pb4uski
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I just saw an ad in Kiplinger's Personal Finance for this service for a "smart withdrawal strategy helps you get more, keep more". Has anyone tried this? Impressions?
I just saw an ad in Kiplinger's Personal Finance for this service for a "smart withdrawal strategy helps you get more, keep more". Has anyone tried this? Impressions?
We also present two tax-efficient withdrawal strategies that use Roth conversions. In the first, the taxpayer converts sufficient funds from the TDA to a Roth IRA to fully use the 15% tax bracket; she would have been in the 25% bracket if all withdrawals came from the TDA. Then, she withdraws additional funds as needed to meet her spending needs from the taxable account. Once the taxable account has been exhausted, she withdraws sufficient funds each year from the TDA to fully use the 15% bracket and then withdraw additional funds from the TEA. The advantage of this strategy compared to the prior strategy is that the taxpayer has more funds in the TEA growing tax-free but fewer funds in the taxable account growing at an after-tax rate of return.
In the second tax-efficient strategy that uses the Roth conversion, the taxpayer makes two separate Roth conversions at the beginning of the first 25 retirement years with each conversion amount begin sufficient to fully use the 15% tax bracket. At the end of the year, she retains the funds in the Roth TEA with the higher returns and recharacterizes the other Roth TEA. This strategy allows her to avoid taxes on the returns earned in the year on the converted funds, and these funds henceforth will grow tax free in the TEA.
In a detailed example using the 2013 federal tax brackets, we demonstrated that the most tax-efficient withdrawal strategy can add about 7.5 years compared to a tax-inefficient strategy. In addition, the most tax-efficient withdrawal strategy added more than 4 years compared to the strategy advocated by the conventional wisdom.
I found an interesting paper (interesting to wonks like us that is) authored by two of the principals in RetireeIncome.com at http://twenty-first.com/pdf/tax-efficent_withdrawal_strategies.pdf