxable Account: Provide me with sustainable, growing, dividend income. I will use this account to completely fund my retirement. Based on my pre-retirement budgeting I should be able to cover about 80% of my expenses from dividend income. The other 20% will come from a combination of saved cash and periodic sales; at this time those sales will be AAPL and GOOGL shares. I won't be completely passive here but other than these sales expect to do little trading here. I'm reasonably happy with what I own though I'm sure that as I pursue my quest to become the longest-lived Human Being in the history of the planet    that some companies will run into problems. Total return/value is not a primary goal of this account but it's always nice to have.

You asked for opinions and I gave you mine.    What would you do if you didn't own AAPL or GOOGL?  Do that instead lol.  You will rationalize whatever you do in the end.  That is what we humans do.  Maybe AAPL or GOOGL will get smacked in a few months and it will look brilliant for awhile.  Those are just two of the toughest stocks in the market to make a two year bet against.  The reason you purchased them is still valid.