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Old 12-20-2019, 06:42 AM   #381
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Originally Posted by RunningBum View Post
That doesn't mean you'd favor adding to the taxable account over the Roth. It means if you already have highly appreciated assets in taxable, and plan to leave money to an heir, you are probably better taking from a Roth than selling those assets in taxable.

If you start from scratch with a $1000 investment, putting it in taxable and letting it grow untouched until you die is no better than putting it in a Roth and doing the same for your heirs. In fact if your investment generates any taxable dividends or interest, it will do worse in the taxable account.
Yes agree completely.
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Old 12-20-2019, 07:02 AM   #382
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Originally Posted by RetireBy90 View Post
So with secure act looking like it will become law shortly and included is changing RMDs to age 72, does this change your strategy ? My plan today without this change is to do conversions for 7 years to age 70 when RMDs are/were set to kick in and also my target for SS. Now I'll still have SS income at 70, but if I can delay RMDs to 72 does it make sense to make RMDs at a slightly slower pace, incurring less of the 24% bracket ?

Midpack, you did lots of very useful thinking and research, does this affect your plan ?
Interesting question. I looked it it and it appears to not matter much what we do at age 70 & 71. Due to the SS hump, our marginal rate is 27%, even though we are solidly in the 15% tax bracket. And that doesn't change once we hit 72. So the marginal tax due to RMDs is the same at 70 on. If we do max conversions to age 69, we won't have much 401k left to convert, so we will probably do nothing.
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Old 12-20-2019, 07:14 AM   #383
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Interesting question. I looked it it and it appears to not matter much what we do at age 70 & 71. Due to the SS hump, our marginal rate is 27%, even though we are solidly in the 15% tax bracket. And that doesn't change once we hit 72. So the marginal tax due to RMDs is the same at 70 on. If we do max conversions to age 69, we won't have much 401k left to convert, so we will probably do nothing.
Perhaps in concert with the RMD change, the Gov could look at extending the max age of taking SS to 72 y.o.
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Old 12-20-2019, 08:52 AM   #384
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On the topic of RMDs at 72 vs 70, after earlier post I did do some more work to my spreadsheet and it appears that with the same conversion (to top of 22% and additional $35K in 24%, costing additional $8,400 in 24% bracket) would just about empty my TIRA by age 72. So there is an impact, but I'll have to do more thinking and reviewing advice here. For 2019 conversions I'm done and for 2020 conversions I'm hoping for a pull back in the market or bonds to convert more shares at lower cost and tax.
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Old 12-25-2019, 07:38 AM   #385
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Hey, for those of you who are using Income Strategy: is there a place where you can add (rental) real estate? I have two properties that atm pay for my mother's LTC so I don't think of them as MY assets even though they are technically mine. Nor do I add the income they generate to my income. Once she passes however that will change. And while I could add that rental income into the future income streams, the properties themselves have value that would affect my financial profile.
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Converting into the 22% bracket
Old 12-28-2019, 02:29 PM   #386
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Converting into the 22% bracket

Great thread. Starting to change my mind...

We are 58/59 and have been converting to the top of the 12%/15% bracket for several years. But the amounts are rather small due to ordinary income from two small pensions. So even with 11-12 years to go, we would only convert a small portion of tax-deferred balances by the time SS starts. But this does greatly reduce the probability of RMDs being taxed higher than 22%, which is certainly a good thing.

I'd like to do more. Yet I struggle with paying 22% now to avoid 22% later. Especially since "22% now" throws our qualified dividends and LTCGs into the 15% bucket thus creating the dreaded 27% bracket. Still, I'd prefer to settle-up with the IRS sooner rather than later and current rates are looking pretty good. In theory, 22% reverts to 25% after 2025 and that should help with the 27% thing. But the benefit is still very small and not without risk.

The widow-filing-single scenario doesn't really seem to be a huge deal for us. We both elected single-life annuity on our pensions and we both have large SS benefits coming. So when one dies, the survivor will pay significantly less tax due to one less set of pension/SS. The portfolio can still easily support the survivor; and while expenses won't go down by half, they will go down. Yes, there's still an impact of single vs MFJ on the lower income. But there's just no tax disaster from single rates on same income. Secondly, in Texas, there's stepped-up basis on joint taxable accounts. Our taxable balance includes 35% LTCGs currently, which at 15%, would offset increased tax from single rates for many years.

So it really just boils down to settling the liability now to lock-in our tax rate and remove the uncertainty of future tax rate changes, good or bad. I suppose I should feel good about 22% since we avoided 28-33% when the income was deferred. But then my reptile brain can still conjure up ways this whole thing goes horribly wrong, like an ill-timed, prolonged market collapse right after I depleted the taxable account paying 22%+ conversion tax for 10 years. Or crafty code changes that make indirect use of Roth balances to increase taxes elsewhere.

I'm still undecided for 2019. I'll decide on Monday or Tuesday. The rest of the return is pretty solid at this point and I have the two conversion figures ready to go. It's just a matter of noodling this a bit more and making a decision. DW wants to do it. I'm hesitant as usual, but warming.
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Old 02-14-2020, 03:12 AM   #387
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Great thread. Thanks, everyone.

Single, with ~65% in tax-deferred, I needs to think about this.
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Old 02-14-2020, 08:36 AM   #388
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Hey, for those of you who are using Income Strategy: is there a place where you can add (rental) real estate?...
Not using Income Strategy anymore, but I don't think so.
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Old 02-14-2020, 03:12 PM   #389
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Quote:
Originally Posted by tenant13 View Post
Hey, for those of you who are using Income Strategy: is there a place where you can add (rental) real estate? I have two properties that atm pay for my mother's LTC so I don't think of them as MY assets even though they are technically mine. Nor do I add the income they generate to my income. Once she passes however that will change. And while I could add that rental income into the future income streams, the properties themselves have value that would affect my financial profile.
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Not using Income Strategy anymore, but I don't think so.
Probably too late, sorry I didn't see this much sooner. I didn't enter rental income, but it IS a profile input. I am no longer using Income Strategy either, but I did save the User Guide pdf. [I just PM'd tenant13].
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* Household Details – The Household Details section asks for inputs related to your personal scenario. You’ll be asked to enter your name, date of birth, estimated life expectancy, state of residence, and other details that are important in your withdrawal strategy management.
* ACCOUNTS AND ASSETS – Without having access to your portfolio accounts, Income Strategy™ cannot create a viable set of withdrawal strategy options. You will be able to enter your account information and sync your accounts directly with your financial institutions. An option to enter your accounts manually is available, but if you select this option, you will be required to enter all account updates manually as well.
* INCOME SOURCES – Many of us will have income during retirement. Whether income will be from a job, rental income, or other sources, it’s important to include all income projections within Income Strategy™.
* PENSIONS AND ANNUITIES – While Pensions and Annuities are income, Income Strategy™ understands there are specific rules applied to these types of income.
* SOCIAL SECURITY SETTINGS – One of the most important aspects of retirement income is your Social Security strategy. Income Strategy™ asks you to provide minimal information about your Social Security benefits and will calculate the benefit claiming strategy that is best suited to your withdrawal strategy. This will be noted as the “Primary” strategy. If you would like to choose an alternate claiming strategy, you can do so.
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