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I don't understand why you would zero it out only to put the money back in. Yes, I understand that you could do that, I just don't understand why you would do that. There is a limit to how much you contribute to a Roth each year so if you took out a whopping 200K, for instance, and had that money sitting in your checking account, at most you could contribute 8K back into a Roth, right? So much for living off the interest on your investments.
When I was in my late 20's I invested and had my first "investment portfolio"
1 share of Woolworth
1 share of Ralston Purina
1 share of Wrigley
It was a DRIP portfolio and I was very proud of it
You don't have to be rich to have a portfolio.
I still have that Woolworth certificate...1 share. (company went bankrupt)
I was in my late 20's during the late 90's when the first real estate market uptick began to happen. I looked into investing in REITs at the time but I was stashing money away in my 401k and saving for a down payment on a house. There was really no money left to invest in REITs even though the ones I was looking at had a low minimum investment.
Could I have made a killing had I invested in REITs instead of putting money away in my 401K? Maybe if I had sold at the right time. But I suppose it's equally true that I could have lost it all when the market tanked. I don't remember enough about the funds I was looking at to have a handle on what likely would have happened. I do know that my 401K weathered the storm just fine.
Yes, I gotcha. There are all sorts of rules with these things. I don't pretend to be on top of them all. The only reason I can think of to withdraw all of your Roth money at once and then reinvest it a little at a time is for the write off in order to keep your taxable income as low as possible for other reasons.
Yes, I gotcha. There are all sorts of rules with these things. I don't pretend to be on top of them all. The only reason I can think of to withdraw all of your Roth money at once and then reinvest it a little at a time is for the write off in order to keep your taxable income as low as possible for other reasons.
Or you had some scant amount in a Roth and mainly focused on traditional. Later you determine to embrace the Roth.
Location: Was Midvalley Oregon; Now Eastside Seattle area
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Quote:
Originally Posted by NORTY FLATZ
401K's get taxed.
And if you withdraw enough to put yourself into a higher tax bracket, then you get to pay more taxes.
So, that $1 million just became $650k....BAM!
that assumes that one is continually and massively imbedded in the 35% bracket. Typical poorer person would have a lower effective tax rate.
and if one should live to 99, the RMD factor is 6.8 (2022 table), on the remaining balance.
"Qualified" are not investment accounts but retirement accounts designed to be amortized over your lifetime.
and if one had one mill dollars (2023 $), age 75, the RMD factor of 24.6 will result in a withdrawal rate exceeding 4%.
ymmv
with better tax planning and delaying socal security , a couple can draw out 27,700 a year tax free from ira money with the standard deduction alone as a minimum for up to 8 years and more if over 65 .
one could set a side a few years cash , some roth accounts ,as well as over fund a life insurance policy and borrow it out and have very low income while delaying ss .
had i planned better we could have had a 100k income while delaying ss and taken hundreds of thousands of dollars out tax free over 8 years
but all those years before retirement i thought i knew all i needed to know because i was doing well as an investor AND DIDNT NEED PROFESSIONAL HELP
wrong
up to now our taxable income was in the 12% bracket but with all the interest now generated and me working a bit that will likely change .
however only the portion above the 12% bracket will be taxed higher .
we will definitely take a jump in two years when my rmds start
Last edited by mathjak107; 12-06-2023 at 01:34 AM..
that assumes that one is continually and massively imbedded in the 35% bracket. Typical poorer person would have a lower effective tax rate.
and if one should live to 99, the RMD factor is 6.8 (2022 table), on the remaining balance.
"Qualified" are not investment accounts but retirement accounts designed to be amortized over your lifetime.
and if one had one mill dollars (2023 $), age 75, the RMD factor of 24.6 will result in a withdrawal rate exceeding 4%.
ymmv
while rmds can exceed 4% that doesn’t mean you can spend all of it either .
our rmds as of now go right back in the same fund they came out of in our taxable account , preserving the income generation ability of the portfolio
And if you withdraw enough to put yourself into a higher tax bracket, then you get to pay more taxes.
So, that $1 million just became $650k....BAM!
Fortunately, most of us don't take out $1 million from a 401K/IRA in one distribution---so we are likely going to be in a lower Federal tax bracket than what you noted above. Over time, at current rates, that $1 million is probably becomes closer to $800K to $880K depending upon how much and when you start pulling it out. On the other hand, if you live in a state with high income taxes, it would certainly get you closer to your figure. Either way, your point is correct---you don't have the full $1 million to spend.
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