Should I draw down my 457 now at age 50?

[Slim11]

Ok, so , some of you may know me from, teach me bonds, I need a withdraw calculator and basic threads like that. So this may put it more together for you.

I have a 457 plan with about 450k. I am age 50, retired, 110k a year pension. Right now I am in the 24 percent for federal taxes, later , I probably will be in the next higher bracket. My idea is to rollover 20k a year into a roth. Then withdraw 6k to cover the taxes. So, withdraw 26k a year from the 457 starting in January. At this rate, according to the calculater, I can do this for 29 years @ 4% intrest rate. I do not need this money now, or maybe ever. I may take a rollover holiday when the kido goes to collage in 8 years, and use this $$$ twords that. Plus, if I need it I can just stop adding it to the roth. In 29 years I will be 79, and if I only do the roth conversions for 7 years @ 4% that will be 435k. When I die, the kido will get the roth, or if I live to be 100 and need it I can draw off that. But ,I dont think I will ever need. It. If the 457 money stayed and grew, I can take a larger amount later, but will probably be taxed at 32 percent. I have other money, and am trying to keep that in tax free stuff. At the withdrawl rate of the 26k I will be right under the next tax bracket for next year.

So, good idea , bad idea, what didn't I think of?

 

[SevenUp]

I have a 457 plan with about 450k. I am age 50, retired, 110k a year pension. Right now I am in the 24 percent for federal taxes, later , I probably will be in the next higher bracket. My idea is to rollover 20k a year into a roth. Then withdraw 6k to cover the taxes. So, withdraw 26k a year from the 457 starting in January.

Taking the absence of any current significant other income and the first person singular pronoun at face value, whether filing single or HOH you would just barely be in the 24% federal bracket.

If it seems paying 24% now is probably a good deal, why not convert $70K or whatever takes you to the end of the 24% rate?

 

[Slim11]

This part " At the withdrawl rate of the 26k I will be right under the next tax bracket for next year" I cant do more then that without going to the next tax bracket. Other income.

 

[Slim11]

I wish I could do more, it would be simpler! Lol.

 

[Slim11]

Oh, and another stupid question, if I do the rollover say january 1st, when do I pay taxes? Can I withdray the 6k to cover the taxes in December to pay them in april? I called the 457 plan advisors, and they do not take the taxes out for a rollover. I can and will ask the accountant, but its still on my mind now.

 

[SevenUp]

It's probably better to pay the tax from the cash flow of the pension and "other income" than to withdraw from the Roth.

See Roth conversion - Bogleheads and Safe harbors for more.

If you incur income on 1-Jan of year N, it will be included in the return you file in year N+1 for year N.

 

[Slim11]

It's probably better to pay the tax from the cash flow of the pension and "other income" than to withdraw from the Roth.

See Roth conversion - Bogleheads and Safe harbors for more.

If you incur income on 1-Jan of year N, it will be included in the return you file in year N+1 for year N.

Ty. No roth, what you said before was corect, wanting to take out of a 457, and roll it over to a roth. The other income only leaves me so much to take out before I hit the next tax bracket. But as you said, do as much as possible, so I take that as I am on the right path.

 

[SevenUp]

It's probably better to pay the tax from the cash flow of the pension and "other income" than to withdraw from the Roth.

See Roth conversion - Bogleheads and Safe harbors for more.

If you incur income on 1-Jan of year N, it will be included in the return you file in year N+1 for year N.

Ty. No roth, what you said before was corect, wanting to take out of a 457, and roll it over to a roth. The other income only leaves me so much to take out before I hit the next tax bracket.

Converting $20K to Roth and withdrawing $6K from traditional to make an estimated tax payment is the same* as converting $26K to Roth and then withdrawing $6K from the Roth to make an estimated tax payment.

*Well, maybe not exactly the same depending on your age. But if you are getting $110K/yr in pension plus whatever other unspecified income, can you take the tax payment out of the pension/other stream and let the whole conversion amount go into the Roth?

 

[Slim11]

Converting $20K to Roth and withdrawing $6K from traditional to make an estimated tax payment is the same* as converting $26K to Roth and then withdrawing $6K from the Roth to make an estimated tax payment.

*Well, maybe not exactly the same depending on your age. But if you are getting $110K/yr in pension plus whatever other unspecified income, can you take the tax payment out of the pension/other stream and let the whole conversion amount go into the Roth?

I atually havent thought about that. See , thats why I ask stupid questions. I broke up my investments in my mind in blocks, and havent yet thought of cross mingleing them. If that makes sense. Yes , i could easily dump the whole 26 k in a roth and pay the taxes with other income. Thats way smarter.

 

[Slim11]

0k to further clarify, I see my initial stocks that are in one account as seprate from the cds, and other accounts. Its been easier to access proformance as well as assign a future gain percentage too. It never even crossed my mind to comingle the accounts as I have been doing it seprate for so long.