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Old 02-27-2020, 11:45 AM   #21
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By the way, apologies to lawman for the thread drift, but I hope maybe this discussion is useful to you??
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Old 02-27-2020, 12:02 PM   #22
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My dad had $$$$ in his IRAs when he retired and 0 in his Roth. He made 1 contribution that last year he worked since he could qualify. Then, the rest was roth conversions, paying taxes on each one and the amount was determined by the room he had leftover after all of his other taxable income outside the conversion... less 77,400 or whatever the 12% tax bracket ceiling was. SOOO

For the sake of this thread, he had roughly 35k of taxable income (pension + social security). THEN he roth converted up to that $ 77,400 (this year in 2020 its $78,950) ceiling so...


Roth Conversion Amount = $78,950 (12% Tax Bracket Ceiling) - $35,000 (taxable income like SS and Pension)

Roth Conversion Amount = $43,950 . A dollar more and it gets taxed at the 22% bracket. DO NOT convert if your future tax rates WILL BE LOWER than current tax rates.
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Old 02-27-2020, 03:59 PM   #23
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Originally Posted by lawman View Post
Thanks...After seeing this and thinking about my situation I think I should probably just forget about my IRA's and I - Bonds and just spend off my brokerage account..My income from pensions and SS is already more than I spend..I'm thinking of using my investments for capital expenditures like a swimming pool, new vehicles, home improvements etc..I see no reason for tapping my tax deferred accounts..Is it more complicated than that?
OP, I would project what the expected balances could be on your IRA's at age 72 and then use a RMD calculator to see what RMD's you would have to be taken and see what that extra income would do to your taxes. Then decide if you want to start taking IRA distributions or conversions to help minimize your taxes later.

AARP has an RMD calculator here.
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Old 02-27-2020, 04:27 PM   #24
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Quote:
Originally Posted by kgtest View Post
My dad had $$$$ in his IRAs when he retired and 0 in his Roth. He made 1 contribution that last year he worked since he could qualify. Then, the rest was roth conversions, paying taxes on each one and the amount was determined by the room he had leftover after all of his other taxable income outside the conversion... less 77,400 or whatever the 12% tax bracket ceiling was. SOOO

For the sake of this thread, he had roughly 35k of taxable income (pension + social security). THEN he roth converted up to that $ 77,400 (this year in 2020 its $78,950) ceiling so...


Roth Conversion Amount = $78,950 (12% Tax Bracket Ceiling) - $35,000 (taxable income like SS and Pension)

Roth Conversion Amount = $43,950 . A dollar more and it gets taxed at the 22% bracket. DO NOT convert if your future tax rates WILL BE LOWER than current tax rates.
Not sure where you are getting that $78,950

The top of the 12% tax bracket in 2020 for a married couple is $80,250 of taxable income. The top of the 0% qualified dividends and LTCG bracket for a married couple is $80,000.

And you need to be careful.... if one has qualified dividends and LTCG and you do Roth conversions that put you a dollar over the $80,000 limit then the marginal tax rate is 27% (12% on that $1 of additional ordinary income and 15% on a dollar of preferenced pushed from the 0% bracket to the 15% bracket). It is 27% until all preferenced income is pushed into the 15% bracket and then reverts to 22%.
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