Advice on ROTH Conversions and the non-retirement assets to support this strategy

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557880yvi
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Joined: Wed Mar 06, 2019 3:11 pm

Advice on ROTH Conversions and the non-retirement assets to support this strategy

Post by 557880yvi » Mon Sep 16, 2019 4:36 pm

Dear Fellow Bogleheads,

Joined this amazing group 6 months ago and have learned so much – perhaps just enough to know I that don’t know everything and would benefit from your collective wisdom! This may be a long post but trying to provide as much information to avoid the “you didn’t give enough information for us to help” replies!

I am hoping to get a “sanity check” on our decision to convert our IRA’s to ROTH IRA’s (due to very high projected RMD’s @ 70.5, and while tax rates are low) and advice about the tax impact(s) of certain conversion levels and which non-retirement assets to sell to pay the taxes. Also, 1st time paying estimated taxes (will be due 1/15/20 if we do a ROTH conversion), don’t want to make a mistake!
Will later ask for advice on investing strategy between ROTH accounts/IRA accounts as the conversions happen over the next 8 years (leaning strongly towards the Paul Merriman 10-fund strategy).

So given the information below, did I screw up any thinking/assumptions about ROTHs and what would you do? MANY thanks in advice for your wisdom! (BTW sorry in advance, thought all my nice charts and tables would paste in from WORD but didn't so may look messy - read how to embed images but don't have a public website from which to do this. If anyone can tell me how you get those nice pictures in a post let me know and will repost!)

MAIN QUESTIONS (but any advice welcome!)

1. Have I missed anything about how powerful the benefits are of doing ROTH conversions? My analyses below say do it if we can afford it. Every analytic (NPV) says tax-free growth at any positive level over 20+ years far outweighs the taxes, and lost income on $ used to pay those taxes.

2. Specifically, is the effect of the Capital Gains (CG) tax bump* and NIIT as we sell non-retirement investments, some with large LTCG’s to pay the taxes on the conversion - vs. the power of the ROTH IRA growing tax-free - worth possibly being bumped into the 23.8% high CG bracket and incurring the Net Investment Income Tax (NIIT)? Higher conversions will push us into the 23.8% bump zone but is that extra tax now a wise “investment” for tax-free growth of the ROTHs? Have paid 2 Tax CPA's in the past year to do estimated tax scenarios on this and both made many mistakes that I found and despite claiming competence, really had no idea what they were doing)

3. We will have to begin selling non-retirement assets in ~ 12 months– currently have a year’s worth of cash on hand (living expenses + taxes on conversion). Have always had high risk tolerance but now have to manage that risk as we need this to last 6-8 years. Given that about 85% of our of non-retirement assets to live on are in individual stocks/mutual funds – see chart below - with the current CG that would be incurred if sold (source of potential CG bump/NIIT) – should we lock in gains now, e.g. sell ½ or all of VFIAX and reinvest in VMATX (but potentially eating up room for ROTH conversion dollars)? Plan was keep VMATX until end, liquidated last (yes small risk as it is a bond fund but we can always W/D from IRA’s live on) as it generates federal and state tax-free income.

4. Sell all stocks/mutual funds (other than VMATX and reinvest proceeds in VMATX) pay CG taxes now and do NO ROTH conversion this year?

5. Or some combination in between? Tax scenarios I have run seem to favor no more taxable interest/dividends and moving all into VMATX –no tax and frees up “room” for ROTH conversions. And yes, we give up the upside potential of stocks but reduce risk. Husband is much more nervous than me about market (rode out all major recessions without a worry). But NPV of losing 1 year of ROTH tax-free earnings does not seem wise (however, if RMD age increases and distribution tables for RMD’s were lengthened, selling all now and waiting 1 year to continue ROTH conversions appears to make sense).

*If you are not familiar with the CG Bump Zone, here are links for 2 excellent articles:

Michael Kitces: Navigating The Capital Gains Bump Zone: When Ordinary Income Crowds Out Favorable Capital Gains Rates 30 Jan 19
https://www.kitces.com/blog/long-term-c ... in-0-rate/

Ed Slott: How Roth IRA conversions can escalate capital gains taxes 15 Aug 19

https://www.financial-planning.com/news ... ains-taxes


Background information:

• Ages: both 62 me (F) 6 months older, Feb/Jul birthdays (so splits turning 70.5 into 2028/2029 for RMD’s and taking SS). Both in excellent health. Will delay SS for both until 70.5 to make room for ROTH conversions. We both qualify for the max SS benefits.
• Retired June 2018 to reduce earned income to $0 and convert as much of our IRA’s to ROTH IRA’s as possible until 70.5 (or 72 if SECURE Act bill passes).
• Realize that ROTH conversions will impact Medicare premiums in a couple of years with the 2-year lookback – but analyses still appear to return positive for the ROTH conversions even with those additional costs.
• We have about enough in non-retirement funds + dividends to live and pay taxes on the conversions (in the $200-250k/yr range) for the next 7-8 years (higher $ conversions of $275k/yr or above would require drawing on the income from the ROTHs in the last few years – past the 5-yr waiting period but may be worth doing). Market risk is a concern.
• Residents of MA with no plans in the next 10 years to move out-of-state (caring for elderly relatives and grandchildren – neither a burden, glad we are close enough to do this).
• Fed Tax Bracket 24% - expect to stay in this bracket throughout conversion years.
• MA Tax 5.05%. (And extremely high property taxes, really lost out on the $10k taxes cap!)


Investments/Financial Data:

• Non-Retirement assets: ~$1 million (seems to change hourly depending on the news headlines!) detail below. Will need to sell these over the next 6-8 years until 70.5 and when we start collecting SS.
• Annual Dividends: Approx $22k/yr (before selling any assets and as cash draws down the ordinary income/dividends will also decline depending on what we do with the non-retirement assets generating that income)
• $11k non-taxable VMATX
• $3k taxable as ordinary income (non-qualified)
• 8k taxable at 15% (qualified)
• Retirement assets: ~$3 million plus a few small retirement pensions/annuities that will generate approx. $13,000/year taxable – we will defer until 70.5
• Home: Market value approx. $850k with balance of $225k on the mortgage (2.85%) – this is our only debt and will be paid off Jan 2028 (Interest Income from VMATX below – no federal or MA tax, has always paid the interest plus additional tax-free income so consider this borrowing the bank’s money to invest for a higher return ). Home is 10 years old, built to be extremely low maintenance and age in place – expect to stay here for many years and not practical to sell for approximately another 10 years (so not considering as an asset to generate cash for living expenses through 2027, but could in an emergency)
• 2 new cars that should last 15+ years
• Began ROTH conversions 2018 (small, $60k to get 5 year clock running)
• Need about $110k/yr (conservative estimate with 10% contingency built in) for living expenses. Taxes could add anywhere from $23k-$100k to that cash-flow need depending on ROTH conversions/$LTCG/Dividends. Conversions will add a range of Federal/State taxes (BEFORE selling non-retirement assets and effect of CG bump/NIIT) of:
o Approximate add’l CF needed for 2019 Fed & State taxes with ROTHs (so e.g. $250k/yr 8 yrs needs ~ $300k add'l cashflow)**:
 ROTH Conversion: $200k = $37k
 ROTH Conversion: $250k = $50k
 ROTH Conversion: $300k = $65k
 Adding sale of non-ret assets can add $6k to $20k more! (CG bump, NIIT)
o Sell all non-ret assets except VMATX (reinvesting proceeds in VMATX) and No ROTH conversion 2019 = 2019 Federal and State taxes = $23k

**Note: Taxes take into account that ~ 2.5% of IRA’s are post-tax contributions, this is factored into the tax computations

Method/assumptions to arrive at $ ranges for the ROTH conversions & Tax estimates:

• Started with current balances in IRA’s. In EXCEL, projected forward to 2027-2047 over a range of average returns of 3%-10% to estimate balances for RMD’s at 70.5. Obtained SS benefits at 70.5, estimated taxable portion, inflated by 2% each year and added that amount to the RMD’s to estimate taxable income over the 20 years
• First computed RMD’s based on current start date of 70.5 and age distribution factors (all analyses only better if SECURE act or similar passes) if NO ROTH conversions. Confirmed calculations with several RMD calculators
• Next ran scenarios of RMD’s for range of ROTH IRA conversions of $200-$300k/yr (did $400k but will run out of $ to live on before 8 years at the level)
• Shown below are the charts of RMD’s + taxable SS for NO ROTH, $200k ROTH & $300k ROTH starting 2019. Highlighted years when income would exceed $300k based on expected returns - the NO ROTH scenario is scary!
• Used 2018 Turbo Tax to run tax scenarios then created EXCEL tax models to link to all my EXCEL worksheets (lots of detail) and make the minor adjustments for changes in 2019 tax factors (10-year budget, ROTH conversion levels, when non-ret assets would need to be sold and CG/NIIT effects, etc). Results in Excel have come out very close to Turbo Tax, but has been a bit difficult to bake in the NIIT 8960, MAGI computations, various tax rates and fine line between new standard deduction/itemized deductions. But feel I am “close enough” without any major errors.


Non-Retirement Mutual Funds/Stocks to live on until 2027, remainder of $1M is cash:


Non-Retirement Mutual Funds/Stocks (1st $ is MV $802k, 2nd $ is LTCG $225k sorry can figure out how to embed neat looking table)
Market Value
9/16/2019 LTCG


Funds
    VFIAX $186,293.11 $76,122.40
      VMATX $377,659.23 $3,662.16

      Stocks
        FLIR $79,682.70 $66,806.47
          UNH $60,276.78 $52,305.16
            BRKL $43,834.96 $9,843.78
              CNC $22,602.72 $6,817.52
                DELL $14,139.68 $7,320.68
                  MFC $5,778.91 $1,868.94
                    NGG $12,079.63 $637.62

                    TOTAL
                      $802,347.72 $225,384.73



                      Taxable Income – RMD + Taxable SS – NO ROTH Conversions, $200k or $300k/year 2019-2027

                      • See when taxable income > $300k/yr
                      • % are ranges of average expected returns over 20 years - they should center over each of the 8 RMD scenarios!

                      No ROTH IRA conversions - RMD’s + taxable SS

                      Age Yr 3% 4% 5% 6% 7% 8% 9% 10%
                      70 2027 $100,835 $104,886 $109,220 $113,852 $118,801 $124,084 $129,720 $135,731
                      71 2028 $209,331 $220,720 $233,022 $246,299 $260,618 $276,051 $292,673 $310,562
                      72 2029 $214,155 $227,267 $241,570 $257,161 $274,140 $292,617 $312,708 $334,538
                      73 2030 $219,087 $234,021 $250,476 $268,589 $288,510 $310,398 $334,427 $360,784
                      74 2031 $224,127 $240,988 $259,753 $280,614 $303,781 $329,486 $357,976 $389,525
                      75 2032 $229,276 $248,174 $269,416 $293,266 $320,014 $349,979 $383,514 $421,005
                      76 2033 $234,534 $255,582 $279,479 $306,577 $337,267 $371,986 $411,215 $455,492
                      77 2034 $239,210 $262,417 $289,030 $319,508 $354,370 $394,192 $439,625 $491,396
                      78 2035 $244,672 $270,259 $299,898 $334,181 $373,783 $419,464 $472,087 $532,627
                      79 2036 $249,455 $277,404 $310,109 $348,317 $392,891 $444,812 $505,205 $575,354
                      80 2037 $254,277 $284,689 $320,636 $363,055 $413,031 $471,820 $540,868 $621,845
                      81 2038 $259,131 $292,106 $331,478 $378,407 $434,248 $500,583 $579,256 $672,413
                      82 2039 $264,010 $299,648 $342,633 $394,385 $456,581 $531,196 $620,557 $727,394
                      83 2040 $268,904 $307,304 $354,094 $410,999 $480,071 $563,757 $664,965 $787,145
                      84 2041 $273,800 $315,062 $365,854 $428,251 $504,752 $598,361 $712,685 $852,042
                      85 2042 $277,526 $321,446 $376,067 $443,851 $527,794 $631,534 $759,481 $916,972
                      86 2043 $281,150 $327,770 $386,347 $459,782 $551,642 $666,303 $809,121 $986,641
                      87 2044 $284,652 $334,003 $396,653 $476,001 $576,263 $702,668 $861,679 $1,061,273
                      88 2045 $288,007 $340,109 $406,940 $492,453 $601,606 $740,606 $917,206 $1,141,067
                      89 2046 $291,187 $346,048 $417,151 $509,070 $627,599 $780,067 $975,717 $1,226,188
                      90 2047 $292,606 $349,709 $424,494 $522,176 $649,431 $814,787 $1,029,112 $1,306,222


                      ROTH IRA conversions $200k/yr - RMD’s + taxable SS

                      Age Yr 3% 4% 5% 6% 7% 8% 9% 10%
                      70 2027 $64,130 $66,857 $69,851 $73,133 $76,725 $80,648 $84,928 $89,591
                      71 2028 $128,774 $136,442 $144,882 $154,153 $164,324 $175,463 $187,646 $200,953
                      72 2029 $131,605 $139,758 $148,749 $158,646 $169,524 $181,461 $194,541 $208,853
                      73 2030 $134,540 $143,208 $152,791 $163,367 $175,018 $187,835 $201,911 $217,350
                      74 2031 $137,586 $146,803 $157,023 $168,334 $180,830 $194,616 $209,802 $226,505
                      75 2032 $140,752 $150,555 $161,459 $173,566 $186,987 $201,843 $218,262 $236,385
                      76 2033 $144,048 $154,475 $166,115 $179,087 $193,520 $209,555 $227,348 $247,064
                      77 2034 $147,229 $158,272 $170,646 $184,490 $199,956 $217,213 $236,443 $257,849
                      78 2035 $150,806 $162,558 $175,781 $190,637 $207,308 $225,994 $246,917 $270,322
                      79 2036 $154,255 $166,702 $180,767 $196,642 $214,541 $234,702 $257,394 $282,916
                      80 2037 $157,848 $171,034 $186,000 $202,973 $222,204 $243,983 $268,631 $296,515
                      81 2038 $161,601 $175,572 $191,502 $209,658 $230,338 $253,889 $280,700 $311,219
                      82 2039 $165,530 $180,336 $197,300 $216,731 $238,988 $264,480 $293,683 $327,143
                      83 2040 $169,655 $185,353 $203,425 $224,234 $248,204 $275,825 $307,673 $344,414
                      84 2041 $174,002 $190,652 $209,915 $232,213 $258,047 $288,004 $322,776 $363,178
                      85 2042 $178,114 $195,667 $216,073 $239,821 $267,498 $299,798 $337,548 $381,734
                      86 2043 $182,435 $200,945 $222,565 $247,864 $277,524 $312,364 $353,371 $401,733
                      87 2044 $186,994 $206,518 $229,433 $256,391 $288,185 $325,780 $370,347 $423,312
                      88 2045 $191,823 $212,429 $236,725 $265,460 $299,553 $340,133 $388,589 $446,627
                      89 2046 $196,965 $218,727 $244,501 $275,143 $311,714 $355,532 $408,234 $471,857
                      90 2047 $201,721 $224,524 $251,645 $284,050 $322,950 $369,864 $426,700 $495,856


                      ROTH IRA conversions $300k/yr - RMD’s + taxable SS

                      Age Yr 3% 4% 5% 6% 7% 8% 9% 10%
                      70 2027 $51,338 $51,412 $51,491 $51,576 $53,337 $56,038 $59,029 $62,333
                      71 2028 $104,519 $106,366 $108,361 $110,515 $114,564 $120,497 $129,621 $139,691
                      72 2029 $106,497 $108,625 $110,945 $113,474 $118,015 $124,563 $134,476 $145,437
                      73 2030 $108,517 $110,940 $113,610 $116,548 $121,633 $128,863 $139,658 $151,624
                      74 2031 $110,579 $113,315 $116,360 $119,744 $125,426 $133,414 $145,194 $158,294
                      75 2032 $112,684 $115,751 $119,197 $123,067 $129,405 $138,236 $151,115 $165,493
                      76 2033 $114,831 $118,247 $122,125 $126,522 $133,582 $143,346 $157,454 $173,272
                      77 2034 $116,910 $120,677 $124,996 $129,942 $137,757 $148,505 $163,912 $181,272
                      78 2035 $119,143 $123,296 $128,107 $133,670 $142,351 $154,240 $171,170 $190,350
                      79 2036 $121,293 $125,830 $131,138 $137,338 $146,919 $160,004 $178,540 $199,663
                      80 2037 $123,476 $128,413 $134,247 $141,132 $151,690 $166,090 $186,403 $209,700
                      81 2038 $125,692 $131,046 $137,436 $145,053 $156,672 $172,514 $194,797 $220,525
                      82 2039 $127,942 $133,727 $140,705 $149,104 $161,875 $179,298 $203,761 $232,205
                      83 2040 $130,222 $136,457 $144,052 $153,288 $167,306 $186,463 $213,338 $244,817
                      84 2041 $132,533 $139,232 $147,477 $157,605 $172,975 $194,030 $223,572 $258,441
                      85 2042 $134,684 $141,815 $150,682 $161,685 $178,402 $201,379 $233,652 $272,043
                      86 2043 $136,849 $144,419 $153,928 $165,848 $184,004 $209,059 $244,317 $286,596
                      87 2044 $139,026 $147,039 $157,210 $170,091 $189,780 $217,078 $255,596 $302,160
                      88 2045 $141,212 $149,671 $160,521 $174,403 $195,724 $225,440 $267,514 $318,798
                      89 2046 $143,401 $152,309 $163,853 $178,774 $201,828 $234,148 $280,096 $336,571
                      90 2047 $145,338 $154,610 $166,752 $182,610 $207,281 $242,091 $291,818 $353,449

                      HomeStretch
                      Posts: 4016
                      Joined: Thu Dec 27, 2018 3:06 pm

                      Re: Advice on ROTH Conversions and the non-retirement assets to support this strategy

                      Post by HomeStretch » Mon Sep 16, 2019 5:07 pm

                      Agree that in your situation that making Roth conversions should benefit you (if you can pay the taxes from a Taxable account).

                      Max SS benefit is at age 70 so don’t wait until 70.5 to claim.

                      In running your projections, have you taken into account the cost of foregoing the ACA subsidies for two years per your other post? I see you have taken into account IRMAA, NIIT, CG tax, SS taxation, etc.

                      I definitely see the benefit in making Roth conversions into the 24% bracket even with IRMAA surcharge and NIIT. Not sure if there is as much benefit once you go into the higher IRMAA tier > $267k. In my own modeling I realize that it may make sense to vary the Roth conversions so we have a year at a higher IRMAA tier offset by a couple years at a lower IRMAA tier.

                      Have you tried running your info through iORP to see if it confirms your excel calculations?

                      aristotelian
                      Posts: 7005
                      Joined: Wed Jan 11, 2017 8:05 pm

                      Re: Advice on ROTH Conversions and the non-retirement assets to support this strategy

                      Post by aristotelian » Mon Sep 16, 2019 5:24 pm

                      Do you have any charitable interests? With only $100K living expenses, it seems your spending is not going to keep up with your conversions. If you are going to give a good chunk of your estate to charity, you would be better off doing it with pretax funds.

                      If not, the main beneficiary of the Roth conversions will be your heirs, but if they are in a lower tax bracket they might be better off with an Inherited IRA with stretch distributions in their tax bracket.

                      Topic Author
                      557880yvi
                      Posts: 101
                      Joined: Wed Mar 06, 2019 3:11 pm

                      Re: Advice on ROTH Conversions and the non-retirement assets to support this strategy

                      Post by 557880yvi » Mon Sep 16, 2019 5:55 pm

                      aristotelian wrote:
                      Mon Sep 16, 2019 5:24 pm
                      Do you have any charitable interests?
                      Yes, we do hope to leave substantial amounts to several charities. We will spend more in the future on our grandchildren (they are under 2 now so a while before we can take them on meaningful adventures!) And yes, some will be left in the form of an inherited IRA. Excellent point! thank you

                      Topic Author
                      557880yvi
                      Posts: 101
                      Joined: Wed Mar 06, 2019 3:11 pm

                      Re: Advice on ROTH Conversions and the non-retirement assets to support this strategy

                      Post by 557880yvi » Mon Sep 16, 2019 5:58 pm

                      HomeStretch wrote:
                      Mon Sep 16, 2019 5:07 pm
                      Agree that in your situation that making Roth conversions should benefit you (if you can pay the taxes from a Taxable account).

                      Max SS benefit is at age 70 so don’t wait until 70.5 to claim.

                      Have you tried running your info through iORP to see if it confirms your excel calculations?
                      thanks for reminder about SS at 70 (was mixing up RMD's and SS!) Yes, did use ORP (but found it a bit confusing to use, perhaps am doing something wrong)

                      Boatguy
                      Posts: 32
                      Joined: Fri Apr 19, 2019 7:54 pm

                      Re: Advice on ROTH Conversions and the non-retirement assets to support this strategy

                      Post by Boatguy » Mon Sep 16, 2019 6:26 pm

                      Only slightly off topic, but your choice to not claim SS for either of you until 70 caught my attention. I made some broad assumptions based on your data (both born in 1958 and each with SS benefits at full retirement age of 2850/mo or so) and input them into opensocialsecuity. It said that you leave about $25k/yr on the table by one of you not claiming at the end of this year. Have you considered this at all? That’s a pretty solid ROA and it’s not all taxable, either.

                      Katietsu
                      Posts: 3044
                      Joined: Sun Sep 22, 2013 1:48 am

                      Re: Advice on ROTH Conversions and the non-retirement assets to support this strategy

                      Post by Katietsu » Mon Sep 16, 2019 6:45 pm

                      I need to think about this a bit more. You have done the calculations and I have not. So some thoughts... Your situation is similar to what my trajectory may be - just a few years behind you. I have done some rough projections of my situation and do not see large Roth conversions as a slam dunk. Maybe one of the math wizards will answer this soon.

                      Plus, the benefit of Roth conversion would need to be balanced with the loss of potentially $25 k per year of ACA subsidies for 2020 and 2021.

                      To get to the 23.8% cap gain tax, wouldn’t you have to have over 500k of income. So that would mean selling most of your investments at once while still doing the full > 250k Roth conversion, right?

                      It is a difficult decision even if you get all the projections down based on current knowledge. You do not know what your own life will bring. One of you in full time nursing home care could result in tax free RMD’s if no conversions are done. On the other hand, if one of you is deceased at a young age, then Roth conversions would have made a great deal of sense. And as a 62 year old, you know how many changes in the retirement system and tax code have occurred in the last 30 years so you must expect more change in the next 30 years.

                      User avatar
                      WoodSpinner
                      Posts: 1315
                      Joined: Mon Feb 27, 2017 1:15 pm

                      Re: Advice on ROTH Conversions and the non-retirement assets to support this strategy

                      Post by WoodSpinner » Mon Sep 16, 2019 7:19 pm

                      OP,

                      I think you are on the right track and we are in somewhat similar circumstances.

                      The key is to figure out, just how much to convert and how much to let grow in the IRA.

                      A number of us have decided to target an average AGI during Conversions (in your case 62-70) to match the average projected AGI from 70-79 with RMDs. Typically we re-calculate and plan for a year’s conversion at the start of the year. A great deal can change over time and this gives us an adaptable guideline that tries to balance the various trade-offs. Reducing conversions also becomes a key knob we can turn if we need to reduce our tax-expenses and lessen our Sequence of Return risk.

                      I will definitely bump up against IRMA at some point but it’s certainly worth the extra costs. ACA subsidies and NIIT don’t apply in our case.

                      Key is to have an Excel sheet that incorporates income and projected growth rates to help you plan.

                      Here are a few threads you may find useful....

                      Pre RMD Retirement Sweet Spot
                      Estimating taxes on future Roth Conversions
                      Paying Taxes in Roth Conversions
                      Open Social Security Calculator


                      Good luck!

                      WoodSpinner

                      Silk McCue
                      Posts: 4165
                      Joined: Thu Feb 25, 2016 7:11 pm

                      Re: Advice on ROTH Conversions and the non-retirement assets to support this strategy

                      Post by Silk McCue » Mon Sep 16, 2019 7:44 pm

                      Boatguy wrote:
                      Mon Sep 16, 2019 6:26 pm
                      Only slightly off topic, but your choice to not claim SS for either of you until 70 caught my attention. I made some broad assumptions based on your data (both born in 1958 and each with SS benefits at full retirement age of 2850/mo or so) and input them into opensocialsecuity. It said that you leave about $25k/yr on the table by one of you not claiming at the end of this year. Have you considered this at all? That’s a pretty solid ROA and it’s not all taxable, either.
                      I am certain they have considered this. Given their overall financial situation and goals it would likely be counterproductive to that desired end.

                      Cheers

                      Topic Author
                      557880yvi
                      Posts: 101
                      Joined: Wed Mar 06, 2019 3:11 pm

                      Re: Advice on ROTH Conversions and the non-retirement assets to support this strategy

                      Post by 557880yvi » Mon Sep 16, 2019 8:24 pm

                      Incredible and insightful comments, I will be exploring all the suggestions and links tomorrow. Then running new NPV analyses after seeing what ACA subsidies we may get for healthcare until 65 with no ROTH conversions and comparing to waiting on the ROTH conversions (always love running new spreadsheets!). I didn't know about that and am so grateful for the recommendations.

                      A question I didn't think to answer before posting (knew you guys -BTW a generic non-gender specific term here in New England! - would think of something I hadn't). We do plan and hope to leave some substantial charitable contributions but have self-insured for most things all our lives and don't have LTC insurance. So we don't want to donate parts of our IRA's to charitable trusts until we feel comfortable that we reach an age where we can do that and still have sufficient resources to cover care.

                      HomeStretch
                      Posts: 4016
                      Joined: Thu Dec 27, 2018 3:06 pm

                      Re: Advice on ROTH Conversions and the non-retirement assets to support this strategy

                      Post by HomeStretch » Mon Sep 16, 2019 8:35 pm

                      For your projection input, look into the ACA subsidy scale to determine the subsidy you may be eligible for. The lowest subsidy is at the max MAGI of ~$66k for two people. As your MAGI decreases from ~$66k, your subsidy $ increase. With your significant investment income, you likely won’t qualify for the highest subsidy but even the lowest subsidy is significant. In our case, at the MAGI limit of ~$66k, our annual subsidy would be $15k for a $28k silver plan premium.

                      Carl53
                      Posts: 1900
                      Joined: Sun Mar 07, 2010 8:26 pm

                      Re: Advice on ROTH Conversions and the non-retirement assets to support this strategy

                      Post by Carl53 » Tue Sep 17, 2019 3:57 am

                      557880yvi wrote:
                      Mon Sep 16, 2019 8:24 pm
                      Incredible and insightful comments, I will be exploring all the suggestions and links tomorrow. Then running new NPV analyses after seeing what ACA subsidies we may get for healthcare until 65 with no ROTH conversions and comparing to waiting on the ROTH conversions (always love running new spreadsheets!). I didn't know about that and am so grateful for the recommendations.

                      A question I didn't think to answer before posting (knew you guys -BTW a generic non-gender specific term here in New England! - would think of something I hadn't). We do plan and hope to leave some substantial charitable contributions but have self-insured for most things all our lives and don't have LTC insurance. So we don't want to donate parts of our IRA's to charitable trusts until we feel comfortable that we reach an age where we can do that and still have sufficient resources to cover care.

                      Read up on Qualified Charitable Distributions. https://www.bogleheads.org/wiki/Qualifi ... tributions
                      Depending upon your level of charitable giving, you might find doing so attractive.

                      While not at your pretax level, we have been doing Roth conversions the last nine years, but decent returns have kept the pretax retirement accounts at slightly above where they were before we started, as opposed to my original plan to mostly deplete the accounts. Currently project to run out of non-retirement funds a year or two before reaching 70 and plan to use some of the pretax funds those last year or two with to supplement other income sources. Since we have become aware of QCDs, our plan is to incorporate the use of them, post RMD time. I like the flexibility that they offer. Still will likely do some post 70 Roth conversions, keep substantial pretax balances in case one of us needs extensive nursing care and plan to leave the rest to heirs and charities.

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