Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 07-07-2021, 05:49 PM   #61
Full time employment: Posting here.
 
Join Date: Feb 2017
Posts: 781
Quote:
Originally Posted by N02L84ER View Post
or when one of you dies and you have to switch to filing as single instead of married filing jointly.
Ohhh...never thought of that...
CindyBlue is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 07-07-2021, 05:54 PM   #62
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
ivinsfan's Avatar
 
Join Date: Feb 2007
Posts: 9,262
Quote:
Originally Posted by CindyBlue View Post
Ohhh...never thought of that...

You'll also lose one SS check when that happens and the RMD number will change as well. I have no idea how your pensions are structured.



Start your reading CindyB...
ivinsfan is offline   Reply With Quote
Old 07-07-2021, 06:01 PM   #63
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 32,240
Quote:
Originally Posted by CindyBlue View Post
Does this mean marginal and effective tax rates? If so, the marginal is 12% and the effective is 11%. (I mentioned I was ignorant...sigh...)

I'm thinking that the only way it would get higher is when I have to take RMDs in 6 years, right? (unless, God forbid, we start w*rking again (smile!))
It would probably make sense to consider doing Roth conversions to the top of the 0% preferenced income tax bracket (for qualified dividends and LTCG).

For 2020, that would be federal taxable income of $80,800 ($250 below the top of the 12% tax bracket). Add in the $27,800 standard deduction for MFJ where both are over 65 and $600 for charitable contributions even if you don't itemize and that would be $109,200 of income.

You can test various option using the What-If worksheet in turboTax if you use TurboTax to prepare your taxes or the dinkytown calculator https://www.dinkytown.net/java/1040-tax-calculator.html
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56
pb4uski is offline   Reply With Quote
Old 07-07-2021, 06:42 PM   #64
Full time employment: Posting here.
 
Join Date: Oct 2020
Posts: 557
Quote:
Originally Posted by chassis View Post
@CindyBlue speak on the telephone with your close friends and your relatives. Ask them if they know anyone who is trustworthy and who offers financial advisory services for a fee. Emails won’t get you very far, very fast. Speak with other humans.

Your tax professional is not giving you what it seems like you are looking for. I interpret from your comments that you are looking for the best tax strategy for you and DH. Ask your tax professional for his/her advice for a tax optimization strategy. If you hear static on the phone, or you get the deer in the headlights look from him/her, find a new tax professional.
Very true! We asked our CPA and realized she didn't have a clue how to manage this. I had to explain to her that IRMAA rates are based on the earnings from two years prior, she was astonished. So the initials behind the name do not necessarily mean competence at what you need.
Exchme is offline   Reply With Quote
Old 07-07-2021, 06:47 PM   #65
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 32,240
^^^^ To be fair, what we are referring to is a very narrow niche of practice that most CPAs don't deal with... even CPAs who specialize in taxes.

I think the best alternative would be to try to find a CPA with a PFS (Personal Financial Specialist) and even then they might not be familiar with some of the nuance unless they specifically practice in retirement planning.

In fact, this is such a narrow niche that if you asked 100 CPAs I would be surprised if you would find one that is familiar with it.... there is way too much money chasing corporate audits, corporate taxes, consulting, M&A, SEC practice, etc to make it worthwhile.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56
pb4uski is offline   Reply With Quote
Old 07-07-2021, 07:55 PM   #66
Full time employment: Posting here.
 
Join Date: Feb 2017
Posts: 781
Quote:
Originally Posted by ivinsfan View Post
You'll also lose one SS check when that happens and the RMD number will change as well. I have no idea how your pensions are structured.



Start your reading CindyB...
Hmm...if whoever is left loses the partner's social security check - and also half the other guy's pension - wouldn't that make the income lower therefore less tax hit?
CindyBlue is offline   Reply With Quote
Old 07-07-2021, 07:57 PM   #67
Full time employment: Posting here.
 
Join Date: Feb 2017
Posts: 781
Quote:
Originally Posted by Exchme View Post
Very true! We asked our CPA and realized she didn't have a clue how to manage this. I had to explain to her that IRMAA rates are based on the earnings from two years prior, she was astonished. So the initials behind the name do not necessarily mean competence at what you need.
Wow...I guess it's too much of a specialty thing...
CindyBlue is offline   Reply With Quote
Old 07-07-2021, 08:01 PM   #68
Full time employment: Posting here.
 
Join Date: Feb 2017
Posts: 781
Quote:
Originally Posted by pb4uski View Post
It would probably make sense to consider doing Roth conversions to the top of the 0% preferenced income tax bracket (for qualified dividends and LTCG).

For 2020, that would be federal taxable income of $80,800 ($250 below the top of the 12% tax bracket). Add in the $27,800 standard deduction for MFJ where both are over 65 and $600 for charitable contributions even if you don't itemize and that would be $109,200 of income.

You can test various option using the What-If worksheet in turboTax if you use TurboTax to prepare your taxes or the dinkytown calculator https://www.dinkytown.net/java/1040-tax-calculator.html
I'm sorry - and sad - to say that none of this makes any sense to me. What is "...doing Roth conversions to the top of the 0% preferenced income tax bracket (for qualified dividends and LTCG)" ?
CindyBlue is offline   Reply With Quote
Old 07-07-2021, 08:02 PM   #69
Full time employment: Posting here.
 
Join Date: Feb 2017
Posts: 781
Quote:
Originally Posted by ivinsfan View Post
You'll also lose one SS check when that happens and the RMD number will change as well. I have no idea how your pensions are structured.



Start your reading CindyB...
Working on it!
CindyBlue is offline   Reply With Quote
Old 07-07-2021, 08:19 PM   #70
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
ivinsfan's Avatar
 
Join Date: Feb 2007
Posts: 9,262
Quote:
Originally Posted by CindyBlue View Post
Hmm...if whoever is left loses the partner's social security check - and also half the other guy's pension - wouldn't that make the income lower therefore less tax hit?
This will help mitigate the cost of filing status changing from filing jointly to filing singly.
ivinsfan is offline   Reply With Quote
Old 07-07-2021, 09:11 PM   #71
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 32,240
Quote:
Originally Posted by CindyBlue View Post
I'm sorry - and sad - to say that none of this makes any sense to me. What is "...doing Roth conversions to the top of the 0% preferenced income tax bracket (for qualified dividends and LTCG)" ?
Think of it as converting to the top of the 12% tax bracket.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56
pb4uski is offline   Reply With Quote
Old 07-07-2021, 09:17 PM   #72
Full time employment: Posting here.
 
Join Date: Feb 2017
Posts: 781
Quote:
Originally Posted by pb4uski View Post
Think of it as converting to the top of the 12% tax bracket.
Meaning...that I convert enough to get it so my RMDs from the 403b combined with my other income puts me at the top of the 12% bracket but not enough to put me over the 12% bracket?
CindyBlue is offline   Reply With Quote
Old 07-07-2021, 10:48 PM   #73
Thinks s/he gets paid by the post
Telly's Avatar
 
Join Date: Feb 2003
Posts: 2,204
CindyBlue, I don't know what your approach to LTC (Long Term Care) is, but SS + Pension(s) alone may not be enough to pay for decent LTC if you are self-insuring. Around here, $100k a year would be a good planning number for one patient. And I would expect it to increase far faster than the inflation rate! DW and I are self-insuring, so we will want to keep a pretty good $$$ buffer for the future! So when I get to RMD age, we will probably re-invest most of the RMD into a taxable account whose goal is to generate minimal year-to-year taxes, and grow untouched. And take the tax hit when and if we need to sell some in the future.
__________________
-- Telly, the D-I-Y guy --
Two fools dancing on the hands of time
Telly is offline   Reply With Quote
Old 07-07-2021, 10:55 PM   #74
Full time employment: Posting here.
 
Join Date: Feb 2017
Posts: 781
Quote:
Originally Posted by Telly View Post
CindyBlue, I don't know what your approach to LTC (Long Term Care) is, but SS + Pension(s) alone may not be enough to pay for decent LTC if you are self-insuring. Around here, $100k a year would be a good planning number for one patient. And I would expect it to increase far faster than the inflation rate! DW and I are self-insuring, so we will want to keep a pretty good $$$ buffer for the future! So when I get to RMD age, we will probably re-invest most of the RMD into a taxable account whose goal is to generate minimal year-to-year taxes, and grow untouched. And take the tax hit when and if we need to sell some in the future.
That is a very valuable consideration! Thank you so much for providing this perspective.
CindyBlue is offline   Reply With Quote
Old 07-08-2021, 12:19 AM   #75
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Sunset's Avatar
 
Join Date: Jul 2014
Location: Spending the Kids Inheritance and living in Chicago
Posts: 13,876
Quote:
Originally Posted by CindyBlue View Post
Meaning...that I convert enough to get it so my RMDs from the 403b combined with my other income puts me at the top of the 12% bracket but not enough to put me over the 12% bracket?
Meaning since you are in the 12% tax bracket, do roth conversions to the top of that 12% bracket, each year.
It probably does not make sense to do so much conversion in a year that you go into the next tax bracket.

Whatever is left in the 403b will come out as RMD's and you don't get a choice about that.
__________________
Fortune favors the prepared mind. ... Louis Pasteur
Sunset is offline   Reply With Quote
Old 07-08-2021, 04:20 AM   #76
Thinks s/he gets paid by the post
 
Join Date: Oct 2017
Location: Chapel Hill, NC
Posts: 4,766
Quote:
Originally Posted by CindyBlue View Post
Meaning...that I convert enough to get it so my RMDs from the 403b combined with my other income puts me at the top of the 12% bracket but not enough to put me over the 12% bracket?
Or if you have any interest in giving to charity, give enough to charity each year from your IRA (after you reach age 70.5) to reduce your IRA and required RMD and reduce the tax bite. That it what DH and I are doing. We already give a lot to charity and after age 70.5 we are moving all of our charitable giving to our IRAs.
harllee is offline   Reply With Quote
Old 07-08-2021, 06:14 AM   #77
Full time employment: Posting here.
 
Join Date: Feb 2017
Posts: 781
Quote:
Originally Posted by Sunset View Post
Meaning since you are in the 12% tax bracket, do roth conversions to the top of that 12% bracket, each year.
It probably does not make sense to do so much conversion in a year that you go into the next tax bracket.

Whatever is left in the 403b will come out as RMD's and you don't get a choice about that.
Finally got it! Thank you!
CindyBlue is offline   Reply With Quote
Old 07-08-2021, 06:15 AM   #78
Full time employment: Posting here.
 
Join Date: Feb 2017
Posts: 781
Quote:
Originally Posted by harllee View Post
Or if you have any interest in giving to charity, give enough to charity each year from your IRA (after you reach age 70.5) to reduce your IRA and required RMD and reduce the tax bite. That it what DH and I are doing. We already give a lot to charity and after age 70.5 we are moving all of our charitable giving to our IRAs.
Honestly, I'd love to, but we need to keep and save our money for our "old age." We retired with enough, but not enough to be able to donate too much.
CindyBlue is offline   Reply With Quote
Old 07-08-2021, 07:54 AM   #79
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
target2019's Avatar
 
Join Date: Dec 2008
Location: Stuck in the mud somewhere in the NJ swamp
Posts: 8,380
Quote:
Originally Posted by target2019 View Post
What tax bracket are you in now, Cindy?

The tactic is to stay in a lower bracket, pay taxes on a conversion to Roth IRA, and avoid the additional taxes that will come when you enter a higher tax bracket.
Quote:
Originally Posted by CindyBlue View Post
Does this mean marginal and effective tax rates? If so, the marginal is 12% and the effective is 11%. (I mentioned I was ignorant...sigh...)

I'm thinking that the only way it would get higher is when I have to take RMDs in 6 years, right? (unless, God forbid, we start w*rking again (smile!))
I went over to the tax calculator at https://www.dinkytown.net/java/1040-tax-calculator.html and made a few guesses at your numbers. If you are still in the marginal 12% this year, I believe you are getting close to the top of that bracket. With two pensions, two SS checks and one RMD you're probably soon entering the 22% bracket. If you focus on just that calculator it will give you all you need to know about what to do this tax year 2021 as far as converting 403(b) to Roth IRA. If you and DH work on this together I know it will help you greatly, even if just to validate what a paid adviser comes up with later.

When you go to the calculator it has pre-filled data for a single person. You need to go through each expandable section and make changes to all of the boxes so it fits your profile.

If my estimates are correct, you may soon enter the 22% bracket. And of course it is inevitable that one of you will end up in the 24% bracket (as a single filer). So anything you can convert to Roth while in the "12" is a gain for you for the rest of your years.

As you can see from the depth of some posts here this is an elephant of a topic. You can't eat it all at one time, but a decent tax CPA or tax preparer can work this out for you, maybe make a simple table for the next 7 years or so. Of course the tax situation can change, and the projection won't be accurate each year, but it could be worth the effort.
target2019 is offline   Reply With Quote
Old 07-08-2021, 08:10 AM   #80
Full time employment: Posting here.
 
Join Date: Feb 2017
Posts: 781
Quote:
Originally Posted by target2019 View Post
I went over to the tax calculator at https://www.dinkytown.net/java/1040-tax-calculator.html and made a few guesses at your numbers. If you are still in the marginal 12% this year, I believe you are getting close to the top of that bracket. With two pensions, two SS checks and one RMD you're probably soon entering the 22% bracket. If you focus on just that calculator it will give you all you need to know about what to do this tax year 2021 as far as converting 403(b) to Roth IRA. If you and DH work on this together I know it will help you greatly, even if just to validate what a paid adviser comes up with later.

When you go to the calculator it has pre-filled data for a single person. You need to go through each expandable section and make changes to all of the boxes so it fits your profile.

If my estimates are correct, you may soon enter the 22% bracket. And of course it is inevitable that one of you will end up in the 24% bracket (as a single filer). So anything you can convert to Roth while in the "12" is a gain for you for the rest of your years.

As you can see from the depth of some posts here this is an elephant of a topic. You can't eat it all at one time, but a decent tax CPA or tax preparer can work this out for you, maybe make a simple table for the next 7 years or so. Of course the tax situation can change, and the projection won't be accurate each year, but it could be worth the effort.
This is great information! I can see that I will need to find a good tax person to help us. When you say "make a simple table for the next 7 years or so" do you mean a table for the amount of money we wil need to convert to Roth every year for the next 7 years?
CindyBlue is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
How concerned should we be? RDamien FIRE and Money 8 09-30-2008 01:37 PM
Dollar Plunging: Only Tinfoil Hats Concerned barbarus FIRE and Money 23 03-17-2008 09:23 PM
Taxes, Taxes. Taxes mickeyd FIRE and Money 1 02-09-2008 01:18 PM
Concerned about being bored in ER. David1961 Life after FIRE 30 08-17-2007 07:50 AM

» Quick Links

 
All times are GMT -6. The time now is 03:36 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2022, vBulletin Solutions, Inc.