« previous next »
Pages: 1

Author Topic: I need a system to lower future RMDs  (Read 953 times)

snuka

  • 5 O'Clock Shadow
  • *
  • Posts: 12
  • Age: 54
I need a system to lower future RMDs
« on: January 28, 2020, 01:39:21 PM »
I plan to retire in 5 years. My cost of living will go down considerably so I want to start converting just enough of my Roth IRA each year to still not pay income taxes on it (or a low %). My plan is to convert as much as possible before RMDs kick in on my tIRA so that they are reduced thereby reducing my future tax burden. I'm not planning a Roth conversion ladder because I'm currently in the 24% tax bracket.  Will this work or is there a better way?
Logged

IsThisAGoodUsername

  • 5 O'Clock Shadow
  • *
  • Posts: 92
  • Location: USA
Re: I need a system to lower future RMDs
« Reply #1 on: January 28, 2020, 03:34:03 PM »
Ideally, you have a brokerage account from which you can withdraw funds to support your annual expenses between your retirement date and the date you start performing Roth conversions.  If you do, then your income in those future years will be very low (or possibly even $0) such that your only income will be the Roth conversions. Your brokerage withdrawals will be taxed at capital gains rates and the IRA/401k distributions that you're taking as part of the Roth conversions will be takes at 10%, 12%, or possibly 22%, depending on how much you're converting per year.  This is usually optimal method to perform Roth conversions before RMDs go into effect. See https://www.madfientist.com/how-to-access-retirement-funds-early/.

We will need for information to give more detailed answers, such as your current age, various account balances, any expected pensions, expected date you're going to claim Social Security, current annual expenses, marital status, tax filing status, expected retirement date, and amount you're going to convert each year.
« Last Edit: January 28, 2020, 03:35:41 PM by IsThisAGoodUsername »
Logged

MDM

  • Senior Mustachian
  • ********
  • Posts: 11495
Re: I need a system to lower future RMDs
« Reply #2 on: January 28, 2020, 06:52:38 PM »
Quote from: snuka on January 28, 2020, 01:39:21 PM
I plan to retire in 5 years. My cost of living will go down considerably so I want to start converting just enough of my Roth IRA each year to still not pay income taxes on it (or a low %). My plan is to convert as much as possible before RMDs kick in on my tIRA so that they are reduced thereby reducing my future tax burden. I'm not planning a Roth conversion ladder because I'm currently in the 24% tax bracket.  Will this work or is there a better way?
What marginal tax rate do you expect when you are taking RMDs and SS?
Logged
Pages: 1
« previous next »