Age 60 retired married filing jointly. Have been doing Roth since 1998, 401k Roth since 2010, maxed it out every year with wife. Have 2 million in Roth and 1 million in pretax. Will spend 100,000 per year for next 10 years from pretax. The 2 million in Roth should double in 10 years. At age 70 will take SS and use any leftover pretax for charitable deductions at 70 1/2. QCDs. Our taxes will be minimal with only SS income and Roth income at 70 and over. It’s all in the planning. Average income was 150,000 over 25 years for us.
Yeah. I messed up by doing it backwards and only starting Roth this year at 50. I guess I'll just take from my 401k and traditional IRA first to lower future RMD and leave the Roth alone for the most part to grow tax free.
Probably already figured this out in the past 7 months, but you can convert some from traditional IRA to roth, paying tax now and future growth happens in the Roth. Consider tax rates now vs. anticipated rates and RMDs in the future. This year and next I expect to convert 2/3 of my pre-tax assets to Roth. Figuring the amount, if any, to convert can have many variables. Beyond basic tax rates, also how much of social security is taxable, IRMAA costs on medicare, etc.
Excellent podcast. Could you speak to the pros-cons of keeping $$ in tax-deferred for purposes of paying long-term care expenses (as opposed to paying for LT care insurance)? I'm 60, spouse is 56 and we have saved enough that we should be able to pay for our own long-term care, if needed, using social security and projected RMDs. But I've also been thinking about doing large Roth conversions up to the top of our 24% bracket in the several years between retirement and claiming social security at 70. (If tax rates don't change we'd be in the same bracket in retirement..) But if we convert too much into Roth, leaving much smaller RMDs, and then we needed years of long-term care, we'd lose the ability to use RMDs to pay for health care and deduct all of those health care expenses and would likely be using the Roths instead. (e.g. if a couple in their mid-80s has $300k income (SS plus RMDs), and spends $300k/year on nursing home or 24/7 home care, they'd never pay a penny of tax on any of that income.) I have no clue how one calculates/plans for this, as one's longevity and need for care (none, months, years) is unknown. Thanks!
Good video as always. I would expand the thinking beyond the standard deduction to ensure enough in pre tax to fill up the 10% and 12% bracket’s as well. Depending on your other income and number of years before RMDs, that balance could be over $1m. For example if your first RMD is 20 years away, the standard deduction and low tax brackets will increase for inflation and the year one RMD of $40k on a $1m IRA is likely going to be paid in a low bracket. You do need to look at the impact on your SS and whether more of that will be taxable. Given SS is not indexed for inflation and has a low $44k limit, it’s likely in 20+ years you will not be able to avoid tax on SS with or without IRA withdrawal impact.
Great, thoughtful analysis James. It might be worthwhile to do a piece on the 2024 requirement that all 401(k) catch-up contributions must be Roth contributions.
Your videos always seem to cover all bases. Maybe I missed it, but a major consideration for me is that I don't want my heirs to be put in a tax predicament because they inherited pretax dollars. My goal is to leave just enough in my traditional IRA to eat up the standard deduction and maybe a bit more for QCD's. So, maybe $100k each for me and my wife.
Great job too many people blindly tax wise invest in there retirement accounts I think first how much l need in traditional then put the rest in a Roth
Couldn’t you technically make $117,150 and still be in the 12% tax bracket for married filing jointly since the $27,700 standard deduction will drop you back to $89,450?
Age 60 retired married filing jointly. Have been doing Roth since 1998, 401k Roth since 2010, maxed it out every year with wife. Have 2 million in Roth and 1 million in pretax. Will spend 100,000 per year for next 10 years from pretax. The 2 million in Roth should double in 10 years. At age 70 will take SS and use any leftover pretax for charitable deductions at 70 1/2. QCDs. Our taxes will be minimal with only SS income and Roth income at 70 and over. It’s all in the planning. Average income was 150,000 over 25 years for us.
We’ll done!
I really enjoyed this episode. You have one of the best financial advice shows on RUclips. Thank you.
Yeah. I messed up by doing it backwards and only starting Roth this year at 50. I guess I'll just take from my 401k and traditional IRA first to lower future RMD and leave the Roth alone for the most part to grow tax free.
Probably already figured this out in the past 7 months, but you can convert some from traditional IRA to roth, paying tax now and future growth happens in the Roth. Consider tax rates now vs. anticipated rates and RMDs in the future. This year and next I expect to convert 2/3 of my pre-tax assets to Roth.
Figuring the amount, if any, to convert can have many variables. Beyond basic tax rates, also how much of social security is taxable, IRMAA costs on medicare, etc.
That was a really well worded question
Excellent podcast. Could you speak to the pros-cons of keeping $$ in tax-deferred for purposes of paying long-term care expenses (as opposed to paying for LT care insurance)? I'm 60, spouse is 56 and we have saved enough that we should be able to pay for our own long-term care, if needed, using social security and projected RMDs. But I've also been thinking about doing large Roth conversions up to the top of our 24% bracket in the several years between retirement and claiming social security at 70. (If tax rates don't change we'd be in the same bracket in retirement..) But if we convert too much into Roth, leaving much smaller RMDs, and then we needed years of long-term care, we'd lose the ability to use RMDs to pay for health care and deduct all of those health care expenses and would likely be using the Roths instead. (e.g. if a couple in their mid-80s has $300k income (SS plus RMDs), and spends $300k/year on nursing home or 24/7 home care, they'd never pay a penny of tax on any of that income.) I have no clue how one calculates/plans for this, as one's longevity and need for care (none, months, years) is unknown. Thanks!
Good video as always. I would expand the thinking beyond the standard deduction to ensure enough in pre tax to fill up the 10% and 12% bracket’s as well. Depending on your other income and number of years before RMDs, that balance could be over $1m. For example if your first RMD is 20 years away, the standard deduction and low tax brackets will increase for inflation and the year one RMD of $40k on a $1m IRA is likely going to be paid in a low bracket. You do need to look at the impact on your SS and whether more of that will be taxable. Given SS is not indexed for inflation and has a low $44k limit, it’s likely in 20+ years you will not be able to avoid tax on SS with or without IRA withdrawal impact.
Great, thoughtful analysis James. It might be worthwhile to do a piece on the 2024 requirement that all 401(k) catch-up contributions must be Roth contributions.
Thank you
Your videos always seem to cover all bases. Maybe I missed it, but a major consideration for me is that I don't want my heirs to be put in a tax predicament because they inherited pretax dollars. My goal is to leave just enough in my traditional IRA to eat up the standard deduction and maybe a bit more for QCD's. So, maybe $100k each for me and my wife.
That’s certainly a valid consideration too!
Great job too many people blindly tax wise invest in there retirement accounts
I think first how much l need in traditional then put the rest in a Roth
Is there a way or strategy to take distribution from 457 and move it to ROTH , if you retire early
Great Video!
Couldn’t you technically make $117,150 and still be in the 12% tax bracket for married filing jointly since the $27,700 standard deduction will drop you back to $89,450?
Yes. Adjusted Gross Income of $117,150 is the same as taxable income of $89,450 assuming you take the MFJ standard deduction.
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Like Jack Bogle said: " Costs matter."