Tax Planning for Widowed Retirees: How to Optimize Your Tax Strategy

Jennifer, 54, plans to retire soon. Her husband, 70, is retired, on Social Security, and dealing with some severe health issues. Jennifer worries about possibly becoming single in retirement, which could result in a higher tax bracket for her.
Jennifer is considering whether to convert her traditional accounts to Roth to lower future taxes or to change her contributions to Roth 403b, even if it means paying more taxes now. James walks us through several factors for her to consider and demonstrates why her future tax situation is likely not as dire as she thinks.
Questions Answered:
How should Jennifer maximize her retirement savings in light of her current financial situation and future tax implications?
What factors must Jennifer consider when deciding whether to convert her traditional retirement accounts to Roth or change her contributions to Roth 403b?
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⏱Timestamps:⏱
0:00 - Jennifer’s question
4:46 - Retire early for tax benefits?
6:05 - Roth conversion strategy
8:43 - Consider future expenses
12:38 - Assess SS strategies
13:56 - Consider living situation
15:54 - The conversion question
17:54 - Main takeaways
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[@larryjones9773]

She's 54. Her husband's ill. She needs low taxable income in order to make Roth conversions highly advantageous. Unless she loves her job, I suggest that she seriously considering retiring. It's time. Managing a Roth conversion strategy is time consuming. She'll be plenty busy. I'm in year 10 of my 12 year Roth conversion plan. I started at age 54 and I'm 63 now. She needs to start building a retirement spreadsheet that includes her Roth conversion numbers and all future tax return numbers. It's very time consuming, but there are a huge number of variables and all the numbers need to be estimated, but as accurate as possible, in order to determine the optimal Roth conversion plan. Plus, having all future tax return numbers calculated now, it will help in the future should she become disabled. Her caregiver and accountant can simply rely on her retirement spreadsheet.

[@bjlong4452]

Hi James. Do you happen to recall which episode you spoke about umbrella insurance. It was quite awhile ago. It was a very informative episode like all your episodes and I need to go back and listen to this particular one. Thanks for all the great info you put out there.

[@BardWannabe]

I had to laugh a little at the wording of the question, essentially, “I’m already a multimillionaire, am I totally screwed?”

[@BardWannabe]

No, ma’am, you might have to pay some taxes on money you didn’t pay taxes on yet.

[@johnbrown1851]

As my Mom used to say " sounds like a high class problem"😂

[@thomaslyens7981]

I thought the same thing.

[@markb8515]

Thanks James for another very informative video!

[@MichaelToub]

Great Video!

[@mattchilders3123]

Really good show.

[@ChrisHensley]

Tried to book an appointment but the schedule was full?

[@sbs5130]

15:57 I would agree that this would not be a huge issue. However, the 403b has the Rule of 55 (I think), and IRA Roth conversions have the 5 Year Rule. I suppose these would impact their ability to access Roth assets in the short term, and they already have early retirement on their mind. (But it's a moot point, as in-service conversions aren't allowed.)

[@johnj4094]

Cole I sold some stocks with capital gains so making estimated quarterly payments on irs pay direct…how do we inform irs next year tax season…..that much has been paid
Thanks

[@TheLiberty1999]

There is a line on the 1040 page 2 where you list prepayments and deduct from tax due. It was line 26 on the 2023 1040.

[@jamesglassford9657]

Line 26 on your 1040, estimated tax payments made. I also keep the confirmation numbers on my 1040-ES record for reference for each payment made.

[@Sylvan_dB]

Do you have an account on the IRS web site? You can print a confirmation. Otherwise you can use your transaction records (cancelled check, EFT on your statement, etc).

[@plebinil]

She should get married again :)

[@Max-nt7ho]

Yes, marry someone younger than she! 😊