I have gotten whacked by RMDs and IRMMA. It sucks, but I can't get too upset. Tax rates are low, it is what it is and I guess we can afford it. Certainly plan as you can. But don't make yourself too crazy, either.

@gieb6428

5 ай бұрын

Deal with what you have.

Keep in mind that when a spouse dies, not only does the survivor face the widow trap of the tax brackets changes when they start filing single, they also will likely have a higher IRA balance (their original plus inheriting spouse's IRA) to manage/plan regarding eventual RMDs. A couple tips... 1. My wife and I, in our sixties, each have sizable Trad. IRA accounts (1.5, 1.2 mil). We each have our IRA beneficiary designation set up to split roughly 1/3 each to spouse and our 2 sons. This lessens the RMD tax problem as well as let's our sons inherit before we both pass, likely allowing them to spread out their own tax burden from taking distributions from the inherited IRA's. 2. Because my wife is older by 6 years, we will draw down and convert from her IRA first since I have more years before facing RMD issues. Every few years I may have to adjust my IRA beneficiary percentages to favor my wife if her own IRA has been significantly depleted.

@5150mango

Ай бұрын

Excellent suggestions and strategies, thank you!

Ive came to the conclusion that a traditional IRA MUST BE CAREFULLY MONITORED AND it takes good management to convert/withdraw or it will bite you. Way back while I was still working, I quit putting money in my IRA, but invested in a "non IRA account". So glad I did. Im 75 and still have a lot of money to get out of my IRA without IRMA and other consequences.

Good video. We withdraw tax deferred strategically within the lower tax brackets to lower the balance and spend on experiences while we can.

My RMDs start in 2025. Looks like there is very little I can do to lessen tax burden. I’m in the 24% tax bracket already, but I calculate my RMDs won’t ever push me past to the 32% marginal rate. The IRMAA is another story. I’m in the first tier IRMAA. Once the RMDs kick-in, I’ll be pushing the second tier IRMAA. I know, everyone would like to have my problem.

@frankish5314

4 ай бұрын

If I'm not careful I will have a similar "problem".. I'm only 62 but don't want to start conversions because we will lose our $23,000/yr ACA health care subsidy. By 68 (My Wife will be 65)I will likely have over $2.6M in pretax accounts, by then my deferred pension and SS (at age 70) payments will be around $160k. I guess I will convert up to the first IRMAA limit at 68 and live off what we currently have in ROTHs plus after tax dividends...

The tax graph seems to show _non-Social Security income_ on the X axis, which puts the beginning of the "bad" part of the tax torpedo at around 35-40K of non-SS income. This is great, because it's exactly the graph that would allow someone to begin planning well in advance of retirement. You may not know exactly when you'll retire, what your various account balances will be, or how fast you'll draw on them, but you can still predict your likely SS benefit, filing status, and tax brackets for a given tax year. And that's all you need to construct this graph (or table, which may be more useful in practice, but less illustrative in a video). You can then begin planning around the graph, hopefully early enough to be able to make relatively painless adjustments. I found it useful to learn how to construct such a table for my situation, and think would be a worthwhile exercise for anyone to try. I started by building a table of social security 0-50-85-0% taxation zones, then combined it with an estimated 2026 tax table to build the table-equivalent to the graph in the video. I also added a column for LTCG, and one for bump zone rates on regular income. The result was eye-opening; I only wish I had done this 10 years earlier. I suppose it wouldn't be hard to build set of taxation tables based on a few different SS benefit levels, say $10-20-30-40-50k for single filers, and and a similar set for joint filers, and publish them in a pamphlet or pdf file. If I ever start my own blog I think I'll do exactly that.

@scottdelaney7567

5 ай бұрын

I'd be interested that spreadsheet.

@jskweres2

4 ай бұрын

Is this a Google drive file you'd be willing to share?

This video is very helpful and you deliver one of the best channels for retirement information. Very detailed and valuable. Thank you and keep them coming!

Glad my RMD age will be 75, that helps.

Good video and discussion Eric. I wish I had started my conversions much earlier but didn't have the awareness and knowledge to realize the need. I've been doing them for a few years now but am also into the RMD stage now so need to be cautious to avoid IRMMA penalties. Larry, Central Valley, Ca.

Thanks Eric..information I really need

Great choice of a topic! Kudos to you for your explanations. Tough topic because "one size" does not come close to "fit all",

Amazing, simple informative and really useful video

Great video. I think you provide the best content.

Great video!!!

Its much too difficult to plan this output cuz life happens.

Great videos. I would like to see one on Inherited IRAs (Trad & Roth) as the regulations have changed several times in recent years. Thanks.

@horacepierce9210

5 ай бұрын

For a regular inherited IRA, you have 10 years to drain it.

Great that you mentioned the Qualified Charitable Distribution (QCD) from IRAs. Many people who could benefit from it aren’t aware of it. What if you don’t have an IRA? Simply roll over (tax free) some or all of the assets in your 401(k) or 403(b) into an individual IRA rollover account.

Thanks. Great video. I've been trying to figure out the right ratio of Roth vs Traditional IRA and this was very helpful. The next step is how much extra do I want to do on Roth conversions to minimize the tax burden on my heirs.

Another reason to convert all is if you leave a legacy. If your beneficiaries are currently over 33%, you could take a larger hit in your taxes (not getting above the beneficiaries tax rate. If your tax rate is between 15% to 24%, it makes sense to convert all of your IRA balance to zero (via Roth), especially if you do not need it. Keep your conversions under the IRMAA limits. Converting all to a Roth and leaving a legacy will also mean that your beneficiaries will not have to pay taxes (no 10-year rule will apply).

Wish I had converted all taxable retirement monies to non-taxable Roth while working and had the money to pay the income taxes without cutting some of my taxable retirement accounts off the top to pay for the taxes. Fast forward 10 years and I would be income tax free right now and throughout retirement. Would have bitten the bullet while working and although I may have paid more in income taxes dollar-wise, it doesn't 'feel' like it when you have income coming in from an outside source. Fell into the mindset/trap of 'paying as little income tax as possible while working'. SMH.

@arymniak1

5 ай бұрын

Join the crowd we all bought the lie that taxes will be less in retirement.

@Mitzi73

3 ай бұрын

Yes because that was the cookie cutter advice we were given by the experts.

@rayzerot

3 ай бұрын

Having only Roth is a trap in the other direction though. Instead of, "paying as little income tax as possible while working" it would be, "paying as little income tax as possible while retired." You want at least enough taxable income to fill your lower tax brackets. Otherwise with only a Roth you're paying 22%+ instead of 0% (standard deduction), 10%, or 12%. Doesn't take a whiz to know that 22% is twice as much as 10%

@johngill2853

3 ай бұрын

​@@arymniak1what? Most people pay less taxes and the overwhelming amount have at least some room in lower tax brackets to take advantage of 85% of people have less than a million dollars and even then it's unlikely to be all traditional

My goal is to have RMDs at or less the amount I planned on taking out. My strategy is to pull close to the maximum in the current 12% tax bracket and roll into Roth IRAs what I don't spend.

@horacepierce9210

5 ай бұрын

Unless you have earned income, you can't do a direct contribution to your Roth, and your IRA withdrawal isn't earned income. So, pulling and then waiting won't work. Rather pull as you need. When you get to the end of the year, the CONVERT whatever balance would be needed to get to the 12% limit.

@DunRovinRanch-1969

5 ай бұрын

@@horacepierce9210that’s exactly what Dave said.

@Dave-sw2dm

5 ай бұрын

@@horacepierce9210 That's what I meant. Sorry for the confusion in the way I stated it.

Wouldn't another reason to convert everything to Roth be because you get cheaper healthcare premiums and social security isn't taxed?

Great video. What is an acceptable range for a single person? Half of 400k -750k?

I retired early and have some rental income. Since health insurance is ACA, I don't want to do ROTH conversions now. Also I am glad RMDs got delayed to age 75. I will just use some of it when on Medicare.

@madelineperello1046

4 ай бұрын

Is the rental income considered,for purposes of ACA?

@LivingRetirement

4 ай бұрын

@@madelineperello1046 yes, as rental income counts as ordinary income for tax purposes.

What to do if close to the next tax bracket keeps you from making contributions large enough to even offset any gains, let alone reduce the balance over time? should one "rip the band aid off" and accept the extra 2-3% income tax to ensure your balance is not too large before RMD required? Also, given changes in tax rates in 2026 (?) would this be an even better reason to rip off the band aid?

After the standard deduction, the forced income for my spouse and I will be about $105,000. This amount is already beyond the tax torpedo even without any IRA withdrawals. So I see no way for me to avoid the tax torpedo. 85% of my SS will be taxable. So as long as my IRA withdrawals don’t push me into the next tax bracket (north of $200,000) it’s not likely that I can benefit more than the 3% expected 2026 tax increase by doing Roth conversions. I will be certain for the IRAs to fall in to the acceptable range. Is my calculation correct?

Wait, what? IRA ballance is really the same as 401k ballance for taxes. So when starting RMDs we need to pull or roll less than $60 k per year and have a balance of about $500 k. ? From both ira and 401 k ? Please confirm I understand correctly. My assets are mostly in 401 k with some HSA, Roth ira and brokerage. I hope to roll prior to SS at 70 and RMD at 75.

I am faced with the 'convert all or part' decision and your explanation of the 'convert all' was not very clear.

11:10 Do you have a video that explains the idea of converting to ROTH after earned income has ceased? As a novice, it has always sounded like those accounts could only be added to up to the amount of your earned income. My take is probably wrong, but that's why I'm trying to learn this stuff before I reach that part of my life.

@cceerr11

4 ай бұрын

ROTH IRA contributions require earned income. ROTH IRA conversions do not require earned income. You are converting dollars that were previously contributed to an IRA/401k. At the time of the original contribution earned income was required.

If I am fortunate enough to have enough income from investments outside my trad IRA to cover living expenses. Is it possible to gift from my IRA into Roths for my kids?

If my wife and I live a long time, I want to convert everything. If one of us dies early the conversion amount is less. Who dies first and when determines the amount. So I’m on course to convert everything.

@larryjones9773

5 ай бұрын

If you Roth convert everything, you'll miss out on some 0% & 10% federal tax rates.

@Toomanydays

5 ай бұрын

@Larry we have other income that fills the lower tax brackets. I’m fortunate to be in 22% bracket.

@jimdavis9581

5 ай бұрын

If you convert everything you may loose some tax benefits from loosing the tax benefit of the standard deduction each year of around $30,000 (married)

7:05 You should want to give your highest tax portions of your IRAs to charity.... Assuming you are dealing with a small church or small charity (i.e. local food bank or animal shelter) how do you go about this giving without making a withdrawal?

@cceerr11

4 ай бұрын

QCD's go directly from your IRA to the charity. Either you or your custodian of your IRA, distributes the funds, usually a check is written, directly from the IRA to the charity. This differs from you taking a distribution into your personal account, paying taxes on it, and then writing a check from your personal account.

I'm not a big fan of paying taxes up front to escape possible future taxes. If you convert and pay $100,000 in taxes, then suffer a 40% downturn in the market, the potential damage to the portfolio might be more than enough to ruin a retirement plan. If I'm wrong I pay more future taxes, if you're wrong you say oh well and I'm eating Alpo.

@gieb6428

5 ай бұрын

Set up your Portfolio to handle a 40% draw down. If you are not a Fan of paying taxes up front, then you are probably even more of a Fan of not paying taxes on your Social Security.

This is an important video about Eye Rays.

I would assume there will be a new tax bill once the current one expires.

@horacepierce9210

5 ай бұрын

That all depends on which party controls congress and the white house.

Pretty scary material.

"claw back those tax dollars". lol. Yep, they gonna get 'em one way or another!

@gieb6428

5 ай бұрын

Hoop Jumping