Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Im 63, retired and not yet on SS and have not yet paid tax on a majority of my savings (ie, in an IRA).
It seems (ie, Im not sure) that I need to be finding some balance between:
* this one I could be off but I understand I will have medicare insurance costs proportional to my income for a previous set of years (last two before taking medicare?)
* I have to worry about required minimum distributions when I turn 70.5 and tax brackets
I "think" I want to start converting some money from my IRA to a Roth IRA but the Roth IRA sounds too good to be true so maybe I dont understand it.
Since Im retired, I cant put money in from income. However, it seems I can convert as much as I like from my IRA. The quote below is from a Fidelity info page https://www.fidelity.com/viewpoints/...&adobe_mc_ref=
Quote:
The benefits of a Roth IRA are clear: the potential for tax-free growth and tax-free withdrawals.1 But not everyone may be able to contribute to a Roth IRA because of IRS-imposed income restrictions on contributions. But anyone can convert existing money in a traditional IRA or other tax-deferred retirement savings account to a Roth IRA. And many do.
A Roth IRA conversion does have a cost. Income taxes need to be paid on the converted amount. Taxes are "front-loaded," which allows the money in the Roth IRA to grow tax-free. It also provides tax-free withdrawals for the Roth IRA owners or their heirs.
What I get from this is that I can convert as much of my IRA as I like to a Roth IRA. What I convert I will pay tax on now so have to worry about the tax bracket thing plus the medicare insurance thing.
But once the money is in the Roth IRA, I can take it and whatever growth out without paying any more tax on it. And that money taken out of the Roth IRA will not affect what tax bracket I am in.
Im also under the impression that the consequence of higher medicare insurance premium when I turn 65 will be less important than the benefit I get from converting money to the Roth IRA and potential tax bracket problem with RMD.
You understand.
Go to medicare and you can get the income limits where the price changes.
You said you are retired now so be sure to sign up for Medicare A and B at 65 as a minimum.
If you do not do your own taxes go to CreditKarma https://www.creditkarma.com/ and do your taxes at different income levels. Plan your conversion over a few years. Not sure but you might have to stop the conversion at 70. This is free. You can also use any of the free software provided by other vendors. Check IRS for sources of free software.
In general I favor delaying collecting SS as long as possible.
Location: We_tside PNW (Columbia Gorge) / CO / SA TX / Thailand
34,747 posts, read 58,102,528 times
Reputation: 46237
If you are not getting ACA subsidies,...
You can 'convert to Roth' and maintain your desirable tax threshholds and stay below medicare limits (important prior to signing up)
If you ARE getting ACA subsidies... you can do the conversions as soon as you turn 65 (no more ACA qualification requirements)
What age are you planning to draw SS? Roth rolls should not complicate that, but if in a state that taxes SS, be sure to watch your marginal tax brackets.
Have you calculated your RMD's, if below $2m in quantifiable accts, RMD's won't kill you (at first). As you age... RMD's might begin to eat too much, so convert ASAP if necessary.
Remember you can use RMD for QCD (Charitable donations), As you age, that might be of benefit to mitigate tax obligations.
Roth is a nice tool, but only one of many tools.
Appreciated equities? I put those in a DAF (Donor advised fund) Deduction now, for contribution later.
How are you planning to pay the taxes on your ROTH conversions?
You could send in estimated tax (which I did for years being self employed and got to where I was tired of that hassle) but at the moment I would do this all with Fidelity and when I pull money out of the IRA, I can specify state and fed tax withheld. I would review the tax brackets and see where this additional "income" fell and just have that percent withheld (I think it might be 22% but am not sure). For the state percent withholding, I will have to talk to my tax guy.
Last edited by waltcolorado; 04-23-2019 at 05:33 PM..
You can 'convert to Roth' and maintain your desirable tax threshholds and stay below medicare limits (important prior to signing up)
If you ARE getting ACA subsidies... you can do the conversions as soon as you turn 65 (no more ACA qualification requirements)
What age are you planning to draw SS? Roth rolls should not complicate that, but if in a state that taxes SS, be sure to watch your marginal tax brackets.
Have you calculated your RMD's, if below $2m in quantifiable accts, RMD's won't kill you (at first). As you age... RMD's might begin to eat too much, so convert ASAP if necessary.
Remember you can use RMD for QCD (Charitable donations), As you age, that might be of benefit to mitigate tax obligations.
Roth is a nice tool, but only one of many tools.
Appreciated equities? I put those in a DAF (Donor advised fund) Deduction now, for contribution later.
Roth rollovers could affect the rates at which IRS taxes your SS earnings, no?
They are earned income and could bump you into paying higher rates on SS is how I understand it.
Roth rollovers could affect the rates at which IRS taxes your SS earnings, no?
They are earned income and could bump you into paying higher rates on SS is how I understand it.
you are confused ....
ss being taxed is based on taxable magi income ..roths are not taxable and rollovers are not taxed until money is taken out ... earned income is not investment income it is income you earned working not retirement money you save .
401k's , ira's and taxable brokerage accounts are never considered earned income .
ss being taxed is based on taxable magi income ..roths are not taxable and rollovers are not taxed until money is taken out ... earned income is not investment income it is income you earned working not retirement money you save .
401k's , ira's and taxable brokerage accounts are never considered earned income .
I thought he was referring to a ROTH Rollover...which involves a conversion, which means tax is due that year. Is that not so?
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
