So now we're both holding our breath.Cute 'n Fuzzy Bunny said:Bet we have a vastly different tax scheme before we have nationalized health care...
BTW nice avatar. It ain't la vida loca but it's the next best thing!
So now we're both holding our breath.Cute 'n Fuzzy Bunny said:Bet we have a vastly different tax scheme before we have nationalized health care...
I wonder if it'll be Jeb Bush or Hillary Clinton?Cute 'n Fuzzy Bunny said:I'm thinking within 10 years, maybe 12...for both.
mathjak107 said:lets not forget that rates dont have to end up being higher when we retire...there are 2 ways to pay the huge federal deficit...increase taxes or print money...since politically increasing taxes isnt good ,sneakly printing money sounds more likely.....
Nords said:If you can forecast that pension income or RMDs will put your income into the 25% bracket, and you're currently in the 10-15% bracket, then it makes sense to start partial Roth conversions up to the top of the 15% bracket. It also beats starting 72(t)s or IRA withdrawals at 59 1/2, with their subsequent taxable investments, to reduce RMDs.
That forecast is pretty straightforward...
Hey, if I knew the rates of return for various asset classes for the next 20 years then I suspect that I'd be changing my allocation, too.retire@40 said:That's if you know for sure there will be a 25%, 15%, and 10% bracket in 20 years and you know the income levels for each bracket.
But at least you have a long-term forecast that you can adjust as the tax laws and rates change.
Big improvement. Bruce Steiner, a CPA on Ed Slott's IRA discussion board, compares this to making a "free" IRA deposit and letting it compound forever. This is probably the biggest payoff of a Roth IRA conversion, but of course it requires liquidating investments from taxable accounts (paying even more taxes up front) and trusting the govt not to mess with your bright idea for a few more decades.ESRBob said:If you were able to convert a regular IRA to Roth, paying the taxes with taxable savings (thereby keeping the full amount in the Roth) then my calculations (back of the envelope) say you have to be ahead no matter what, since you've effectively bumped up the amount of assets you've got growing tax free.
As other posters have pointed out, taxes now are the same as taxes later when paid from the IRA's funds. The end result doesn't change if the tax rates don't change. But like a good nuke, I spent a couple hours building a spreadsheet to prove that I couldn't think through the problem without a Microsoft product assist.ESRBob said:Also I haven't done the equations on this but it seems clear to me that if you 'pay your medicine' by paying Roth conversion tax now on a small asset base, then have 40 years or so of compounding appreciation in the Roth you have to be way ahead of the guys leaving the funds to grow the same amount over those decades in a taxable IRA who then must pay tax on the entire large amount, no? What am I missing? Does the whole thing depend on an assumption that the money you used to pay the Roth conversion taxes would have appreciated the same as IRA money and therefore grwo to the same amount you'd pay in taxes at conversion time?
This is where a fourth poster chimes in to point out that if your RMD is big enough, your taxable income rises high enough for Social Security distributions to also end up being taxed.ESRBob said:Also, RMDs are especially awful if your taxable portfolio has grown to the point where you don't actually need the money and want to pass the Roth to your heirs.
Yup. We go through this every year with my FIL. It's getting better but the anxiety levels are still pretty high.markf57 said:There appears to me to be another benifit of converting to a Roth that I don't see mentioned that much. When one converts to a Roth, you no longer have to worry about the 70 1/2 rules about required distributions and the taxes and penalties if you do that wrong. Am I right?
markf57 said:There appears to me to be another benifit of converting to a Roth that I don't see mentioned that much. When one converts to a Roth, you no longer have to worry about the 70 1/2 rules about required distributions and the taxes and penalties if you do that wrong. Am I right?
All of Congress (and their staffs) will be Boomers who didn't save enough for retirement and are working into their 70s & 80s, so I can see that happening.Cute 'n' Fuzzy Bunny said:how long before the lobbying to eliminate taxation of ss benefits...?