Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 01-06-2017, 12:17 PM   #21
Thinks s/he gets paid by the post
 
Join Date: Jan 2008
Posts: 1,495
Quote:
Originally Posted by nun View Post
I'd do ROTH conversions and keep your IRA withdrawals and conversions to a level that when combined with your other taxable income sources keep you in the 15% tax bracket so that dividends are tax free. If you need income above that level take it from taxable accounts.
Exactly. And tax-gain harvest in the process!
Options is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 01-06-2017, 12:45 PM   #22
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
RunningBum's Avatar
 
Join Date: Jun 2007
Posts: 11,376
Quote:
Originally Posted by ijuba View Post

Specifically, I am seeking perspectives on how to begin liquidating the IRA's....
Equities, bonds or both, etc., so as to minimize the tax impact.
It really doesn't matter. When you withdraw from your traditional IRA, it is taxed as regular income. There is no special capital gains or dividends treatment on it. I would withdraw from the asset class that is overweight from your asset allocation plan, to try to keep that in balance.

I agree with the comments about converting some of it to a Roth IRA if you have room within the 15% bracket, or ACA subsidy limit or whatever you might want to keep your income under.
RunningBum is offline   Reply With Quote
Old 01-06-2017, 01:04 PM   #23
Full time employment: Posting here.
 
Join Date: Jan 2014
Location: Austin
Posts: 591
Quote:
Originally Posted by Options View Post
I am also in the fairly unique position of having $2 of every $3 in taxable, so am drawing down taxable until 70 to keep conversion taxes low. Another reason I am converting to Roth is to minimize possible negative consequences of future tax reform (Roths are tax-free).
Fairly unique but not alone - I'm in the same position of having 2/3rd's of my portfolio in taxable and 1/3rd in tIRA. Into my third year of ER and dividends/CGD's of the taxable have been more than enough to cover living expenses but don't provide much headroom for Roth conversions. My new year resolution is to spend a lot of time this year educating myself and calculating how/when to start juggling the various puzzle pieces into a picture that makes sense.

My original plan was to live off taxable, let my tIRA grow and wait until 70 to collect SS. But there's a growing possibility that when that time comes my taxable account would still be substantial and consist of even more unrealized capital gains, my tIRA would be huge, and between SS benefits, RMD's, dividends, and CGD's the tax bill would be astronomical. Not a bad situation to be in, for sure, but I'd be kicking myself in the ass every morning for not having done a better job at minimizing taxes.

Need to consider if spending down my tIRA first would make more sense.
__________________
ER'd 6/1/2014 @ age 53.
Looking4Ward is offline   Reply With Quote
Old 01-06-2017, 01:45 PM   #24
Dryer sheet aficionado
 
Join Date: Jul 2013
Location: Spicewood
Posts: 48
Quote:
Originally Posted by Montecfo View Post
As far as your investments doing better than the 6-8% return you get from letting your SS grow, hard to project the future and know that will be the case.
I have never bought into the idea that delaying SS is a 6-8% "return". At best, it grows based on COLA only. A return implies that the asset grows each year and at any point in time, the full amount, principal plus growth is available for you or your heirs to use. And while different than investment risks, there are also downside risks to SS amounts as well in the future (100% taxation for example) .

Delaying SS would be better characterized as a 6-8% increase in monthly payment amount, not growth of an asset. And when you consider smaller monthly payments over a longer time vs. larger monthly payment over a shorter time, then the cross over point is around 11-13 years. So, taking SS at age 70 means there is no financial gain til at least age 81. And the percentage gain compared to taking SS early will be very low even at life expectancy of around 85 yrs.

This is just my view, but I took SS early (since I have no control over changes in SS or yearly COLA) and maximized investment assets that I at least have some possibility of adapting to market changes.
larrytbm is offline   Reply With Quote
Old 01-06-2017, 02:03 PM   #25
Dryer sheet aficionado
 
Join Date: Jul 2013
Location: Spicewood
Posts: 48
Quote:
Originally Posted by sengsational View Post
The recommendations of the tool often have the retiree paying more taxes early in order to reduce taxes later. That doesn't sit well with some people because there's no guarantee that the retiree will live-out the entire plan (ie they'll never hit break-even paying taxes early vs late).
Think any of them also decide to delay SS til age 70 expecting to live forever and rake in lots of money? I'm one of those paying taxes early, but then my perspective goes beyond my lifetime and I hope to give my heirs the possibility of less taxes as well.
larrytbm is offline   Reply With Quote
Old 01-06-2017, 02:11 PM   #26
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
RunningBum's Avatar
 
Join Date: Jun 2007
Posts: 11,376
Quote:
Originally Posted by larrytbm View Post
Think any of them also decide to delay SS til age 70 expecting to live forever and rake in lots of money? I'm one of those paying taxes early, but then my perspective goes beyond my lifetime and I hope to give my heirs the possibility of less taxes as well.
If you live past the SS break even point you will leave you heirs more by delaying the start of SS.
RunningBum is offline   Reply With Quote
Old 01-06-2017, 02:16 PM   #27
Thinks s/he gets paid by the post
2017ish's Avatar
 
Join Date: Apr 2012
Location: Nashville
Posts: 2,136
Quote:
Originally Posted by larrytbm View Post

Quote:
Originally Posted by sengsational
The recommendations of the tool often have the retiree paying more taxes early in order to reduce taxes later. That doesn't sit well with some people because there's no guarantee that the retiree will live-out the entire plan (ie they'll never hit break-even paying taxes early vs late).
Think any of them also decide to delay SS til age 70 expecting to live forever and rake in lots of money? I'm one of those paying taxes early, but then my perspective goes beyond my lifetime and I hope to give my heirs the possibility of less taxes as well.
Well, we aren't there yet, but that's what we plan. Roth conversions up front, probably to top of 25% bracket, delay whatever social we might end up with to 70 at least for highest earner (probably for both of us though). The longevity insurance is compelling given DW's individual life expectancy. My planning takes her to 105, based on family history, education/health level, etc.
__________________
OMY * 3 2ish Done 7.28.17
2017ish is offline   Reply With Quote
Old 01-06-2017, 02:39 PM   #28
Thinks s/he gets paid by the post
 
Join Date: Mar 2009
Posts: 2,517
Quote:
Originally Posted by RunningBum View Post
If you live past the SS break even point you will leave you heirs more by delaying the start of SS.
There's more than one assumption in play with this scenario. First, I get a kick out of how people believe that future changes in SS benefits, taxes and investment returns will be treated fairly and based on history. It's all speculative and we have to make our own decisions. Personally I'll take what I can get from SS ASAP and live with my investment decisions. Just like I've done for the last 35+ years. Thanks
__________________
Took SS at 62 and hope I live long enough to regret the decision.
foxfirev5 is offline   Reply With Quote
Old 01-06-2017, 03:36 PM   #29
Thinks s/he gets paid by the post
nun's Avatar
 
Join Date: Feb 2006
Posts: 4,867
Quote:
Originally Posted by RunningBum View Post
If you live past the SS break even point you will leave you heirs more by delaying the start of SS.
Yes but it should be no surprise that the break even point is close to the average mortality age. Given the 50/50 chance of hitting the break even point and as I'm not worried about running out of money, I'm going to take SS as early as I can.
__________________
So we beat on, boats against the current, borne back ceaselessly into the past.

Current AA: 75% Equity Funds / 15% Bonds / 5% Stable Value /2% Cash / 3% TIAA Traditional
Retired Mar 2014 at age 52, target WR: 0.0%,
Income from pension and rent
nun is offline   Reply With Quote
Old 01-06-2017, 04:16 PM   #30
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
RunningBum's Avatar
 
Join Date: Jun 2007
Posts: 11,376
Quote:
Originally Posted by foxfirev5 View Post
There's more than one assumption in play with this scenario. First, I get a kick out of how people believe that future changes in SS benefits, taxes and investment returns will be treated fairly and based on history. It's all speculative and we have to make our own decisions. Personally I'll take what I can get from SS ASAP and live with my investment decisions. Just like I've done for the last 35+ years. Thanks
That's definitely the wild card in the equation. I don't know how to evaluate the possibilities of that.
RunningBum is offline   Reply With Quote
Old 01-06-2017, 05:18 PM   #31
Thinks s/he gets paid by the post
 
Join Date: Oct 2012
Location: Colorado Mountains
Posts: 3,073
Quote:
Originally Posted by Options View Post
The strategy for those who retire early is to delay SS until 70 using roth conversions in the intervening years. I am not trying to optimize this strategy to the nth degree, but instead am only converting up to the 15% tax bracket, which I know is lower than if I didn't convert when delaying SS. I am also in the fairly unique position of having $2 of every $3 in taxable, so am drawing down taxable until 70 to keep conversion taxes low. Another reason I am converting to Roth is to minimize possible negative consequences of future tax reform (Roths are tax-free).
I think Medicare used to be "tax free". Not any more. It has "fees" for higher income recipients. The higher your income the more you pay. My motto is to "never say never" when it comes to all government programs.
Hermit is offline   Reply With Quote
Old 01-06-2017, 05:42 PM   #32
gone traveling
 
Join Date: Apr 2011
Posts: 3,375
No interest in spending down IRA. Just want to live life as I want & if that includes IRA spend down, OK. I mean, who cares if I spend it down?
gerntz is offline   Reply With Quote
Old 01-06-2017, 06:08 PM   #33
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
RunningBum's Avatar
 
Join Date: Jun 2007
Posts: 11,376
Quote:
Originally Posted by gerntz View Post
No interest in spending down IRA. Just want to live life as I want & if that includes IRA spend down, OK. I mean, who cares if I spend it down?
Did someone ask you? I don't think anyone cares if you spend your IRA down. Do you have a problem if someone else does? Why?

Most of us are here to learn. I don't really care what anyone else does, but I want to know why they do what they do, to see if I can do anything better in my own situation. I'll also put out my own opinion on what to do, to see what holes people shoot into it. Also, entertainment.

Not really sure what the point of your post is?
RunningBum is offline   Reply With Quote
Old 01-06-2017, 06:42 PM   #34
Thinks s/he gets paid by the post
 
Join Date: Jan 2008
Posts: 1,495
Quote:
Originally Posted by foxfirev5 View Post
There's more than one assumption in play with this scenario. First, I get a kick out of how people believe that future changes in SS benefits, taxes and investment returns will be treated fairly and based on history. It's all speculative and we have to make our own decisions. Personally I'll take what I can get from SS ASAP and live with my investment decisions. Just like I've done for the last 35+ years. Thanks
Emphasis added

Good point. I am personally viewing delayed SS as longevity insurance acting like an annuity the best annuity deal you can get, based on my personal odds of living longer. I am not considering any break even analysis in this consideration. It is strictly an "insurance" consideration based on my risk tolerance in the area of longevity. Nothing is certain. We do the best we can with what we've got at the moment. Flexibility is crucial.

Quote:
Originally Posted by Hermit View Post
I think Medicare used to be "tax free". Not any more. It has "fees" for higher income recipients. The higher your income the more you pay. My motto is to "never say never" when it comes to all government programs.
Absolutely. And there's more where that came from. This is why I added (probably way too much) padding to my PF to mitigate possible negative future outcomes by way of upcoming tax/SS/medicare reform.

Quote:
Originally Posted by gerntz View Post
No interest in spending down IRA. Just want to live life as I want & if that includes IRA spend down, OK. I mean, who cares if I spend it down?
Well, you might care if you leave money on the table (by paying more taxes than needed) if you failed to analyze your own personal situation sufficiently. It's amazing how different (as in lower) taxes can be in retirement when effective tax bracket management strategies are employed. For the duration of my PF life, I will only pay about $600 annually in taxes, and that's only because I'm doing roth conversions. The conversions will considerably reduce taxes after delayed SS and RMD's start at 70 1/2.
Options is offline   Reply With Quote
Old 01-06-2017, 07:16 PM   #35
Thinks s/he gets paid by the post
 
Join Date: Oct 2012
Location: Colorado Mountains
Posts: 3,073
Quote:
Originally Posted by Options View Post
.... Well, you might care if you leave money on the table (by paying more taxes than needed) if you failed to analyze your own personal situation sufficiently. It's amazing how different (as in lower) taxes can be in retirement when effective tax bracket management strategies are employed. For the duration of my PF life, I will only pay about $600 annually in taxes, and that's only because I'm doing roth conversions. The conversions will considerably reduce taxes after delayed SS and RMD's start at 70 1/2.
That's awesome! I can't get below the 25% tax bracket. I have a nice pension that kicks my SS into the 75% taxable bracket which increases my taxable income even more! (It isn't pretty being "rich" in the eyes of the tax man!) When I reach 70 1/2, tax things really get ugly - above $10k to multiples of that each year depending on how much I give to charity (QCDs). Rule #1 to stay out of this situation is to not allow your spouse to die!
Hermit is offline   Reply With Quote
Old 01-06-2017, 08:01 PM   #36
Thinks s/he gets paid by the post
gauss's Avatar
 
Join Date: Aug 2011
Posts: 3,024
Quote:
Originally Posted by 2017ish View Post
Well, we aren't there yet, but that's what we plan. Roth conversions up front, probably to top of 25% bracket, delay whatever social we might end up with to 70 at least for highest earner (probably for both of us though). The longevity insurance is compelling given DW's individual life expectancy. My planning takes her to 105, based on family history, education/health level, etc.
+1 Very similar thinking to my approach. I have always been influenced by Delayed Gratification (ie I probably would not have "eaten the marshmallow").

-gauss
gauss is offline   Reply With Quote
Old 01-06-2017, 08:04 PM   #37
Thinks s/he gets paid by the post
gauss's Avatar
 
Join Date: Aug 2011
Posts: 3,024
Quote:
Originally Posted by Hermit View Post
That's awesome! I can't get below the 25% tax bracket. I have a nice pension that kicks my SS into the 75% taxable bracket which increases my taxable income even more! (It isn't pretty being "rich" in the eyes of the tax man!) When I reach 70 1/2, tax things really get ugly - above $10k to multiples of that each year depending on how much I give to charity (QCDs). Rule #1 to stay out of this situation is to not allow your spouse to die!
+1 Another very sobering reason why I am Roth converting every year now for the next 20 years while we are able file taxes as Married Filing Jointly (MFJ).
gauss is offline   Reply With Quote
Old 01-06-2017, 08:27 PM   #38
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jun 2005
Posts: 10,252
Quote:
Originally Posted by Sunset View Post
For any young readers: I wish we had put more into ROTH's instead of simply filling up the IRA/401K's , more of a mixture would have been better overall for us.
Roths were not invented in time for us to use them much and many people could not contribute to them because of income limits. Furthermore, conversions were off limits unless income was low.

I am glad Roths weren't around to confuse the situation of saving for retirement because we might have put too much money in them instead of taking the tax breaks for just using regular 401(k)s and 403(b)s.

As it is, our tax bracket dropped from 33% or so to 15% and lots of income is tax free now. Our effective rate (average taxes) on our AGI is about 3%. There are lots of folks who don't pay any income taxes at all.

We can do Roth conversions now while we are in this low bracket, so that's what we do. We can pay the taxes for conversions from our taxable account which is the best way to do it.

As for the tax torpedo, I have projections and just don't see it happening for us.
LOL! is offline   Reply With Quote
Old 01-06-2017, 08:55 PM   #39
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 30,490
Our IRAs are less than 10% of our liquid assets, and we get above the 15% tax bracket for total income meaning some of our dividends/cap gains are tax-free but not all of them.

We're just going to bite the tax torpedo. We'll put it off until 70 and get hit by RMDs and SS taxes at the same time. Our tax bracket will probably increase, but we would pay AMT on any extra ordinary income now, so it just doesn't matter.
__________________
Retired since summer 1999.
audreyh1 is online now   Reply With Quote
Old 01-06-2017, 09:37 PM   #40
gone traveling
 
Join Date: Apr 2011
Posts: 3,375
Quote:
Originally Posted by RunningBum View Post
Did someone ask you? I don't think anyone cares if you spend your IRA down. Do you have a problem if someone else does? Why?

Most of us are here to learn. I don't really care what anyone else does, but I want to know why they do what they do, to see if I can do anything better in my own situation. I'll also put out my own opinion on what to do, to see what holes people shoot into it. Also, entertainment.

Not really sure what the point of your post is?
The title of this thread is "Spending down IRA in retirement". I gave my opinion on that. What's the problem?
gerntz is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
More difficult then you would think... spending down LARS FIRE and Money 49 01-19-2015 12:50 PM
When to do you start purposely spending down capital? LARS FIRE and Money 82 08-17-2010 09:56 AM
2008 Actual Spending and 2009 Budgeted Spending dex FIRE and Money 122 03-17-2009 02:49 PM
Can I max out my Roth IRA, Trad. IRA, and SIMPLE IRA? thefed FIRE and Money 9 09-24-2007 04:52 PM

» Quick Links

 
All times are GMT -6. The time now is 03:17 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2021, vBulletin Solutions, Inc.