Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
... another QLAC question
Old 09-28-2016, 03:47 PM   #1
Dryer sheet aficionado
 
Join Date: Jun 2014
Posts: 38
... another QLAC question

I now am down to 15 more "get ups" until I RE next month. Somehow, in all my thinking/planning about retirement, I never heard (or paid any attention to) this concept called "QLAC". It came up recently in a conversation with a friend (who RE'd a couple of years ago) in the context of what the best strategy is for reducing the tax hit when RMD's kick in. He is 68, so the RMD issue is closer for him than for me, and he said if he had it to do over, he would have invested the maximum possible in a QLAC when he retired at 60, primarily to reduce the RMD he'll be facing in 2 years.

SO, I've been doing some reading about QLAC, both in some of the threads here, and in various other sites ... and am more confused now than before about how to "calculate" whether it would be a good idea or not.

I've never really liked the whole idea/concept of an annuity, in general ... but I also have a visceral negative response when I think about the tax hit caused by RMDs.

Is there some option in I-ORP that would be able to tell me if that would be a good strategy in my particular situation? Or should I just "bite the bullet", and go find a tax advisor?
__________________

__________________
merlin3942 is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 09-28-2016, 04:36 PM   #2
Moderator
rodi's Avatar
 
Join Date: Apr 2012
Location: San Diego
Posts: 7,664
I had to look up QLAC - it's a qualified life annuity contract. It can defer, but not eliminate RMDs if purchased within the IRA. Kitces is not a fan.
https://www.kitces.com/blog/why-a-ql...md-obligation/

I would think, if you have time before RMDs, your better tool is ROTH conversions.
__________________

__________________
Retired June 2014. No longer an enginerd - now I'm just a nerd.
micro pensions 7%, rental income 18%
rodi is offline   Reply With Quote
Old 09-28-2016, 04:47 PM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 14,283
Have you considered doing Roth conversions from ER until you are 70?
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
pb4uski is offline   Reply With Quote
Old 09-29-2016, 07:22 AM   #4
Dryer sheet aficionado
 
Join Date: Jun 2014
Posts: 38
Thanks for the feedback. re: ROTH conversion - yes, I do plan to do that as well, to the "top of the current marginal tax rate bracket" each year. But I also hope to sell off some individual stocks that are in a taxable brokerage account that have made considerable gains over the years during that time frame as well to keep the capital gains tax from that as low as I can, so I won't be able to get the 401k balance down to the point where the RMD's won't push me into a higher tax bracket when they kick in. That's why I thought the QLAC might be a good option in addition to max'ing out the ROTH conversion to the top of the lowest tax bracket I can manage to stay within.

Thinking about this stuff is ALMOST enough to make me want to just keep w*rking instead .... NOT! ;-)
__________________
merlin3942 is offline   Reply With Quote
Old 09-29-2016, 08:18 AM   #5
Thinks s/he gets paid by the post
Big_Hitter's Avatar
 
Join Date: May 2013
Location: In the fairway
Posts: 3,676
Quote:
Originally Posted by rodi View Post
Kitces is not a fan.
that's a sign right there that they are a good idea
__________________
Swing hard, look up
Big_Hitter is offline   Reply With Quote
Old 09-29-2016, 08:19 AM   #6
Thinks s/he gets paid by the post
Big_Hitter's Avatar
 
Join Date: May 2013
Location: In the fairway
Posts: 3,676
Quote:
Originally Posted by merlin3942 View Post
Or should I just "bite the bullet", and go find a tax advisor?
get a fee-based CFP that knows what he/she is doing - you really need 3 RIGs

read "money for life" by Steve Vernon, FSA
__________________
Swing hard, look up
Big_Hitter is offline   Reply With Quote
Old 09-29-2016, 08:42 AM   #7
Thinks s/he gets paid by the post
Sunset's Avatar
 
Join Date: Jul 2014
Location: Chicago
Posts: 3,374
Quote:
Originally Posted by merlin3942 View Post
Thanks for the feedback. re: ROTH conversion - yes, I do plan to do that as well, to the "top of the current marginal tax rate bracket" each year. But I also hope to sell off some individual stocks that are in a taxable brokerage account that have made considerable gains over the years during that time frame as well to keep the capital gains tax from that as low as I can, so I won't be able to get the 401k balance down to the point where the RMD's won't push me into a higher tax bracket when they kick in. That's why I thought the QLAC might be a good option in addition to max'ing out the ROTH conversion to the top of the lowest tax bracket I can manage to stay within.
..
So just a thought, if you do the ROTH conversions, leaving the LTCG alone. Then when you are 70 and have to take RMD's , taking the LTCG will be optional, and controllable.
Plus won't at that age and tax bracket, taking the LTCG still be lower than the regular tax bracket ?
__________________
Sunset is offline   Reply With Quote
Old 09-29-2016, 09:36 AM   #8
Full time employment: Posting here.
RetireAge50's Avatar
 
Join Date: Aug 2013
Location: Seattle
Posts: 990
Like you I had not heard of a QLAC either. Doesn't seem like they solve any problems just delays the inevitable.

My tax strategy is to try to keep my taxable income about the same each and every year. For this reason a QLAC will not work for me.

I would keep it simple and just keep doing what you have done to get to this point. Write down your plan and stick to it as you age.
__________________

__________________
RetireAge50 is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Good read on deferring SS versus QLAC Big_Hitter FIRE and Money 12 02-03-2016 09:20 AM
QLAC - recent IRS ruling and guidelines LRDave FIRE and Money 1 07-09-2014 11:50 AM
Another HSA question - order of contributions question NYCO FIRE and Money 4 11-14-2011 07:49 PM
Another snow and Ice storm another screwed up airline. newguy88 Other topics 5 03-19-2007 12:24 PM

 

 
All times are GMT -6. The time now is 06:23 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.