SecondCor521
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Hi all.
I thought I understood this FIRE finance stuff, but I'm unclear on how to proceed with my current situation.
I asked on Bogleheads about this situation and got some advice. I'm asking here now to perhaps get some different and additional eyeballs on it.
I am 54 and single. I have a traditional IRA, Roth IRA, and taxable account (among other things).
I currently spend all of my taxable dividends, any gifts, some side gig income, and miscellaneous income. I am left with an annual cash flow deficit of $X per year.
My taxable is about 5 * $X. My Roth is about 23 * $X. My traditional is about 41 * $X.
I value flexibility, simplicity, depleting my traditional IRA (for long term tax planning to reduce RMDs) and preserving my Roth (for tax free growth) and my taxable (for flexibility).
There are three plans I could follow:
1. Status quo. Currently I sell $X from my taxable each year to meet my cash flow deficit. Since my taxable is about 50% basis, this creates $X/2 of AGI. I then Roth convert on top of this up to my AGI target. I've been doing this for the past eight years basically.
2. Roth pipeline. I could stop selling from taxable to fund my cash flow. This would enable me to Roth convert all of what I was doing under my status quo, plus Roth convert another $X/2. I would instead draw $X from my Roth to cover my cash flow.
3. SEPP. I could stop selling from taxable to fund my cash flow. I could then Roth convert much like in plan #2. I would set up an SEPP from my tIRA for $X each year to cover my cash flow. The main drawback of this plan is it's lack of flexibility and lack of simplicity.
I'm fairly convinced that based on my values, plan 2 is better than plan 3. It's more flexible, simpler, and has the opportunity to reduce my tIRA more.
I am struggling with which is better between plan 1 and plan 2. Plan 2, the Roth pipeline, is more flexible, but a bit less simple, but reduces my tIRA the most. The other reason I tend not to like plan #2 is that relatively speaking it drains my Roth compared to my taxable.
I was planning on doing the SEPP starting in January of 2024, and that is what has got me thinking about this again.
Advice? Thoughts?
I thought I understood this FIRE finance stuff, but I'm unclear on how to proceed with my current situation.
I asked on Bogleheads about this situation and got some advice. I'm asking here now to perhaps get some different and additional eyeballs on it.
I am 54 and single. I have a traditional IRA, Roth IRA, and taxable account (among other things).
I currently spend all of my taxable dividends, any gifts, some side gig income, and miscellaneous income. I am left with an annual cash flow deficit of $X per year.
My taxable is about 5 * $X. My Roth is about 23 * $X. My traditional is about 41 * $X.
I value flexibility, simplicity, depleting my traditional IRA (for long term tax planning to reduce RMDs) and preserving my Roth (for tax free growth) and my taxable (for flexibility).
There are three plans I could follow:
1. Status quo. Currently I sell $X from my taxable each year to meet my cash flow deficit. Since my taxable is about 50% basis, this creates $X/2 of AGI. I then Roth convert on top of this up to my AGI target. I've been doing this for the past eight years basically.
2. Roth pipeline. I could stop selling from taxable to fund my cash flow. This would enable me to Roth convert all of what I was doing under my status quo, plus Roth convert another $X/2. I would instead draw $X from my Roth to cover my cash flow.
3. SEPP. I could stop selling from taxable to fund my cash flow. I could then Roth convert much like in plan #2. I would set up an SEPP from my tIRA for $X each year to cover my cash flow. The main drawback of this plan is it's lack of flexibility and lack of simplicity.
I'm fairly convinced that based on my values, plan 2 is better than plan 3. It's more flexible, simpler, and has the opportunity to reduce my tIRA more.
I am struggling with which is better between plan 1 and plan 2. Plan 2, the Roth pipeline, is more flexible, but a bit less simple, but reduces my tIRA the most. The other reason I tend not to like plan #2 is that relatively speaking it drains my Roth compared to my taxable.
I was planning on doing the SEPP starting in January of 2024, and that is what has got me thinking about this again.
Advice? Thoughts?
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