Author Topic: How to withdraw funds from your IRA and 401k without penalty before age 59.5  (Read 76120 times)

LiseE

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Re: How to withdraw funds from your IRA and 401k without penalty before age 59.5
« Reply #150 on: November 07, 2017, 10:30:21 AM »
Does this look right?  I've been reading and learning about the Conversion Ladder strategy and it seems the timing may be right in the near future.  Here are the details:

Hubby not currently working - 2018 Income = zero
March 2018 I will be taking a package from my company and getting 40 weeks of pay -  Income for 2018 = 130K
Inheritance of 200K received in 2018
1.1M in 401K (need to get this money out!)

So with the inheritance and the severance package we will have enough to live on for over 5 years and hope to get the conversion pipeline well established.  Am I on the right track here?

With Hubby and I both not generating income in 2019, THIS is the year to start our conversions as our tax bracket will be lower.  I don't know the numbers off hand but with charitable giving and standard deduction for married filing jointly lets say our total deductions for 2018 about 20K. ( we might be investing in real estate in this time frame which will offer more tax incentives so our taxable income could be even lower)

So if we convert 50K from 401K --> TraditionalIRA --> RothIRA we will have to pay the taxes on the 50K but we'll hopefully be in the 15 or 25% tax bracket.  So we need to really look at our deductions to decide how much to convert to see if getting our income down to < 13K to get the 15% bracket.

Am I understanding the timing and the tax implications correctly?


Cheddar Stacker

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Re: How to withdraw funds from your IRA and 401k without penalty before age 59.5
« Reply #151 on: November 07, 2017, 01:09:30 PM »
Does this look right?  I've been reading and learning about the Conversion Ladder strategy and it seems the timing may be right in the near future.  Here are the details:

Hubby not currently working - 2018 Income = zero
March 2018 I will be taking a package from my company and getting 40 weeks of pay -  Income for 2018 = 130K
Inheritance of 200K received in 2018
1.1M in 401K (need to get this money out!)

So with the inheritance and the severance package we will have enough to live on for over 5 years and hope to get the conversion pipeline well established.  Am I on the right track here?

With Hubby and I both not generating income in 2019, THIS is the year to start our conversions as our tax bracket will be lower. 

Everything until here sounds great, then you sort of lost track.

If you convert $50k it will be income on your return. Assuming you have no other income and you have $20k in deductions, you would have $30k taxable income. In 2018 (not considering tax law changes) the 10% bracket goes up to $19k, and the 15% bracket goes up to $77k. So you really could convert up to $97k and still be in the 15% bracket.
Indecision may or may not be my problem.