CRLLS
Thinks s/he gets paid by the post
Unfortunately I drank the Kool-Aid about tax deferred IRAs and 401K's early and didn't pay much attention after that. Whoever said our tax rates will be lower in retirement was, at best, optimistic, at worst, just pushing their offerings. As a result, I found that too much of our investments were in the IRAs, >90% to be certain. FYI, we are currently 67 yrs old, have no investment accounts outside of IRAs and Roths.
Previously, Roth conversions were out of our purview due to controlling our income for ACA subsidies. Over the last 2 years, I converted a small amount without much analysis other than keeping under the max of our current tax bracket. I just ran a simple spreadsheet looking at Roth conversions from the 1,000 ft level. My intent is two fold. To minimize our later year's taxes (at the expense of today's taxes), but mostly to plan for the eventuality of one of the two of us will outlive the other, being taxed as Single. Who knows when that will happen but it certainly will occur.
The current plan is to start to conversion at ~ 4.5% this year, and the same $ amount for the next x years. We will also make ~3% withdrawals for the next 3 year's as live-on money until RMDs kick in. At the same time I will file for SS at 70, increasing from my current spousal benefit. Then the RMDs will become our live-on money. Roth conversions will continue at the same $ level during RMDs. This level of income/conversion also keeps us under IRMMA throughout or expected lifetime.
The interesting part is, if my spreadsheet assumptions are correct and the market follows typical performance, by age 78, only 8 years into RMDs, the balance will be 50/50 IRA and Roth. IF we both live till age 83, then the balance will be 25% IRA and 75% Roth. By age 90, the IRAs could be depleted/converted totally. I don't think that I will follow the Conversion plan that late. Review the plan, Adjust the plan, and Implement the plan, is THE plan.
I view the Roth bucket as tax free money if needed, since we would have no penalties. This is better than a taxable investment account IMO. So far we do not plan to ever tap into the Roth except for emergencies and if necessary, our personal LTC insurance. This plan keeps us from having to reinvest the RMDs into taxable accounts. IMO this helps to manage our future income and taxes better.
Today I took the first step and converted ~ 4.5% of our IRAs. In the next few days, I will run a proforma tax calculation and make another IRA W/D, 100% for taxes.
Should I be doing anything different/better given the situation we are currently in and our stated goals above?
Previously, Roth conversions were out of our purview due to controlling our income for ACA subsidies. Over the last 2 years, I converted a small amount without much analysis other than keeping under the max of our current tax bracket. I just ran a simple spreadsheet looking at Roth conversions from the 1,000 ft level. My intent is two fold. To minimize our later year's taxes (at the expense of today's taxes), but mostly to plan for the eventuality of one of the two of us will outlive the other, being taxed as Single. Who knows when that will happen but it certainly will occur.
The current plan is to start to conversion at ~ 4.5% this year, and the same $ amount for the next x years. We will also make ~3% withdrawals for the next 3 year's as live-on money until RMDs kick in. At the same time I will file for SS at 70, increasing from my current spousal benefit. Then the RMDs will become our live-on money. Roth conversions will continue at the same $ level during RMDs. This level of income/conversion also keeps us under IRMMA throughout or expected lifetime.
The interesting part is, if my spreadsheet assumptions are correct and the market follows typical performance, by age 78, only 8 years into RMDs, the balance will be 50/50 IRA and Roth. IF we both live till age 83, then the balance will be 25% IRA and 75% Roth. By age 90, the IRAs could be depleted/converted totally. I don't think that I will follow the Conversion plan that late. Review the plan, Adjust the plan, and Implement the plan, is THE plan.
I view the Roth bucket as tax free money if needed, since we would have no penalties. This is better than a taxable investment account IMO. So far we do not plan to ever tap into the Roth except for emergencies and if necessary, our personal LTC insurance. This plan keeps us from having to reinvest the RMDs into taxable accounts. IMO this helps to manage our future income and taxes better.
Today I took the first step and converted ~ 4.5% of our IRAs. In the next few days, I will run a proforma tax calculation and make another IRA W/D, 100% for taxes.
Should I be doing anything different/better given the situation we are currently in and our stated goals above?
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