Best uses of a Roth

[davidfin]

Having bitten the tax bullet and converted a substantial sum from my tIRA to my Roth I’m wondering how folks utilize their Roth account.

 

[Gotadimple]

Having bitten the tax bullet and converted a substantial sum from my tIRA to my Roth I’m wondering how folks utilize their Roth account.

As the last place to take withdrawals. Invest in an allocation strategy across all accounts that puts more stocks in a Roth for greater potential earnings (dividends and capital gains).

 

[Sunset]

So far haven't used it, still doing conversions.

My thinking is it will come in very handy when making a large purchase and don't have enough cash, like if we buy another house.

Otherwise I just see it as tax arbitrage of the tax rate when no SS/RMD and married compared to later when SS & RMD & single.

I've done tax returns for singles , and it takes very little money to get into higher rates once a person has SS and RMD.

 

[Dash man]

I keep mostly dividend growth stocks and a few corporate bonds in my Roth. I do some options trading with the stocks for extra earnings if the environment is right. I doubt if I’ll ever touch it for spending since we still have a substantial taxable account and tIRA. We’re still doing conversions, but the taxes we pay out of our taxable account will still have plenty left after we’re done converting. Kids will be happy one day.

 

[pb4uski]

If/when we exhaust our taxable account money for living expenses before I start SS at 70, the next pot that we would use for living expenses would be our Roth.

The plan would be to continue and stay the course on doing Roth conversions to the top of the 12% tax bracket each year and withdraw what we need to for living expenses from the Roth. If the Roth conversions exceeds withdrawals for living expenses in a particular then the remainder continues to sit in the Roth tax-free. OYOH, if withdrawals for living expenses exceeds the Roth conversion then it just effectively converts the Roth conversion to a tIRA withdrawal used for spending and there is nothing wrong with that.

 

[foxfirev5]

Still doing conversions. However as the balance has grown I've gone from 100% equity funds to TIPS for new money. As long as TIPS returns are positive.

The long term objective is for the Roth's to provide tax free income after RMD's, if required. Otherwise, it's our LTC plan and if anything is left that part is for the heirs.

 

[DAYDREAMER]

Great question, and watching responses from the ER guru's with eyes wide open.

My initial thinking of Roth uses was for purchasing Large ticket items (IE: cars, rv's, houses), without impacting the years tax plan.

 

[OverThinkMuch]

I understand my situation is an outlier, but my Roth IRA was not needed for retirement. I decided I could afford my Roth going to zero, which allowed me to take bigger risks (YMMV).

Three years ago Covid-19 fears caused a chunk of the stock market to be priced for bankruptcy. For each stock, maybe the price was accurate. But taken as a group, the chance of a fraction of the economy collapsing was mispriced. I studied it and decided "stocks recover", and bought a diverse group of stocks. If they all collapsed, we'd be talking about the second great depression right now. But they did recover, and my Roth IRA did extremely well.

 

[Montecfo]

Doing conversions. Will touch Roth last if needed.

Invested for long-term growth, 100 pct equities.

No plans to invade it for managing taxable income (as alternative to IRA).
I have an an HELOC to help with that.

 

[RetiredAt49]

I’m nearly finished with my algorithmic, machine learning trading bot (which automatically places trades throughout the day without human intervention). As soon as it’s running smoothly I plan to use my Roth account so that it grows tax free. Thus far, I’ve nearly doubled my taxable account size but have hit some brokerage snags (TD Ameritrade said I was placing too many trades on their platform).

 

[harley]

Like most others here, my Roth would be the last thing I'd touch for withdrawals. My actual plan is to never touch it, and use it to pass on money to DD tax free. We're starting DW's SS this year, so our window for Roth conversions in the 22% bracket will shrink to nearly nothing. But over the past decade we've managed to move a significant number of dollars out of the tIRA to the Roth. I try not to let the tax tail wag the investment dog, but I really do get a kick out of trying to (legally, of course) minimize taxes. Everybody needs a hobby.

 

[gcgang]

Roth will most likely go to daughter. Doubt I’ll ever need money in it during the remainder of my life.

Have accelerated conversions over the last few years to max out tax bracket before starting Social Security or RMDs (age 68 now), or before tax rates go up (2025?).

However, I still view the assets as part of my portfolio and investments in it are mostly fixed income oriented.

 

[DrRoy]

Haven't used it yet at 63.

 

[user5027]

Having bitten the tax bullet and converted a substantial sum from my tIRA to my Roth I’m wondering how folks utilize their Roth account.

Reduced AGI to maximize ACA subsidy.

 

[Jerry1]

The plan is that it will be the last money spent. Hoping it will be there to pass to my daughters but if I have to use it for long term/medical care, that’s fine too.

 

[COcheesehead]

Holding onto it if I were to need funds without taking any tax hit. Will likely be the last funds spent or a secret pot of gold during RMD years.

I have income oriented investments in it because the tax free nature leverages up the yields.
I also continue to add to it because I have earned income in retirement.

 

[MarieIG]

I'm still in the conversion process.

The long range plan (keeping in mind that circumstances can change) is to convert the majority of my Roth by the time DH turns 70) keeping behind a bit in the traditional IRA for charitable donations;

Keep high tax investments in the Roth;

After age 70 take out a small monthly stipend for discretionary expenses;

If there is a remainder, leave that for DH - heirs.

 

[Which Roger]

DW and I plan for two things each year:
X = How much spending money we need
Y = How much income we want (to manage taxes and ACA subsidies)

Depending on the values of X and Y, we will tap various sources, and the Roth comes into play is some cases where X>Y, such as years when we will be making a large purchase

 

[Sunset]

We are still in the conversion process.

However, our plan is to leave a good sized chunk in IRA's in case of large medical/long term nursing home bills as those will be deductible and make the IRA withdrawal nearly tax free.

 

[skyking1]

As everyone else has said, it is likely to be left to grow.

 

[pb4uski]

We are still in the conversion process.

However, our plan is to leave a good sized chunk in IRA's in case of large medical/long term nursing home bills as those will be deductible and make the IRA withdrawal nearly tax free.

Given that when I retired in 2012 that tax-deferred was 53% of our retirement assets and despite aggressive Roth conversions for the last 10 years it is now 58%, I think there is no amount of sensible Roth conversions that can avoid leaving a good sized chunk in tIRAs.

When we become of age some will be used for QCDs and some will be available for large medical/nursing home bills.

 

[Romer]

Right now doing conversions. Reducing/eliminating RMDs is nice, but my main driver is what happens to tax rates when we go married to single due to one of us passing. If we have only ROTH IRAs at the point, it will be a negligible change.

 

[Octogirl]

Still converting, however Roth $$ will be the last account we 'll use.
My experience in paying for Long term care suggests holding it for that (just in case).
Relatives had to sell tIRA, pay taxes (at 22%), THEN pay nursing home bills for mom- Not good
But if DH and I never need it, its goes to the kids

 

[NgineER]

Always an interesting discussion.

Do you all have an end goal in your conversions with respect to Roth IRA/tIRA ratio?
50/50, 72/25, 90/10 or 100/0?

I see the benefit of being able to pay for medical expenses, QCD etc.

 

[Sunset]

Given that when I retired in 2012 that tax-deferred was 53% of our retirement assets and despite aggressive Roth conversions for the last 10 years it is now 58%, I think there is no amount of sensible Roth conversions that can avoid leaving a good sized chunk in tIRAs.

......

..
Do you all have an end goal in your conversions with respect to Roth IRA/tIRA ratio?
50/50, 72/25, 90/10 or 100/0?

..

I never thought to see what our percentage was.. may try that going forward.

Does one count the 401K in the IRA group, since it can convert to an IRA and is like an IRA once retired, or leave it out. ?