In the 5 years before I retired, I spent a lot of time managing our money as I prepared our portfolio for the transition from the “Accumulation Phase” to the “Withdrawal Phase”. If you’ve been a long-time reader, you’ve read all about it. (If you’re new, check out my 2015-18 posts in the Archives.)
As I mentioned in The 90/10 Rule of Retirement, I’m spending a lot less time managing our money now that I’m retired. But still, SOME time is required. How much, exactly?
I was curious about that, so I decided to break it all down. Below, you’ll find every task I do while managing our money and how much time is required for each. It’s also a handy checklist of what items you may want to consider doing as you manage your money.
Voyeurism at its finest…
Now that I'm retired, how much time do I spend managing our money? Today, I'll give you every task and the time required. Voyeurs, rejoice. Click To Tweet
How Much Time I Spend Managing Our Money
Below is every step I take during the course of a year while managing our money, along with a brief explanation and an estimate of the time required. Under each step, I’ve included links to previous articles which provide more details for those who would like to dig deeper.
In the conclusion, I’ll provide the final estimate of how much time I spend managing our money over the course of a year.
The final figure surprised me…and adds further verification of The 90/10 Rule of Retirement!
1. Managing The Bucket Strategy: 5 hours
I’ve been pleasantly surprised by how little time is required to maintain our Bucket Strategy now that I’m retired. We have a “paycheck” automatically deposited into our checking account every month from our CapitalOne360 account and know we can spend whatever we have in checking each month. No budgets, no monthly tracking. The main tasks involved in managing our money for the Bucket Strategy are summarized below:
A. Quarter Re-Filling of Bucket 1: Every quarter, I review what we’ve spent from Bucket 1 and determine whether the markets have been sufficiently generous to allow a “refill”. I attempt to keep Bucket 1 “full” (~3 years of cash) to maximize my protection against the sequence of return risk, though I’m fine in drawing it down in the event of a market downturn.
B. Rebalancing our Asset Allocation: In conjunction with the quarterly refill, I also take a quick look at my Personal Capital (affiliate link) account to check our Asset Allocation vs. our target (60% Stocks / 30% Bonds & Cash / 10% Alternatives). In a quick 5-minute glance, I can tell if our stock allocation has exceeded our 60% “ceiling”, triggering a rebalancing.
In addition, I do some “Bucket Strategy” maintenance during our annual financial review, which I’ll address later.
Further Reading:
- How To Build a Retirement Paycheck (The Bucket Strategy)
- How to Manage The Bucket Strategy
- Your Bucket Strategy Questions, Answered
- A Guide To Achieving Your Targeted Asset Allocation
2. Executing An Annual Roth Conversion: 3 Hours
In our Retirement Drawdown Strategy, we explained that we had “too much” money in our pretax accounts, and have been following our strategy of executing a Roth rollover every year since I retired. We “top off” our marginal tax bracket every year, and identify the targeted amount when calculating our Estimated Quarterly Taxes (see section below). Throughout the year, I enter our income into a simple spreadsheet to ensure our estimated Roth conversion amount remains accurate (1 hour), then execute the conversion in September (2 hours).
Unfortunately, the process of converting from our Vanguard 401(k) to our individual Vanguard Roth is frustratingly manual and requires several phone calls and “snail mail” paperwork to execute the conversion. Time well spent, given it should lower our total tax burden over the course of our retirement. Our 401(k) process with Vanguard does NOT include the withholding of taxes, so I manage that through Estimated Quarterly Taxes (see the next section). I actually prefer that they don’t withhold, since I’d prefer to pay my tax bill with after-tax money instead of having a portion of the conversion be diverted to Uncle Sam.
Further Reading:
3. Annual Tax Filing & Estimated Quarterly Taxes: 3 Hours
My annual tax filing process is simple – I throw all of my tax forms in a folder and deliver it to my CPA. I keep a notepad in my tax file with the dates that all of the forms are received every year, so it’s a simple process of checking them all off as they come in to make sure we don’t miss any. I spend a bit of time reviewing the tax return before filing, then get on with life. Estimated time: 1 hour.
The Estimated Quarterly Tax issue is a new one for us in retirement. Every year after we get our tax returns back, I update a simple spreadsheet with estimated earnings for the new year and calculate how much of a Roth conversion we’ll target to hit the top of our marginal tax bracket. Based on this, I fill out and print the quarterly tax forms (State and Federal), put them in a file for quarterly payment, and enter reminders on my calendar when each quarterly payment is due. I also ensure our bucket strategy expense estimate reflects an accurate estimate of the taxes we’ll be paying each quarter. Estimated time: 1 hour.
Finally, I also make the maximum contribution to our HSA every year, a simple online process that takes ~15 minutes. Including the drive time to my CPA, we’ll call it 3 hours in total.
4. Trading Options in My “Fun Money” Account: 6 Hours
I’ll admit it, I like to trade.
Fortunately, I’m aware of the damage that can do, so as a primarily “Buy and Hold” investor I scratch my itch by trading options in my TD Ameritrade “fun money” account (<5% of our portfolio). I wrote about it in my Option Trading Strategy post a few years ago, and I still follow that basic strategy.
In short, I sell put options (an obligation to Buy the stock if the price is below the “strike price” at expiry) on stocks I’d like to own, and sell call options (an obligation to Sell the stock if the price is above the strike price at expiry) on stocks I already own that have had an acceptable increase in price since my purchase date. In return for those obligations, I receive an “option premium” payment, which typically yields ~10% annually.
It’s a fun little “hobby” and generates a bit of extra cash flow. I keep my trades small and only make a few a month, but I enjoy the process. It also gives me something to talk about during my occasional lunch meetings with my 85-year-old friend, Ed, who actually wrote a book on option trading. We smile as we realize no one else in the restaurant has any idea what we’re talking about. If nothing else, the trading pays for lunch…
Call it 30 minutes a month (excluding my lunches with “may all your options expire out-of-the-money” Ed – wink).
Further Reading:
5. Paying Monthly Bills: 0 Hours
We all have to pay our monthly bills, right? Not me. It was a chore I detested earlier in life, and my wife offered to take on the task as her “money role” in our household. I manage the “investment stuff”, and she manages “the bills”. It’s a nice arrangement and it works well for us.
I haven’t paid a monthly bill in ~30 years, and I appreciate my wife volunteering for the burden. Just one more reason why I love that woman! (Yes, I’m a lucky man, and am thankful for the 34 years I’ve enjoyed with my bride).
6. Conduct A Year-End Financial Review – 3 Hours
The most important part of managing our money is our comprehensive Year-End Review, which I conduct each year in early January. As outlined in my free Financial Review Checklist, the following are the key steps taken:
- Update Your Net Worth
- Capture Your Current Asset Allocation
- Determine Portfolio Rebalancing Actions
- Update Your Bucket Status
- Update Your Spending for the Previous Year
- Establish Your Spending Limits for the New Year
I only update our Net Worth once per year, and it is one of the most important steps in our annual review. Based on the updated Net Worth, I establish the “guardrails” for the following year’s spending levels and revise the automatic paycheck in our Bucket Strategy accordingly. It’s also when I capture our actual spending from the previous year to ensure we’re staying within our pre-defined limits. Capturing our spending is as easy as comparing our Jan 1 vs. Dec 31 balance in our CapitalOne account.
Having done a year-end review for 20+ years, the process is efficient and takes an estimated 2-3 hours. They’re the most important hours I invest in managing our money in the course of a year.
Further Reading:
Conclusion
Drum Roll, Please! As promised, my grand total time allocation required for managing our money is….
20 Hours!
Given there are 365 days in a year, that works out to just a tad over 3 minutes per day!
Going a step further, there are 8,760 hours in a year, so my 20 hours equates to just 0.23% of my time in retirement! Hmmm, worth a Tweet?
I spend just 0.23% of my time in retirement managing our money. Here are all the tasks I do, and how much time each takes. Click To TweetSo, you may ask, what do I do with the other 99.7% of my time in retirement? Hold that thought…I’m planning on addressing that question in my next post!
Your Turn: How much time do you spend managing your money? Are there any steps you take which I’ve omitted from this summary?
Nice Fritz, I like the detailed breakdown. I’m even lazier and spend less than that since I don’t (yet) do quarterly taxes, don’t trade anything, and don’t (yet) need a bucket strategy. I spend maybe 5 minutes every month updating my net worth spreadsheet (total 1 hour annually), and maybe 3 hours doing taxes in April. So 4 hours including taxes, or .046% of my time!
Wow, Dave, you’re up early this morning! .046% = Impressive.
We’ll have to start a new “<1% Club!"
Thanks for sharing. Curious, why can’t you do your Vanguard rollover to Roth online? I watched a tutorial and it appeared to be rather simple. What am I missing? Thanks
Gail, the issue is 100% due to the fact that it’s a 401(k) and driven by the rules set by my company when they established the plan. If it was a personal Vanguard IRA, it could be done online. Hope that clarifies.
I assume you want to maintain your ability to withdraw penalty free prior to 59 1/2 and that’s why you don’t do a bigger 401k to IRA rollover first. I have a Vanguard IRA so hoping the process is easier for IRA to Roth IRA rollover.
Unfortunately, I have to add an additional step:
7. Read the Retirement Manifesto and Apply to My Retirement – 4 Hours
Every morning I wake up and look to see if I’ve received an email from Fritz at The Retirement Manifesto. If so, I read the blog post and consider how I can use the information to optimize our retirement finances and procedures. I also review various financial podcasts and listen to any that Fritz participates in.
Thanks for the continued advice and explanation of the path you’re following, Fritz. I always get some ideas I can use.
Haha, great addition! Only 4 hours? If I were to add that step, it’d total 100% of my time. Try as I might, I can’t ever get away from that guy….wink.
Depends on how much money you have. I have to spend a lot of time managing my affairs as I like to call it. The dividends alone keep coming in and need to be reinvested. Options income adds also. Pensions, social security and rents, etc. Constant monitoring is actually fun in my opinion. It’s my new job. But, how much time we spend managing our money definitely depends on how much you’ve got. No money, no time.
I’ll have to challenge your therom on “time spent managing our money depends on how much you’ve got”. We’ve got a pretty healthy portfolio, not sure I see the correlation. Glad you enjoy “constant monitoring”, that’s why it’s called “Personal” Finance! I spent a lot of years in the “constant monitoring” mode, have elected to take a more automated approach in my retirement. Hike your own hike, right!?
Nice time motion study Fritz. In the cancer care world we call it the process of care, perhaps we can call yours the financial process of ensuring continued retirement enjoyment. I know it’s a mouth full. I will work on it. LOL. I feel your pain on the conversions. Takes a few days and some paperwork to go from my Wells Fargo IRA to Vanguard Roth. The bucket fill is easier since it’s all Vanguard. I agree with RichCNJ, can’t discount your wonderful consult as well as others I follow like the Big ERN and Bogleheads.
“FPOECRE”, perhaps. Hmmmm. I agree, you need to work on that one a bit. Smiles. Thanks for your kind words regarding my work, I’m honored to be considered in the same company with Karsten and the Bogleheads!
Thanks for the heads up on the slow process of the Vanguard 401K to Roth Conversion. When we retire in two years, we will be moving our Company pre-tax 401k to Vanguard Traditional IRA. Then we start converting Vanguard IRA to Vanguard IRA every year as you described.
Now to find a CPA to help with the tax planning…
I suspect you’ll find the process of moving from your personal Vanguard IRA to Roth something you can do online. I’ve considered converting my entire 401(k) to a personal Vanguard IRA, but I like the fixed income option that’s only available through my 401(k), so I’ve held off thus far…
Fritz – As always, thank you for sharing. We mirror each other in terms of age, employment (1 company) and when we retired from full-time employment. My plan is similar to yours, except I will be using a quarterly dividend/capital gains bucket for my monthly expenses. I’m guessing when you reach 59.5, you’ll take your company 401K and turn it into Vanguard Rollover IRA? That’s my plan since it will help with the Roth conversions. Thank you again.
Mike, I’ve considering rolling my 401K over to a VG IRA, but there’s a fixed income fund in my 401K (pays ~2%, so I consider it a bond in my allocation) that isn’t available in individual IRA’s. It would help with the ROTH conversion logistics, making them available online, so it may be worth making the switch.
Hello Fritz,
If you can hold the same funds in a traditional rollover IRA as in your 401(k) at Vanguard, for the same fees, you may wish to consider a one-time complete rollover. After that the traditional IRA to Roth IRA conversions each year should take just seconds online (it does for me @ Fidelity, where I simply select the holding(s) and number of shares I‘d like to convert online). Also, I‘m sure you know this but starting at age 63 you‘ll need to consider your Medicare IRMAA as well as your marginal income tax bracket when selecting the amount to convert to a Roth each year – IRMAA brackets are cliffs so one dollar too much of conversion can be expensive.
Thank you,
Sabine
Sabine, see my comment immediately above to Mike. Also, thanks for bringing up the IRMAA, a critical bracket for folks to be aware of at age 63. I actually put a reminder on my calendar in the year I turn 63 to ensure I avoid “falling off the cliff”.
I spend 19 less hours because Personal Capital, Vanguard and Betterment manage my investments. They also do direct deposit transfers each month from the portfolios. All I have to do is tell them to switch to the cash bucket if the market tanks. My CPA generates the quarterly tax vouchers for me. I do plan to do some ROTH conversions now that my consulting is reduced to near zero. Hated to hear about all the paperwork since I’m at Vanguard, but since I’m a managed client I bet they’ll do all that for me. I should be so industrious like you and save all the fees I’m paying, but…lazy.
You’re not lazy, Steve. I read your blog and know how active you are! You’ve just chosen to use your $ to use your time in a way that better suits you. And that, my friend, is what retirement is all about.
When you re-balance, do you do that in just the tax-deferred accounts only?
Ah, Rex pays attention to this stuff! Yes, I do the re-balancing in my tax-deferred (remembering, of course, that I am selling some stocks from my after-tax account for the quarterly refilling of Bucket 1 cash).
My strategy mirrors yours closely except I can’t do Roth conversions yet due to too high of stock payouts for a few years. I just hope the option still exists in the future. I go one step further and schedule my tax payments online. I get reminder emails before the EFT occurs. I scheduled both fed and state until I moved to a tax free state this year. This works for me since my taxes are higher every year through the stock payout years and I can calculate 110% of last year’s actual taxes to avoid penalties. I was just telling my husband this morning that I miss the constant monitoring of finances leading up to retirement (of course since I’m a retired CPA). The auto pilot is nice too considering the number of hours I spent carefully planning to get here Thanks for all the great advice and guidance!
CB, Thanks for the motivation, I definitely need to take some time to set up the quarterly tax payments electronically. A bit of time on the front, but it’ll save me the quarterly hassle for years. Makes note to self…
I love to read posts like this, Fritz. It’s interesting to compare to how we do things in our own retirement. You’re a pro though – I still spend a little more time managing our finances though. I should figure out how much time it comes out to sometime.
One quick note – I do our annual Roth IRA conversions through Vanguard as well and haven’t ever had to call them. Similar to you, I don’t have them withhold anything for taxes either. I just do it all online and call it a day. Is there something more that you do during this process that’s giving you the extra work?
Jim, the only reason I have to call/fill out forms/mail back is due to the fact that the conversions are coming out of my company’s 401K and into my individual Roth. Our 401K rules don’t allow that to be done online. I may convert my entire 401K to a Vanguard IRA to simplify the process, but there is a fund in my 401K that isn’t available in the VG IRA (a fixed rate fund paying ~2%, so I consider it “bond-like”. Could easily transfer this portion to a bond if I chose to set up the VG IRA. Considering it…
Fritz- Just found out about you a few months ago. Always enjoy what you have to say on various subjects. I especially enjoyed this article because I can compare my strategy and procedures with yours. I always learn something from your blog. Best Regards
Glad you “found” me, Tom. Welcome to the team!
Great article, Fritz! It’s one I’ll bookmark in my “must re-read” file. Quick question: why the quarterly tax payments instead of simply paying all at once at end of year? I read a lot on retirement prep, but I can’t recall hearing or reading anywhere else about paying taxes quarterly during retirement. Thanks!
Casey, technically I could pay in the final quarter if I chose to do my Roth conversion then. For me, it’s easier from a cash flow management perspective to pay it quarterly, it aligns better with my bucket strategy and “monthly paycheck” budgeting system.
Thanks for sharing, wonderful that things are going so nicely for you.
But what I would really love to know is how much time your lovely wife spends handling the bills. I am the wife in our marriage and I handle all the bills, feel most comfortable doing them via paper rather than online, and match receipts with the statements. It takes me hours each week. Would your wife possibly track her time spent on this task so we could have a more full picture?
Thanks again,
Joan in PA
Joan, great question, and I agree it does provide a more “complete” picture of the time our household spends managing finances. I talked with her about it, and she said “I hardly spend any time at all. Everything is automated, so I just have to revise the payment amounts and confirm the due date. Less than 30 minutes/month, for sure”. So, we’ll call it 6 more hours managing our finances on an annual basis. For the record, we’re a big fan of using electronic banking and automating as much as possible.
Thanks so much for the response, Fritz, and thanks to your lovely wife for her input on how much time she spends handling the bills.
Guess I am really an old fuddy-duddy, as I keep receipts and check them against the printed bills. I live in fear of eventually being forced to go online for all finances.
My memory is not good enough to do without receipts matched to statements, although I can’t say I have encountered many issues — just a few, paltry when weighed against the overall time involved. Auto renewals of magazine subscriptions is one issue, as is auto renewals of shopper membership feels. Once they have your credit card, they like to use it!
Again, my memory of many details is failing (almost 71) so I rely on a paper trail.
Great that things are going so well with your approach.
Thanks again for the response.
Joan in PA
Hi Fritz. Thanks for your sharing.
Besides saving the fees, do you see an advantage of the manual rebalancing and asset allocation control process vs a roboadvisor like Betterment?
My aim is to automate as much as possible, not just for saving the time but also for giving my future self peace of mind when spreadsheets will start to feel confusing and error prone.
I’d also like to automate a scoreboard to check each year actual vs plan personal finances to determine if I have to course correct or stay put.
Do you have any thoughts on this?
Javier, personally I enjoy the “hands on” approach of doing a quick check of my portfolio every quarter through the Personal Capital scorecard, then deciding specifically which accounts I’d like to use for my rebalancing. I don’t have a problem with the robovisor approach if it works for you, but I just prefer to do it myself. As for your automated annual scoreboard, the closest I have is the projected Net Worth each year from my original retirement cash flow projection (completed a year before I retired). Nothing fancy, but I like your idea.
Thank you Fritz. Projecting the net worth year after year seems a good overall measure.
If something happens to your wife, will you be able to pay the bills? Does she also manage the income that comes in steady so she can pay the bills? You can manage all your investments 24 hrs a day but if you miss paying just one bill, your whole financial economic world may collapse with a dent in your FICO score, or a missed medical insurance premium payment or a missed car payment, car insurance payment, tax bill, mortgage payment. Your wife’s roll is way more important than yours will ever be. Guard your wife’s health well. Or worse yet, if she drops dead, you’re kinda like screwed, aren’t ya?
Typical chauvinistic male species.
If something happens to my wife, I won’t be able to do anything. She is my life. Hard to believe, given that I’m a “typical chauvinistic male species”, right?
Hi Fritz,
I’m retired for 14 days and have put in 30 hours or so since. I’m swing trading so I have to watch the stocks on the mornings I trade. Everything financial is on spread sheet so easy to track and improve as needed.
Thanks for sharing the little at a time roth conversions – still considering if my 1/5 current roth IRA’s should be increased in retirement – a little at a time might be the right approach.
I only wish I was on the East coast for a 9:30 open instead of Pacific coast for a 6:30 open.
14 Days! Congratulations! We’re going to have to work on your wake-up time, though. That’s WAY to early to be getting up in your first month of retirement! WInk.
After I fired my financial advisor and moved to DIY, it initially took some work to get everything sorted. But now, I probably only spend an hour a month managing our money. Easy peasy or rather Index and chill!
“Index and chill”. Nice motto!
Fritz,
Thanks for another great article. Since reaching The Finish Line six months ago, I’ve definitely spent less time compared to pre-retirement. Although, just today I spent a couple of hours making a spreadsheet in an effort to understand our income going forward and how to best manage our tax liabilities. Specifically, when (and how much) to start cashing out our tax deferred accounts. And when to sell our investment properties which will result in large capital gains (and depreciation recapture). It’s quite a challenging problem!
I prefer to do taxes myself since it helps me understand the tax implications of many aspects of our financial situation. It takes a few hours, but I think it’s time we’ll spent. I know your typically “hands on”, so I’m surprised you don’t do them yourself!
The Finish Line? Tsk-tsk. We call it “The Starting Line” around here….wink.
As for doing taxes myself, it’s something I’m more comfortable having a professional handle for me. One of the very, very few areas of my life I outsource, actually.
Fair enough about the taxes, they’re getting more and more complex every year!
And I’m embarrassed about getting The Starting Line incorrect….I’m not sure where that came from!
That explained your struggle with your retirement. For 90% (90Percenters) of the population, retirement is the proper game plan. For the remaining 10%, retirement is nothing more than a self-imposing jail sentence of the best you can be.
You are the 10Percenters!