Maybe some 401k is setup that you have to pay 20%. Maybe it’s best to convert to IRA before doing the Roth conversion.
This is an interesting conversation.
The net amount we wanted into Roth IRA was $25,000. That is what is going in.
We don’t want to pay the taxes out of checking account, and our other liquid account is reserved for a specific larger amount of a necessity or what we consider a necessity.
The amount for Roth IRA was based on what our RMDs are projected to be and ‘leveling off’ on low tax years. We will look at it every 6 months when we sit down with financial advisor, but we can also look at these details from home.
I do pay into state taxes as I think we will owe - as we want to be close to full payment at tax time, and we may be due some money back.
We just made retirement transition and with a few years may see some more stabilization.
I am not grossly upset about the market situation – I certainly don’t like it, but IMHO it will not grossly affect us.
If we have some situations that require us to use a CPA, we have used one in the past and like him. Still making baby steps on estate planning, while dealing with some other issues which may determine how things get set up and also any changes with beneficiary designations. Weighing out tax and non tax with estate.
I have to see oncologist again this next week (after 12 years cancer free) - which may not mean something serious is going on, but it also may mean we have to think things through with situation at hand. Following medical protocol that PCP indicated is needed.
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Understand, but that gets back to my original point: I question whether there is much/any long-term value to converting this way, as nearly every article I have seen indicates that conversions make financial sense only when you can pay the tax out of an existing taxable account (cash, checking…).
btw: for those interested, the Bogleheads blog contains numerous threads on Roth conversion strategies.
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“That’s what our CPA says. IF you have more money and have to pay taxes, you still have more money. Do your best with tax strategies and maximize your income, not an either/or.”
In general I agree with that. But for couples who are (or will soon be) on Medicare, be aware of IRMAA impacts too. If selling large investments or doing big Roth conversions, do some pre-planning so as to not be surprised by higher Medicare costs
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I am thinking of transferring funds from my regular 401k with my former employer to regular IRA. The main reason is because my former employer charged large fees. The only negative impact of this move that I found online was that IRAs are not protected in case of litigation. What are your thoughts on the subject?
I’ve not heard that, but … we have an umbrella policy large enough to protect all of our assets.
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Just did a quick search:.
This is regulated at the state level. In California, IRAs are not protected the same as 401ks, but if you have documentation that shows the money came from an employer plan, it is.
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it will be a Rollover IRA so it can have some better protections than a regular IRA. But to prevent the issue from becoming an issue, invest in an Umbrella policy.
And yes, I’d definitely get out of a plan that had high fees.
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It’s true, I’ve heard about , I do have a large umbrella insurance.
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Does Medicare automatically adjust premiums annually based on income changes? If I start at my 65th birthday, the premium based on 2020 income places me at the maximum IRMMA payment. If I wait until January (still within the window) 2021 income puts me at the standard premium. If paperwork is required to make that change happen, I’d rather wait until January to file.
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yes, Medicare (SS really) will adjust your Medicare premiums based on calendar year. For example if you enroll in Medicare and are subject to IRMAA in December, you will owe IRMAA for that month, based on your 2020 tax return. Starting January, IRMAA is based on the 2021 return. It may take awhile, but eventually you’ll get a new letter. (I was December enrollee similar to your situation. My new letter said I was subject to IRMAA but the IRMAA rate was now $0.00, and I got a refund for the early months of the new calendar year.)
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Fantastic, thank you for this info!
Yes there is a significant difference with the growth of the Roth IRA in the investments over these years and not having the tax on the growth of the 401k with transfer of funds in ‘earlier’ years; (and these Roth IRA funds are looked to not being used by us and therefore are in less conservative investments with good growth projections). It means a difference on the estate by many hundreds of thousands – estimate is when we are expected to die by age 92 and the projections of the difference with after tax. If DH lives like many of his predecessors/ancestors, he will live beyond 92 and the growth will be even more.
Originally I was not going to get Medicare Part B for my husband. We went on vacation in Europe for 4 months. Luckily when we came back, we changed our mind, we were still in the window. I believe it’s 3 months after you turn 65. But please Google for the exact information, I’m just going by memory.
This is a very good point! And this was brought up and discussed in the group meetings our financial group put on “How Tax Planning Changes Through Four Stages of Retirement”. Specifically talked about Income Related Monthly Adjustment Amounts IRMAA on what will be due for Medicare Part B – and wanting to avoid a surcharge. Look back 2 years.
If at 72 your RMDs (required minimum distributions) won’t have an effect or as large an effect on Medicare premiums.
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Yes, the window is 7 months long…3 months before your birthday, the birthday month itself, and then 3 months after. So I’m good to go either the end of this year or the start of '23.
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Learning so much from this thread.
Can I ask - for those who have umbrella policies - this sounds like such a good, safe idea…is there an average amount you pay per month (or year?) extra for this umbrella component of your insurance? Thanks for any thoughts!
It used to be pretty inexpensive, I don’t know what it is this year, but it depends on how much it’s covered.
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