We are considering buying a second home for winter (probably about 12 to 18 months from now). I would prefer to just pay cash for it. I am looking at schemes to pull funds from assorted sources in an effort to flatten the curve of the impact to taxes. My initial thought was to pull money from the 401k in late 2021, and hold it in cash. Then pull additional money from the 401k in 2022. Additional funds could come from a 50k loan against the 401k, which could then be paid off in 2023, and finally a pull from the Roth account.
The alternative is to just continue to max the Roth conversions, and pull the whole thing from the Roth account. Assuming that there is no change in tax rates, ignoring market performance, and that withdrawal/conversions are done to the same incremental tax rate- Are these approaches equivalent? The loan is just pulling money from 2023 into 2022, but it is no different than pulling money from a Roth (just pushing the tax obligation out into 2023)?
We have been building up the Roth accounts by doing conversions, and it seems that I have built a mental wall that says to continue building but don’t draw from them. Much like the transition from accumulating mode to spending down mode, I think I am just a bit hung up on this. I would appreciate any thoughts to help me clarify my thinking.
The alternative is to just continue to max the Roth conversions, and pull the whole thing from the Roth account. Assuming that there is no change in tax rates, ignoring market performance, and that withdrawal/conversions are done to the same incremental tax rate- Are these approaches equivalent? The loan is just pulling money from 2023 into 2022, but it is no different than pulling money from a Roth (just pushing the tax obligation out into 2023)?
We have been building up the Roth accounts by doing conversions, and it seems that I have built a mental wall that says to continue building but don’t draw from them. Much like the transition from accumulating mode to spending down mode, I think I am just a bit hung up on this. I would appreciate any thoughts to help me clarify my thinking.