Prove cost basis non covered MF shares (no records)

[badatmath]

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Originally Posted by pb4uski It is important to know how much of the $8,000 of dividends and interest are qualified dividends. Given the perameters that you describe, any qualified dividends and LTCG would be tax-free... so even if you made the basis $0 and had $14,432 of LTCG and 1/2 of the $8k of dividends and interest were qualified dividends your tax would still be $0. The standard deduction for a single under 65 for 2023 is $13,850. If 1/2 of the $8k of dividends and interest were interest then you would still have $9,850 of headroom for no tax Roth conversions from tax-deferred accounts. No brainer! https://www.irscalculators.com/tax-calculator

Yeah good points too. I won't know how much I might get really as it varies year to year. At least half would be qualified I think. And I can't rule out scrapping this plan and taking my pension but it is a start!

[badatmath]

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Originally Posted by pb4uski Once you start SS and any pensions and RMDs do you expect to be paying taxes? And if so, at what rate on the RMDs (IOW, what will be the increased tax caused by the RMDs in relation to the RMD amount)? If you do expect to be paying taxes once any pensions, SS and RMDs start then this would be an ideal time to do either no-tax or low-tax Roth conversions.

Yes I will some real tax on pension and SS. 22% I suppose?

RMDs have not really crossed my mind. I would assume I will have an inherited IRA at some point too if I live long enough.

Humbly grateful I have you guys to ask questions of as they occur to me.

[pb4uski]

If you really expect that RMDs will be taxed at 22% or more then I would serioudly consider Roth conversions to the top of the 12% tax bracket. IMO better to pay 8% or so now rather than 22% or more later.

If you went to the top of the 12% tax bracket and had $4k of interest income I think you could convert about $36k a year and pay less than $3K in tax based on what you have told us.

[badatmath]

Quote:

Originally Posted by pb4uski If you really expect that RMDs will be taxed at 22% or more then I would serioudly consider Roth conversions to the top of the 12% tax bracket. IMO better to pay 8% or so now rather than 22% or more later. If you went to the top of the 12% tax bracket and had $4k of interest income I think you could convert about $36k a year and pay less than $3K in tax based on what you have told us.

Can conversions be shoved into my existing ROTH IRA?

[pb4uski]

Yes, you transfer either securities or money from your existing IRA to your existing Roth IRA. If securities are transferred then the Roth conversion is measured based on the fair value of the securities transferred on the date transferred.

It is best to pay the taxes from after-tax money.

[SecondCor521]

A thing to remember with Roth conversions is that they are irrevocable. Once you push that "submit" button on a Roth conversion, there is no "undo" procedure if you change your mind later in the year based on new information. (There used to be; there isn't any more.)

That sometimes means it's helpful to do Roth conversions towards the end of the year when you know your full income and tax picture.

There are reasons to do them at the beginning of the year or even in the middle of the year sometimes, but that's a more advanced discussion.

[badatmath]

I just looked up my RMD at 73 OMG.

Ridiculous that I am broke as hell now and will have too much income if I live that long. I guess my taxes will be higher than I thought. . . .

Seems like punishment for trying to save money. Should have had more fun.

[SecondCor521]

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Originally Posted by badatmath I just looked up my RMD at 73 OMG. Ridiculous that I am broke as hell now and will have too much income if I live that long. I guess my taxes will be higher than I thought. . . . Seems like punishment for trying to save money.

Make sure you're calculating it right. It should be between three and four percent of your IRA balance when you're 73.

Not punishment, just the prescribed end of the tax deferral.

You can help mitigate the problem by Roth conversions, as @pb4uski has been mentioning.

[pb4uski]

Quote:

Originally Posted by badatmath I just looked up my RMD at 73 OMG. Ridiculous that I am broke as hell now and will have too much income if I live that long. I guess my taxes will be higher than I thought. . . . Seems like punishment for trying to save money. Should have had more fun.

That's why it's called tax-deferred and not tax-free!

It makes no sense that someone would be "broke as hell now" and will have "too much income later". You must be misinterpreting something or are embellishing because you are upset that you have to pay taxes on tax-deferred withdrawals.

If your taxes will be higher than you thought then you didn't think things through or you are badatmath.

Even though your taxes are higher than you thought if you are typical your taxes paid on any tax-deferred withdrawals will be far less than the taxes saved when you deferred that income.

I think that I'm fairly typical... I saved 28%-32% in federal tax when I deferred that income and will be paying 10-17% when I withdraw it or convert it to a Roth. I also saved ~7% in state income taxes when I deferred that income and will pay 0% when I withdraw or convert it because I now live in a state with no income tax. So together, I am saving 25% - 22% in tax!

[badatmath]

Quote:

Originally Posted by SecondCor521 Make sure you're calculating it right. It should be between three and four percent of your IRA balance when you're 73. Not punishment, just the prescribed end of the tax deferral. You can help mitigate the problem by Roth conversions, as @pb4uski has been mentioning.

I got more than that so I must be doing it wrong it was more like 6%. But either way I was expecting my RMD to be less. 3-4 would still be more than my salary (once added to pension and SS). And that would be the pension I wanted to increase to prevent me eating cat food in my 70s. . .

Quote:

Originally Posted by pb4uski That's why it's called tax-deferred and not tax-free! It makes no sense that someone would be "broke as hell now" and will have "too much income later". You must be misinterpreting something or are embellishing because you are upset that you have to pay taxes on tax-deferred withdrawals. If your taxes will be higher than you thought then you didn't think things through or you are badatmath.

Well of course I expected to pay tax. I did NOT expect to earn more in retirement than when w*rking but that may be the case. It doesn't make sense but . . . it looked like it. But as you say I am probably confused and definitely badatmath. I will have to start over with fresh eyes another day

And as my income since 4/1/23 has been a $97 rebate check yes I think it is fair to say I'm feeling very broke and not enjoying it but have been trying to play the long game and hang in there. Apparently I am not even playing with the right pieces and the rules are in another language.

Keep in mind too that the pension (which I haven't started) is so low if i took it next month I'd qualify for like reduced utilities and stuff if i was a little older. (It was on my last bill so I checked).

[pb4uski]

Figure it this way.

When you deferred all that income that is in your tax-deferred accounts today, you expected that your income taxes in retirement would be lower that your income taxes when you deferred that income, right? Otherwise, you never would have deferred that income.

If it turns out that you were wrong, that your tax rate in retirement will actually be more than when you deferred that income, then tax-deferral didn't work for you... BUT it alos means that you ended up being much more financially successful than you thought that you would be... so that is good, right.

So, you are either saving on taxes or ended up much more financial successful that you expected to be... either way, you win!

[SecondCor521]

The age 73 divisor is 26.5. So take your current IRA balance, increase it by whatever you think your investment returns will be between now and age 73, then divide that number by 26.5. That'll be your RMD dollar amount for your first year.

If you're broke now and have too much income later, there are ways to even things out. How old are you now?

[badatmath]

Quote:

Originally Posted by pb4uski Figure it this way. When you deferred all that income that is in your tax-deferred accounts today, you expected that your income taxes in retirement would be lower that your income taxes when you deferred that income, right? Otherwise, you never would have deferred that income. If it turns out that you were wrong, that your tax rate in retirement will actually be more than when you deferred that income, then tax-deferral didn't work for you... BUT it alos means that you ended up being much more financially successful than you thought that you would be... so that is good, right. So, you are either saving on taxes or ended up much more financial successful that you expected to be... either way, you win!

I guess that is a nice way to think of it but I'd have preferred a little less sucess and a little more fun along the way. Also, my current home is in a pretty marginal location for safety and it is trending down. But my house is below median price and I cannot easily trade it for a different one. I am not one who can just sell and downsize - it would be an upsize with a need to bring a substantial balance to the table.

Quote:

Originally Posted by SecondCor521 The age 73 divisor is 26.5. So take your current IRA balance, increase it by whatever you think your investment returns will be between now and age 73, then divide that number by 26.5. That'll be your RMD dollar amount for your first year. If you're broke now and have too much income later, there are ways to even things out. How old are you now?

55. "Too much" would not even register as "enough" for most of you I'm sure. At current balance my RMD would be about 50K so less than I first feared but more than I ever considered. I am too bad at math to guess what it would grow to by 73. I expected IDK perhaps half that. I'd still prefer the pension higher only because I can't screw it up or lose it.

It is no wonder I seldom post in the money forum I clearly don't know anything about it.

Thank you both very much for your help.

[Montecfo]

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Originally Posted by badatmath Thanks, SecondCor521. I don't see how I can use specific id with no statements to back myself up for the earliest years but I will see what NT says. Back then I was buying every payday so there would be at least 26 transactions per year I think.

There is price data out there. It is possible to reconstruct.

You could do it by payday, by month, by year.

But you need to know how much you invested and when.

[Montecfo]

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Originally Posted by pb4uski If this potential sale would be taxed at 0% then there is no sense to fretting about the basis at all. Or perhaps you can split the sale so the non-covered shares are 0% taxed. Am I understanding you correctly that NT is saying that for covered shares the basis based on average cost is $65.82/share and that the average cost basis for non-covered shares is $48.11/share? If so, I would use whatever Northern Trust provides you since you do not have any better information that can be used as evidence. And just cross your fingers that the various custodians over the years have keep track of the non-covered shares basis correctly.

Who would question NT's records?

IRS has no way to reconstruct it that's different from any method OP could use.

[SecondCor521]

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Originally Posted by badatmath 55. "Too much" would not even register as "enough" for most of you I'm sure. At current balance my RMD would be about 50K so less than I first feared but more than I ever considered. I am too bad at math to guess what it would grow to by 73. I expected IDK perhaps half that. I'd still prefer the pension higher only because I can't screw it up or lose it. It is no wonder I seldom post in the money forum I clearly don't know anything about it. Thank you both very much for your help.

Here's an intro article to some options you have to even out your income. It describes three options you have (Roth conversion ladder, SEPP, and just pay the 10% penalty):

https://www.madfientist.com/how-to-a...t-funds-early/

I skimmed it and it looked like it might be good for you based on your handle here. At least the first part where he lays out the three options. (*)

I'm guessing you don't have a 401(k) or similar at a job you left this year. (If you did, there might be a fourth option in addition to the three mentioned above.)

(*) He does get some very very minor technicalities wrong, but at least it's a starting point for you to learn about some of the options. If you like any of the options there then you can dig into them more or people here can probably answer questions about them.

[badatmath]

Quote:

Originally Posted by SecondCor521 Here's an intro article to some options you have to even out your income. It describes three options you have (Roth conversion ladder, SEPP, and just pay the 10% penalty): https://www.madfientist.com/how-to-a...t-funds-early/ I skimmed it and it looked like it might be good for you based on your handle here. At least the first part where he lays out the three options. (*) I'm guessing you don't have a 401(k) or similar at a job you left this year. (If you did, there might be a fourth option in addition to the three mentioned above.) (*) He does get some very very minor technicalities wrong, but at least it's a starting point for you to learn about some of the options. If you like any of the options there then you can dig into them more or people here can probably answer questions about them.

The money I wish I had not saved so much of is in a 401K. I'd have just saved it somewhere else or spent it on a better life if I could do over. I will check the article in the morning when I am in a less cranky frame of mind. Odds of me living to even 73 are not that great - not to say I have a ton of issues but almost none of my family has lived that long. (No they didn't smoke - they just . . . died).

[badatmath]

Quote:

Originally Posted by Montecfo There is price data out there. It is possible to reconstruct. You could do it by payday, by month, by year. But you need to know how much you invested and when.

NT might be able to get my actual old transactions (not just old prices) depending on if the previous admins have them on file.

Quote:

Originally Posted by SecondCor521 Here's an intro article to some options you have to even out your income. It describes three options you have (Roth conversion ladder, SEPP, and just pay the 10% penalty): https://www.madfientist.com/how-to-a...t-funds-early/ I skimmed it and it looked like it might be good for you based on your handle here. At least the first part where he lays out the three options. (*) I'm guessing you don't have a 401(k) or similar at a job you left this year. (If you did, there might be a fourth option in addition to the three mentioned above.) (*) He does get some very very minor technicalities wrong, but at least it's a starting point for you to learn about some of the options. If you like any of the options there then you can dig into them more or people here can probably answer questions about them.

The money I am whining about now is in a 401K. I understand it would be possible to take without penalty since rule of 55. (Not 100% sure my plan allows this).

It just never occurred to me that I'd even want to/could afford to/if allowed to by plan. And now I have no pension strategy which I thought I had figured out.

[SecondCor521]

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Originally Posted by badatmath The money I am whining about now is in a 401K. I understand it would be possible to take without penalty since rule of 55. (Not 100% sure my plan allows this). It just never occurred to me that I'd even want to/could afford to/if allowed to by plan. And now I have no pension strategy which I thought I had figured out.

You can call the 401(k) plan administrator and find out. Or ask to see the full plan document and look for yourself; the info should be in there.

It's puzzling to me if you have too much money in the 401(k) and only $97 of income and think your life expectancy is 18 years or less and know one of the ways to take it why you wouldn't.

It's probably the "afford to" part. Have you run FIREcalc with your numbers or posted a case study here? People are usually pretty generous with their help here on those sorts of things.

If it turns out the plan lets you and you want to and can afford to, I don't know what other obstacles there would be to doing so. Maybe fear of doing the math wrong or end of life expenses.

[pb4uski]

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Originally Posted by badatmath ... 55. "Too much" would not even register as "enough" for most of you I'm sure. At current balance my RMD would be about 50K so less than I first feared but more than I ever considered. I am too bad at math to guess what it would grow to by 73. I expected IDK perhaps half that. I'd still prefer the pension higher only because I can't screw it up or lose it. It is no wonder I seldom post in the money forum I clearly don't know anything about it. Thank you both very much for your help.

Well lucky for you, I'm decent at math.

Your 50K RMD based on current balance *26.5 = $1,350,000 today.

At 3% growth in 18 years at age 73 it would be $2.26 million, at 5% it would be $3.19 million and at 7% it would be $4.48 million.

Formula is $1,350,000*(1+i)^(73-55).

Or using FIRECalc with beginning portfolio of $1,350,000, $1 spending, 18 years and 50/50 AA:

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... FIRECalc looked at the 135 possible 18 year periods in the available data, starting with a portfolio of $1,325,000 and spending your specified amounts each year thereafter. Here is how your portfolio would have fared in each of the 135 cycles. The lowest and highest portfolio balance at the end of your retirement was $1,295,304 to $6,804,025, with an average at the end of $3,120,336. ...