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Old 07-23-2019, 08:48 PM   #21
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Like most things, it depends. If you know you'll leave something behind, maybe it is better to spend down a Roth rather than cash in highly appreciated taxable assets, since those will get a step up basis when inherited.
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Old 07-23-2019, 09:49 PM   #22
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Quote:
Originally Posted by pb4uski View Post
Why are you spending money from your Roth? Given that a Roth is tax-free shouldn't that be the last account to be spent?... it is for me.
I am not spending money from my Roth, I'm essentially spending from my tIRA as I already explained. Twice.

It is just that I chose to have this spending money pass through my Roth, as opposed to wasting time and effort on determining how to divvy up the annual amount I wish to declare as income between direct tIRA withdrawals and tIRA->Roth conversions. The total income tax is the same either way.

As to why I'm not spending from taxable - my calculations show that my approach allows me to convert a few more $k to Roth per annum than I would have been able to if I spent from taxable (full of highly appreciated assets).

Your situation is different; it does not mean that what is right for you is correct for me and vice-versa.
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Old 07-23-2019, 11:23 PM   #23
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I see now... a bit of an different way to do it but I get the idea. The Roth conversion that is spent is effectively the same as a tIRA withdrawal that is spent and whatever is not spent is effectively a Roth conversion.. and they you top it up with an additional Roth conversion as you are finalizing your tax situation.

I guess I do the opposite... a tIRA withdrawal to rebalance my cash to target (effectively to replenish cash for spending since the beginning of the year) and then a Roth conversion to the top of the desired tax bracket (0% capital gains bracket in my case).

But the end result of each is similar.
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Old 07-24-2019, 07:29 AM   #24
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joyless--- You are totally correct, that if you convert to Roth you pay the tax and if you withdraw from tIRA you pay the tax. And it'll be the same %.

I've thought about the same thing from time to time, but it often appears from reading here and elsewhere that Roth $$s are never ever to be spent. Never wanted to raise the consideration.
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Old 07-24-2019, 07:43 AM   #25
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I've thought about the same thing from time to time, but it often appears from reading here and elsewhere that Roth $$s are never ever to be spent. Never wanted to raise the consideration.
I don't think that's the case at all. There's just a priority order in which you should tap accounts (for tax efficiency). As I noted above, it's different for different people. For me, I'm less likely to touch my highly appreciated taxable mutual funds, unless the stepped-up basis tax law changes.

Most of us are planning for at least a near worst case scenario. If that doesn't happen, we're going to leave money behind. But if things are bad, we will not hesitate to use all money, including Roth funds or whatever funds you plan to tap last. So it's not a matter of "never ever" tapping those funds, it's that those are the last resort funds, which may not be needed.

I think that's a big difference from declaring an account as off-limits and never ever to be spent.
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Old 07-24-2019, 07:45 AM   #26
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I also would not hesitate to tap my Roth this year if I needed more cash and did not want to lose my ACA subsidy by taking a gain or income from other sources.
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Old 07-24-2019, 08:07 AM   #27
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Hey RB--- yeah I overstated the Roth tapping thing. There are, as you have noted, a whole lot of different ways that work best for withdrawls.
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Old 07-24-2019, 08:15 AM   #28
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Quote:
Originally Posted by joylesshusband View Post
I am not spending money from my Roth, I'm essentially spending from my tIRA as I already explained. Twice.

It is just that I chose to have this spending money pass through my Roth, as opposed to wasting time and effort on determining how to divvy up the annual amount I wish to declare as income between direct tIRA withdrawals and tIRA->Roth conversions. The total income tax is the same either way.
This is what I'm doing. I don't see any point to a direct tIRA withdrawal for spending money when I can convert to a Roth and draw from that.
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