Avoiding Retirement Taxes (US)

[Txtriathlete]

What are the options to shelter cash for the long term?

Looking forward, I am going to have a tax train wreck when I get to age 70.5 (currently I am 52). TSP, 401K, IRAs and my wife's SEP (she's 2 years younger than me) all come due for mandatory distributions. Due to some really good fortune, its likely we will never need this money to live on - my preference would be to "let it ride" and let my wife pass it on to the kids or wherever in her will.

My current employer doesn't allow after tax contributions to the 401K, so no mega Roth opportunity. Wife has an IRA and a SEP account, so no backdoor Roth for her. I do not have an IRA but do have the 401K and TSP accounts, so I could (I think) do a backdoor Roth for myself. We have a "whole life" insurance policy we contribute to, only because I can park after tax cash there to grow tax free (its technically insurance not an investment) but it gets crappy returns and has high fees.

What else is out there?

[ZiziPB]

It's a good problem to have :-)

Since you seem to have more money than you need, I'd say stop working and start converting the lot to Roth.   A married couple can convert quite a lot tax free or at very low rates. 

Here is some reading material for you: 

http://www.gocurrycracker.com/tag/roth-conversion/

http://www.gocurrycracker.com/never-pay-taxes-again/

[MDM]

What are the options to shelter cash for the long term?

The generic strategy is to
- contribute to traditional accounts while working, then
- convert those traditional accounts to Roth after retiring and before taking pension and SS, then
- live off SS, pension, and withdrawals from taxable and Roth accounts as needed.

Need more information to comment on your specific situation.  See How To: Write a "Case Study" Topic if interested.

[Txtriathlete]

It's a good problem to have :-)

Since you seem to have more money than you need, I'd say stop working and start converting the lot to Roth.   A married couple can convert quite a lot tax free or at very low rates. 

Here is some reading material for you: 

http://www.gocurrycracker.com/tag/roth-conversion/

http://www.gocurrycracker.com/never-pay-taxes-again/

This is where I am stuck.

we can convert our 401ks and IRAs to a ROTH IRA, a small amount each year.  Any dollars converted to a ROTH are considered income,

The only account I have flex with is my (future) IRA - my wife's SEP and IRA have high balances which will create a tax burden if/when converted to Roth - now or in the future. Anything converted now will look like long term IRA money (and be taxed accordingly). Any "low earning" recently deposited after tax contributions to the IRA (backdoor Roth) will be dwarfed by historical balances. When converted, the IRS looks at the funds converted as representative of the entire 401K/IRA/SEP amount and taxes accordingly. 

Since I do not have a traditional IR I have the ability to convert money via Backdoor Roth. However teh amount to convert ($6500/year) is negligible compared to what i need.

Bottom line is I have no "low tax" years between then and now to convert taxable assets...

[Txtriathlete]

What are the options to shelter cash for the long term?

The generic strategy is to
- contribute to traditional accounts while working, then
- convert those traditional accounts to Roth after retiring and before taking pension and SS, then
- live off SS, pension, and withdrawals from taxable and Roth accounts as needed.

Need more information to comment on your specific situation.  See How To: Write a "Case Study" Topic if interested.

Yeah, I think we are beyond that. I am looking for something other than Roth conversions which will get taxed heavily.

Maybe create a non-profit and hire my family as officers? Something like that? Money donated to the non-profit would be a charitable donation (not taxable) and a non-profit shouldn't have a tax liability?  I'm spit balling tho - I don't know much about this at all...probably tax evasion not avoidance.

I guess the simple question is "what are other non-taxed strategies (not deferred - don't want to defer taxes!) or vehicles other than 401K, Roth and IRA?"

[ZiziPB]

It's a good problem to have :-)

Since you seem to have more money than you need, I'd say stop working and start converting the lot to Roth.   A married couple can convert quite a lot tax free or at very low rates. 

Here is some reading material for you: 

http://www.gocurrycracker.com/tag/roth-conversion/

http://www.gocurrycracker.com/never-pay-taxes-again/

This is where I am stuck.

we can convert our 401ks and IRAs to a ROTH IRA, a small amount each year.  Any dollars converted to a ROTH are considered income,

The only account I have flex with is my (future) IRA - my wife's SEP and IRA have high balances which will create a tax burden if/when converted to Roth - now or in the future. Anything converted now will look like long term IRA money (and be taxed accordingly). Any "low earning" recently deposited after tax contributions to the IRA (backdoor Roth) will be dwarfed by historical balances. When converted, the IRS looks at the funds converted as representative of the entire 401K/IRA/SEP amount and taxes accordingly. 

Since I do not have a traditional IR I have the ability to convert money via Backdoor Roth. However teh amount to convert ($6500/year) is negligible compared to what i need.

Bottom line is I have no "low tax" years between then and now to convert taxable assets...

You missed where I said STOP WORKING.  If you have enough money to retire now (which it sounds like you do), stop working, start enjoying life and create some "low tax" years during which you can convert.

There's not much you can do tax-wise while you're working and generating a significant income.

[secondcor521]

I guess the simple question is "what are other non-taxed strategies (not deferred - don't want to defer taxes!) or vehicles other than 401K, Roth and IRA?"

+1 to the idea of stopping working.

Option 2:  Suck it up and pay the taxes; #firstworldproblems.

Option 3:  Open a taxable account and buy something that pays little to no dividends - BRK.B maybe.  Either hold until you die, in which case your heirs get a step-up in basis to the value as of your date of death, or use the appreciated shares to donate to charity and take a deduction of the then-current value.

Option 4:  Investigate an HSA.  Depending on how the healthcare landscape turns out, it could be a sheltering opportunity.

Option 5:  If you have kids, you can shelter education money in 529's and ESA's.  Sounds like you may not have kids, though.