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Old 12-01-2023, 04:33 PM   #421
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When I qualify, I would love to do my RMD as a QCD January 2nd, and then add to it as the year goes on if there is a need. I love the QCD feature.
Pretty much what we do. Not the RMD on Jan. 2 though. We just write QCD checks during the year and we take distributions during the year, including the big December distribution to make the safe harbor withholding amount (plus RMD balance if needed). Since Schwab just sends us QCD checks we write them wherever it's feasible; public radio, church, other of DW's nonprofits, state sheriff association, etc. I don't know if other brokerages provide checks but its so sensible for everyone that I'm sure it will be coming.
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Old 12-07-2023, 04:22 PM   #422
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I believe the bank/brokerage must follow these IRA withdrawal rules.
If you have IRA accounts at multiple banks/brokerages, then none of them knows your full story, or even can know what you are doing in the other accounts.
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Old 12-19-2023, 02:10 PM   #423
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Read all 22 pages today with only one question, for poster Sunset.

On the first page, you mentioned: "OP - Do you do long term capital gains harvesting to get tax free money or are your pensions too high ?'

Do you mind clarifying what is meant by long term capital gains harvesting for tax free money? I seem to always pay taxes on my LT capital gains.
Thanks
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Old 12-19-2023, 02:14 PM   #424
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Tax harvesting is selling some stocks at a loss to offset the gains in others.
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Old 12-19-2023, 02:29 PM   #425
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Originally Posted by SunnyOne View Post
Read all 22 pages today with only one question, for poster Sunset.

On the first page, you mentioned: "OP - Do you do long term capital gains harvesting to get tax free money or are your pensions too high ?'

Do you mind clarifying what is meant by long term capital gains harvesting for tax free money? I seem to always pay taxes on my LT capital gains.
Thanks

Another option is to sell some assets with gains if you are eligible to pay no taxes on the gains. You can sell some to realize the gain, pay no taxes and then after 30 days repurchase that asset, or you can purchase another asset with the cash from the sale. CNBC says
Quote:
You may qualify for the 0% long-term capital gains rate for 2021 with taxable income of $40,400 or less for single filers and $80,800 or less for married couples filing jointly.
So if your taxable income was say $50K you could realize $30K of cap gains tax free. If you sell then repurchase after 30 days, and you gain $30K each year for say 10 years, you have no tax bill but if you held it you would have $300K of cap gains that you will owe taxes on, and probably IRMAA and other levies.

That is the general description the way I understand it, others may provide more details or correct any errors.
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Old 12-19-2023, 02:31 PM   #426
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My interpretation was taking capital gains while your income is less than the threshold for the 15% rate on taxable gains (in 2023 that's $89,250 in taxable income for MFJ). So you pay zero percent on the capital gain, then you immediately rebuy and reset yourself to a higher basis.

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...If you sell then repurchase after 30 days...
There is no wash sale rule for capital gains, only for losses. So you can rebuy and reset your basis immediately.
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Old 12-19-2023, 02:37 PM   #427
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Originally Posted by SunnyOne View Post
Read all 22 pages today with only one question, for poster Sunset.

On the first page, you mentioned: "OP - Do you do long term capital gains harvesting to get tax free money or are your pensions too high ?'

Do you mind clarifying what is meant by long term capital gains harvesting for tax free money? I seem to always pay taxes on my LT capital gains.
Thanks
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Originally Posted by Gumby View Post
My interpretation was taking capital gains while your income is less than the threshold for the 15% rate on taxable gains (in 2023 that's $89,250 in taxable income). So you pay zero percent on the capital gain, then you immediately rebuy and reset yourself to a higher basis.

Edit to add. There is no wash sale rule for gains, only for losses. So you can rebuy and reset your basis immediately.
+1 I think Sunset was talking about taking advantage of the 0% capital gains tax bracket if you have hedadroom to do so.

So for example, let's say that it is late December and you know what your 2023 tax return numbers will be and that your taxable income will be $10,000 below the top of the 0% tax bracket.

You would sell some assets in taxable accounts that have unrealized long-term gains sufficient to generate a taxable gain of $10,000 and that $10,000 gain would have $0 tax.

After that, you can either do nothing and keep the proceeds from the sale for spending or you could even buy back the same ticker seconds later and effectively increase your cost basis of that lot for no cost.
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Old 12-19-2023, 02:43 PM   #428
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There is no wash sale rule for capital gains, only for losses. So you can rebuy and reset your basis immediately.
I stand corrected. Thanks for mentioning that
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Old 12-19-2023, 02:45 PM   #429
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I am familiar with tax loss harvesting and do it myself, but was thrown off by tax gain harvesting and wondered if it was some cool trick I had yet to learn of...and how it might different from regular LT equity sales.
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Old 12-30-2023, 12:02 AM   #430
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I am doing some small Roth conversions for my dad because he's about to pass so that the rmd doesn't kill my mom who is 21 years younger when she has to take it. It's not a lot but they should have been converting this entire time a little like $10k a year.

That being said I know people who do taxes for a living, an old coworker who tells her clients to do a Roth 401k and they are in the 37% bracket. I'm like in retirement they are going to be making $700k income? Okay that's nuts but sure. You know how big a portfolio you need to have that much? Most people don't get there but ok
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Old 12-30-2023, 07:25 AM   #431
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I am doing some small Roth conversions for my dad because he's about to pass so that the rmd doesn't kill my mom who is 21 years younger when she has to take it. It's not a lot but they should have been converting this entire time a little like $10k a year.

That being said I know people who do taxes for a living, an old coworker who tells her clients to do a Roth 401k and they are in the 37% bracket. I'm like in retirement they are going to be making $700k income? Okay that's nuts but sure. You know how big a portfolio you need to have that much? Most people don't get there but ok

I/we are no where near that income level to pay that much tax, but my last 5 years working I put all my 401k contributions to a Roth. Paid at 22% rate at the time and now we are also in 22% so no savings for doing the Roth when I did, however it gave me flexibility to draw what I want/need at any time now that I'm over 59.5, also makes the RMDs manageable, and will make managing tax rate easier from here on. For me, I'll pay the same rate so I don't see any advantage to defer (rates could go up or down) and I'm done paying taxes on the Roth funds. Just a small load off my mind.

All said, some funds in Roth and some TIRA gives flexibility, IMHO
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Old 01-04-2024, 10:10 PM   #432
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I've not read the entire thread, but feel as if I've seen the discussion many times before! The rigor one puts in determines the accuracy. I have yet to see in the thread an approach that wasn't filled with holes, inaccuracies, etc. Each introduce imprecision. Most end up showing the comparison to be within the margin of error they design into their analysis.

Not sure the OP is still tuned in, but in other words, pick an approach & don't worry about it, You say you don't feel like fooling with it? Then don't. If you'd feel better, a model can be formed to show you are right.
Im still here. I really appreciate everyones response. This has been a very interesting thread!
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Old 01-04-2024, 10:15 PM   #433
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Thanks for starting this thread. It was useful as people gave reasons why and why not although you asked for the why nots. It brought some clarity to my decision. We have done them to control ACA subsidies and stay out of Medicaid. I was not sure, if we should continue until I put together a spread sheet with modest gains and realized we will move from 12% into 22% (25%) not too long after I have to start RMDs. So, its a given for us for now unless something changes. We can probably delay that higher tax bracket for a number of years depending on the conversions. I think to know why not you have to have the why as well. Thanks again for starting this very informative discussion.
Thanks, djsander for the response. Your appreciation is greatly appreciated!
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Old 01-04-2024, 10:25 PM   #434
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Echoing the thanks for starting this thread. Observing and engaging in the discussion has been extremely helpful to my understanding of the issues and questions.

Keying in on the issue of UNCERTAINTY, it's clear that this aspect of the question - to convert or not to convert - cuts both ways. For those of you who can convert within fairly low tax brackets, it certainly seems well worth it. As someone put - you're taking uncertainty OFF the table. Into the 22% and above brackets, the answers start getting way fuzzier and a whole lot less CERTAIN.
Thank you for your response. I think what we finally decided to do was to do some small conversions of DWs T-IRAs. It wont do much, but it may help to lower her RMDs at the time when they come.
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Old 01-04-2024, 10:43 PM   #435
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While the money is in the traditional account, it's part yours and part Uncle's.

When you convert, you keep the part that's all yours. Best to do that when you get to keep the largest part - i.e., when the tax rate is lowest.

The commutative property of multiplication governs many conversion results.
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Old 01-06-2024, 06:39 AM   #436
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This thread is still timely, and very interesting. Would be nice to have an AI bot on hand to generate a summary...Lol

We just closed out one of her IRA's at Vanguard, and did that by converting 1/2 last year, and 1/2 just this week. If you have a smallish account, it may help you to dispose of it in this way (convert to Roth). One less thing on your retirement plate to monitor. For us, one less fund, one less account to track.
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Old 01-06-2024, 08:08 AM   #437
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^^^ Yup. Last week I withdrew a small inherited IRA for the same reason, one less account to track and I don't have to worry about forgetting to take an RMD and get penalized or forget to drain it after 10 years and get penalized and I have loads of tax deferred funds in other IRAs.
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Old 01-08-2024, 05:55 PM   #438
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We have not done any Roth conversions for the same reasons people have listed here. It never made sense as we live below our means and RMD, SS, etc. (We are 66/65) will always keep us in a high bracket and I am still working at maximum earning power at age 66. Our IRA/401 assets are around 3M, investable around 11M, not including real estate. CPA told us we will always be in a high bracket and will always be paying high tax as we do plan to sell equity positions at some point and pay capital gains. Why should we contribute taxes in the highest bracket now on money that is not needed and probably will never be needed? Additionally, we pay a huge penalty in losing the compounding that the government now subsidizes through tax deferment. It never made sense as our savings always far exceeded our retirement needs (assuming I did not die early). We have so much deferred capital gains in our brokerage account side that just the rebalancing is going to handcuff us to being in a high bracket for the rest of our lives. Roth really does nothing for us in that mode of operation except severely reduces compounding our our taxable equity base. I was always suspicious and felt it was a scam by the feds to get some tax relief now. Maybe I'm wrong but it doesn't mean I made a mistake.
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Old 01-08-2024, 10:48 PM   #439
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...Roth really does nothing for us in that mode of operation except severely reduces compounding our our taxable equity base. I was always suspicious and felt it was a scam by the feds to get some tax relief now. Maybe I'm wrong but it doesn't mean I made a mistake.
Yup. You're wrong. It's not a scam. But it's also not designed to provide tax benefits to someone with $14m + in assets so you're right that Roth conversions don't work in your rare circumstances.

No disrespect intended but why in the world are you still working?
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Old 01-08-2024, 10:58 PM   #440
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Principally, Roth conversions provide an opportunity for tax-rate arbitrage across time. If you will always be in the top rate, it is true that little or no benefit could be expected.

But you evidently have a misconception regarding the "huge penalty in losing the compounding that the government now subsidizes through tax deferment." The commutative law of multiplication assures us that it makes no difference if you realize gains first, then pay taxes, or pay taxes first, then enjoy gains.
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