52 yo with another can I do it.

[pb4uski]

Yes, you would have to pay taxes on Roth conversions. The big idea is to do as much as you can when you are in a lower tax bracket before SS and/or RMDs put you into a higher tax bracket. I've converted a lot over the last 6 years and paid about 8.5% on average...a combination of 0%, 10% and 12%.

[viking111]

Quote:

Originally Posted by pb4uski Yes, you would have to pay taxes on Roth conversions. The big idea is to do as much as you can when you are in a lower tax bracket before SS and/or RMDs put you into a higher tax bracket. I've converted a lot over the last 6 years and paid about 8.5% on average...a combination of 0%, 10% and 12%.

I think perhaps if you have a large 401k it's worth it. If most of assets are in taxable, I'm not sure if it's worth it.

[ILikeStarTrek]

Quote:

Originally Posted by viking111 I would have to pay taxes on the 401K funds if converted, wouldn't I?

Yes, that's why you want to do it when you will be in the lowest possible tax bracket for you. Convert a little year by year so you don't jump to a higher tax bracket.

[ILikeStarTrek]

Quote:

Originally Posted by viking111 I think perhaps if you have a large 401k it's worth it. If most of assets are in taxable, I'm not sure if it's worth it.

You will pay taxes on your 401k money eventually (unless you die first, in which case your heirs will pay the taxes). When you are in your 70s, you will be forced to pull money out in the form of Required Minimum Distributions. Your 401k money may have grown by then so it could have 3 times the value it does now, and thus be more likely to put you into a higher tax bracket.

In general, 401k withdrawals/conversions/RMDs is all about doing it when you are in the lowest possible tax bracket. From how you have described your situation, it seems like in your case that could be over the next few immediate years.

[viking111]

"You need to include taxes in your data for Firecalc. E.g., if you will be using up non-retirement money until age 60 and then drawing from pre-tax retirement sources thereafter, at a 25% income tax rate you will need to pull 207k to have 155k of spending money. One way to do this in Firecalc is to add the extra amount as "Off Chart spending" starting the year you are 60 (or whatever age you will start pulling from pre-tax)."

One other thing. As we age we won't be spending as much and most of our money is in taxable. So although the higher tax rate is important, I don't think it will cause us too much problems. But I will take your advice and start to slowly convert some of the 401K money to a Roth. Thank you.

Based on what I have read and you and others have stated on this site, it seems I'm we are in good shape for retirement. I also have some good options for part time work. About 8 hours per week that pays well enough to make a difference but not too much of a difference to put me in a higher tax bracket.

[Finance Dave]

Quote:

Originally Posted by viking111 I also have some good options for part time work. About 8 hours per week that pays well enough to make a difference but not too much of a difference to put me in a higher tax bracket.

That's what I've done. Although some would say I'm not "FIREd" lol. I do handyman work about 4-8 hours/week, and use the money for my hobbies.

Another thing to think about is how much of your spending is discretionary. Ours is about 50%. So if there is a market downturn, you just take one fewer vacations the following year or buy a Honda Pilot rather than a Lexus RX. LOL

[viking111]

Quote:

Originally Posted by Finance Dave That's what I've done. Although some would say I'm not "FIREd" lol. I do handyman work about 4-8 hours/week, and use the money for my hobbies. Another thing to think about is how much of your spending is discretionary. Ours is about 50%. So if there is a market downturn, you just take one fewer vacations the following year or buy a Honda Pilot rather than a Lexus RX. LOL

That's true. A large part would be vacation, car payment. If I reduce that for a bad year then our WR will drop. The part time work would basically work out the same and then SS would do that.

[pb4uski]

Quote:

Originally Posted by viking111 I think perhaps if you have a large 401k it's worth it. If most of assets are in taxable, I'm not sure if it's worth it.

For most ERs, their biggest pot is tax-deferred.

[GTP2022]

Yes. Absolutely.

[Scratchy]

I see upstream you state you've accounted for health expenses in the $155k. I'm curious to know what health insurance coverage/costs you plan for.

[viking111]

Quote:

Originally Posted by Scratchy I see upstream you state you've accounted for health expenses in the $155k. I'm curious to know what health insurance coverage/costs you plan for.

My wifes previous job gave her health insurance for the next couple of years.
After that I priced out healthcare on Healthcare.gov and put the cost into the budget including the deductible cost till 65 years old and then after that I adjusted for it after we are both on medicare.