Midpack
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
...by considering taxable, IRA RMDs & when to take Soc Sec and legally minimizing taxes throughout retirement.
Have we discussed this topic already that I missed? The Taxation Of Social Security Benefits As A Marginal Tax Rate Increase? | Kitces.com
About 1/3rd of our portfolio is in TIRAs, almost completely non-deductible, and none in Roth IRAs (we weren't eligible).
With the end of the year approaching and RMD 11-13 years away, I am still wrestling with whether or not Roth conversion makes sense for us. The online calculators don't factor in taxes, or specifically how Soc Sec is taxed vs AGI.
I spent days building a spreadsheet to look at different scenarios in taking income from taxable, TIRA vs Roth Conversion and withdrawals from either, and when to take Soc Sec. To keep it manageable I assumed conservative but linear real returns, Federal taxes only, and tax rates staying the same (inflation adjusted) - even though none of that will be true. The deeper I got, the more difficult it became, it's mind-boggling for a simpleton like me at least and I'm usually reasonably capable with spreadsheet analysis. [edit: calculating taxable income is the most difficult aspect to me from taxable, 4 TIRAs, dividends, cap gains, Soc Sec, etc. and then applying the 50%/85% Soc Sec thresholds on top of it all.]
I found a spreadsheet from a Boglehead member, but it's pretty complex too, and without examining every assumption he made, I can't draw conclusions.
I even considered going to an FA, but minimizing taxes over a lifetime doesn't seem to be a focus area for any FA's I've found. They can help with taxes short term, but seemingly not long term.
Taking Soc Sec at 70 is best for us irrespective of other income sources (how most people seem to evaluate when to take Soc Sec), but RMDs call that into question for me. It appears RMDs will force us to withdraw more than we expect to need and Soc Sec on top of that will be heavily taxed - so we may be money ahead after taxes by taking Soc Sec earlier. And the fact that we're withdrawing less than SWR would suggest now, only makes our tax picture 15-20 years from now look worse. Yes, I know it's a nice problem, but I'd still like to optimize for beneficiaries. And yes I know I can't hit any of this exactly.
I have my work cut out for me in Dec. However, I'm starting to think with all the variables/unknowns the best course may simply come down to:
If you made it this far, thanks for your patience.
Have we discussed this topic already that I missed? The Taxation Of Social Security Benefits As A Marginal Tax Rate Increase? | Kitces.com
About 1/3rd of our portfolio is in TIRAs, almost completely non-deductible, and none in Roth IRAs (we weren't eligible).
With the end of the year approaching and RMD 11-13 years away, I am still wrestling with whether or not Roth conversion makes sense for us. The online calculators don't factor in taxes, or specifically how Soc Sec is taxed vs AGI.
I spent days building a spreadsheet to look at different scenarios in taking income from taxable, TIRA vs Roth Conversion and withdrawals from either, and when to take Soc Sec. To keep it manageable I assumed conservative but linear real returns, Federal taxes only, and tax rates staying the same (inflation adjusted) - even though none of that will be true. The deeper I got, the more difficult it became, it's mind-boggling for a simpleton like me at least and I'm usually reasonably capable with spreadsheet analysis. [edit: calculating taxable income is the most difficult aspect to me from taxable, 4 TIRAs, dividends, cap gains, Soc Sec, etc. and then applying the 50%/85% Soc Sec thresholds on top of it all.]
I found a spreadsheet from a Boglehead member, but it's pretty complex too, and without examining every assumption he made, I can't draw conclusions.
I even considered going to an FA, but minimizing taxes over a lifetime doesn't seem to be a focus area for any FA's I've found. They can help with taxes short term, but seemingly not long term.
Taking Soc Sec at 70 is best for us irrespective of other income sources (how most people seem to evaluate when to take Soc Sec), but RMDs call that into question for me. It appears RMDs will force us to withdraw more than we expect to need and Soc Sec on top of that will be heavily taxed - so we may be money ahead after taxes by taking Soc Sec earlier. And the fact that we're withdrawing less than SWR would suggest now, only makes our tax picture 15-20 years from now look worse. Yes, I know it's a nice problem, but I'd still like to optimize for beneficiaries. And yes I know I can't hit any of this exactly.
I have my work cut out for me in Dec. However, I'm starting to think with all the variables/unknowns the best course may simply come down to:
- if I think tax rates will increase - take more now from IRAs to bring down future RMD income and delay Soc Sec to 70
- if I think tax rates will stay the same (inflation adjusted) - withdraw from all sources somewhat equally such that taxable income stays the same for the long haul which may suggest taking Soc Sec earlier.
- if I think tax rates will decrease - I simply don't.
If you made it this far, thanks for your patience.
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