I have about 10% of my retirement funds in a taxable account, 90% in traditional IRA’s.
I have a small pension of $10,000 a year, and a parttime online teaching job that earns me around $9000 a year. So the rest of my expenses need to be funded from my investments, at a 2.5% to 3.0% SWR until I take SS.
This year I am trying to keep my MAGI under the 400% poverty level so that I can continue to receive subsidies for ACA. By the way, I am renting and no longer have any itemized deductions. I am single and 60 years old.
When I first joined the forum and read posts that said “I’m taking dividends and capital gains up to the 15% tax bracket”, I really had no idea what that meant. Slowly I’ve come to understand and assume that those are dividends and capital gains from folks’ taxable accounts. (There was a thread a while ago where folks posted the percentages they had in taxable and tax deferred accounts—that was very interesting). Since my taxable account is such a small percentage of my overall savings, I don’t think I can do the same thing—live off the dividends.
I think I am kinda stuck with most having to fund most of my expenses with taxable (IRA withdrawals) “income”. I’ve been reading about and trying to understand the concept of Roth conversions, but those would be taxable as well, correct?
I just wanted to ask if I’m missing something? There’s really no way to minimize my MAGI, or my tax bracket for that matter, other than keeping my expenses under the 400% poverty level ($46,900 for a single person as I understand it). OR spending down my comparatively small taxable account instead of making too many taxable withdrawals from the IRA? Not sure if that would be a good idea.
If it was just me, I could manage my expenses to keep the ACA subsidies. But 2014 happens to be a year when both my kids could use a little help to move into the next phase of their lives—probably 2 or 3 thousand for each would do it. But $6000 more in an IRA withdrawal would put me over the limit for subsidies.
But then I think—I’m so fortunate to be where I am, what’s a few thousand more in subsidy repayment in the long run? I would rather help my sons with a little bit now rather than 30 years from now. And I have had these IRA’s for almost 30 years without paying any taxes on them—I understand that it’s time!
Any advice would be much appreciated! I have learned so much from this forum about these issues. I’m just looking for some confirmation of my understanding of the tax and ACA implications of my situation. Thanks!!