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Old 08-15-2014, 05:44 PM   #21
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Originally Posted by mpeirce View Post
Out of curiosity, has anyone run a model showing what amount in an IRA when one is 70 and having to take RMDs would put you into the 28% bracket? (for simplicity, assuming no other income and no change in tax laws)
There are a lot of factors going into the calculation. Every couple is different due to the age/work history/SS amount/401K amount.

In my case, DW is 5 1/2 years younger than I. Though we worked exactly the same number of years in US, her 401k total is 30% higher than mine.

I have an elaborate spreadsheet with all different possible cases: when to begin our SS; how much to convert to Roth, how much is used as ACA MAGI etc.

For now it appears to me that the best case is that we start our SS at 70, and start Roth conversion right after we RE and turn 59 1/2, we can maintain 15% tax bracket into RMD years using today's dollar.

By the time I am 70 1/2, my 401K will have $40,000 remaining, and my DW will have $320K remaining. This is because I have more years to convert, and DW will have fewer years plus she will be the only member purchasing ACA at later years, so we plan to convert hers less in order to receive subsidy if it is still available.

There is just too many variables involved. We will be doing this calculation each year even after we RE next year.

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Old 08-16-2014, 06:24 AM   #22
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The math problem discussed here is the one I was trying to solve, which ultimately led me to purchase ESPlanner. What I was trying to do is find the optimum (and variable) Roth conversion amount each year given my particular SS, pension, deferred salary, and assets situation.

I hope to be leaving money to heirs so the end goals I was shooting for were to getr a reasonable living standard and a maximized after-tax estate, with the estate mostly in Roths.

ESPlanner made the calculations easier and more accurate than any other method I tried. I'm like most of us here, so before shelling out the money to buy it I made my own spreadsheet, tried other spreadsheets, Fidelity, ********, firecalc, i-orp, Vanguard, Financial Engines, etc etc etc.

One of the interesting findings that ESPlanner showed us was that in our particular situation we are better off taking SS at 62. That was not obvious and is counter to conventional wisdom. We keep revising our model and retesting and still get the same result.

The positive of ESPLanner is that it calculates the taxes for you, every year. The negative is that the Roth conversion process in the current version of ESPlanner is a three step process. Hopefully in the future someone will come up with a new software tool which has an "optimization function" built in.

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Old 08-16-2014, 12:43 PM   #23
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Originally Posted by mpeirce View Post
Out of curiosity, has anyone run a model showing what amount in an IRA when one is 70 and having to take RMDs would put you into the 28% bracket? (for simplicity, assuming no other income and no change in tax laws)
I did the 25% since there is such a significant difference between 15% and 25% and less difference between 25% and 28%. I did it for a single, but for a couple it would be double assuming they were of the same age.

However, the assumption that there is no other income is dubious. What you could do is subtract other income from the 47,050 before multiplying by the RMD factor if there is other income, but if the income is only SS it gets trickier as some SS would likely be exempt from tax.

Top of 15% tax bracket $36,900
Personal exemption 3,950
Standard deduction 6.200
Subtotal 47,050
Age 70 RMD 27.4
Result 1,289,170

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