How to defer more income

[hopefullyoneday]

I already contribute the max to my 457 with catchup, also maxing the hsa acct. I also contribute to my pension. I still have extra cash that i don't need to live on and don't want to pay taxes on it. I own a rental as a side gig so some of my losses pass through to my reg income. Is there anything else I can do to tax defer the extra income? Since I have a side business rental can i qualify for any other pre tax retirements? Thanks for any input.

 

[RetiredHappy]

Having savings in taxable account is not a bad thing. In fact we are about 50-50 in taxable and tax deferred accounts, and love the flexibility even though we are deep into retirement.

 

[GenXguy]

When I was working for an employer with a 457B plan, they had an additional plan called a 401a, and I was able to have income put into that in excess of maxing out my 457B. So, I would verify for certain whether that is an option. I had no idea it was an option at my company until I was chatting with some folks down in HR. Interestingly, a few years after I got in on that action, they stopped doing it because of the lack of interest.

To defer income on existing savings, I'm using some MYGA's.

 

[hopefullyoneday]

Having savings in taxable account is not a bad thing. In fact we are about 50-50 in taxable and tax deferred accounts, and love the flexibility even though we are deep into retirement not.

Not worried about a taxable acct as my pension will be 100k per year.

 

[hopefullyoneday]

When I was working for an employer with a 457B plan, they had an additional plan called a 401a, and I was able to have income put into that in excess of maxing out my 457B. So, I would verify for certain whether that is an option. I had no idea it was an option at my company until I was chatting with some folks down in HR. Interestingly, a few years after I got in on that action, they stopped doing it because of the lack of interest.

To defer income on existing savings, I'm using some MYGA's.

Yeah i have asked them what else i could do. They have a non SS pension and 457b and hsa. I was allowed to double down on the 457b for the past 3 years which helped defer taxes but this year i am only allowed to do the over 50 catch up.

 

[Slim11]

I assume you make to much to contribute to a roth? If not pay the taxes now, and get the benifit later. So you are limited. Pay the taxes and invest it. Not much else to do. Since you did the 3 year catch up you are close to retirement, or at least on paper can retire and not much else can be done to lower you tax rate. I am not an accountant but probably had a similar job. When you retire see if they can defere some pay to the next year.

 

[hopefullyoneday]

I assume you make to much to contribute to a roth? If not pay the taxes now, and get the benifit later. So you are limited. Pay the taxes and invest it. Not much else to do. Since you did the 3 year catch up you are close to retirement, or at least on paper can retire and not much else can be done to lower you tax rate. I am not an accountant but probably had a similar job. When you retire see if they can defere some pay to the next year.

Not sure about Roth this year as still working overtime. Early retirement date is June 2027 at which time i will burn sick and vacation time for about 2.5 years then officially retire with the pension. Wont be able to defer my pension as it will be a set amount. But i can tell them when and how much with the 457b.

 

[bada bing]

Look into "backdoor Roth". You can't have traditional pre-tax IRA balances without triggering pro-rata tax accounting though.

Have you checked to see if you might have access to NQDC plan (Non-qualified deferred comp) ? When I was working my, mega-corp employer offered a lot of bells and whistles that they didn't communicate, including a NQDC plan for excess retirement contributions.. You have to dig.

The holy grail of extra deferral plans is to have access to what's called "Mega-Bockdoor Roth". You'll probably have to do the investigation yourself to see if it's possible with your particular employer plans.

Earned side income makes you eligible for a solo-401K. You don't get to double up on your individual qualified contribution limits, but the employer contributions are on a per employer basis. I believe you can defer up to 20% of your self employment income as an employer contribution.

I used all of the above while working as a low level grunt employee. It takes some individual effort to see what's possible.

 

[RetiredHappy]

Not worried about a taxable acct as my pension will be 100k per year.

What about you need a lump sum to go on a round the world cruise or a big home remodel?

 

[Koolau]

I already contribute the max to my 457 with catchup, also maxing the hsa acct. I also contribute to my pension. I still have extra cash that i don't need to live on and don't want to pay taxes on it. I own a rental as a side gig so some of my losses pass through to my reg income. Is there anything else I can do to tax defer the extra income? Since I have a side business rental can i qualify for any other pre tax retirements? Thanks for any input.

I assume you've done the research to insure you're not creating a tax "bomb" for yourself in the future. We're kinda "there" because we saved so much in the 401(k) and tIRAs back in the day. I was able to Roth all the tIRAs and a bit of the 401(k) before RMDs. But now, things are piling up (income wise) and creating higher taxes and "cliffs" like IRMAA.

What's that they say? Be careful what you wish for.

Best luck in figuring out this First World problem. It's a good one to have if you have to have a problem.

 

[Slim11]

And just making sure, you said you used catch up for the 457, you did the 3 year catch up provision? That allows you to double your contributions for 3 years IF you have under funder the 457 in the past. You can not contribute more then the max for each year totalled together. Hope I explained that well. And as stated above, when you with draw this money, it's taxable, this is ok unless you sit on it for 20 years and make your mandatory withdraws. That may hurt down the line. I was in your place last year. I am now doing some roth conversions yearly and will hopefully leave it as an emergency fund or for the kido when they get older. You can acess your 457 upon separation of service with no penalties.

 

[marko]

Personally, I never let the tax-tail wag the dog.

Having said that, I never converted to a Roth but wish I had. I pay the tax and don't give it a second thought. Pay it now, pay it later.

 

[Slim11]

Personally, I never let the tax-tail wag the dog.

Having said that, I never converted to a Roth but wish I had. I pay the tax and don't give it a second thought. Pay it now, pay it later.

I'll agree, the roth thing is almost a wash for me. But who knows what the tax rate will be later, so I figured I will do some now to cover all the bases. Plus I like that if I do die, the kido can keep it up till 18 , then start the 10 year withdraws.

 

[marko]

I'll agree, the roth thing is almost a wash for me. But who knows what the tax rate will be later, so I figured I will do some now to cover all the bases. Plus I like that if I do die, the kido can keep it up till 18 , then start the 10 year withdraws.

Yeah, my Roth conversion would not have been to my advantage. I don't know why but my accountant said it was less than a wash. Fine.

With the market on rocket fuel right now I'm happy with the tax deferred. As far as RMDs they start this coming year but as I've noted before, my RMD is much less than what I normally withdraw anyways.

One of my rules is that I think about taxes one day a year: April 14th. I don't even pay estimateds despite the pleas of my tax guy.

 

[hopefullyoneday]

What about you need a lump sum to go on a round the world cruise or a big home remodel?

Have more than enough liquid cash for anything like that.

 

[hopefullyoneday]

I assume you've done the research to insure you're not creating a tax "bomb" for yourself in the future. We're kinda "there" because we saved so much in the 401(k) and tIRAs back in the day. I was able to Roth all the tIRAs and a bit of the 401(k) before RMDs. But now, things are piling up (income wise) and creating higher taxes and "cliffs" like IRMAA.

What's that they say? Be careful what you wish for.

Best luck in figuring out this First World problem. It's a good one to have if you have to have a problem.

Our combined income right now is about 250k, when we retire it will be less than half and that is when we will start doing the roth conversions since we will be in a lower tax bracket.

 

[hopefullyoneday]

And just making sure, you said you used catch up for the 457, you did the 3 year catch up provision? That allows you to double your contributions for 3 years IF you have under funder the 457 in the past. You can not contribute more then the max for each year totalled together. Hope I explained that well. And as stated above, when you with draw this money, it's taxable, this is ok unless you sit on it for 20 years and make your mandatory withdraws. That may hurt down the line. I was in your place last year. I am now doing some roth conversions yearly and will hopefully leave it as an emergency fund or for the kido when they get older. You can acess your 457 upon separation of service with no penalties.

yes i doubled down for the 3 yrs since i did not contribute to the 457 for 10yrs because my pension was going to be enough. But then the city changed the pension formula so now i am playing catchup. yes it will be taxable so when i separate and will be in a lower tax bracket i will start doing the roth conversions.

 

[hopefullyoneday]

Personally, I never let the tax-tail wag the dog.

Having said that, I never converted to a Roth but wish I had. I pay the tax and don't give it a second thought. Pay it now, pay it later.

I am in the 24% tax bracket now so trying to defer what all i can. Will be in the 12% when i retire and will do the roth conv then.

 

[marko]

I am in the 24% tax bracket now so trying to defer what all i can. Will be in the 12% when i retire and will do the roth conv then.

And that's my "problem". I've been above 30% for the past 40 years and no sign of it changing going forward. Fifty years ago I was "told" that I'd be in a much lower bracket by now. Ha! Never happened! (lying b@$tards)

Again, I try to think about taxes one day a year. Just tell me how much is the check I need to write on April 14th. Do I hate it? Sure! That's why I don't think about it. The same reasons I refuse to pay estimateds. Harumff!

 

[Koolau]

Heh, heh, I'm sure there are many of us here who would trade places with you. I can't relate to income large enough to put me in the 30% bracket. But I have "enough" so I'm not really envious - just maybe a bit "wistful."

Congrats on your great income. Glad someone is paying lots of taxes. We really need it!

 

[GenXguy]

Those Roth options suggested wouldn't defer any additional income you're earning this year, which seems to be what you are asking. Too bad you don't have the 401a option. It's up to $69,000 alone, then combine it with your 457B max & catchup. But, that combined total would normally include your company match - it did for me. It actually exceeded what I ever needed to contribute.