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What to do with IRA
Old 05-22-2023, 06:41 AM   #1
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What to do with IRA

So I'm 63 and am happily employed with no thoughts of retirement until at least 70 when I'll get 4200 / month from SS.

In the meantime, I've got an IRA that's got close to 600k in it. I haven't put anything in it for 4 years and it's not really growing. Putting pretax money in it would only serve as a tax break.

I do have a 401k that I do put pretax money in; it has around 60k in it.

What should I do with that IRA?

A few other items to mention: my house and cars are paid off, I have no debt.
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Old 05-22-2023, 06:57 AM   #2
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It sounds like you're interested in getting perspectives on what asset classes would be appropriate for someone in your shoes? You will find that this is a highly personal decision. Many of us here define an asset allocation target and try to stick to it. That means a certain percentage in equities and a certain percentage in fixed income. If your 401k has a stable value fund, that can be a good fixed income choice.
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Old 05-22-2023, 07:15 AM   #3
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One thing I would spend some time on is a long-term tax plan (considering RMDs, IRMAA, etc). You could make Roth conversions or if your tax rate is high now, maybe contribute more to your IRA that, as you said, "only serve as a tax break".
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Old 05-22-2023, 07:23 AM   #4
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One thing I would spend some time on is a long-term tax plan (considering RMDs, IRMAA, etc). You could make Roth conversions or if your tax rate is high now, maybe contribute more to your IRA that, as you said, "only serve as a tax break".
I've thought about doing some Roth conversions but my tax rate is too high right now.
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Old 05-22-2023, 07:40 AM   #5
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Originally Posted by unixfreak View Post
I've got an IRA that's got close to 600k in it. I haven't put anything in it for 4 years and it's not really growing.

What should I do with that IRA?
What are you invested in? Do you have access to a money market fund? At the moment, a lot of my fixed income allocation is earning 4.73% in SPAXX (IRA) and 4.97% in FIGXX (410k) at Fidelity.
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Old 05-22-2023, 07:52 AM   #6
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Since you have a retirement plan at work, you probably canít do a pre-tax IRA contribution. Do the max in the 401K, contribute to a Roth if you can, and build up a taxable account.
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Old 05-22-2023, 08:06 AM   #7
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Three possibilities I can think of, all favoring NOT doing any Roth conversions.

1) Let your heirs have it. You are probably in a higher tax bracket than they are so don't convert to a Roth. Let them pay the taxes at a lower rate.

2) Let charities have it. You can do QCDs up to 100K/yr(?) starting at 70.5 while you are alive, and they let them have the rest when you die. Since they pay not tax on it, do not convert to a Roth.

3) Leave it in the IRA in case you need very expense care in your old age due to a physical or memory incapacity that is a deductible medical expense. Then you take the income and can write off much of it with the medical deduction. Don't forget that you the first 7.5% of your income is not deductible, so you won't be able to write off all of it.

Personally I'd retire earlier than 70 (and do Roth conversions in the years before collecting SS) but if you'd rather keep working that's your choice, of course.
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Old 05-22-2023, 10:21 AM   #8
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Above 1 & 3 are reasons we are not doing Roth conversions.

Is there a reason you want to do something with your IRA? What is your goal? How is it invested?
I am not sure what kind of advice you are asking for.
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Old 05-22-2023, 11:45 AM   #9
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... What should I do with that IRA? ...
Why the sudden urge to do something?



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Old 05-23-2023, 05:14 AM   #10
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Three possibilities I can think of, all favoring NOT doing any Roth conversions.

1) Let your heirs have it. You are probably in a higher tax bracket than they are so don't convert to a Roth. Let them pay the taxes at a lower rate.

2) Let charities have it. You can do QCDs up to 100K/yr(?) starting at 70.5 while you are alive, and they let them have the rest when you die. Since they pay not tax on it, do not convert to a Roth.

3) Leave it in the IRA in case you need very expense care in your old age due to a physical or memory incapacity that is a deductible medical expense. Then you take the income and can write off much of it with the medical deduction. Don't forget that you the first 7.5% of your income is not deductible, so you won't be able to write off all of it.

Personally I'd retire earlier than 70 (and do Roth conversions in the years before collecting SS) but if you'd rather keep working that's your choice, of course.
I'm not working to leave money for anyone but my wife - and who she chooses. She's 9 years younger than I and relies on my income as we're a one income family. I have some old cars that will go to my kids. Actually 3 cars to 3 kids and cash to 3 step kids.

I like 3. I'm healthy .... but but future health is unknown. I'd rather not be a burden to anyone. I have a small HSA as well.
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Old 05-23-2023, 05:16 AM   #11
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Why the sudden urge to do something?



Darn good question!

I don't think it's so sudden as it's been on the mind for the last few years.
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Old 05-23-2023, 06:22 AM   #12
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What is your overall target asset allocation?

What is the asset allocation of the 600K IRA as invested now?
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Old 05-23-2023, 06:56 AM   #13
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If you can contribute to a 401K, you should look into maximizing that to shelter as much current income as you can while you are working and in a higher bracket than after you retire.

Roth Conversions while you work would likely be a poor idea for the same reason, your tax bracket is likely higher today than it will be after you retire. If you retire and claim SS at 70, then Roth Conversions might still not make sense as you may be in the range where conversions subject more SS to taxation, which means outrageously high tax rates on the conversion.

Once you start RMDs, then perhaps modest Roth Conversions to the top of the IRMAA tier or tax bracket that you are in would make sense.
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Old 05-23-2023, 08:38 AM   #14
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Darn good question! I don't think it's so sudden as it's been on the mind for the last few years.
OK, not sudden. But still, what problem are you trying to solve? If you can state the problem simply and concisely in terms of financial goals, the solution may be obvious. If you can't, then don't do anything.
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Old 05-23-2023, 10:40 AM   #15
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What is your overall target asset allocation?

What is the asset allocation of the 600K IRA as invested now?
It's a balanced portfolio:
domestic stock 40%
foreign stock 9%
bonds 45%
short term and other 6%
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Old 05-23-2023, 10:52 AM   #16
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Bonds or bond funds? (Probably bond funds. I sold all mine and put those $'s into MM funds when the fed raised rates. I got >3X the returns.)
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Old 05-23-2023, 11:09 AM   #17
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It's Fidelity total bond, Fidelity equity dividend, Fidelity equity income, capital and income, corporate bond fund. Those are the biggies.
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Old 05-23-2023, 01:43 PM   #18
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Yes, I feel your pain. 2022 was a bummer for bond funds. They lost 10-20% off their NAV as the Fed pushed rates up. 2023 hasn't seen much improvement on NAV either, because rates went up, just more slowly. With dividends of 1-4%, recovering that way is slow as molasses.

That's why I bailed out, put the $ in MM funds (~ 5% now), and am looking for and buying good rates with longer term fixed income instruments.

May I recommend you read:

https://www.early-retirement.org/for...ng-114400.html

https://www.early-retirement.org/for...re-116449.html

https://www.early-retirement.org/for...on-115186.html

Or, you can ride it out until the NAVs recover. I've read where that may take a while.
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Old 05-23-2023, 01:43 PM   #19
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Quote:
Originally Posted by unixfreak View Post
So I'm 63 and am happily employed with no thoughts of retirement until at least 70 when I'll get 4200 / month from SS.

In the meantime, I've got an IRA that's got close to 600k in it. I haven't put anything in it for 4 years and it's not really growing. ....
Are you sure ?
Maybe it grew for 2.5 years and has fallen in the past 1.5 years ?

Where do have this IRA located, some brokerages charge a fee of 2% per year just to hold the account, plus then there are actual fund fees, over time that 2% fee really kills the growth.

Otherwise your allotment seems OK.

Understand $600K will roughly generate $36K income for 30 years. If you need more during retirement, then continue to contribute to the IRA, or a Roth.

Does your 401K have an employer match ?, if so certainly put in the required amount to get the match.
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