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Old 07-28-2014, 01:08 PM
 
Location: Delray Beach
1,136 posts, read 1,439,949 times
Reputation: 2510

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The type of withdrawal method that Mathjak advocates is the one I employ now and consider it an optimal one for me and people in a similar situation; i.e having substantial but not overwhelmingly HUGE tax-deferred account balances. Say in the 1-3 million range. Above that and you WILL be forced into higher tax brackets when you start the RMD's later in life.

Even then, withdrawing $$ earlier, in the absence of other very large income sources, will lower the taxes paid on these withdrawals which help fund your retirement needs, and will be in the no-to-lower range of income brackets. If you can keep your income to under $85k (while increasing your future SS benefit) you also minimize your Medicare costs, which increase at regular intervals above this.

It may not be a windfall, but it IS a tax-minimizing strategy for some of us.
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Old 07-29-2014, 07:03 AM
 
4,481 posts, read 4,743,979 times
Reputation: 9940
Quote:
Originally Posted by rdflk View Post
Maybe I don't understand all that I should about this.

My mom's financial planner (and the investment house, I guess) send us paperwork saying what the RMD is. She takes it and just puts in her MMF. Whether you need the money -- or don't need the money -- I don't get why it has to be that complicated. If you don't want to be short on the amount round up to the nearest hundred or thousand, and put it in another account. I suppose if you want to put it in another 'retirement' account that's more 'detailed' of an issue. I like to keep my finances simple, I guess.



Amen!!! After reading half the thread I started to hear voices. Like in my head and they weren't mine! Although, I do find it interesting, the info... not the voices.
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Old 07-29-2014, 11:29 AM
 
8,201 posts, read 11,915,499 times
Reputation: 17994
Quote:
Originally Posted by rdflk View Post
Maybe I don't understand all that I should about this.

My mom's financial planner (and the investment house, I guess) send us paperwork saying what the RMD is. She takes it and just puts in her MMF. Whether you need the money -- or don't need the money -- I don't get why it has to be that complicated. If you don't want to be short on the amount round up to the nearest hundred or thousand, and put it in another account. I suppose if you want to put it in another 'retirement' account that's more 'detailed' of an issue. I like to keep my finances simple, I guess.
Here, let me complicate them for you a bit.

After SEC rules, my advice: Stay out of money-market funds!
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Old 07-29-2014, 12:53 PM
 
Location: High Cotton
6,131 posts, read 6,443,832 times
Reputation: 3657
I'm afraid many people can't see the forest for the trees, or simply don't take nearly everything they really should into consideration when analyzing and making financial decisions. Or, have people advising you that really aren't very smart. Maybe you (and they) flunked math in the 3rd gade...

One thing I've always chuckled about is; why would anyone go into debt [just] to get a tax deduction. Many people think when they get a debt paid-off that it's to their financial advantage to go into debt again [just] so they can get a tax deduction. I once knew a man that had six children - his reason for having so many children was because of the tax deductions he received! You could also ask; why would anyone withdraw money now (they don't need and must pay tax on the withdrawal) from a tax-deferred account for the purpose of reducing the amount of money in that account so they won't have to pay as much tax many years from now, especially when they can't be sure of what the tax structure or consequences will be years from now.

Be it Debt & Taxes, or Savings & Taxes, there is an awful lot of misinformation given to people from the [so-called] experts. Maybe a bit off-topic, but I happened upon this interesting article that made me wonder how many Flunked Math in the 3rd Grade.
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Old 07-29-2014, 03:40 PM
 
71,613 posts, read 71,751,865 times
Reputation: 49222
Quote:
Originally Posted by highcotton View Post
I'm afraid many people can't see the forest for the trees, or simply don't take nearly everything they really should into consideration when analyzing and making financial decisions. Or, have people advising you that really aren't very smart. Maybe you (and they) flunked math in the 3rd gade...

One thing I've always chuckled about is; why would anyone go into debt [just] to get a tax deduction. Many people think when they get a debt paid-off that it's to their financial advantage to go into debt again [just] so they can get a tax deduction. I once knew a man that had six children - his reason for having so many children was because of the tax deductions he received! You could also ask; why would anyone withdraw money now (they don't need and must pay tax on the withdrawal) from a tax-deferred account for the purpose of reducing the amount of money in that account so they won't have to pay as much tax many years from now, especially when they can't be sure of what the tax structure or consequences will be years from now.

Be it Debt & Taxes, or Savings & Taxes, there is an awful lot of misinformation given to people from the [so-called] experts. Maybe a bit off-topic, but I happened upon this interesting article that made me wonder how many Flunked Math in the 3rd Grade.
there are soilid reasons why paying some tax now is the smart thing to do. you might not warrant it in your case.

any ira money i can pay zero tax on or 5% if i take up to 42k now only to have it taxed starting in 4-8 years at at least 25% is a no brainer. especially if i can draw income from my taxible account at the same time at zero long term capital gains rates or possibly 5%.

lets see zero to 5% now or 25% or higher starting in 4- 8 years depending when i file for ss.? hmmmmmmm which deal sounds better ,especially since that deferred money may be down in value in 8 years or have slow growth ..

Last edited by mathjak107; 07-29-2014 at 03:48 PM..
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Old 07-29-2014, 08:41 PM
 
Location: South Jersey
69 posts, read 52,231 times
Reputation: 347
For people with large tax-deferred IRA's, it makes sense to convert some of that to Roth IRA now, before being forced to take RMD's, as long as you can keep it all in the 15% marginal tax bracket.

At 70 1/2, when the RMDs begin, and also if you delayed starting SS until 70, it could push you into a much higher tax bracket than 15%.
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