@AttorneyMother, if I knew what the market would do, there are many things I would do with that knowledge before I started thinking about timing RMDs.
I have been thinking that, depending on income tax rate in the donut hole years between working and RMDs+SS+pensions, it might be opportune to do some Roth conversions and possibly also migrate some IRA/401k money to taxable. Your point about the difference between ordinary income rates and the lower capital gains and dividend rates is taken.
I guess the goal is to âfill upâ lower rate buckets at the right time, but not make the bucket overflow.
Thanks. I realize I am looking at information with the benefit of hindsight and no one has a reliable (if any) crystal ball. And I am not a market-timing investor; Iâm more an automatic or couch-potato investor.
But it occurred to me that the the shifting of RMDs from the IRA to taxable accounts will happen, unless we need to spend all the RMDs each year for living expenses. And if Iâm doing financial gymnastics to convert tIRAs to Roths during the donut-hole years (as you call them), then I might as well consider all the advantages, even if some of them are speculative. Also, because of tax budgeting, it may take more years than we have to completely drain the tIRAs into Roths.
Frankly, I also want to consider all of these issues before decrepitude takes its toll. I will have to explain it all to H if I donât get it all done and that is daunting.
Agree that it is daunting to figure out the best amount to convert from tIRA to Roth IRA. We have been on the fence and not converted, other than backdoor Roth IRAs so far. We are considering it but not too much. We are not spending the RMDs, but have not been slow in converting. We will consider it. We have a small IRA of Hâs tha we can convert and we can slowly take money out of my 457K by my former employer and convert those amounts, but it really doesnât seem to matter much one way or another, so we havenât been really motivated to do anything.
Ha ha. That daunting explanation is why I decided to spend our HSAs even if the optimal thing is to keep them as a Super IRA :). My wifeâs eyes rolled around in her head in a frightening way when I tried to explain it.
Those few years of reduced income are probably not long enough, as you said. We paid off our mortgage early, when everyone around here was calling us idiots (QQQ options will make you a zillionaire, dude, why are you paying off your mortgage? We know how that ended). We did it in part because, assuming we pay our taxes, the home is ours. I feel similarly about tax-advantaged accounts and taxable. I am more confident that the funds in a taxable account are âoursâ to do with as we see fit. Itâs a juvenile attitude, but there you are.
Another factor to consider is that you can undo a conversion to a Roth (itâs called ârecharacterizationâ) up until your final tax filing date (one reason to file an extension). So if you convert at the beginning of the year and the value drops you can convert it back into a tIRA, then reconvert the reduced value 30 days later and save some taxes. Or if you wind up in a higher bracket than expected, you can undo the conversion.
I read about the ârecharacterizationâ to undo a conversion that is allowed through the extended tax filing deadline. For us, the only iffy number would be year-end cap gains dividends and distributions and whether those would push AGI into another bracket. So, Iâd wait until those numbers before converting.
@IxnayBobâ
I think I stand a better chance of having our D pay attention to it. Because he wanted to support electric cars, H thought Fisker was a good investment. Now I understand the concept of a worthless security better than I ever had to. He looked at Tesla but did not like the car as much (as if that should make a difference.) Again, hindsight is great. But thatâs a different topic.
@AttorneyMother, I am waiting patiently for my Tesla Model X (my deposit was number 6,xxx). I will buy the car but not the stock. It is the first car Iâve been excited about since I was a teen or young adult. I usually just take my wifeâs hand-me-downs; she enjoys cars.
@IxnayBobâ, one of Hâs buddies has a Tesla and is very happy with it. They also built a charging station at their home. otherwise with our high elecxtricity prices, it was running them $1000/month! Now with the charging station, down to $0 H ooohed & ahhhhed over the car with everyone else but honestly we donât drive much and donât feel it makes sense for us.
They put up a new photovoltaic system, which they got some federal and state tax rebates for, but of course installing that was very expensive but they create the fuel to run their Tesla now. The PV system should last 25-30 years or more.
Another thought on RMDsâŠIf you continue to work after age 70 1/2âŠeven part time, you can continue to fund a
SEPâŠout-of-one-basket-into-another-basket.
How many legs will your retirement stool have? Not only from the investment category- IRA, pension, 401k etc but things like down sizing, relocation. Earlier I even mentioned having less pets but it could include cooking more at home, no longer having a cleaning lady or lawn service. Heck for many people the commute cost savings could be a leg on the stool.
Although I imagine most of us would use the Roth bucket if that were the case. Earn $5500, put $5500 into the Roth bucket. All other considerations about taxes being relatively equal.
Interesting question, tom. Ours will have 3 legs - pension, SS, and investments. No downsizing, we are still in the house we bought 27 years ago when we got married. We already eat most meals at home, do not have cleaning or lawn service. No pets currently. My H only commutes about 5 miles to work each way and I retired 25 years ago! I expect our expenses to remain the same or go up with more travel in retirement.
âone of Hâs buddies has a Tesla and is very happy with it. They also built a charging station at their home. otherwise with our high elecxtricity prices, it was running them $1000/month! Now with the charging station, down to $0 H ooohed & ahhhhed over the car with everyone else but honestly we donât drive much and donât feel it makes sense for usâ
HImom, I told my husband this (he always thought he might want a Tesla), and now heâs pretty disinterested in ever getting one! I thought the entire point of paying all that money was getting something very inexpensive to fuel.
@tom1944, Good question about legs of retirement. Iâm trying to figure that out. Things like have a nest egg to help kids, another to travel, another to likely support my mother at some point, possibly have 2 smaller homes instead of one⊠Is that the kind of stuff you are talking about? We are fortunate to have a fair amount saved for retirement (I think, but it depends on what you read, etc.) and will be working for several more years, but the closer I get, the more nervouse I become worrying about if we will have enough.
@busdriver11, for national average cost (gas and electric), gasoline vehicles cost around $5k, Tesla $1k For 30,000 miles of driving per year.
If you charge at one of the Superstations, it is free and you can charge to 50% in 20 minutes.
The initial cost of a Tesla is high, so if there isnât a bit of excitement in being part of a paradigm shift in automobiles, it might not be worth it. Itâs a bit like worrying about the gas mileage in a Bentley (between 9-12 mpg, or so they say). :). It is cheaper to charge a Tesla than put gas in a car, in most locations, but your break even point will probably never be reached. I want one because it is mind-boggling technology.
Bob (or notBob, actually), but 1K/month electricity fees? Yikes! Even if electricity is far cheaper elsewhere, it would still be in the hundreds of dollars monthly. And then youâre mooching off people when you go to visit them. Now if you had a bunch of Superstations nearby, maybe worth it.
Anyways, he got a different car, and thatâs gonna have to last him for a long, long time!
@busdriver11, thatâs per YEAR (30k miles) not month! Itâs around $80 or $90 per month, which is around one fill up for my Range Rover. Not that the Range Rover is known for its fuel efficiency
Just a quick FYI. My H has had a plug-in electric car for the past 2-3 years. Not a Prius but I donât think it makes a difference. During no month was the electric bill $1000 for the additional cost. Hawaii may be different, butâŠI think there may be some misinformation. (No offense intended to HIMom.) To be perfectly honest, I do not recall noticing a significant bump in the monthly bill.
