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Post by liftlock on Feb 17, 2024 4:10:50 GMT
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Post by steelpony10 on Feb 17, 2024 11:34:38 GMT
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Post by yogibearbull on Feb 17, 2024 13:46:47 GMT
steelpony10, clicking M* link 2nd time may work, or copy-and-paste link in another tab.
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Post by FD1000 on Feb 17, 2024 14:18:11 GMT
Sometimes you have to login.
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Post by yogibearbull on Feb 17, 2024 14:39:16 GMT
M* articles shouldn't require login. But access to M* Discussions does.
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Post by liftlock on Feb 17, 2024 16:43:00 GMT
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Post by yogibearbull on Feb 17, 2024 17:02:57 GMT
liftlock, problem is ProBoards' viglink redirect. That applies to your posted link too. Lately, a 2nd click on M* links also bypasses this redirect. Copy-and-paste in a new tab certainly does that.
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Post by nibble on Feb 17, 2024 17:12:06 GMT
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Post by FD1000 on Feb 17, 2024 20:37:48 GMT
The whole article is summarize at "The Roth conversion, I believe, is really just something I call “tax insurance.” You’re insuring against the uncertainty of what future higher tax rates could do in retirement to you. So, that’s the long and short of it. It’s a bet on future tax rates."
If you are among most retirees and a portfolio of $200-400K, no need to do conversion. The problem starts to get bigger as you have more money. In most cases, at above one million, conversion is a good idea. If you get to $2-3 million, it's difficult to avoid higher taxes, unless you retired very early, had a modest spending habits, and kept Roth conversion. I'm sure most prefer to be in that situation. Of course, you can lose money consistently too. That's the easiest way
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Post by mozart522 on Feb 17, 2024 23:04:40 GMT
I finished converting my IRA in January. Next year I will start on my wife's. Her RMDs don't start until 2025 and that is the year we could go back up to 15% if nothing is changed. Her RMD can't be used to convert but it can be used to pay the taxes on the conversion. I'm likely doing the conversion to avoid giving my heirs a large tax bill, but it also will allow us to blend Roth with TIRA when we make a large purchase to keep in the same bracket. Unfortunately, we will always pay tax on SS as we have pension income that will keep us above the threshold. I like to convert early in the year. It seems to me that converting at the end of the year doesn't matter unless taxes go up in that year.
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Post by steelpony10 on Feb 17, 2024 23:35:16 GMT
liftlock , Thanks that link worked. I’ve read 80% of retirees take out more then their current RMD (TIRA) including me. I saw in one committee meeting paper they were considering removing the RMD completely to encourage the other 20% to join the crowd. That would leave simply a non taxable and taxable IRA. The reason would be the government hopes to get more taxes quicker to spend. I never converted because that didn’t fit my retirement goals.
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Post by retiredat48 on Feb 19, 2024 0:25:30 GMT
liftlock,...thanks for Slott presentation. I did his suggestions and converted (some of) Trad IRAs to ROTHs during my age sixties to RMD time. Notwithstanding, I disagree with Slott in two regards. 1) He states gvt unlikely to ever tax Roths. I consider most likely is a means tax or other taxes on both Roth withdrawals (income) and yr end values (wealthtax). For example my two granddaughters are projected to have $8 million dollars in Roths 42 years from now, normal growth rates. AINT GONNA HAPPEN. Gvt will not allow such tax free growth and be able to withdraw tax free. 2) Slott considers the long run future is very, very likely to have much higher tax rates as currently (soak the rich). I see it differently. Along will come a gvt leader who realizes this will not work; that the country needs to BROADEN the tax base (now 50% of people pay zero tax). Such broadening needs be accomplished by promising lower rates. Like if all pay taxes, only need 17% rate to equal todays tax structure. Similar to the perceived fairness of Social Security taxes. R48
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Post by mozart522 on Feb 19, 2024 16:25:44 GMT
retiredat48, Disagree with 1) Roth withdrawals would normally be done to spend, otherwise why withdraw? Spending helps the economy, and taxing it would discourage withdrawals. A wealth tax would not be likely placed on retirement accounts without being placed on on all forms of wealth and billionaires are not going to allow that to happen. It is possible that they might put a cap on Roth growth at some point and growth beyond that is taxable. I highly doubt there are significant numbers of people in your granddaughter's potential situation. As for inherited Roth's, all bets are off. I can easily see it being means taxed, or automatically losing all Roth benefits and being placed in a taxable account upon inheriting. IRAs were never intended to be a means of generational wealth transfer. However, one thing I am sure of is that neither you or I will be around to see who is correct.
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Post by win1177 on Feb 19, 2024 17:43:15 GMT
Interesting article! It has started me thinking about slowly converting over the next 5 years or so. Our taxes are already pretty damn high, and look they are going to stay higher in retirement. I really do NOT see tax rates going down, especially with the deficit, SS shortfalls, etc. We (as a country) cannot keep spending like we have an unlimited “credit card”, and (unfortunately) our Congress is a bunch of stupid idiots who cannot figure their way out of a wet paper sack, much less solve the real issues our country faces.
Thanks for the article liftlock!
Win
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Post by retiredat48 on Feb 19, 2024 18:39:09 GMT
Interesting article! It has started me thinking about slowly converting over the next 5 years or so. Our taxes are already pretty damn high, and look they are going to stay higher in retirement. I really do NOT see tax rates going down, especially with the deficit, SS shortfalls, etc. We (as a country) cannot keep spending like we have an unlimited “credit card”, and (unfortunately) our Congress is a bunch of stupid idiots who cannot figure their way out of a wet paper sack, much less solve the real issues our country faces. Thanks for the article liftlock! Win Yes, you and I may see a tax rate decline too late, if ever. But for someone in early sixties planning, and paying 22-24% tax to gvt to convert, I say wait. You may see lower rates , and lower taxable (RMD) income problems if you stop working when you "have enough"...even if at age 48! I see the tax on a "comfortable retirement" remaining reasonable to low. As in: in most of my 31 years retired my fed tax was zero dollars. Lastly, rates have to go DOWN. Reason is...you could tax at 100% all the income of the wealthy and moderately wealthy and not do much for the debt problem. Only a broad-based tax will suffice; and only a lower rate will get it accepted. BTW I lived where a new yorker paid 95% total tax on incomes above a threshold...90% fed top tax rate plus NY state/local taxes. They said it was necessary. It's when all the lop holes like deferred income, etc came about. Over the years it was reduced, with Pres Reagan doing a big reduction in top tier rate. Fifty percent pay no fed tax now...they all must/should pay some! R48
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Post by flipperxxx on Feb 19, 2024 19:17:51 GMT
Interesting article! It has started me thinking about slowly converting over the next 5 years or so. Our taxes are already pretty damn high, and look they are going to stay higher in retirement. I really do NOT see tax rates going down, especially with the deficit, SS shortfalls, etc. We (as a country) cannot keep spending like we have an unlimited “credit card”, and (unfortunately) our Congress is a bunch of stupid idiots who cannot figure their way out of a wet paper sack, much less solve the real issues our country faces. Thanks for the article liftlock! Win Yes, you and I may see a tax rate decline too late, if ever. But for someone in early sixties planning, and paying 22-24% tax to gvt to convert, I say wait. You may see lower rates , and lower taxable (RMD) income problems if you stop working when you "have enough"...even if at age 48! I see the tax on a "comfortable retirement" remaining reasonable to low. As in: in most of my 31 years retired my fed tax was zero dollars. Lastly, rates have to go DOWN. Reason is...you could tax at 100% all the income of the wealthy and moderately wealthy and not do much for the debt problem. Only a broad-based tax will suffice; and only a lower rate will get it accepted. BTW I lived where a new yorker paid 95% total tax on incomes above a threshold...90% fed top tax rate plus NY state/local taxes. They said it was necessary. It's when all the lop holes like deferred income, etc came about. Over the years it was reduced, with Pres Reagan doing a big reduction in top tier rate. Fifty percent pay no fed tax now...they all must/should pay some! R48 -------------------so what would you do if, say, you had 1mil in taxable and 1mil in TIRA and were currently living only on SS but with taxes that suddenly got pretty stiff what with last year's rise in rates on MM funds and you were 70, with RMDs not that far off? just grin and bear it and pay up?
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Post by archer on Feb 19, 2024 20:45:21 GMT
Mr Slott seems to think taxes will go up in the future, and that when the Gov needs the money they will increase taxes to get it. If the Gov. doesn't need money now, when will it? Why hasn't the Gov increased taxes years ago given it's growing debt? How often in the past have we had blatant tax increases? Tax increases are the death nail for politicians. The best they can do is eliminate tax saving opportunities. In the case of Roths, they could possibly limit future rollovers like they were in the past. No way the gov would do something as blatant as start taxing Roths after people already paid taxes on conversions. Yes, theoretically it could happen, but there would be severe repercussions.
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Post by win1177 on Feb 19, 2024 21:23:03 GMT
Yes, you and I may see a tax rate decline too late, if ever. But for someone in early sixties planning, and paying 22-24% tax to gvt to convert, I say wait. You may see lower rates , and lower taxable (RMD) income problems if you stop working when you "have enough"...even if at age 48! I see the tax on a "comfortable retirement" remaining reasonable to low. As in: in most of my 31 years retired my fed tax was zero dollars. Lastly, rates have to go DOWN. Reason is...you could tax at 100% all the income of the wealthy and moderately wealthy and not do much for the debt problem. Only a broad-based tax will suffice; and only a lower rate will get it accepted. BTW I lived where a new yorker paid 95% total tax on incomes above a threshold...90% fed top tax rate plus NY state/local taxes. They said it was necessary. It's when all the lop holes like deferred income, etc came about. Over the years it was reduced, with Pres Reagan doing a big reduction in top tier rate. Fifty percent pay no fed tax now...they all must/should pay some! R48 -------------------so what would you do if, say, you had 1mil in taxable and 1mil in TIRA and were currently living only on SS but with taxes that suddenly got pretty stiff what with last year's rise in rates on MM funds and you were 70, with RMDs not that far off? just grin and bear it and pay up? Flipperxxx, In answer to your question, I might do a partial conversion, up to the top of wherever my tax bracket is close to increasing. But I wouldn’t do a full conversion. I just feel tax rates have to increase at some point, we cannot continue to spend our children’s future away!!! Another option, charitable deductions! Win
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Post by yogibearbull on Feb 19, 2024 21:35:18 GMT
For many, there is a big jump in taxable income when the RMDs start.
Years ago I started with a very low base in Roth IRA as Roth Conversions income limits were removed only in 2010. But in the few years leading up to RMDs, I started Conversions at the rate equal to my initial RMD (from 403b, T-IRA). This gave me some time to adjust to new income and tax level, and also by the time the RMDs started, I had a decent balance in my Roth IRA. Once RMDs started, I stopped making the Conversions.
This made my tax-advantaged fund more diversified - a mix of tax-deferred and tax-free.
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Post by flipperxxx on Feb 20, 2024 14:24:00 GMT
Flipperxxx, In answer to your question, I might do a partial conversion, up to the top of wherever my tax bracket is close to increasing. But I wouldn’t do a full conversion. I just feel tax rates have to increase at some point, we cannot continue to spend our children’s future away!!! Another option, charitable deductions! Win Makes sense, tho i'll have to see if how much i can convert is worth the hassle. meanwhile, i already do my own form of charitable contributing -- ie giving money to ex girlfriends who have fallen on hard times -- but sadly no deductions come my way for that, only a bit of good karma, i hope and pray, tho who knows.
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Post by retiredat48 on Feb 20, 2024 16:29:04 GMT
flipperxxx ,...who posted: "R48----so what would you do if, say, you had 1mil in taxable and 1mil in TIRA and were currently living only on SS but with taxes that suddenly got pretty stiff what with last year's rise in rates on MM funds and you were 70, with RMDs not that far off? just grin and bear it and pay up?"----------------------------- You have a good taxable/IRA portfolio balance...and low spending needs--excellent. --In taxable, each year,I would try to take advantage of zero percent tax on dividend income up to a threshold limit; also take advantage of zero cap gains taxes up to a threshold limit of income. --Within reasonable cap gain taxes if selling things, Shift most income producing funds in taxable, to be in the Trad IRA. Shift or own most low income/high growth funds into taxable. --Buy ETFs in taxable which have a favorable tax distinction in they pay nominal annual cap gains, until you sell anything. Like, a small cap growth ETF owned in taxable has almost zero annual income, and minimal if any annual cap gains. Ditto a fund like FSPTX large cap growth...or ETF equivalent. --Keep majority of fixed income/bond funds in IRAs. Consider buying some high yielders there in IRA; including a little leveraged CEFs. --Do conversions to Roth each year till RMD time, that take you into the 12% bracket. Final point. I don't see where you "...with taxes that suddenly got pretty stiff what with last year's rise in rates on MM funds" have a concern. Yes if you earn more on MM funds in taxable you would owe more tax. Thus, shift main money market funds owned into the IRA. To me, a 10-12% tax rate is not stiff. Like, if your trad IRA doubles in size in next three years, you will have larger RMDs...but so what? You don't turn this down for you now have much more assets to pay any taxes. Currently a one million TIRA means about $35,000 RMD age 73. You get standard deduction; so a 12% tax on remainder is not large. Gvt gave you a tax advantaged IRA space for years; pay a little back! Good day... R48
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Post by yogibearbull on Feb 20, 2024 18:47:42 GMT
There are also good reasons to keep some in T-IRA. Those $s can be used for QCDs after 70, and also for sudden large deductible expenses (healthcare etc).
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Post by mozart522 on Feb 20, 2024 19:13:24 GMT
Right now there is a known, planned tax increase of 3% in 2026 for those of us in the current 12% bracket. This alone is a reason to convert to Roth up to the bracket.
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Post by flipperxxx on Feb 20, 2024 20:34:40 GMT
flipperxxx ,...who posted: "R48----so what would you do if, say, you had 1mil in taxable and 1mil in TIRA and were currently living only on SS but with taxes that suddenly got pretty stiff what with last year's rise in rates on MM funds and you were 70, with RMDs not that far off? just grin and bear it and pay up?"----------------------------- You have a good taxable/IRA portfolio balance...and low spending needs--excellent. --In taxable, each year,I would try to take advantage of zero percent tax on dividend income up to a threshold limit; also take advantage of zero cap gains taxes up to a threshold limit of income. --Within reasonable cap gain taxes if selling things, Shift most income producing funds in taxable, to be in the Trad IRA. Shift or own most low income/high growth funds into taxable. --Buy ETFs in taxable which have a favorable tax distinction in they pay nominal annual cap gains, until you sell anything. Like, a small cap growth ETF owned in taxable has almost zero annual income, and minimal if any annual cap gains. Ditto a fund like FSPTX large cap growth...or ETF equivalent. --Keep majority of fixed income/bond funds in IRAs. Consider buying some high yielders there in IRA; including a little leveraged CEFs. --Do conversions to Roth each year till RMD time, that take you into the 12% bracket. Final point. I don't see where you "...with taxes that suddenly got pretty stiff what with last year's rise in rates on MM funds" have a concern. Yes if you earn more on MM funds in taxable you would owe more tax. Thus, shift main money market funds owned into the IRA. To me, a 10-12% tax rate is not stiff. Like, if your trad IRA doubles in size in next three years, you will have larger RMDs...but so what? You don't turn this down for you now have much more assets to pay any taxes. Currently a one million TIRA means about $35,000 RMD age 73. You get standard deduction; so a 12% tax on remainder is not large. Gvt gave you a tax advantaged IRA space for years; pay a little back! Good day... R48 thank you very much for this. it helps make a little order out of the chaos inside my wee aging brain. currently, the only stocks i own are via VTMFX (tax managed balanced, in taxable) and PRWCX (in IRA). i probably have too much in cash in taxable and too much in various bond funds in the IRA. it recently occurred to me that, given my preferred pauper's lifestyle, i ought to be investing not with me in mind but my 40-year-old daughter, but perhaps that's a topic to put in a thread of its own. again, thanks for weighing in!
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Post by archer on Feb 20, 2024 21:21:40 GMT
Right now there is a known, planned tax increase of 3% in 2026 for those of us in the current 12% bracket. This alone is a reason to convert to Roth up to the bracket. More details on that 3% here. The linked article is suggesting not all the planned tax changes for 2026 will happen, but likely there will be definitely some increases. The main one I noticed that will hit me the hardest due to my overall tax picture is lowering the Standard deduction. Most of my money is already in a Roth, so the decrease in standard deduction will have a significant increase in the % of RMD that is taxed.
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kent
Ensign
Posts: 43
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Post by kent on Feb 20, 2024 23:08:51 GMT
archer, What if Trump gets back in, do you think the tax brackets will change? "More details on that 3% here. The linked article is suggesting not all the planned tax changes for 2026 will happen, but likely there will be definitely some increases. The main one I noticed that will hit me the hardest due to my overall tax picture is lowering the Standard deduction. Most of my money is already in a Roth, so the decrease in standard deduction will have a significant increase in the % of RMD that is taxed."
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Post by mozart522 on Feb 20, 2024 23:24:53 GMT
archer , What if Trump gets back in, do you think the tax brackets will change? "More details on that 3% here. The linked article is suggesting not all the planned tax changes for 2026 will happen, but likely there will be definitely some increases. The main one I noticed that will hit me the hardest due to my overall tax picture is lowering the Standard deduction. Most of my money is already in a Roth, so the decrease in standard deduction will have a significant increase in the % of RMD that is taxed." That would likely depend on who holds the House and Senate.
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Post by retiredat48 on Feb 20, 2024 23:25:12 GMT
flipperxxx ,...who posted: "R48----so what would you do if, say, you had 1mil in taxable and 1mil in TIRA and were currently living only on SS but with taxes that suddenly got pretty stiff what with last year's rise in rates on MM funds and you were 70, with RMDs not that far off? just grin and bear it and pay up?"----------------------------- You have a good taxable/IRA portfolio balance...and low spending needs--excellent. --In taxable, each year,I would try to take advantage of zero percent tax on dividend income up to a threshold limit; also take advantage of zero cap gains taxes up to a threshold limit of income. --Within reasonable cap gain taxes if selling things, Shift most income producing funds in taxable, to be in the Trad IRA. Shift or own most low income/high growth funds into taxable. --Buy ETFs in taxable which have a favorable tax distinction in they pay nominal annual cap gains, until you sell anything. Like, a small cap growth ETF owned in taxable has almost zero annual income, and minimal if any annual cap gains. Ditto a fund like FSPTX large cap growth...or ETF equivalent. --Keep majority of fixed income/bond funds in IRAs. Consider buying some high yielders there in IRA; including a little leveraged CEFs. --Do conversions to Roth each year till RMD time, that take you into the 12% bracket. Final point. I don't see where you "...with taxes that suddenly got pretty stiff what with last year's rise in rates on MM funds" have a concern. Yes if you earn more on MM funds in taxable you would owe more tax. Thus, shift main money market funds owned into the IRA. To me, a 10-12% tax rate is not stiff. Like, if your trad IRA doubles in size in next three years, you will have larger RMDs...but so what? You don't turn this down for you now have much more assets to pay any taxes. Currently a one million TIRA means about $35,000 RMD age 73. You get standard deduction; so a 12% tax on remainder is not large. Gvt gave you a tax advantaged IRA space for years; pay a little back! Good day... R48 thank you very much for this. it helps make a little order out of the chaos inside my wee aging brain. R48 reply in bold: Great. Glad to have helped. currently, the only stocks i own are via VTMFX (tax managed balanced, in taxable) and PRWCX (in IRA). i probably have too much in cash in taxable and too much in various bond funds in the IRA. R48: Price/Geroux has a couple new funds that are 100% stock....consider changing to them in IRA if they fit. it recently occurred to me that, given my preferred pauper's lifestyle, i ought to be investing not with me in mind but my 40-year-old daughter, but perhaps that's a topic to put in a thread of its own. R48: Indeed. Once one "has enough" they should have an allocation for their heirs. In your case how about owning a fund like FSPTX Tech Sector Fund (75% of top ten holdings are in stocks like NVIDIA, Microsoft) or a comparable type cap growth fund...eventually for your daughter to inherit!). Ride aboard Artificial Intelligence for next decade.
again, thanks for weighing in! R48 You're welcome. BTW Great job in your savings, and lower cost living.
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Post by liftlock on Feb 20, 2024 23:40:03 GMT
There are also good reasons to keep some in T-IRA. Those $s can be used for QCDs after 70, and also for sudden large deductible expenses (healthcare etc). Agreed. I hope itemized deductions for health care expenses exceeding 7.5% of AGI survives the expiration of the tax cuts and jobs act at the end of 2025. I can see Congress wanting to eliminate itemized deductions since most taxpayers no longer benefit from them.
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Post by liftlock on Feb 21, 2024 0:01:54 GMT
Right now there is a known, planned tax increase of 3% in 2026 for those of us in the current 12% bracket. This alone is a reason to convert to Roth up to the bracket. More details on that 3% here. The linked article is suggesting not all the planned tax changes for 2026 will happen, but likely there will be definitely some increases. The main one I noticed that will hit me the hardest due to my overall tax picture is lowering the Standard deduction. Most of my money is already in a Roth, so the decrease in standard deduction will have a significant increase in the % of RMD that is taxed. I suspect higher standard deductions will survive. Congress partially justified increasing the standard deduction to offset the elimination of personal exemptions and to simplify the tax code. It might be difficult for Congress to justify reducing the standard deduction without restoring the personal exemption and it's complexity.
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