Hi --
Sorry for these newbie questions -- I've tried searching but haven't been able to come up with the answers.
I ER'd (involuntarily and about three years earlier than planned) in late 2013. Financially, it's fine, but now I'd like to do some tIRA-to-Roth conversions and rebalance my portfolio, and I'm stuck. Yes, I should have done this earlier in 2014, but elder-care responsibilities got in the way....
Tax status: single. Age: 56. 2014 Deductions: standard.
About half my portfolio is in IRAs or Roth IRAs; the non-tax advantaged holdings are in Vanguard mutual funds, ETFs, and two stocks.
I have four IRAs at Vanguard (all were 401(k) roll-overs, from four different employers). They only contain pre-tax contributions.
My income in 2014 will be about $16K in dividends and interest. My health insurance plan in 2014 is HSA eligible, so I can open an HSA and, as I understand it, put in $4,300 ($3,300 + $1000). This will reduce my income to a bit less than $12K.
Is this correct?
Next, I want to do two things: rebalance and convert.
Rebalance: I need to clean up my portfolio, in particular isolating the income/dividend generating holdings into my IRAs/Roth IRA. To do this, I will need to sell non-retirement holdings. As I understand it, as long as my tax bracket is 15% or less, I will not be taxed on capital gains. So this is the time to do a significant tidying, right?
Convert: I also want to convert some tIRA funds to a new Roth IRA, maximizing my utilization of the 15% tax bracket (up to $37,450 in taxable income).
And this is where I'm stuck: suppose I generate $20K in capital gains in rebalancing. There's no tax on the capital gains, but does it count as income, thereby reducing the amount I can safely convert by $20K? Or in the 15% tax bracket, will rebalancing/capital gains have no impact on how much I can convert without jumping to the next tax bracket?
Again, apologies: I'm having a hard time figuring out how these two actions affect each other, and in what order I should undertake them.
Thank you.
Sorry for these newbie questions -- I've tried searching but haven't been able to come up with the answers.
I ER'd (involuntarily and about three years earlier than planned) in late 2013. Financially, it's fine, but now I'd like to do some tIRA-to-Roth conversions and rebalance my portfolio, and I'm stuck. Yes, I should have done this earlier in 2014, but elder-care responsibilities got in the way....
Tax status: single. Age: 56. 2014 Deductions: standard.
About half my portfolio is in IRAs or Roth IRAs; the non-tax advantaged holdings are in Vanguard mutual funds, ETFs, and two stocks.
I have four IRAs at Vanguard (all were 401(k) roll-overs, from four different employers). They only contain pre-tax contributions.
My income in 2014 will be about $16K in dividends and interest. My health insurance plan in 2014 is HSA eligible, so I can open an HSA and, as I understand it, put in $4,300 ($3,300 + $1000). This will reduce my income to a bit less than $12K.
Is this correct?
Next, I want to do two things: rebalance and convert.
Rebalance: I need to clean up my portfolio, in particular isolating the income/dividend generating holdings into my IRAs/Roth IRA. To do this, I will need to sell non-retirement holdings. As I understand it, as long as my tax bracket is 15% or less, I will not be taxed on capital gains. So this is the time to do a significant tidying, right?
Convert: I also want to convert some tIRA funds to a new Roth IRA, maximizing my utilization of the 15% tax bracket (up to $37,450 in taxable income).
And this is where I'm stuck: suppose I generate $20K in capital gains in rebalancing. There's no tax on the capital gains, but does it count as income, thereby reducing the amount I can safely convert by $20K? Or in the 15% tax bracket, will rebalancing/capital gains have no impact on how much I can convert without jumping to the next tax bracket?
Again, apologies: I'm having a hard time figuring out how these two actions affect each other, and in what order I should undertake them.
Thank you.