My wife and I are 66;65 now but I'm trying to do some early planning for RMD. All of our current pre-tax IRA/401-K assets are in SPY or equivalent. By the time RMD happens the 401-K will be rolled into the IRA. I'm projecting $3M give or take in the IRA once the consolidation happens so I'm thinking $110K-$120K RMD (exact amount not important for this discussion) and we will be in a high 33% bracket. I plan to move the proceeds into SPY or equivalent in a brokerage account and pay required taxes from the proceeds.
For the sake of simplicity let's assume $120K RMD with 40K taxes (33% marginal rate) will this just be a simple matter of reducing 120K of SPY to 80K of SPY with new basis at RMD price? Simple thinking indicates 33% tax on 4% of the IRA with step-up on the remaining 2.67% (of the IRA) remaining after 1.33% tax (of the IRA) to the government.
I know these numbers change every year as I get older but visually is this a close estimate of reality or is there some flaw in my simplistic thinking here?
We are fortunate not to need these funds for our living expenses so the "M" in "RMD" is the watchword and very important.
IRA - $3M
1st year RMD $3M/26.5 - $118K ($120K for sake of rounding up)
1st year tax - $40K
1st year left - $80K
For the sake of simplicity let's assume $120K RMD with 40K taxes (33% marginal rate) will this just be a simple matter of reducing 120K of SPY to 80K of SPY with new basis at RMD price? Simple thinking indicates 33% tax on 4% of the IRA with step-up on the remaining 2.67% (of the IRA) remaining after 1.33% tax (of the IRA) to the government.
I know these numbers change every year as I get older but visually is this a close estimate of reality or is there some flaw in my simplistic thinking here?
We are fortunate not to need these funds for our living expenses so the "M" in "RMD" is the watchword and very important.
IRA - $3M
1st year RMD $3M/26.5 - $118K ($120K for sake of rounding up)
1st year tax - $40K
1st year left - $80K