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12-07-2017, 09:49 AM
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#21
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Full time employment: Posting here.
Join Date: Jul 2013
Posts: 792
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Quote:
Originally Posted by Lsbcal
Silly question, how to pronounce Kitces?
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I had a teacher who spelled it Kitzes and pronounced it KIT-zes. I assume his is KIT-ses.
I need to go read the article, because I have wondered if I should be taking chunks of the large six-figure IRA I inherited from DH (the rollover of his 401k) to lessen the size of it so that when my own 401k and IRAs arrive at RMD time, I don't have three very large pots needing to be RMD'ed when I'm 70.
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12-07-2017, 09:54 AM
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#22
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Thinks s/he gets paid by the post
Join Date: Apr 2013
Location: Ormond Beach
Posts: 1,407
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Quote:
Originally Posted by Which Roger
If I or DW don't need the money, Qualified Charitable Distributions may be the way to go.
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Yup. Not leaving a big pile to the kids, so QCDs will do the trick for us if we don't need the money. I'm hoping at that point that the kids won't need it either, making it a no-brainer to me.
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12-07-2017, 10:06 AM
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#23
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Full time employment: Posting here.
Join Date: Jul 2013
Posts: 792
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Quote:
Originally Posted by googily
I had a teacher who spelled it Kitzes and pronounced it KIT-zes. I assume his is KIT-ses.
I need to go read the article, because I have wondered if I should be taking chunks of the large six-figure IRA I inherited from DH (the rollover of his 401k) to lessen the size of it so that when my own 401k and IRAs arrive at RMD time, I don't have three very large pots needing to be RMD'ed when I'm 70.
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Having now read it, I'm kind of like Example 6, though I'm only 51 and still working. And I'm not sure I would qualify for Roth conversions because of my salary, but will have to investigate. But if I have space in my tax bracket next year to take non-RMD distributions from the inherited IRA (which I can do as a spouse without penalty), I may do that, moving the money into my brokerage account or a Roth IRA if it's available to me.
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12-07-2017, 10:32 AM
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#24
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Thinks s/he gets paid by the post
Join Date: Apr 2012
Location: Nashville
Posts: 2,506
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Quote:
Originally Posted by googily
...And I'm not sure I would qualify for Roth conversions because of my salary, but will have to investigate. ...
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There is no income cap on roth conversions, as opposed to contributions (hence, the "backdoor roth" option).
Basically a matter of comparing marginal tax rate now versus that likely in your future.
(We plan to be going to be doing lots of conversions--from DW's age 56 through her age 69--to the top of whatever the pertinent bracket may be.)
__________________
OMY * 3 2ish Done 7.28.17
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12-07-2017, 10:38 AM
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#25
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Full time employment: Posting here.
Join Date: Jul 2013
Posts: 792
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Quote:
Originally Posted by 2017ish
There is no income cap on roth conversions, as opposed to contributions (hence, the "backdoor roth" option).
Basically a matter of comparing marginal tax rate now versus that likely in your future.
(We plan to be going to be doing lots of conversions--from DW's age 56 through her age 69--to the top of whatever the pertinent bracket may be.)
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Ah, good to know. For some reason, my brain sees "Roth" and just seizes. Maybe because of the contribution limit. I'll start reading about conversions/back doors.
I plan to work full time for at least another year and then probably a few years of part-time after that, but who knows. It goes against what DH and I had planned, to keep working once we reached this level of savings, but right now it gives me something to do and gets me out of the house. A little structure while trying to get used to this new world.
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12-07-2017, 12:18 PM
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#26
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Thinks s/he gets paid by the post
Join Date: Oct 2006
Posts: 4,629
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Quote:
Originally Posted by Which Roger
If I or DW don't need the money, Qualified Charitable Distributions may be the way to go.
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Interesting. We routinely donate to charities, but I assumed a QMD wouldn't do us any good. QMDs would give us a lower gross income and equally lower itemized deductions, for the same taxable income. I wasn't aware of anything that made gross income important to us.
But, that's when we itemized deductions. We've just slipped below that line. If the standard deduction goes up by another $8,000, we'll be solidly below.
In this situation, it seems that the QMD could save us some tax dollars.
Am I getting this right?
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12-07-2017, 12:37 PM
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#27
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Thinks s/he gets paid by the post
Join Date: Dec 2015
Location: Santa Paula
Posts: 4,077
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There are a number of factors involved. If you use the standard deduction, using the QCD will lower your taxable income. It may also impact the taxable amount of Social Security.
However, if you itemize, the impact using the QCD is to lower your AGI for medical deduction calculations.
__________________
Retired Jan 2009 Have not looked back.
AA 60/35/5 considering SS and pensions a SP annuity
WR 2% with 2SS & 2 Pensions
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12-07-2017, 07:28 PM
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#28
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Thinks s/he gets paid by the post
Join Date: Oct 2012
Location: Colorado Mountains
Posts: 3,165
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Quote:
Originally Posted by Clone
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No DAF for QCDs and the 70.5 is a hard date. Send money prior to reaching 70.5 and it does not count as a QCD. It will be taxed if I am not mistaken.
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12-08-2017, 06:34 AM
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#29
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gone traveling
Join Date: Apr 2011
Posts: 3,375
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Quote:
Originally Posted by Which Roger
If I or DW don't need the money, Qualified Charitable Distributions may be the way to go.
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I didn't realize this:
"One important caveat of using a QCD to satisfy an RMD obligation, though, is that an RMD is presumed to be satisfied by the first distribution that comes out of the IRA for the year."
I.e., once you take RMD vs. QCD, QCD isn't possible beyond the total RMD amount for the year. Net, take/do the QCD first, then balance of RMD as RMD, if any.
I do take that if RMD for a year is say $10K & you take $5K out first that $5K still is available for QCD.
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12-08-2017, 06:38 AM
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#30
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gone traveling
Join Date: Apr 2011
Posts: 3,375
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Quote:
Originally Posted by braumeister
Yes, good point. Tax brackets and the Medicare MAGI brackets have to both be considered. I've been careful about that since missing the MAGI once and landing in a higher IRMAA category for a year. Now I have them both in my spending projections spreadsheet and they turn colors if they go over the limit.
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Agree.
This:
"It’s also important to recognize that for those who are making more substantial gifts, it is often even more tax-efficient to donate appreciated investments (e.g., stocks, mutual funds, or ETFs with embedded gains) instead, and use the charitable donation deduction to offset the income tax consequences of taking a (separate) RMD. The reason is that while a QCD is a perfect pre-tax deduction that avoids the tax consequences of an RMD, donating investments with embedded capital gains obtains a charitable deduction to offset the tax consequences of the RMD and also permanently avoids the capital gains taxes on the investment itself!"
seems to miss that added issue.
And the cap gains taxes can be missed to a degree by gifting to peoples in the 0% LTCG brackets and by holding appreciated assets thru death.
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12-08-2017, 06:41 AM
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#31
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gone traveling
Join Date: Apr 2011
Posts: 3,375
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Quote:
Originally Posted by Hermit
No DAF for QCDs and the 70.5 is a hard date. Send money prior to reaching 70.5 and it does not count as a QCD. It will be taxed if I am not mistaken.
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Important in first RMD year that the QCD can't occur till after actual age of 70.5+. But I believe the RMD can be taken at any time of first RMD calendar year (and till next Apr. 15/filing date), not just after age 70.5.
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12-08-2017, 06:45 AM
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#32
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Thinks s/he gets paid by the post
Join Date: Jun 2005
Posts: 1,183
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I may purchase a QLAC (Qualified Longevity Annuity Contract) in my IRA in my late 60's if they are cost competitive at that time ... and I wouldn't start receiving payments until I am say, 80 years old. They offer a huge mortality credit bonus.
Since the IRS only clarified their use in IRAs around 3 years ago, these are probably just coming up as possibilities for many people and the products are probably not well developed yet.
My question is: Any idea if QLACs are cost-competitive yet? (e.g., anywhere close to actuarily neutral)
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12-08-2017, 07:25 AM
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#33
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2016
Posts: 9,525
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RMD will be a concern for but I have to realize I have delayed taxes for years. Bottom line we will have to pay taxes on that money one way or another. That article was a great read but was a lot for me to take in.
I wish I didn't have to take RMD but no way around it. LOL
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12-08-2017, 07:36 AM
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#34
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Thinks s/he gets paid by the post
Join Date: Dec 2015
Location: Santa Paula
Posts: 4,077
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Quote:
Originally Posted by kramer
I may purchase a QLAC (Qualified Longevity Annuity Contract) in my IRA in my late 60's if they are cost competitive at that time ... and I wouldn't start receiving payments until I am say, 80 years old. They offer a huge mortality credit bonus.
Since the IRS only clarified their use in IRAs around 3 years ago, these are probably just coming up as possibilities for many people and the products are probably not well developed yet.
My question is: Any idea if QLACs are cost-competitive yet? (e.g., anywhere close to actuarily neutral)
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Do not purchase a QLAC. My broker tried to get me to buy one.
Here is a link to Kitces comment:
https://www.kitces.com/blog/why-a-ql...md-obligation/
__________________
Retired Jan 2009 Have not looked back.
AA 60/35/5 considering SS and pensions a SP annuity
WR 2% with 2SS & 2 Pensions
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12-08-2017, 08:04 AM
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#35
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Thinks s/he gets paid by the post
Join Date: Jun 2005
Posts: 1,183
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Quote:
Originally Posted by Souschef
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Actually, I have found this article to be widely misinterpreted. He is addressing people who are buying a QLAC strictly to defer RMDs who wouldn't otherwise buy such an annuity. In other words, people who don't plan to spend their IRA during their lifetime.
But for people who want to purchase a longevity annuity and who don't have a legacy plan for their traditional IRA, they can be great, if you get actuarial value. In fact, quoting from this often misinterpreted article:
Quote:
Ultimately, then, the key point is that if a longevity annuity is appealing to buy for retirement income and longevity hedging purposes – especially as a fixed income alternative – and the available dollars to buy it are within an IRA or other retirement account, there’s nothing wrong with using those retirement dollars and buying a QLAC, and getting the RMD deferral along the way. But if the goal is to defer RMDs in the first place, the value proposition of the QLAC isn’t very compelling
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And, as he said in the article that this thread is about, if you are going to buy a deferred annuity, your traditional IRA is the place to do it.
The real question is if QLAC's are developing into competitively priced products ... if they are, they can be a great longevity hedge due to the double decker mortality credits.
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