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Old 03-15-2017, 07:59 AM
 
Location: Close to an earthquake
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Quote:
Originally Posted by jghorton View Post
That sounds very much worth checking out (although I think I'm pushing my tax bracket thresholds now). I don't have much time before RMD's kick-in (2/2018 at 70-1/2), and may only have time to do some account and write-off restructuring. I'm wondering if by tracking "unused lower tax brackets" (even with RMD's), and even taking excess withdrawals according to tax bracket levels, if I can still save taxes downstream).

Perhaps also, potential tax cuts in 2017/8 could reduce the overall RMD Tax hit.
I've seen wasted 15% tax rate bracket only to also see someone years later finding their full-retirement age SS benefits and RMD being taxed at 25% or 28% marginal tax rates.
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Old 03-15-2017, 08:25 AM
 
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At age 56 I'm going from the 25% to the 15% bracket now, and likely for my last 8-10 working years. I'll also likely be in that same 15% bracket during retirement.

Given that all my own IRA money is in a ROTH, with no RMD….(and that's the smallest of all my accounts, nothing compared to what's in the 401K)…. I'm wondering if I need to worry about the SS tax torpedo, enough to go through converting the 401K money to a TRAD IRA, and THEN to a Roth.

Also tell me again why I can't go straight from a 401k, pay the taxes, and transfer one time to a Roth? Is that just the rule, or there's some tax reason (to the Trad. IRA first, then the Roth, 2 moves instead of one)?
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Old 03-15-2017, 09:10 AM
 
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you can't roll directly to unlike account status . you can roll to the same status and then convert . it is 2 steps .
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Old 03-15-2017, 05:25 PM
 
Location: Near San Francisco, CA
184 posts, read 114,578 times
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Quote:
Originally Posted by jghorton View Post
Any ideas on how to reduce or contain RMD taxes. One seems to be to convert one's 401K's/IRA's to Roth's before one's RMD's kick-in. Is there a way to get tax breaks on grandkids college, annuity payouts - or to better control one's annual tax bite? --- Many of us are interested in your successful and creative strategies.
Use "above the line" deductions.
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Old 03-18-2017, 09:42 AM
 
Location: Phoenix, AZ > Raleigh, NC
15,069 posts, read 19,002,971 times
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Quote:
Originally Posted by borninsac View Post
I've seen wasted 15% tax rate bracket only to also see someone years later finding their full-retirement age SS benefits and RMD being taxed at 25% or 28% marginal tax rates.
Yes, but what did they lose by taking early distribution and losing the tax deferred status on the income and gain on investments.

And for those with kid's that are going to inherit IRA's, I'll remind you of the magic that can occur with tax savings from properly formed Qtip IRA's and designated beneficiary IRA's. The latter is useful even without k8ds.
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Old 03-18-2017, 11:01 AM
 
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for heirs roths can be the best way to go .
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Old 03-18-2017, 01:11 PM
 
Location: Saint Johns, FL
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Quote:
Originally Posted by borninsac View Post
I'll offer some non-conventional thinking. Look at your current marginal tax rate and what it'll be when you're required to take RMD. The only thing you can do not knowing what lies ahead is to assume future rates will be as they currently are. The only exception might be to anticipate what tax rates will be once probable 2017 tax legislation starts being known.

Make sure you don't leave any lower tax rate bracket on the table now, particularly if your future marginal tax rates due to SS benefits and RMD will push you to a higher tax bracket. I see this happening way to often.

To guard against wasting unusued lower tax rate brackets now, consider taking distributions now rather than at RMD but only up to the maximum amount of lower tax rate bracket available. If what I'm saying isn't clear, talk to your trusted tax guy and have him/her do a projection for you.

Paying now goes against conventional thinking but your goal should be taking a long-term approach of paying the least amount of taxes over your lifetime. Sometimes you do this by paying now rather than later.

Hope this helps.
I agree except better to convert those amounts rather than simply withdraw.
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Old 03-19-2017, 07:36 AM
 
Location: Central Massachusetts
4,800 posts, read 4,845,678 times
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Quote:
Originally Posted by Newporttom View Post
I agree except better to convert those amounts rather than simply withdraw.
It all depends on a persons perspective. Some people like me will spend it down now and wait for collecting on SS later. That will allow me to reduce RMD in later years. We already have income for life so my traditional 401k is our spending money. We do not plan on leaving our daughter a huge legacy. It is our money we saved not hers.
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Old 03-19-2017, 07:40 AM
 
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the greatest gift from the tax gods is the fact we can delay social security , let it grow , while getting retirement money at zero tax that was likely written off at much much higher tax rates if a couple

you can take up to 22k or so a year out at no tax and as much as 40k at about 4% tax just using the standard deductions and exemptions ..
that is up to 320k taken at less than 5% tax over 8 years while getting a bigger ss check to , by as much as 69% plus colas than at 62 .

those are levels you will likely never see again once ss kicks in with rmd's . .

Last edited by mathjak107; 03-19-2017 at 07:56 AM..
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Old 03-19-2017, 09:10 AM
 
2,674 posts, read 1,539,886 times
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Quote:
Originally Posted by mathjak107 View Post
the greatest gift from the tax gods is the fact we can delay social security , let it grow , while getting retirement money at zero tax that was likely written off at much much higher tax rates if a couple

you can take up to 22k or so a year out at no tax and as much as 40k at about 4% tax just using the standard deductions and exemptions ..
that is up to 320k taken at less than 5% tax over 8 years while getting a bigger ss check to , by as much as 69% plus colas than at 62 .

those are levels you will likely never see again once ss kicks in with rmd's . .
So you recommend living on 40k per year? Truly, these gyrations to avoid a few tax $ are silly for most people. You also must consider that, as your SS increases with time, so does your likelihood of it being taxed, and moving you to a higher tax bracket.

You just can't generalize about this stuff. There are too many moving parts.
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