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Old 03-12-2019, 10:05 AM   #61
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Originally Posted by Tom52 View Post
Then things suddenly changed. Shortly after retirement we inherited some dividend paying stocks and a couple of IRAs. We were required to convert the IRAs to annuities so as not to take a huge tax hit in one year by cashing them out.
Someone may have told you that, but it might not have been an accurate statement. Inherited IRAs, provided you meet some basic requirements, can be drained via RMDs based on the recipient's age when they inherit. (Perhaps you didn't meet the requirements?)

As long as I'm here, my answers to the OP (may be some repeats, sorry):

Capital gains are taxed at lower rates than ordinary dividends. (Although qualified dividends may be taxed at the same rate?) The other thing is you have somewhat more control on when you realize income, rather than being subject to whatever dividends they decide to pay out (which can in turn, depend on things like the December 2018 downturn creating large fund outflows and thus large CG distributions).

I hold VTSAX in my taxable account. The dividends are less than what I spend, and are way below the ACA threshhold for me (I live in the lower 48 and have two dependents).

I paid off my mortgage a few years before I retired. I don't want to start that debate, but I mention it here because it gives me flexibility - since I don't have a mortgage payment, I don't have to generate the cash flow to pay the mortgage. Avoiding generating that cash flow generally allows me to avoid recognizing income from the IRS' point of view.

Generally I predict income of about 199% of FPL to get Silver CSR, and then figure out in December what I want my income to be based on my tax situation. I adjust my income upward with Roth conversions and/or realizing LTCG. I try to find the sweet spot where I use up my dependent tax credits (since they are non-refundable), generate the cash I need for next year, and keep me under the simplified needs test limit for FAFSA purposes. I also look at my total marginal bracket between federal, state, ACA, and FAFSA.

Since I don't have earned income nor do I currently have an HSA-compatible plan, I don't really have flexibility to lower my AGI after 12/31 each year. So I generally try to be very careful to calculate everything out in December and then sneak up on my AGI target from below, leaving what I consider enough room to spare in case something happens.

I will add that I've been retired about three years now and feel like I've mostly figure out how to play the IRS game as an early retiree. I did a lot of research ahead of time, but then as I go through tax season each year I learn a little more each time.
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Old 03-12-2019, 10:16 AM   #62
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Originally Posted by SecondCor521 View Post
Someone may have told you that, but it might not have been an accurate statement. Inherited IRAs, provided you meet some basic requirements, can be drained via RMDs based on the recipient's age when they inherit. (Perhaps you didn't meet the requirements?)
Here's a handy-dandy guide for anyone who is in the need-to-know camp:
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