Looks like Secure 2.0 will pass [emoji16]

[Dtail]

Oops, I didn’t finish my post - 2032 is when RMD age increases to 75.

Works for me and my DGF.

 

[W2R]

So I will turn 75 later this year, missing out on realizing any benefit from this legislation. I also missed out on the RMD change to 72. Reminds me of my working days when after 15 years with the company I finally qualified for a third week of vacation - the same year they reduced the qualification to 5 years.

Everyone is invited to my pity party.

I'll join too! Like you, I had to start my RMD's at age 70. Oh well - - worse things have happened to both of us in our lives, I'm sure. I planned to use my TSP to fund my retirement anyway. So it did.

But in the time honored internet practice of one-upmanship, I must add that there was no ACA when I retired and yet private health insurance was sky high. So, I had to work two extra years until I was eligible for retiree insurance.

At least I did not have to choose between joining the military or getting drafted during Vietnam, like most of my male friends, being female. Being a timid and non-aggressive person, that could have been so much worse both for the military and for me.

 

[Golden sunsets]

I'll be 73 this December and started RMD's at 70.5. Does anyone know for sure if I'm eligible to skip any RMD's?

PS. I will download the bill later bbut not home now. Just thought I'd ask or an early read.

 

[MissMolly]

You could have skipped 2020 RMD (too late now), but other than that, no.

 

[TheWizard]

Ding! Ding! Ding! I am a WINNAR!

Will update my RMD withdrawal spreadsheet models after I finish celebrating .

I'll update my spreadsheets as well, but I'm waiting until this bill gets signed into law...

 

[TheWizard]

It looks like I'll get another delay of RMDs until January, 2023 if this gets signed into law.
This is good for me, yes, but not an incredible bonus.

I withdraw roughly the same amount as RMDs would require now, but for Roth conversions.
So in 2023, I stop Roth converting and just funnel the extra cash flow into my taxable account.
It's all good if you play your cards right...

 

[PageTwo]

I think you can do Roth conversions before 55. Has naught to do with Rule of 55.

I've been doing conversions of after-tax contributions to my 401K for years (my plan allows high limits of after tax contributions, and lets us convert them right away, paying 0 capital gains tax). However I have left the pre-tax sub-account alone during my working years.

It just so happens that I'm retiring right as I turn 55. Given that I won't have regular income, I'll take advantage of the rule of 55 to start converting the pre-tax portion. I honestly don't know if I would have been able to convert it while working (never asked) but it would have risen my tax bracket quite a bit...

Hope this all makes sense? Thanks for any insights

 

[PageTwo]

You would do "chunks" to stay in a lower tax bracket (I think)

That makes sense if: (1) your 401k Plan Description will allow it and, (2) any tax savings are worth the effort. For me, my Plan Description allowed the Mega-Back Door conversion but, only once. Also remember that tax is due on only the "earnings", which must follow their original associated Post-Tax 401k contributions. So, perhaps, the tax on the earnings might not be large enough for you want to do it twice. YMMV.

Correct - the model I'm using shows that I'll stay in a lower tax bracket by doing partial conversions over several years. However I'll double check that that's allowed by the plan. Otherwise I guess I'll have to do just one massive conversion... tricky to come up with the cash for the tax bill unless it can be taken from the account itself.

Huston55 - I think you're referring to converting after-tax monies. Pre-tax 401K conversions require paying tax on the total amount (which is considered ordinary income AFAIK).

 

[Golden sunsets]

You could have skipped 2020 RMD (too late now), but other than that, no.

Oh we did skip 2020. As regards 2021 going forward, NO CHANGE is what I assumed. Just checking.

 

[street]

I need to read up on this bill passing but so is this for IRA's and 401K's? So, if born in 1956 you wouldn't have to take RDM's till 75 years of age?

 

[FI_RElater]

"It's your party and you'll cry if you want to..."

So I will turn 75 later this year, missing out on realizing any benefit from this legislation. I also missed out on the RMD change to 72. Reminds me of my working days when after 15 years with the company I finally qualified for a third week of vacation - the same year they reduced the qualification to 5 years.

Everyone is invited to my pity party.

Well, I can appreciate changes like that... I was "involuntarily" changed to FERS vs the CSRS I initially was in...I would be drawing much more now in retirement. AFA vacation, I was in use-or-lose most of my later years and had a &*#%%'ng supervisor for a couple of them that wanted to deny leave (I was a technical lead but tried to properly schedule time-off so as to not impact projects)... kind of hard to replace summers in maine or montana with winter vacations, ya think?

currently mid-60's and doing conversions... the extra years might allow more conversions at lower tax rates (still have 401k that will be converted after this IRA, as there's non-deductible and 8606-stuff I want to avoid in the future)

 

[SecondCor521]

I've been doing conversions of after-tax contributions to my 401K for years (my plan allows high limits of after tax contributions, and lets us convert them right away, paying 0 capital gains tax). However I have left the pre-tax sub-account alone during my working years.

It just so happens that I'm retiring right as I turn 55. Given that I won't have regular income, I'll take advantage of the rule of 55 to start converting the pre-tax portion. I honestly don't know if I would have been able to convert it while working (never asked) but it would have risen my tax bracket quite a bit...

Hope this all makes sense? Thanks for any insights

It's a bit confusing.

Since you're retiring in the year in which you turn 55, then you can make partial 401(k) withdrawals as long as your employer plan allows them.

However, anyone (you included, but also me included who retired at 46) can leave a job at any age, roll their 401(k) to an IRA (or set of IRAs), and then do Roth conversions from their traditional IRA to their Roth IRA. In fact that is what I did.

So the only thing you're really gaining with your method - as far as I can see - is the ability to do partial conversions from your 401(k) to your Roth IRA without the intermediate traditional IRA that others would have to do. But that's really just some paperwork shuffling and setup hassle.

 

[PageTwo]

It's a bit confusing.

Since you're retiring in the year in which you turn 55, then you can make partial 401(k) withdrawals as long as your employer plan allows them.

However, anyone (you included, but also me included who retired at 46) can leave a job at any age, roll their 401(k) to an IRA (or set of IRAs), and then do Roth conversions from their traditional IRA to their Roth IRA. In fact that is what I did.

So the only thing you're really gaining with your method - as far as I can see - is the ability to do partial conversions from your 401(k) to your Roth IRA without the intermediate traditional IRA that others would have to do. But that's really just some paperwork shuffling and setup hassle.

Yes - I was trying to avoid the intermediate step. But that's a great point - if for some reason I can't do multiple yearly partial rollovers from the 401K, rolling the whole thing into a tIRA and then doing it from there is the perfect workaround. So thanks!

 

[jollystomper]

I'll update my spreadsheets as well, but I'm waiting until this bill gets signed into law...

True. Who knows what might be added/changed by the time it gets thru the house and senate...

 

[audreyh1]

Oh we did skip 2020. As regards 2021 going forward, NO CHANGE is what I assumed. Just checking.

Once you start RMDs you stay on that same schedule. Only if RMDs are exempted in a given year do you get a break.

For example, DH will be 73 in 2028, and by the new rule if passed will have to start that year at 73, even though the very next year the starting age is raised to 74.

 

[audreyh1]

I need to read up on this bill passing but so is this for IRA's and 401K's? So, if born in 1956 you wouldn't have to take RDM's till 75 years of age?

No. You would start at age 74 in 2029. It’s phased in over 10 years. Age 75 is for folks born in 1958 or later and starts in 2032.

 

[street]

audreyh1 >>> Thanks and I did go read all posts and see where they actually stated that.
This is very interesting change!

 

[deserat]

So I will turn 75 later this year, missing out on realizing any benefit from this legislation. I also missed out on the RMD change to 72. Reminds me of my working days when after 15 years with the company I finally qualified for a third week of vacation - the same year they reduced the qualification to 5 years.

Everyone is invited to my pity party.

Story of my life...I have rarely been grandfathered into any changes, especially those that occurred with my military stints...my year group was usually the cutoff-sigh.

I just blank it out and keep moving forward....realizing I am still fortunate, just not as fortunate as some...

 

[Exchme]

I get to wait until 75 if this becomes law. Both sides like this as it feels good to constituents without being terribly important one way or the other to government coffers. The big impact in our case would just be a little more flexibility in making Roth conversions.

 

[FIREarly]

Have you thought about moving your money to the Caymans?

A smile a day

*not legal advice and this is not suggested. Please seak professional knowledge with your personal money.

 

[cat4ever]

Also remember that tax is due on only the "earnings", which must follow their original associated Post-Tax 401k contributions. So, perhaps, the tax on the earnings might not be large enough for you want to do it twice. YMMV.

While I'm not sure what a "Mega" backdoor conversion is, since he (PageTwo) is converting a pre-tax 401K to a Roth, he will have to pay taxes on the entire amount that's converted since he's never paid taxes on his contributions.

 

[donheff]

That (chunks) makes sense if: (1) your 401k Plan Description will allow it and, (2) any tax savings are worth the effort. For me, my Plan Description allowed the Mega-Back Door conversion but, only once. Also remember that tax is due on only the "earnings", which must follow their original associated Post-Tax 401k contributions. So, perhaps, the tax on the earnings might not be large enough for you want to do it twice. YMMV.

Doing a mega conversion would be costly for anyone with a sizeable 401K. Can't you just roll the whole thing into an IRA and then do "chunks" within a lower tax band?

 

[Golden sunsets]

Well, I can appreciate changes like that... I was "involuntarily" changed to FERS vs the CSRS I initially was in...I would be drawing much more now in retirement. AFA vacation, I was in use-or-lose most of my later years and had a &*#%%'ng supervisor for a couple of them that wanted to deny leave (I was a technical lead but tried to properly schedule time-off so as to not impact projects)... kind of hard to replace summers in maine or montana with winter vacations, ya think?

currently mid-60's and doing conversions... the extra years might allow more conversions at lower tax rates (still have 401k that will be converted after this IRA, as there's non-deductible and 8606-stuff I want to avoid in the future)

FI; What do you mean by "involuntarily transferred to FERS from CSRS"? Did you leave the federal government and redeem your pension and then go back later, in which case you had no option to choose CSRS? That is the only scenario under which you would "involuntarily" be in FERS.

At the time that the federal government "switched" from CSRS to FERS, current employees were given the "option" to convert to FERS, but it certainly was "opt in", not forced in any way. At the time that this happened, one of the selling points was portability. If you made the switch, the government started depositing to your TSP, which of course builds faster than the CSRS pension. Only those who knew they would be leaving the government would be incented to make the switch.

I can recall one person (only one) of very large number of people in our agency who voluntarily switched. He never did leave the agency and sorely regretted making the change.

 

[Golden sunsets]

Once you start RMDs you stay on that same schedule. Only if RMDs are exempted in a given year do you get a break.

For example, DH will be 73 in 2028, and by the new rule if passed will have to start that year at 73, even though the very next year the starting age is raised to 74.

Audrey; We do get to switch to the new RMD withdrawal rate tables starting in 2022 though, don't we?

 

[Alan]

Doing a mega conversion would be costly for anyone with a sizeable 401K. Can't you just roll the whole thing into an IRA and then do "chunks" within a lower tax band?

This is what my wife and I did with our 401ks. One more conversion to do this year for my wife's IRA and we will then be 100% converted to Roth for both of us. We did it over 11 years after retiring early in 2010.