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Old 10-07-2017, 02:20 PM   #21
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Just give the extra to charities straight from the IRA account. It doesn't count as income, so your life doesn't change in any way except for gaining the satisfaction of helping others.
Just to point out...one needs to follow the rules carefully to make sure it will count as a QCD (qualified charitable distribution) vs a normal distribution. The first will, as you say, not increase one's AGI. The second will, although a tax deduction is allowed.

Just did one for the first time.
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Old 10-07-2017, 06:15 PM   #22
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I don't really have an equivalent place to put the money. Shoving it into a 1% account is not going to work since I will have to live on the profits. I guess I have time to work on it.

I thought this would only be complicated for rich folks but I am DEFINITELY not one of those.
You're being silly now.... why not just invest it in the same thing that it came out of... for example, if it was in equities in your tax-deferred account then move it to a taxable account invested in equities.... you might be able to buy the same ticker... in which case you are simply transferring money from your left pocket to your right pocket.

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Starting to look like I should not have done so as I would have paid less (total) tax I think.
Perhaps you really are bad at math.... the way to tell is to figure what your marginal tax rate was when you deferred that income and what it is now that you are withdrawing... for some people the taxes that they saved when they deferred the income will be higher than the taxes that they pay on withdrawals.... for many it might be the same and for some it might be higher.
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Old 10-07-2017, 06:54 PM   #23
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I'm also curious as to how close people's RMD is to their current IRA withdrawals.
I wasn't taking anything but another poster reminded me that eventually I'll have to take it and the tax it will be tremendous. Yeah I'll still be net ahead but I will pay a higher percentage tax. So I have decided to stop reinvesting all dividends in the IRA, roll those into my taxable account, and pay the taxes now. Another person suggested that I roll out a significant portion of it into my Roth. Decided against that
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Old 10-10-2017, 07:58 AM   #24
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............................... Another person suggested that I roll out a significant portion of it into my Roth. Decided against that
Why? If you withdraw and put in taxable, you will pay taxes. Same if you withdraw and put in Roth. However taxable account will have taxes on future distributions and sales but Roth withdrawals will be tax free assuming you meet the 5 yr and 59.5 yrs old conditions.

This is assuming you withdraw the same amounts in both cases.....for taxable and for Roth. If you are comparing taking a larger amount for Roth than for taxable, then you could push into a higher tax bracket or you could consider distributing the Roth conversion over a number of yrs so that doesn't happen.
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Old 10-10-2017, 08:19 AM   #25
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Why? If you withdraw and put in taxable, you will pay taxes. Same if you withdraw and put in Roth. However taxable account will have taxes on future distributions and sales but Roth withdrawals will be tax free assuming you meet the 5 yr and 59.5 yrs old conditions.

This is assuming you withdraw the same amounts in both cases.....for taxable and for Roth. If you are comparing taking a larger amount for Roth than for taxable, then you could push into a higher tax bracket or you could consider distributing the Roth conversion over a number of yrs so that doesn't happen.
+1. This seems like a tailor made situation for partial Roth conversions, unless there's some immediate need to spend that money.
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Old 10-10-2017, 10:31 AM   #26
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Yeah. I'm not that smart.
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Old 10-10-2017, 10:42 AM   #27
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Iím a broken record, but here I go again!

When you take your MRDs, look at the 25% federal bracket and take all that you can up to, but never over that amount. Having the extra cash on hand when a big bill comes along later can save you a lot!

The 25% Federal bracket with the 85% taxability of your SSB creates a marginal rate of 46.25% and if you are pushing dividend income over that limit the initial marginal rate is actually 55.5%. A marginal rate is how much your taxes go up because you take another dollar out of your IRA, it is not the same as your tax bracket, that bracket is only one part of the marginal rate.
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Old 10-10-2017, 11:27 AM   #28
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Thanks for the info but like I said, I'm not that smart. I leave it to RMD at 70 bc that will give me enough (in today's dollars which will only increase by Max 4% per year) to private pay the nicest SNF in the Diablo Valley area + shopping $$s. That let's me sleep at night while:
1. Legacy Acct for 7 grandkids
2. Roth to DS & DD
3. Paid off house to all 9 of them

I used to be a CRTP so I fully understand marginal tax rates, tax deductible home health / assisted living / SNF, but we all gotta do what let's us sleep well
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Old 10-10-2017, 11:31 AM   #29
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RMD

I have had to do this for 8 years. With the market the way is has been doing, my IRA balance is higher, even considering the withdrawals.
Since I have no immediate need for most of the money, I have been gifting some of it to my 2 sons and my wife's 2 sons. I figure they need it now, not after I am gone.
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Old 10-10-2017, 11:41 AM   #30
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Yeah. I'm not that smart.
And unwilling to make an effort to learn a relatively simple concept?
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Old 10-10-2017, 11:50 AM   #31
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And unwilling to make an effort to learn a relatively simple concept?
sarcasm

We are all different & should have financial plans suited to our needs not some cookie cutter / automated model

How does anyone know if it'll put me at the highest marginal rate? And if I hold off it may be all tax deductible (home health nursing / assisted living / SNF)

getting off soap box now
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Old 10-10-2017, 11:54 AM   #32
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sarcasm

We are all different & should have financial plans suited to our needs not some cookie cutter / computer program driven model

How does anyone know if it'll put me at the highest marginal rate?
OK then. I'll remember not to waste any more of my time on this.
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Old 10-10-2017, 12:06 PM   #33
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Question please:

Even if in high tax bracket, would taxes on RMDs be 15% because of cap gains?
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Old 10-10-2017, 12:12 PM   #34
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Question please:

Even if in high tax bracket, would taxes on RMDs be 15% because of cap gains?
no. When you withdraw from an TIRA, all the withdraw is taxable as normal income with the exception if the TIRA as a positive tax basis. Since the capital gains occurred in the TIRA which is tax deferred, it does not come out with the capital gains benefit.
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Old 10-10-2017, 03:49 PM   #35
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Question please:

Even if in high tax bracket, would taxes on RMDs be 15% because of cap gains?
No, it's taxed as ordinary income. It's not considered a capital gain.
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Old 10-10-2017, 04:08 PM   #36
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Thanks for the answer to that. Much appreciated.

Sometimes I feel like such a neophyte, but it's a joy to keep learning.
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Old 10-10-2017, 04:30 PM   #37
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One of the disadvantages of holding equities in a tax-deferred account is that it effectively converts tax preferenced qualified dividends and lon-term capital gains into ordinary income. Also, for international equity funds held in a tax-deferred account, any foreign taxes paid go to waste.
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Old 10-10-2017, 04:35 PM   #38
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Iím a broken record, but here I go again!

When you take your MRDs, look at the 25% federal bracket and take all that you can up to, but never over that amount. Having the extra cash on hand when a big bill comes along later can save you a lot!

The 25% Federal bracket with the 85% taxability of your SSB creates a marginal rate of 46.25% and if you are pushing dividend income over that limit the initial marginal rate is actually 55.5%. A marginal rate is how much your taxes go up because you take another dollar out of your IRA, it is not the same as your tax bracket, that bracket is only one part of the marginal rate.
Note that the additional rate only holds for 9 k if single and 12k if married. Beyond 34,000 or 44k if married it drops down to the regular rate.
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Old 10-10-2017, 09:13 PM   #39
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Note that the additional rate only holds for 9 k if single and 12k if married. Beyond 34,000 or 44k if married it drops down to the regular rate.
There are no set figures on when these marginal tax rates start and end, they depend on your personal Social Security Benefit level and where your other income is coming from.

For single individuals:

If your SS benefit level is $20,000, the 50% taxability of your SSB start at a gross income level of $35,000, the 85% taxability level starts at a gross income level of $44,000, the 46.25% or 55.5% marginal tax rates start at a gross income level of $55,243 and continue for the next $3,460 of income.

If your SS benefit level is $35,000, the 50% taxability of your SSB start at a gross income level of $42,500, the 85% taxability level starts at a gross income level of $51,500, the 46.25% or 55.5% marginal tax rates start at a gross income level of $66,797 and continue for the next $14,409 of income.

Basically, the higher your benefits, the more tax deferred income you receive so taxes start at higher gross levels which means that you save a lot more taxes at lower income levels. Since you have saved more taxes, and the IRS wants 85% of your benefits taxed, you have more to give back to the IRS so the width of the 46.25% marginal bracket is wider.
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Old 10-11-2017, 07:41 AM   #40
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Iím a broken record, but here I go again!

When you take your MRDs, look at the 25% federal bracket and take all that you can up to, but never over that amount. Having the extra cash on hand when a big bill comes along later can save you a lot!

The 25% Federal bracket with the 85% taxability of your SSB creates a marginal rate of 46.25% and if you are pushing dividend income over that limit the initial marginal rate is actually 55.5%. A marginal rate is how much your taxes go up because you take another dollar out of your IRA, it is not the same as your tax bracket, that bracket is only one part of the marginal rate.
So what is on the other side of the record? That is what are the trade offs in dealing with it. Take a couple with decent earning records and since people here are FIRE, a fair amount of TIRA assets. One could take SS early, but that would likely effect roth conversion costs if one tried to reduce future RMDs. Or you take SS later and roth convert without running into SS being taxed early. However for some it won't matter as if they have too much TIRA as conversion taxes may just be too high.

Have you done any analysis on the trade off on when to take SS and size of future RMD (roth coversion effects)?
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