Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 11-17-2023, 11:13 AM   #381
Recycles dryer sheets
 
Join Date: May 2016
Posts: 168
Quote:
Originally Posted by Robert the Red View Post

I can see the value of conversions if your pre-RMD / pre-SS income is in the 12% bracket, and you'll be pushed up when those income sources hit.
One receiving RMD and SS can have a younger spouse who's RMD & SS is in the future. DW's age 70 SS & RMD will nearly double our income.
thatguy 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 11-17-2023, 04:05 PM   #382
Full time employment: Posting here.
 
Join Date: Sep 2016
Location: Way up North
Posts: 542
Quote:
Originally Posted by PERSonalTime View Post
Our Part B premiums are employer paid.
Off topic, but I'm curious. Is your premium subsidy open ended ? Or is there a cap on medical reimbursements ?

I have what my former employer calls a RRA = Retiree Reimbursement Account. It has a nominal value based on years of service, money that I can apply to qualified medical expenses, including Part B and D premiums. But it is capped at account value earned while working. I started retirement 3 years ago with ~$120K in credit and I'm down to $90K remaining. I used $30K so far "paying" for retiree medical premiums for the last 3 years. I transition to Medicare in a few months and probably have enough credit remaining to pay part B & D for remaining lifespan. But not if I spend a couple decades paying IRMAA.

It sounds like some here have similar programs, but are they capped or open ended ?
bada bing is offline   Reply With Quote
Old 11-19-2023, 01:13 PM   #383
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Koolau's Avatar
 
Join Date: Jul 2008
Location: Leeward Oahu
Posts: 16,713
Quote:
Originally Posted by Rianne View Post
We plan to use the interest generated from the CDs and treasuries in the tIRA for income. Just as our pension would have been taxed the withdrawals from the tIRA will be taxed and we'll stay in the 12% tax bracket. Since we're controlling the growth of our tIRA and will WD as needed, RMDs won't be a problem. It follows pay now or pay later. Our taxed portion of the portfolio is all LTCG (40%). We can control cashing in the I-bonds as well. The interest on those far exceeds the principal since we bought them in the early 2000s. We'll leave those alone.

Yeah, it's nice to be able to control your taxable income. I find that we have less and less control now that we're into RMDs. Also, we are spending a lot more which also takes away some of the control we used to have. We need to start thinking about our I-bonds before they become a tax bomb.
__________________
Ko'olau's Law -

Anything which can be used can be misused. Anything which can be misused will be.
Koolau is offline   Reply With Quote
Old 11-27-2023, 11:01 AM   #384
Recycles dryer sheets
 
Join Date: Jan 2014
Posts: 440
Quote:
Originally Posted by bada bing View Post
Off topic, but I'm curious. Is your premium subsidy open ended ? Or is there a cap on medical reimbursements ?

I have what my former employer calls a RRA = Retiree Reimbursement Account. It has a nominal value based on years of service, money that I can apply to qualified medical expenses, including Part B and D premiums. But it is capped at account value earned while working. I started retirement 3 years ago with ~$120K in credit and I'm down to $90K remaining. I used $30K so far "paying" for retiree medical premiums for the last 3 years. I transition to Medicare in a few months and probably have enough credit remaining to pay part B & D for remaining lifespan. But not if I spend a couple decades paying IRMAA.

It sounds like some here have similar programs, but are they capped or open ended ?
Luckily for us, it's for our lifetimes. :-) No caps.
PERSonalTime is offline   Reply With Quote
Old 11-27-2023, 12:17 PM   #385
Administrator
Gumby's Avatar
 
Join Date: Apr 2006
Posts: 22,243
Quote:
Originally Posted by bada bing View Post
Off topic, but I'm curious. Is your premium subsidy open ended ? Or is there a cap on medical reimbursements ?
....
It sounds like some here have similar programs, but are they capped or open ended ?

Mine is open ended. Whatever I pay for Medicare premiums, including any IRMAA, is reimbursed by increasing my pension. And that lasts for life. Of course, I had to contribute 3% of my pay for 10 years to get that benefit, so it was by no means free.
__________________
Living an analog life in the Digital Age.
Gumby is offline   Reply With Quote
Old 11-27-2023, 02:35 PM   #386
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Koolau's Avatar
 
Join Date: Jul 2008
Location: Leeward Oahu
Posts: 16,713
Quote:
Originally Posted by bada bing View Post
I have what my former employer calls a RRA = Retiree Reimbursement Account.

I think that's what we have. Megacorp used to provide subsidized retiree medical benefits, then switched to an outside provider and once on medicare, provided the equivalent of subsidized medicare supplement. Eventually, Megacorp gave us a yearly amount toward a RRA (I think that's right.) It started around $6K/year and the money went toward virtually any Medicare approved treatment (OOP, Co-pays, premiums (both MC and supplementes)) Megacorp sent us to VIA which helps us each year "shop" for the most appropriate MC supplement insurance.

By the way, the amount we receive has gone up with inflation (I think it's up to about $6500/year each now.) That's just about enough to let us break even most years. YMMV
__________________
Ko'olau's Law -

Anything which can be used can be misused. Anything which can be misused will be.
Koolau is offline   Reply With Quote
Old 11-27-2023, 09:12 PM   #387
Full time employment: Posting here.
 
Join Date: Sep 2016
Location: Way up North
Posts: 542
Quote:
Originally Posted by bada bing View Post
Off topic, but I'm curious. Is your premium subsidy open ended ? Or is there a cap on medical reimbursements ?
Quote:
Originally Posted by PERSonalTime View Post
Luckily for us, it's for our lifetimes. :-) No caps.
Quote:
Originally Posted by Gumby View Post
Mine is open ended. Whatever I pay for Medicare premiums, including any IRMAA, is reimbursed by increasing my pension. And that lasts for life.
Quote:
Originally Posted by Koolau View Post
I think that's what we have. Megacorp used to provide subsidized retiree medical benefits, then switched to an outside provider and once on medicare, provided the equivalent of subsidized medicare supplement. Eventually, Megacorp gave us a yearly amount toward a RRA (I think that's right.) It started around $6K/year and the money went toward virtually any Medicare approved treatment (OOP, Co-pays, premiums (both MC and supplementes)) Megacorp sent us to VIA which helps us each year "shop" for the most appropriate MC supplement insurance.
All that's interesting - although maybe off topic for the thread. I haven't done any detailed research, but find it interesting that private company Retiree medical programs exist and there isn't much standardization. Seems like the terms are pretty varied.
bada bing is offline   Reply With Quote
Old 11-28-2023, 06:58 AM   #388
Thinks s/he gets paid by the post
misanman's Avatar
 
Join Date: Apr 2008
Posts: 1,213
The company I worked for use to pay the supplement cost but froze the amount about the time I retired. Still a nice benefit but gradually shrinking in value as prices go up.
misanman is offline   Reply With Quote
Old 11-29-2023, 09:57 AM   #389
Recycles dryer sheets
 
Join Date: Jan 2014
Posts: 440
Quote:
Originally Posted by Midpack View Post
While true, the first question might be, how much do you have in deferred assets? If it's a (relatively) large amount, then the above applies. In our case, if we didn't do aggressive Roth conversions, our RMDs alone would be ridiculously large, especially on top of Soc Sec and "passive income" from dividends, interest, STCGs. Yes, first world problems.

If your deferred assets aren't that much, it won't make much difference regardless, and there's probably no need to analyze further.
How large is ridiculously large?
PERSonalTime is offline   Reply With Quote
Old 11-29-2023, 10:16 AM   #390
Thinks s/he gets paid by the post
Rianne's Avatar
 
Join Date: Aug 2017
Location: Champaign
Posts: 4,554
Our tIRA is all laddered with CDs and treasuries $1M+. We plan to use the interest earned as income. We'll pay taxes in the 12% tax bracket as married filing together over 65. The taxes will go up if one of us passes and puts one of us in the 12-22% tax bracket. But the SS will decrease by about 1/2 if that happens.
__________________
"Do not go where the path may lead, go instead where there is no path and leave a trail."

Ralph Waldo Emerson
Rianne is offline   Reply With Quote
Old 11-29-2023, 10:25 AM   #391
Recycles dryer sheets
 
Join Date: Jan 2014
Posts: 440
Quote:
Originally Posted by Winemaker View Post
Right now my goal is to convert all of DW's tIRA over to a Roth, that will put her close to 7 figures there. She will continue to get my pension, and hers per my unplanned demise. We will then begin to convert/spend my 7 figure tIRA, and she will have close to my 7 figure Roth. At that point, she can defer, donate or whatever.
I think thatís a great plan. I have been thinking about going that route as well. What is your current tax rate? And what do you anticipate your tax rate will be when you get to her RMD?
PERSonalTime is offline   Reply With Quote
Old 11-29-2023, 12:11 PM   #392
Thinks s/he gets paid by the post
 
Join Date: Nov 2006
Posts: 1,578
I've started looking at my 2024 possible conversions. For the first time ever, our taxable income will be pretty low. So low, that less than 40% of my SS will be taxed. So, as you guessed, any conversions will cause more of my SS to be taxed. I calculate if I wanted to do $65K of conversions up to the top of the 12% bracket, I'd pay 16.5% in taxes on that money. Ugh.

Once RMDs kick in (8 years), with no more conversions, we'd be right at the top of the 12%, maybe bleeding a tiny bit into the 22%. Tough decision on whether I should do anymore conversions. Thoughts?
PatrickA5 is offline   Reply With Quote
Old 11-29-2023, 02:17 PM   #393
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 35,318
Quote:
Originally Posted by PatrickA5 View Post
I've started looking at my 2024 possible conversions. For the first time ever, our taxable income will be pretty low. So low, that less than 40% of my SS will be taxed. So, as you guessed, any conversions will cause more of my SS to be taxed. I calculate if I wanted to do $65K of conversions up to the top of the 12% bracket, I'd pay 16.5% in taxes on that money. Ugh.

Once RMDs kick in (8 years), with no more conversions, we'd be right at the top of the 12%, maybe bleeding a tiny bit into the 22%. Tough decision on whether I should do anymore conversions. Thoughts?
Question: is the "Once RMDs kick in (8 years), with no more conversions, we'd be right at the top of the 12%, maybe bleeding a tiny bit into the 22%." with RMDs? So RMDs are being taxed at 12% plus perhaps if RMDs cause more SS to be taxed... or RMDs are on top of the 12% bracket so taxed at 22%?

Also, have you included growth in tIRA balances in your calculations?

In a way, 16.5% isn't horrible. What tax bracket were you in when that income was deferred? 28%?

The basic principle is that if the effective tax rate on conversions now is significantly less than the effective tax rate on conversions later when you have RMDs then do Roth conversions, otherwise don't bother with them.

It sounds like for you it is a push. 16.5% now vs a mix of 12% and 22% later.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56
pb4uski is offline   Reply With Quote
Old 11-29-2023, 02:52 PM   #394
Thinks s/he gets paid by the post
 
Join Date: Nov 2006
Posts: 1,578
Quote:
Originally Posted by pb4uski View Post
Question: is the "Once RMDs kick in (8 years), with no more conversions, we'd be right at the top of the 12%, maybe bleeding a tiny bit into the 22%." with RMDs? So RMDs are being taxed at 12% plus perhaps if RMDs cause more SS to be taxed... or RMDs are on top of the 12% bracket so taxed at 22%?

Also, have you included growth in tIRA balances in your calculations?

In a way, 16.5% isn't horrible. What tax bracket were you in when that income was deferred? 28%?

The basic principle is that if the effective tax rate on conversions now is significantly less than the effective tax rate on conversions later when you have RMDs then do Roth conversions, otherwise don't bother with them.

It sounds like for you it is a push. 16.5% now vs a mix of 12% and 22% later.
The income after RMDs begins includes all income (SS, Divvys/Interest from taxable and RMDs. And yes, I've included 5% growth in my tax deferred accounts (assuming no more conversions) and 2% growth in SS. I've also accounted for future bracket and standard deduction increases (also at 2%)

We will be right on the edge of the 12% bracket, with maybe up to $10K at 22% (26%).

We were mainly in the 28% bracket while working with a few years at 31% and a few years at 12/15%.
PatrickA5 is offline   Reply With Quote
Old 11-29-2023, 02:55 PM   #395
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 35,318
^^^ Given that it looks like future Roth conversions are at best a push.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56
pb4uski is offline   Reply With Quote
Old 11-29-2023, 02:57 PM   #396
Thinks s/he gets paid by the post
 
Join Date: Nov 2006
Posts: 1,578
Quote:
Originally Posted by pb4uski View Post
Question: is the "Once RMDs kick in (8 years), with no more conversions, we'd be right at the top of the 12%, maybe bleeding a tiny bit into the 22%." with RMDs? So RMDs are being taxed at 12% plus perhaps if RMDs cause more SS to be taxed... or RMDs are on top of the 12% bracket so taxed at 22%?

Also, have you included growth in tIRA balances in your calculations?

In a way, 16.5% isn't horrible. What tax bracket were you in when that income was deferred? 28%?

The basic principle is that if the effective tax rate on conversions now is significantly less than the effective tax rate on conversions later when you have RMDs then do Roth conversions, otherwise don't bother with them.

It sounds like for you it is a push. 16.5% now vs a mix of 12% and 22% later.
Another idea I'm toying with is in early 2025, I could possibly suspend my SS payments for 3 years. Due to an inheritance, we're in a different financial situation than we were a few years ago when I took SS at 62. Not sure I'd want to do that, but it's a possibility that would make the SS moot for a few years.
PatrickA5 is offline   Reply With Quote
Old 11-29-2023, 02:59 PM   #397
Thinks s/he gets paid by the post
 
Join Date: Nov 2006
Posts: 1,578
Quote:
Originally Posted by pb4uski View Post
^^^ Given that it looks like future Roth conversions are at best a push.
Agreed. Of course, there's also the tax bump when I die and DW is filing Single. She'll definitely be in a higher bracket.
PatrickA5 is offline   Reply With Quote
Old 11-29-2023, 03:00 PM   #398
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 35,318
I was actually going suggest that before but some people have very strong feelings on when to take SS and I figured that you had your reasons for taking it earlier than FRA or 70.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56
pb4uski is offline   Reply With Quote
Old 11-29-2023, 03:31 PM   #399
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
RunningBum's Avatar
 
Join Date: Jun 2007
Posts: 13,036
Quote:
Originally Posted by PatrickA5 View Post
I've started looking at my 2024 possible conversions. For the first time ever, our taxable income will be pretty low. So low, that less than 40% of my SS will be taxed. So, as you guessed, any conversions will cause more of my SS to be taxed. I calculate if I wanted to do $65K of conversions up to the top of the 12% bracket, I'd pay 16.5% in taxes on that money. Ugh.

Once RMDs kick in (8 years), with no more conversions, we'd be right at the top of the 12%, maybe bleeding a tiny bit into the 22%. Tough decision on whether I should do anymore conversions. Thoughts?
You could do a smaller conversion, just enough to stay out of your 22% projection.

One of the reasons (along with longevity insurance) I've held off on taking SS is to have more room for conversions, so I like your idea of suspending SS for a few years.
RunningBum is offline   Reply With Quote
Old 11-29-2023, 03:37 PM   #400
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Brat's Avatar
 
Join Date: Feb 2004
Location: Portland, Oregon
Posts: 7,097
I just called Fidelity to discuss IRA conversion. The customer service person said that our RMDs must go to a taxable account and couldn't go to a Roth. Nuts. It has been a while since we did conversions, maybe before RMDs kicked in.
__________________
Duck bjorn.
Brat 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
Backdoor Roth and Roth conversions - no current Roth or IRA G-Man FIRE and Money 135 09-12-2022 07:51 AM
Roth Conversions even if you don't have the money to pay the taxes? qwerty3656 FIRE and Money 8 06-22-2021 05:58 PM
Roth conversions and MAGI limits on Roth IRA contributions Austin704 FIRE and Money 8 01-11-2021 03:11 AM
Basic important pre-retirement planning things I didn't even realize I didn't know 43210 FIRE and Money 32 11-28-2017 08:38 AM
Stuff You Didn't Know You Didn't Know mickeyd Other topics 21 08-07-2017 04:33 PM

» Quick Links

 
All times are GMT -6. The time now is 12:52 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2023, vBulletin Solutions, Inc.