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-   -   Should I go the rest of the way with a ROTH (http://www.early-retirement.org/forums/f28/should-i-go-the-rest-of-the-way-with-a-roth-72404.html)

FireCat 06-12-2014 06:08 PM

Should I go the rest of the way with a ROTH
 
Greetings, I am in the class of 2015 although it will be at the very end of the year. My question is I am thinking I may have to control my MAGI to get the ACA subsidy and with my pension I will be very near the 400% limit. When I FIRE I should have around 100k in Roth account I currently have only $55k and balance in Deferred Tax account if I keep my current allocations. Both of us are working so we could take the tax hit so I am thinking about going all ROTH for the next 18 months. That would give me an additional $80K in contributions as DW and I are both maxing out plus catch ups. What I don't know is if I am going to start withdraw that money right away is there a benefit. I would likely only need to withdraw about $12K per year from the ROTH. The subsidy would be worth about $6k per year. It seems my taxes for next year would go up around 12K and maybe 6k for this year if I changed over. I am looking to make the ROTH money last until Medicare.


FIRECAT

Animorph 06-12-2014 07:30 PM

You may still have a chance to Roth convert from age 65 until 70.5 at a lower tax rate. Medicare will kick in, and maybe no SS and no RMD's.

heeyy_joe 06-12-2014 08:59 PM

The strategy you describe is what I am doing to get ready to FIRE at year end. This will be the third consecutive year I have done Roth plus Roth conversions. I will be able to control my taxable income beginning next year to get the maximum subsidy.

FireCat 06-12-2014 09:48 PM

Quote:

Originally Posted by heeyy_joe (Post 1459139)
The strategy you describe is what I am doing to get ready to FIRE at year end. This will be the third consecutive year I have done Roth plus Roth conversions. I will be able to control my taxable income beginning next year to get the maximum subsidy.

I am not too squared away on the Roth Conversions. My tax deferred account is in a 457 and I am assuming that if I can stay under the subsidy cut off I will
1. Max my HSA allotment
2. Withdraw from Tax deferred and Roth to fund Retirement Life
3. Any dollars below Subsidy level I should do Roth conversions.

As I see it my ROTH Conversions will be low, as my pension will be $8000 under the 400% cutoff.

What are most retirees thoughts on Roth Conversions and when they are a good idea. At a young age in retirement it does seem that if you can convert some dollars it might be wise as you can potentially let those funds grow for some time before withdrawing.

aja8888 06-12-2014 10:39 PM

Quote:

Originally Posted by Animorph (Post 1459122)
You may still have a chance to Roth convert from age 65 until 70.5 at a lower tax rate. Medicare will kick in, and maybe no SS and no RMD's.

I don't think there is an upper age limit for converting an IRA into a Roth.

Animorph 06-13-2014 01:46 PM

Quote:

Originally Posted by aja8888 (Post 1459155)
I don't think there is an upper age limit for converting an IRA into a Roth.

Nope, not as far as I know either. Although you can only Roth convert after taking out the RMD, which can make it much less beneficial. But the whole reason I'm Roth converting is to reduce taxes when RMD's and SS hit after 70. Once the RMD's are reduced to a decent level I have no need to Roth convert.

aja8888 06-13-2014 03:09 PM

Quote:

Originally Posted by Animorph (Post 1459328)
Nope, not as far as I know either. Although you can only Roth convert after taking out the RMD, which can make it much less beneficial. But the whole reason I'm Roth converting is to reduce taxes when RMD's and SS hit after 70. Once the RMD's are reduced to a decent level I have no need to Roth convert.

I am contributing to a Solo 401K and have to take out the RMD the same year I put into it (still have part time 1099 income @ 701/2). But I can put in $23,000 without company match so that is what I do to minimize taxes on the income. At the same time I have to take an RMD from my IRA, and then throw in SS payments to the income pot. I go nuts with Turbo Tax during the year to try to figure what to do to minimize taxes.

Lsbcal 06-13-2014 05:25 PM

Quote:

Originally Posted by FireCat (Post 1459102)
Greetings, I am in the class of 2015 although it will be at the very end of the year. My question is I am thinking I may have to control my MAGI to get the ACA subsidy and with my pension I will be very near the 400% limit. When I FIRE I should have around 100k in Roth account I currently have only $55k and balance in Deferred Tax account if I keep my current allocations. Both of us are working so we could take the tax hit so I am thinking about going all ROTH for the next 18 months. That would give me an additional $80K in contributions as DW and I are both maxing out plus catch ups. What I don't know is if I am going to start withdraw that money right away is there a benefit. I would likely only need to withdraw about $12K per year from the ROTH. The subsidy would be worth about $6k per year. It seems my taxes for next year would go up around 12K and maybe 6k for this year if I changed over. I am looking to make the ROTH money last until Medicare.


FIRECAT

Sounds to me like you would be better to pass these details to a good CPA. Try to set up a multi-year plan. I doubt that we can see your whole tax and investment picture.


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