Capture Zero Tax LTCG Instead of Doing Roth Conversions?

[pb4uski]

$41k is taxable income.... $65k of income/AGI less $24k standard deduction.

So if you were at 400% FPL to get ACA subsidies and had NO other income you could only do $65k of Roth conversions or 0% LTCG a year... and some income from investments or a pension would reduce that $65k dollar-for-dollar... my point is that it is hard to transition a lot of money from tIRA to Roth with constraints like that.

And a lot of people want to be below 400% FPL to optimize subsidies, which makes it harder still.

 

[Finance Dave]

$41k is taxable income.... $65k of income/AGI less $24k standard deduction.

So if you were at 400% FPL to get ACA subsidies and had NO other income you could only do $65k of Roth conversions or 0% LTCG a year... and some income from investments or a pension would reduce that $65k dollar-for-dollar... my point is that it is hard to transition a lot of money from tIRA to Roth with constraints like that.

And a lot of people want to be below 400% FPL to optimize subsidies, which makes it harder still.

Thanks for clarifying, now I see what you were saying. Although I think being able to move $65k IS a fairly large chunk of money...but for some on this forum it's not enough....which is a good thing.

 

[pb4uski]

Yes, $65k is a fair chunk but that would be the absolute maximum that a couple could do... and a desire for lower income for better subsidies, interest and dividend income and pensions will get in the way.

Heck, we don't even have an ACA constraint and my average Roth conversion has only been a bit more than $50k because of LTCG, pension and int/divs... in that order. I retired 6 years ago... did all LTCG the first year but Roth conversions to top of 15% bracket since... converting abut 25% of my retirement date tIRAs... but my tIRA today is still higher than when I retired despite those conversions... 36% higher due to great investment results. I'm not unhappy about that but I do sort of feel like a dog chasing its tail.

OTOH, our Roth balances are now 22% of the total vs 3% when I retired and taxable is 24% of total vs 44% of the total when I retired.

 

[Finance Dave]

Yes, $65k is a fair chunk but that would be the absolute maximum that a couple could do... and a desire for lower income for better subsidies, interest and dividend income and pensions will get in the way.

Heck, we don't even have an ACA constraint and my average Roth conversion has only been a bit more than $50k because of LTCG, pension and int/divs... in that order. I retired 6 years ago... did all LTCG the first year but Roth conversions to top of 15% bracket since... converting abut 25% of my retirement date tIRAs... but my tIRA today is still higher than when I retired despite those conversions... 36% higher due to great investment results. I'm not unhappy about that but I do sort of feel like a dog chasing its tail.

OTOH, our Roth balances are now 22% of the total vs 3% when I retired and taxable is 24% of total vs 44% of the total when I retired.

Yes it's great you have more in your Roths now...gives you lots of options to manage taxable income. We will have the ACA constraint...but I'm hoping our gov't sees fit to change something within the next 1-2 years. I have some tricks up my sleeve to get us through a couple years...but we can't go on with our current lifestyle forever at $64k/year.

 

[Huston55]

OTOH, our Roth balances are now 22% of the total vs 3% when I retired and taxable is 24% of total vs 44% of the total when I retired.

PB-

Seems this bit alone makes it worth the effort.

 

[pb4uski]

Agreed... smaller tax torpedo once SS and RMDs start.