Still Learning
Recycles dryer sheets
We will both be 64 this year and into our 2nd year of retirement. Just met with our Accountant to review if we should convert our Vanguard IRAs to Roth IRAs. The value will be about $1.15 million next year and $1.5+ at 71.
Was expecting to convert 100% next year as we only took a 2.5% withdrawal this year keeping us in the 12% tax bracket. Our Accountant suggested only a 25% conversion to reduce taxes and avoid exposure to LTC industry in the future as the entire Roth fund is exposed. We currently have 5 years of self financed LTC that would last longer with in-home care should that be practical. Once we are on Medicaid we must make sure that any overnight hospital stays are under "admitted" status only for additional health & LTC benefits. Currently we are both healthy to date. While RMDs are exposed to the LTC industry we understand the main IRA fund is not. We also have $1 million in cash which we plan to create a new account at Fidelity with about $200K initially to start a new income stream. We have no debt and SS/Pension pay all bills including health care and 40% of discretionary spending.
To convert 25% next year would cost about about $55K. If we avoid the 25% Roth conversion then the first RMD at 72 would be about $53K and result in about $11,660 tax assuming 22% tax bracket.
We need to update our will and will be discussing potential of a trust to avoid some TLC exposure and protect the transfer of our assets to our daughter when we pass.
Starting to think Roth is not the end all and that creating a trust will start to complicate our retirement especially in later life. We need to up our withdrawal rate anyway to avoid too much money in our 80s and would reduce RMDs. Thinking that just staying with IRAs would be easier.
Thoughts?
Was expecting to convert 100% next year as we only took a 2.5% withdrawal this year keeping us in the 12% tax bracket. Our Accountant suggested only a 25% conversion to reduce taxes and avoid exposure to LTC industry in the future as the entire Roth fund is exposed. We currently have 5 years of self financed LTC that would last longer with in-home care should that be practical. Once we are on Medicaid we must make sure that any overnight hospital stays are under "admitted" status only for additional health & LTC benefits. Currently we are both healthy to date. While RMDs are exposed to the LTC industry we understand the main IRA fund is not. We also have $1 million in cash which we plan to create a new account at Fidelity with about $200K initially to start a new income stream. We have no debt and SS/Pension pay all bills including health care and 40% of discretionary spending.
To convert 25% next year would cost about about $55K. If we avoid the 25% Roth conversion then the first RMD at 72 would be about $53K and result in about $11,660 tax assuming 22% tax bracket.
We need to update our will and will be discussing potential of a trust to avoid some TLC exposure and protect the transfer of our assets to our daughter when we pass.
Starting to think Roth is not the end all and that creating a trust will start to complicate our retirement especially in later life. We need to up our withdrawal rate anyway to avoid too much money in our 80s and would reduce RMDs. Thinking that just staying with IRAs would be easier.
Thoughts?