CardsFan
Thinks s/he gets paid by the post
The current thread on taking SS early got me thinking (again) about when to take and the tax implications.
So.. I used this calculator to run some scenarios: https://www.olt.com/main/home/taxestimator.asp
We are both 63, planning to take SS at FRA (66.2), and currently doing Roth conversions within the 12% bracket.
Using the referenced calculator, it predicts my current tax liability pretty closely ($6,000 to 8,000 depending on income from investments, no other income).
If I start SS, and stop conversions, my tax liability drops to $500-600. Can keep the cash flow constant by using cash/mm/selling bond funds that are close to par, with no additional income.
We will be in the 22% bracket (or more) when RMD's set in. There is no way to convert enough between now and 70.5 to stop that, or even substantially affect it (good problem to have, in reality).
So, now I am thinking, finish converting DW's tIRA to Roth (for simplicity) and then start SS at 65, when Medicare kicks in (for simplicity) and save $6,000+ per year in taxes, for 5 years.
FWIW, there is a very high probability that we will never use the IRA's for our selves, beyond paying taxes at RMD time. (yes, we probably worked a few years longer than needed, but after the great recession, we got a little more conservative) We have one DS, who will likely get a windfall beyond his expectations, even if we start significant charitable donations at RMD age.
So, the questions for this group:
1. Has anyone used the referenced calculator, and have you found it to be fairly accurate?
2. Does taking SS at 65 make sense in this scenario? I just don't see the benefit of waiting any longer
3. Am I missing something and letting the tax tail wag the dog?
So.. I used this calculator to run some scenarios: https://www.olt.com/main/home/taxestimator.asp
We are both 63, planning to take SS at FRA (66.2), and currently doing Roth conversions within the 12% bracket.
Using the referenced calculator, it predicts my current tax liability pretty closely ($6,000 to 8,000 depending on income from investments, no other income).
If I start SS, and stop conversions, my tax liability drops to $500-600. Can keep the cash flow constant by using cash/mm/selling bond funds that are close to par, with no additional income.
We will be in the 22% bracket (or more) when RMD's set in. There is no way to convert enough between now and 70.5 to stop that, or even substantially affect it (good problem to have, in reality).
So, now I am thinking, finish converting DW's tIRA to Roth (for simplicity) and then start SS at 65, when Medicare kicks in (for simplicity) and save $6,000+ per year in taxes, for 5 years.
FWIW, there is a very high probability that we will never use the IRA's for our selves, beyond paying taxes at RMD time. (yes, we probably worked a few years longer than needed, but after the great recession, we got a little more conservative) We have one DS, who will likely get a windfall beyond his expectations, even if we start significant charitable donations at RMD age.
So, the questions for this group:
1. Has anyone used the referenced calculator, and have you found it to be fairly accurate?
2. Does taking SS at 65 make sense in this scenario? I just don't see the benefit of waiting any longer
3. Am I missing something and letting the tax tail wag the dog?