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Need some advice on Diversification
Old 07-17-2014, 12:33 AM   #1
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Need some advice on Diversification

Greetings all, DW and I will be retiring at the end of 2015 and will have a COLA'd pension plus funds from a Deferred plan to supplement income. I would like to over time reduce my taxable income to help with the ACA. Pension will be right up to the 399% level so I really need to figure something out as I would like to spend an additional 30k annually from other sources and the subsidy is sizable. I will have

600k from deferred plan
100k Roth from Deferred plan
100k in Cash

What would be a good strategy to position myself into to help reduce my tax liabilities.


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Old 07-17-2014, 07:21 AM   #2
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There is no such thing as a free lunch.

If you need an additional $30k a year above your pension, you might get a few years by utilizing your taxable funds ($100k in cash) and another few years utilizing your Roth.

Are you sure you will be under 400% FPL after considering income from your taxable accounts? You can get a good idea by taking your 2013 AGI, subtracting your wage income, adding in your pension and making any other appropriate adjustments. I was thinking I would keep my income under 400% FPL for subsidies but later decided that I was better off to forgo the subsidies and do Roth conversions to the top of the 15% tax bracket to reduce the time I'll spend in the 25% tax bracket in my 70s.

If you select a HSA eligible plan and make HSA contributions that will reduce your income but it doesn't help out on the cash flow.

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Old 07-17-2014, 08:46 AM   #3
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Dividends and capital gains from the taxable accounts may be a big problem. You may need to make sure any big dividend shares or active funds are in retirement accounts.

If you are just too close to the limit, you may have to consider at least one year with big capital gains over the limit. Then use the cash from that year to fund the following year or two while staying under the limit.
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