kannon
Recycles dryer sheets
Evening Everyone. Was hoping to get feedback on possible strategy as I enter further into retirement.
Reading on FIRE and other websites talk about the importance of establishing a retirement income stream. Up until now my thought was just selling some of our mutual fund shares as we need the money (and pay the taxes unfortunately).
I am focusing now more on tax impacts than I maybe should have done in the past. To be honest my focus in the past was mainly tax deductions from our 401/403 plan and not really thinking about the long term.
I am seeing my tax bracket go down or at least have more "headroom" within the bracket over the next few years due to my recent retirement. My wife and I have 401/403 of about $1M, all from pretax contributions. We will be needing to make decisions with these funds - stay, rollover, ....
What I have calculated is that (if my calculations are correct) that we can save a good amount of money by start moving our 401/403 over next few years to a Roth IRA and pay the tax now at a lower tax bracket (~ 25%) rather than wait till the RMDs kick in (~33%).
Being somewhat new to Roth IRAs my plan is to move the 401/403 funds to a dividend focus mutual fund like Vanguard Dividend Appreciation Index Fund Admiral with the intent of not reinvesting dividends (like we usually did during our accumulation phase) and using the dividends as the basis of our retirement income stream.
If we keep the funds in the Roth IRA for five years can we then use the dividends without any type of federal tax? Is this strategy even doable within the rules of Roth IRA conversions? Is there a more tax efficient way of establishing an income stream.
Thanks. As always, greatly appreciate all of the great knowledge for FIRE'ers.
Kannon
Reading on FIRE and other websites talk about the importance of establishing a retirement income stream. Up until now my thought was just selling some of our mutual fund shares as we need the money (and pay the taxes unfortunately).
I am focusing now more on tax impacts than I maybe should have done in the past. To be honest my focus in the past was mainly tax deductions from our 401/403 plan and not really thinking about the long term.
I am seeing my tax bracket go down or at least have more "headroom" within the bracket over the next few years due to my recent retirement. My wife and I have 401/403 of about $1M, all from pretax contributions. We will be needing to make decisions with these funds - stay, rollover, ....
What I have calculated is that (if my calculations are correct) that we can save a good amount of money by start moving our 401/403 over next few years to a Roth IRA and pay the tax now at a lower tax bracket (~ 25%) rather than wait till the RMDs kick in (~33%).
Being somewhat new to Roth IRAs my plan is to move the 401/403 funds to a dividend focus mutual fund like Vanguard Dividend Appreciation Index Fund Admiral with the intent of not reinvesting dividends (like we usually did during our accumulation phase) and using the dividends as the basis of our retirement income stream.
If we keep the funds in the Roth IRA for five years can we then use the dividends without any type of federal tax? Is this strategy even doable within the rules of Roth IRA conversions? Is there a more tax efficient way of establishing an income stream.
Thanks. As always, greatly appreciate all of the great knowledge for FIRE'ers.
Kannon