I am finally coming around to the idea that it will be prudent for me to do a significant amount of Roth conversions if I want to save significant taxes come RMDs and also make life a little more tax friendly for the surviving spouse. I have been in a semi-retired state and expect to make too much money this year for it to make sense in 2021, but am anticipating no earned income starting 2022, when both DW & I will turn 58. While I have posted around the question of Roth conversions/RMDs in the past, I am struggling to find the right answer for someone in my situation. I frankly don't know how to get some solid suggestions other than to share some real numbers. This is something I generally don't like to do as in the past I find there are some judgmental people on this board who like to comment "how could you spend that much?" type remarks. So, I would ask only those who have constructive suggestions to reply.
Background...
- $6M+ After Tax/$6M Tax Deferred (no Roth)
- Plan to keep my AA between 50/50 - 60/40
- Plan on $300K/yr gross spend, including taxes (a good 50%+ discretionary). Will I spend it all every year... who knows, planning allot of "go go" year spending and gifting.
- DW & turn 57 here within the next few months (empty nesters, 4 kids & 3 grandkids)
- Everything paid for, staying in house for the time being
- No pensions, will take SS at 70 (whatever that ends up being/budgeting 75% of benefit)
Questions...
- Using the current tax code, starting 2022, should I take my first $300K as 1) naturally occurring dividends/CGs from after tax accts (estimate $125K - $150K/yr currently) + 2) a 401K withdrawal up to the total, then fill up the balance of the 24% bracket (up to $418K currently) in Roth conversion, rinse and repeat every year until I see my RMDs drop into the 24% tax bracket (based on today's tax code) or keep going?
- Take a 401K withdrawal (after deducting income from after tax acct) up to the top of the 24% bracket, no Roth conversions, rinse & repeat year after year as above?
- How should I really look at the effects of AMT, IRMAA, NIIT, changes in my capital gains rate in picking how much I convert each year?
I have run the math using only my after tax $$ until RMDs (paying very little tax) and then paying significant taxes in RMDS. The math still works to fund my life, priority 1. Paying little taxes for the next 14 years also begs the question should I weigh the NPV of paying little taxes today compared to higher taxes in the future? However, while I don't have hard legacy goals, I realize there will be a boat load of $$ if I am reasonably prudent here.
Yes, real first world problems, not complaining, just want to be a good steward of what I have been fortunate to accumulate.
Background...
- $6M+ After Tax/$6M Tax Deferred (no Roth)
- Plan to keep my AA between 50/50 - 60/40
- Plan on $300K/yr gross spend, including taxes (a good 50%+ discretionary). Will I spend it all every year... who knows, planning allot of "go go" year spending and gifting.
- DW & turn 57 here within the next few months (empty nesters, 4 kids & 3 grandkids)
- Everything paid for, staying in house for the time being
- No pensions, will take SS at 70 (whatever that ends up being/budgeting 75% of benefit)
Questions...
- Using the current tax code, starting 2022, should I take my first $300K as 1) naturally occurring dividends/CGs from after tax accts (estimate $125K - $150K/yr currently) + 2) a 401K withdrawal up to the total, then fill up the balance of the 24% bracket (up to $418K currently) in Roth conversion, rinse and repeat every year until I see my RMDs drop into the 24% tax bracket (based on today's tax code) or keep going?
- Take a 401K withdrawal (after deducting income from after tax acct) up to the top of the 24% bracket, no Roth conversions, rinse & repeat year after year as above?
- How should I really look at the effects of AMT, IRMAA, NIIT, changes in my capital gains rate in picking how much I convert each year?
I have run the math using only my after tax $$ until RMDs (paying very little tax) and then paying significant taxes in RMDS. The math still works to fund my life, priority 1. Paying little taxes for the next 14 years also begs the question should I weigh the NPV of paying little taxes today compared to higher taxes in the future? However, while I don't have hard legacy goals, I realize there will be a boat load of $$ if I am reasonably prudent here.
Yes, real first world problems, not complaining, just want to be a good steward of what I have been fortunate to accumulate.