RMD 3 card Monte??

[TheOtherMe]

Sept 6, 2024 21:44:04 GMT -5 ripvanwinkle said:

Sept 6, 2024 12:05:20 GMT -5 minnesotapaintlady said:

3. However, the amount I convert is considered income and will  be noted on my tax return when I file my taxes. The amount I convert is added to my gross income for that tax year. The higher the conversion amount, the more I'll owe in taxes.

I that about right??

You forgot you get to pay taxes on it!  Lots of beautiful taxes!  

[ripvanwinkle]

Sept 7, 2024 9:17:44 GMT -5 TheOtherMe said:

Sept 6, 2024 21:44:04 GMT -5 ripvanwinkle said:

3. However, the amount I convert is considered income and will  be noted on my tax return when I file my taxes. The amount I convert is added to my gross income for that tax year. The higher the conversion amount, the more I'll owe in taxes.

I that about right??

You forgot you get to pay taxes on it!  Lots of beautiful taxes!  

I didn't forget. I was hoping to find a work around so I wouldn't have to pay them.

[teen persuasion]

Sept 8, 2024 0:37:00 GMT -5 ripvanwinkle said:

Sept 7, 2024 9:17:44 GMT -5 TheOtherMe said:

You forgot you get to pay taxes on it!  Lots of beautiful taxes!  

I didn't forget. I was hoping to find a work around so I wouldn't have to pay them.

Have no other income. If RMDs plus converted amounts are less than your standard deduction (or itemized deductions) you owe zero tax.

[TheOtherMe]

Be poor like my parents were.  Their social security and RMD's never put them in a taxable position.  

[ripvanwinkle]

Sept 8, 2024 15:29:35 GMT -5 teen persuasion said:

Sept 8, 2024 0:37:00 GMT -5 ripvanwinkle said:

I didn't forget. I was hoping to find a work around so I wouldn't have to pay them.

Have no other income. If RMDs plus converted amounts are less than your standard deduction (or itemized deductions) you owe zero tax.

Well, sadly though, I still have to work full time.

[ripvanwinkle]

If I had realized 25yrs ago the final cost of it when I have to take the RMD I never would have started a IRA. I would have just done a Roth IRA. Everyone extols the benefits of the IRA but doesn't show you the cost at the end with the RMD.

Sure you get a tax deduction but it seem any gains I got now get wiped out with RMD.

[MN-Investor]

Not only did you get the tax deduction in the year you contributed to your IRA, all the income generated by your IRA - all the interest and dividends - have grown tax free for all those years. Yeah, it kind of sucks that you have to pay taxes on it now, but it really is a heck of a deal.

Once my husband's company offered a Roth 401(k), that's where he made his contributions. But we had decades where only a regular 401(k) was available, so, starting next year, I'm going to have some large RMDs. But, as my husband used to say... First World Problems.

[teen persuasion]

What was your tax rate when you were contributing to tax deferred? How much did you save in taxes all those years? Would you have less in total saved if you'd used Roth?

We used traditional for work accounts: 401k, 403b, SIMPLE IRA. The tax savings from the reduced AGI were huge, we used the resulting tax refunds to then fund Roth IRAs for both of us. So the Roth accounts are all extra savings. Those Roths are 40% of our total now!

So if we'd gone all Roth from the beginning, wed have only 60% of what we have now.

[minnesotapaintlady]

Sept 12, 2024 6:47:07 GMT -5 teen persuasion said:

So if we'd gone all Roth from the beginning, wed have only 60% of what we have now.

Same, my marginal rate is very high, so I'd have much less if I'd gone all Roth from the beginning.  Well...Roth 401K wasn't even available to me until a few years ago.

I throw everything into traditional that I can through work and the tax savings goes into my Roth IRA. 

[teen persuasion]

Sept 11, 2024 22:56:27 GMT -5 ripvanwinkle said:

If I had realized 25yrs ago the final cost of it when I have to take the RMD I never would have started a IRA. I would have just done a Roth IRA. Everyone extols the benefits of the IRA but doesn't show you the cost at the end with the RMD.

Sure you get a tax deduction but it seem any gains I got now get wiped out with RMD.

How much will your RMD be?

The first RMDs are under 4% -- they do grow to be a larger % as you grow older, but each RMD means you are withdrawing and reducing the total bit by bit.

What do you have IN your tIRA? You should keep all your bond funds (lower growth) in there, and stock funds in Roth or taxable accounts. Then the tIRA grows more slowly, smaller RMDs.

[MN-Investor]

If you have a $1M balance in your tIRA on 12/31/2024, and you are turning 73 in 2025, then your first RMD would be $37,735.85. Just an FYI.

[Rukh O'Rorke]

Sept 11, 2024 22:56:27 GMT -5 ripvanwinkle said:

If I had realized 25yrs ago the final cost of it when I have to take the RMD I never would have started a IRA. I would have just done a Roth IRA. Everyone extols the benefits of the IRA but doesn't show you the cost at the end with the RMD.

Sure you get a tax deduction but it seem any gains I got now get wiped out with RMD.

the information is out there! And was out there 25 years ago. I probably started retirement saving about 25 years ago too. What I heard was 401k to get any company match money, max roth, then back to max 401k. Since about 2013 I did only 401k because I desperately needed the tax break.

this might be helpful for trying to get the lowest tax situation in retirement:
www.kitces.com/wp-content/uploads/2019/04/Tax-Efficient-Withdrawal-Strategies-In-Retirement-IWI-May-6-2019-Handouts.pdf

I'm confused why you would still need to work full time though at 73? You would get your max social security check already and then your RMDs. If you are working full time, that money you take our from the 401k is going to be taxed at a high level.

In my case I will at least get to fill the standard decutions and the 10 and 12% brackets before I get to the 22% tax bracket which is the deduction I got when putting most of the money in.

if you working FT at the same company, google says you may not need to do RMD from that 401k;

If you are still employed, you do not have to take a required minimum distribution (RMD) from your current 401(k) regardless of your age, as long as your employer doesn't require it. That is in fact an IRS rule. RMD requirements depend on your age, the account type and whether or not you are still employed.

[Rukh O'Rorke]

Sept 12, 2024 10:51:29 GMT -5 Rukh O'Rorke said:

Since about 2013 I did only 401k because I desperately needed the tax break.

And yes - I am fast approaching need to pay the fiddler on this. Cost of doing business.

[azucena]

I've mentioned this before but wanted to throw this out there. My company recently gave us the option of allowing a one time in-plan conversion of current year's 401k employee deposits to Roth 401k and paying the taxes on current year's earning on those deposits.

Then we also have the option to elect automatic in plan conversions of each new after tax after tax 401k investment to Roth. This happens before earnings develop so we will not be taxed on them. So now I get the best of both worlds.

ETA to correct

9/13/24 ETA to correct

[Rukh O'Rorke]

Sept 12, 2024 11:00:11 GMT -5 azucena said:

I've mentioned this before but wanted to throw this out there. My company recently gave us the option of allowing a one time in-plan conversion of current year's 401k employee deposits to Roth 401k and paying the taxes on current year's earning on those deposits.

Then we also have the option to elect automatic in plan conversions of each new after tax investment to Roth. This happens before earnings develop so we will not be taxed on them. So now I get the best of both worlds.

I have roth option at my 401k, but I'm still not convinced it is worth forgoing the tax break. Although, I'm only at 24%.

Maybe I should start with Roth?

le sigh!

teen persuasion had a really good point on another thread about how I've already perma-filled the lower tax brackets for my retirement with current 401k money. Been thinking on that a lot lately...

[Rukh O'Rorke]

oh - the other thing on my balancing scales is that I am currently directly all my 401k new money to cash equivalent in case I rage quit at any moment, or there is a huge crash when I decide to retire, rage or not. Would not want to park cash in roth.....


Ok, well i took my current 10% contribution and split it 6% pretax, and 4% roth.......I'll think about the investment stuff after I see how this works in the website. Hoping I can put the 6% and match into the cash buck and put the 4% roth into sp500...

[minnesotapaintlady]

Sept 12, 2024 11:00:11 GMT -5 azucena said:

I've mentioned this before but wanted to throw this out there. My company recently gave us the option of allowing a one time in-plan conversion of current year's 401k employee deposits to Roth 401k and paying the taxes on current year's earning on those deposits.

Then we also have the option to elect automatic in plan conversions of each new after tax 401k investment to Roth. This happens before earnings develop so we will not be taxed on them. So now I get the best of both worlds.

ETA to correct

What's the advantage of allowing conversions of new traditional contributions?  Do they not just allow direct contributions to your Roth 401K?

[azucena]

My 401k contribution goes in pre-tax, converts to Roth same day so then earnings are not taxed either. Right? Questioning myself now due to chaotic week lol.

[ripvanwinkle]

Sept 12, 2024 10:51:29 GMT -5 Rukh O'Rorke said:

Sept 11, 2024 22:56:27 GMT -5 ripvanwinkle said:

If I had realized 25yrs ago the final cost of it when I have to take the RMD I never would have started a IRA. I would have just done a Roth IRA. Everyone extols the benefits of the IRA but doesn't show you the cost at the end with the RMD.

Sure you get a tax deduction but it seem any gains I got now get wiped out with RMD.

the information is out there! And was out there 25 years ago. I probably started retirement saving about 25 years ago too. What I heard was 401k to get any company match money, max roth, then back to max 401k. Since about 2013 I did only 401k because I desperately needed the tax break.

this might be helpful for trying to get the lowest tax situation in retirement:
www.kitces.com/wp-content/uploads/2019/04/Tax-Efficient-Withdrawal-Strategies-In-Retirement-IWI-May-6-2019-Handouts.pdf

I'm confused why you would still need to work full time though at 73? You would get your max social security check already and then your RMDs. If you are working full time, that money you take our from the 401k is going to be taxed at a high level.

In my case I will at least get to fill the standard decutions and the 10 and 12% brackets before I get to the 22% tax bracket which is the deduction I got when putting most of the money in.

if you working FT at the same company, google says you may not need to do RMD from that 401k;

If you are still employed, you do not have to take a required minimum distribution (RMD) from your current 401(k) regardless of your age, as long as your employer doesn't require it. That is in fact an IRS rule. RMD requirements depend on your age, the account type and whether or not you are still employed.

Why do I still need to work at 73? You're kidding right? Two divorces, a mortgage and 5 market crashes over the years make it so. And I've never worked for any govt with a sweet PERS plan or company that had a 401K with matching money. Its all my hard earned money.

I don't have 401K. Just a traditional IRA and a Roth IRA and a taxable stock brokerage account.

[teen persuasion]

Sept 12, 2024 12:14:22 GMT -5 minnesotapaintlady said:

Sept 12, 2024 11:00:11 GMT -5 azucena said:

I've mentioned this before but wanted to throw this out there. My company recently gave us the option of allowing a one time in-plan conversion of current year's 401k employee deposits to Roth 401k and paying the taxes on current year's earning on those deposits.

Then we also have the option to elect automatic in plan conversions of each new after tax 401k investment to Roth. This happens before earnings develop so we will not be taxed on them. So now I get the best of both worlds.

ETA to correct

What's the advantage of allowing conversions of new traditional contributions?  Do they not just allow direct contributions to your Roth 401K?

I was wondering the same thing - why?

If that part about after tax contributions hadn't been struck thru, it would make sense - contribute to after tax, then immediately convert to Roth before any earnings is a Mega Backdoor Roth. After tax space is in addition to traditional/Roth 401k space, so you could contribute to both if you have enough extra money.

[minnesotapaintlady]

Sept 12, 2024 17:56:04 GMT -5 azucena said:

My 401k contribution goes in pre-tax, converts to Roth same day so then earnings are not taxed either. Right? Questioning myself now due to chaotic week lol.

As teen persuasion said it really only makes sense if they're converting after-tax contributions to Roth. You're not going to be able to get a tax-deduction and have it be Roth.

[Rukh O'Rorke]

Sept 12, 2024 20:46:12 GMT -5 ripvanwinkle said:

Why do I still need to work at 73? You're kidding right? Two divorces, a mortgage and 5 market crashes over the years make it so. And I've never worked for any govt with a sweet PERS plan or company that had a 401K with matching money. Its all my hard earned money.

I don't have 401K. Just a traditional IRA and a Roth IRA and a taxable stock brokerage account.

well, we've all had the same market conditions and I think most to all of us have been in the market 25 year now.

depending on amounts and rates, etc. and how much longer you plan on working, you might want to do larger roth conversions after taking your RMD over the next few years to get more money into the roth. that will be good for you as you dislike taxes so much.

are you taking social security already? or still delaying? I'm not sure how it works working after 70 for getting a larger benefit.

[ripvanwinkle]

Sept 12, 2024 22:54:23 GMT -5 Rukh O'Rorke said:

Sept 12, 2024 20:46:12 GMT -5 ripvanwinkle said:

Why do I still need to work at 73? You're kidding right? Two divorces, a mortgage and 5 market crashes over the years make it so. And I've never worked for any govt with a sweet PERS plan or company that had a 401K with matching money. Its all my hard earned money.

I don't have 401K. Just a traditional IRA and a Roth IRA and a taxable stock brokerage account.

well, we've all had the same market conditions and I think most to all of us have been in the market 25 year now.

depending on amounts and rates, etc. and how much longer you plan on working, you might want to do larger roth conversions after taking your RMD over the next few years to get more money into the roth. that will be good for you as you dislike taxes so much.

are you taking social security already? or still delaying? I'm not sure how it works working after 70 for getting a larger benefit.

I took SS at 66. Full retirement age for me. I took it because my car died and needed a new car and I needed the extra monthly money to pay for it. I plan on keep on working. I like working. Some of my friends who retired died within 5 yr from not doing anything.

[azucena]

Sept 12, 2024 22:36:03 GMT -5 minnesotapaintlady said:

Sept 12, 2024 17:56:04 GMT -5 azucena said:

My 401k contribution goes in pre-tax, converts to Roth same day so then earnings are not taxed either. Right? Questioning myself now due to chaotic week lol.

As teen persuasion said it really only makes sense if they're converting after-tax contributions to Roth. You're not going to be able to get a tax-deduction and have it be Roth.

Checked again after having my morning coffee and I stand corrected. It's my after-tax that can autoconvert.

Really just holding on thru this TGIF workday in hopes of catching up on sleep and rest this weekend. Being on edge about teen's episodes is exhausting.

[teen persuasion]

Sept 12, 2024 22:54:23 GMT -5 Rukh O'Rorke said:

Sept 12, 2024 20:46:12 GMT -5 ripvanwinkle said:

Why do I still need to work at 73? You're kidding right? Two divorces, a mortgage and 5 market crashes over the years make it so. And I've never worked for any govt with a sweet PERS plan or company that had a 401K with matching money. Its all my hard earned money.

I don't have 401K. Just a traditional IRA and a Roth IRA and a taxable stock brokerage account.

well, we've all had the same market conditions and I think most to all of us have been in the market 25 year now.

depending on amounts and rates, etc. and how much longer you plan on working, you might want to do larger roth conversions after taking your RMD over the next few years to get more money into the roth. that will be good for you as you dislike taxes so much.

are you taking social security already? or still delaying? I'm not sure how it works working after 70 for getting a larger benefit.

Moot point, but there's no point in delaying beyond 70. Benefits hit the max at 70, other than annual COLA.

Usually you want to delay SS to 70 to give you more time/room for Roth conversions, and coincidentally for longevity insurance (if everything goes bad and you run out of savings, at least your SS is maxed out and should continue to give you monthly income.)

[teen persuasion]

Sept 12, 2024 20:46:12 GMT -5 ripvanwinkle said:

Sept 12, 2024 10:51:29 GMT -5 Rukh O'Rorke said:

the information is out there! And was out there 25 years ago. I probably started retirement saving about 25 years ago too. What I heard was 401k to get any company match money, max roth, then back to max 401k. Since about 2013 I did only 401k because I desperately needed the tax break.

this might be helpful for trying to get the lowest tax situation in retirement:
www.kitces.com/wp-content/uploads/2019/04/Tax-Efficient-Withdrawal-Strategies-In-Retirement-IWI-May-6-2019-Handouts.pdf

I'm confused why you would still need to work full time though at 73? You would get your max social security check already and then your RMDs. If you are working full time, that money you take our from the 401k is going to be taxed at a high level.

In my case I will at least get to fill the standard decutions and the 10 and 12% brackets before I get to the 22% tax bracket which is the deduction I got when putting most of the money in.

if you working FT at the same company, google says you may not need to do RMD from that 401k;

Why do I still need to work at 73? You're kidding right? Two divorces, a mortgage and 5 market crashes over the years make it so. And I've never worked for any govt with a sweet PERS plan or company that had a 401K with matching money. Its all my hard earned money.

I don't have 401K. Just a traditional IRA and a Roth IRA and a taxable stock brokerage account.

Ok, so you have earned income + investment income from the taxable account + RMD from the tIRA + SS.

How much of your SS is taxable will depend on the total of the "other" income. If your SS was already 85% taxable due to earned income plus investment income, then the RMD will only be taxed at your bracket rate. If not, it will increase how much of your SS is taxable, too.

Any state tax?

[jerseygirl]

If you work after 70 and amount was more than one of your previous low years, then your SS amount should increase
I had a consulting business after 70 and my SS increased every year

[Rukh O'Rorke]

Sept 13, 2024 10:52:41 GMT -5 jerseygirl said:

If you work after 70 and amount was more than one of your previous low years, then your SS amount should increase
I had a consulting business after 70 and my SS increased every year

interesting! and kudos to you on that!

really bucking the trend of women's peak earnings in their 40s!

[Rukh O'Rorke]

Sept 13, 2024 7:34:10 GMT -5 azucena said:

Sept 12, 2024 22:36:03 GMT -5 minnesotapaintlady said:

As teen persuasion said it really only makes sense if they're converting after-tax contributions to Roth. You're not going to be able to get a tax-deduction and have it be Roth.

Checked again after having my morning coffee and I stand corrected. It's my after-tax that can autoconvert.

Really just holding on thru this TGIF workday in hopes of catching up on sleep and rest this weekend. Being on edge about teen's episodes is exhausting.

hope the weeend goes well!

[minnesotapaintlady]

Sept 13, 2024 10:52:41 GMT -5 jerseygirl said:

If you work after 70 and amount was more than one of your previous low years, then your SS amount should increase
I had a consulting business after 70 and my SS increased every year

But you still CLAIM at 70 correct?  

There is no more 8% annual increase after that point and the adjustment due to current wages replacing past lesser wages happens annually even after starting your payments.