Taxes & Withdrawal Strategy

[Dtail]

Quote:

Originally Posted by Gotadimple To the OP, I would just add, that withdrawing from your 401K (if you qualify and there is no penalty) is probably a good strategy to use to avoid a tax torpedo. That's the one that comes when you take social security and have to start taking RMD from the 401k. Reducing the tax-deferred account (401K/traditional IRA) to the extent you can before RMDs kick in will also help reduce the tax hit. -Rita

True, but a little of the tax torpedo is coming earlier at 62 with DH taking his SS at that age. So it is possible that the best tax efficiency could include some mix of taxable too.
Using spreadsheets will assist in this process.

[tb001]

Quote:

Originally Posted by Gotadimple To the OP, I would just add, that withdrawing from your 401K (if you qualify and there is no penalty) is probably a good strategy to use to avoid a tax torpedo. That's the one that comes when you take social security and have to start taking RMD from the 401k. Reducing the tax-deferred account (401K/traditional IRA) to the extent you can before RMDs kick in will also help reduce the tax hit. -Rita

Yes, we'd planned on converting to top of bracket when it makes sense, so basically smoothing out the withdrawals.

It's a bit of a catch 22--it seems like you plan for worst case scenarios from a market returns perspective, but the flip side is that should minimize taxes. Then you plan for worst case tax scenarios, but that also means you have typical returns!

[bingybear]

Quote:

Originally Posted by RunningBum There's no such thing as "always the best strategy" in most financial situations, and this is certainly one with too many variables.

OP--
There are so many situations that one cannot control or know. Some people talk about the tax torpedo being the taxing of SS. That is just a pop gun to what often when the first spouse dies and they have both spouses incomes but file taxes as single. I have a relative who became widowed right as she was starting RMDs.

What would happen if you inherited someone else's nest egg (such as the one noted above?


It is difficult to define the best strategy when you don't know what will happen.


I'm now doing roth conversions up to the top of the 24% bracket. Will it be the least taxing? Not sure since I don't know every variable.

Go look at some old folks homes and see the % of men. You may want to consider the death of a spouse in your planning.

Run some ideal cases and some where bad thing happen (death of a spouse) and get a feel for where the edges of the problem space is. Then look at how to plan.

[big-papa]

Besides I-ORP you might also want to check out RPM (Retiree Portfolio Model) over on Bogleheads - warning, though, it's powerful but takes a bit of time to fully comprehend it. If you're not into spreadsheets, forget it.
https://www.bogleheads.org/wiki/Retiree_Portfolio_Model

Cheers.