Not sure if this is a unique situation, or the correct area to ask.....
Our current plan is in place:
- sufficient after tax funds to live on starting 2022 through 2026 when DW qualifies for Medicare
- intentionally limiting tax deferred account withdrawals during this time to ensure "best value" ACA plans for each. We both have chronic health conditions and the coverage is far better than our really good COBRA plan, if that plan even exists in 2022......
- virtually all remaining unallocated funds are in traditional IRA
The wrinkle that recently arose is that we want to get a couple of big ticket items (big tow vehicle & travel trailer) that weren't on the radar until now.
2021 is the last "full salary" year for us, so the federal tax rate would be at 22% to start with. I'm thinking this is the last year until 2026 to pull a large amount of taxable income.
NY state allows $20K "deduction" for IRA withdrawals, and gets about 6% with different bracket levels than federal.
As I run the "what-if" numbers, the 30% income tax (federal + state) and additional 8% sales tax is a real concern. "The only sure thing......death & taxes" :-)
Sucking it up and paying up is one option, and I'd have to pay estimated tax or increase withholding to avoid further pain of penalties regardless...
I'm also considering 2 other "hybrid" options that involve withdrawing less from
- finance the RV and or tow vehicle, making payments over the 4 years, pay it off in 2026 when we have less concern about the ACA cliff. If the RV is collateral on the loan, it appears the loan interest is deductible.
- selling my "inflation hedge" after October 2021, when I can pay 15% capital gains (saves about 7-9% federal income tax).
The supply chain is so "upside down" it's the absolute worst time to buy, but we have decided that 2022 is the time to go for it, given our health circumstances.
We're likely to put a deposit on the RV in the next 3 months due to the very long lead time.
DW has absolutely vetoed my offer to w*rk another year (after another very brief ER visit), which really wouldn't solve the tax concerns.
We are extremely grateful to have these "first world problems", and don;t want to diminish our regular charitable contributions through the "bridge period" to pay taxes this year.
I'm still crunching the numbers wondering if I've missed any other options?