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.
I don't know about before/after RMDs start--
Because the calculation is based on your MAGI total---
You could have other source of income--maybe already started SS since RMDs HAVE to start at 70.5 but you can take them w/o tax penalties sooner than that...
Maybe you have part time income, rental income, or a pension, or dividends/interest as well to count toward MAGI---
The Medicare premium IS recalculated each year after you enroll for Medicare--but may not change from one yr to next
You receive a letter from SS/Medicare around November/Dec notifying you of what the premium for the next year will be...based on your tax return 2 yrs prior...
AS LONG AS your MAGI puts you under the supplemental tax rate, your premium will always be the minimum flat rate for B and D...even if it?MAGI varies from one year to the next.
IF YOU HAVE HIGHER MAGI two yrs prior and your premium puts you into one of the penalty ranges, you MIGHT be able to ask for reevaluation based on 1 of 6 or 7 life-change events...
There is form you fill out, send it/take it to SS office and ask them to determine if you can set aside the MAGI from two yrs before and use your current/lower income...
IT is complicated--and speculating about what precisely your premiums might be in 15 yrs--
When you are eligible for Medicare -- is just that speculation...
Some people would say it is better to have money in a Roth as long as it doesn't cost you money to do it
Some people would say it is better to have money in a Roth and even pay a somewhat higher tax bill to have the options that a Roth would offer in retirement
Everyone's situation is different...
We moved two IRAs from past employers into Roths several years ago--We were 60 or so... our income was too high to do that previously when Roths were created even though we could see the benefit to having one. And the law did not allow a back-door Roth either if your income was over the limit...
We DID pay increased income tax at that time although the market drop had reduced the value in the accounts that we moved to Roths--so that was helpful...and we have a more complicated tax situation that most people do so our situation fluctuated from year to year.
And we had the cash to pay the extra tax w/o taking it out of savings...so we just did it.
Some people would say that was not a smart move--
And some people are afraid that the tax-free withdrawal from Roths might be changed by Congress in the future which would limit their beneficial aspect...
You can only do what you can, based on what you know at the time--
Trying to predict what Congress will do in 5 yrs or 15 yrs is just too ephemeral to act on...
Location: Chapel Hill, NC, formerly NoVA and Phila
9,777 posts, read 15,788,843 times
Reputation: 10886
Quote:
Originally Posted by loves2read
I don't know about before/after RMDs start--
Because the calculation is based on your MAGI total---
You could have other source of income--maybe already started SS since RMDs HAVE to start at 70.5 but you can take them w/o tax penalties sooner than that...
Maybe you have part time income, rental income, or a pension, or dividends/interest as well to count toward MAGI---
The Medicare premium IS recalculated each year after you enroll for Medicare--but may not change from one yr to next
You receive a letter from SS/Medicare around November/Dec notifying you of what the premium for the next year will be...based on your tax return 2 yrs prior...
AS LONG AS your MAGI puts you under the supplemental tax rate, your premium will always be the minimum flat rate for B and D...even if it?MAGI varies from one year to the next.
IF YOU HAVE HIGHER MAGI two yrs prior and your premium puts you into one of the penalty ranges, you MIGHT be able to ask for reevaluation based on 1 of 6 or 7 life-change events...
There is form you fill out, send it/take it to SS office and ask them to determine if you can set aside the MAGI from two yrs before and use your current/lower income...
IT is complicated--and speculating about what precisely your premiums might be in 15 yrs--
When you are eligible for Medicare -- is just that speculation...
Some people would say it is better to have money in a Roth as long as it doesn't cost you money to do it
Some people would say it is better to have money in a Roth and even pay a somewhat higher tax bill to have the options that a Roth would offer in retirement
Everyone's situation is different...
We moved two IRAs from past employers into Roths several years ago--We were 60 or so... our income was too high to do that previously when Roths were created even though we could see the benefit to having one. And the law did not allow a back-door Roth either if your income was over the limit...
We DID pay increased income tax at that time although the market drop had reduced the value in the accounts that we moved to Roths--so that was helpful...and we have a more complicated tax situation that most people do so our situation fluctuated from year to year.
And we had the cash to pay the extra tax w/o taking it out of savings...so we just did it.
Some people would say that was not a smart move--
And some people are afraid that the tax-free withdrawal from Roths might be changed by Congress in the future which would limit their beneficial aspect...
You can only do what you can, based on what you know at the time--
Trying to predict what Congress will do in 5 yrs or 15 yrs is just too ephemeral to act on...
Thanks for all of that information. It is certainly something I didn't give any thought to. After reading this thread, I realize it isn't a clear case for us at this point to convert some more money to a Roth IRA. If we were in the 15% range, I would do it, but the benefits are not a sure thing at the 25% tax rate, in my opinion. I will keep it in the back of mind, though over the next few years in case our income changes. Thank you so much for your input!
Thanks for all of that information. It is certainly something I didn't give any thought to. After reading this thread, I realize it isn't a clear case for us at this point to convert some more money to a Roth IRA. If we were in the 15% range, I would do it, but the benefits are not a sure thing at the 25% tax rate, in my opinion. I will keep it in the back of mind, though over the next few years in case our income changes. Thank you so much for your input!
I wouldn't be overly focused on the 25% vs 15% rate. We are in the 33% bracket (before ACA 3.8% tax) and still do rollover Roth. The reason for us is tax diversification. We don't want too many eggs in a 401(k) basket since the possibility always exists for different tax treatment on those buckets between now and the time we can pull from them. Even with less tax benefit, backdoor Roth is good for us in allowing us to start growing a bucket of funds that will be taxed differently than our tax-deferred and taxable accounts.
I also have a Roth 401(k) option at work and have switched over to that, again at the cost of some immediate tax hit, since we don't even have $30k in Roth space but many multiples of that in 401(k) and taxable. Balance is good.
In the long run I think you will be better off with the ROTH. But a mixture of ROTH and non ROTH is good as you do not know what the future (tax laws) will hold. As you get older (less time for investments to grow) and your income increase and deductions decrease I would move toward the traditional IRA and 401k but for now I would try and max out the ROTH.
I would convert a little of your 401k and IRA each year to a ROTH. Pay attention to your tax brackets now and in the future to determine how much to convert each year.
I would ask my HR department to add a ROTH 401k to your current plan. It should not be a costly item for the company to do. From my experience you just check a box on the prototype forms.
Also do a little studying on required minimum distributions. Probably too many variables at this time to know what the best answer but you can start to educated yourself.
Remember you could live another 30 or 40 years in retirement so the ROTH can be a very good bucket for your equity investments. If you might leave an estate the ROTH is better than a regular 401k or IRA.
Location: Chapel Hill, NC, formerly NoVA and Phila
9,777 posts, read 15,788,843 times
Reputation: 10886
Quote:
Originally Posted by Bull City Rising
I wouldn't be overly focused on the 25% vs 15% rate. We are in the 33% bracket (before ACA 3.8% tax) and still do rollover Roth. The reason for us is tax diversification. We don't want too many eggs in a 401(k) basket since the possibility always exists for different tax treatment on those buckets between now and the time we can pull from them. Even with less tax benefit, backdoor Roth is good for us in allowing us to start growing a bucket of funds that will be taxed differently than our tax-deferred and taxable accounts.
I also have a Roth 401(k) option at work and have switched over to that, again at the cost of some immediate tax hit, since we don't even have $30k in Roth space but many multiples of that in 401(k) and taxable. Balance is good.
Thanks for your input Bull City Rising! I definitely like the idea of not putting too many eggs in one basket, which was the reason we did the Roth initially. But now my husband's retirement accounts are getting more lopsided toward 401k as time goes on. It appears he only has $75K that we could possibly convert, so maybe I will see about doing a bit each year, then I don't have to worry too much about a big tax hit in one year. The job my husband has now will probably be his last, so I don't think he'll have an opportunity to convert any more before retirement.
Location: Chapel Hill, NC, formerly NoVA and Phila
9,777 posts, read 15,788,843 times
Reputation: 10886
Quote:
Originally Posted by rjm1cc
In the long run I think you will be better off with the ROTH. But a mixture of ROTH and non ROTH is good as you do not know what the future (tax laws) will hold. As you get older (less time for investments to grow) and your income increase and deductions decrease I would move toward the traditional IRA and 401k but for now I would try and max out the ROTH.
I would convert a little of your 401k and IRA each year to a ROTH. Pay attention to your tax brackets now and in the future to determine how much to convert each year.
I would ask my HR department to add a ROTH 401k to your current plan. It should not be a costly item for the company to do. From my experience you just check a box on the prototype forms.
Also do a little studying on required minimum distributions. Probably too many variables at this time to know what the best answer but you can start to educated yourself.
Remember you could live another 30 or 40 years in retirement so the ROTH can be a very good bucket for your equity investments. If you might leave an estate the ROTH is better than a regular 401k or IRA.
Yes, I like the idea of converting a little bit each year. I will look more into the RMD and try to figure out what sort of withdrawals we will be looking at down the road if we continue with the same retirement savings over the next few years. Yes, lots of different variables, but I'll try to run a few scenarios. Thanks for your comments!
We had meeting with our advisor this week and one thing we discussed was the Roth conversions out of my husband's IRA, now that his DB plan was rolled over. Advisor said he would like to use any vacant space up to the 25% tax level--which is 150K top.
We just don't have many years to do this---other people might have longer time line and do it more efficiently...
It won't make that much difference maybe to the yearly RMDs he is required to start taking at 70.5 but it would help with any emergency money we might need or for something like helping with college tuition for our grandson 15 yrs down the road.
And Roths are an attractive inheritance asset.
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.
