Majority of assets in retirement accounts

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Topic Author
Nowizard
Posts: 2345
Joined: Tue Oct 23, 2007 5:33 pm

Majority of assets in retirement accounts

Post by Nowizard » Wed Jan 03, 2018 10:00 am

A current thread focuses on whether the ROTH or Traditional IRA is best, depending on personal circumstances, beginning with repeating the often quoted suggestion of funding a ROTH before a Traditional one. A related issue is how much focus to place on tax deferred investments and whether one can protect too much of one's assets in this manner. Our personal situation is that we have SS and a pension that meet most of our spending needs. We also have significant assets in retirement accounts now subject to RMD's. The combination results in a "First World Problem" of more income than at any previous time, along with higher taxation.
To what extent is this a frequent issue, and how do people deal with it other than by increasing donations, gifting or using tax free bonds?

Tim

NightFall
Posts: 267
Joined: Wed Mar 12, 2014 4:38 pm

Re: Majority of assets in retirement accounts

Post by NightFall » Wed Jan 03, 2018 10:13 am

Once you are drawing from a pension and SS, there is not that much you can do. I think that many here plan on retiring before drawing from either source (if a pension is even available). During that time period, they would perform roth conversions at low tax rates and live off of any taxable accounts or create a roth ladder. Doing so would minimize rmds later in retirement.

Depending on your specific situation, it could make sense to perform additional roth conversions in the coming years. There are new tax brackets as of this year. If you believe that tax rates starting at the level of your pension+SS and up to your RMD will increase in the future, it could make sense to perform roth conversions now to reduce rmds in the future. Of course, it's not really possible to know what future tax rates will be. I will state that I am unsure if it is possible to perform roth conversions while taking rmds. This isn't my situation, so I don't have first hand knowledge.

Lynette
Posts: 1889
Joined: Sun Jul 27, 2014 9:47 am

Re: Majority of assets in retirement accounts

Post by Lynette » Wed Jan 03, 2018 10:23 am

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Last edited by Lynette on Wed Jan 09, 2019 12:01 am, edited 1 time in total.

Topic Author
Nowizard
Posts: 2345
Joined: Tue Oct 23, 2007 5:33 pm

Re: Majority of assets in retirement accounts

Post by Nowizard » Wed Jan 03, 2018 1:16 pm

Yes, we do pay additional for Medicare, Part B and D. I have wondered if there will be a change in the indexing for those additions with the new tax laws but expect if there are changes they would be more likely to increase the "penalty" than reduce it relative to Medicare.

Tim

mhalley
Posts: 7654
Joined: Tue Nov 20, 2007 6:02 am

Re: Majority of assets in retirement accounts

Post by mhalley » Wed Jan 03, 2018 1:36 pm

Considering that I am currently paying over $2500 a month for our health insurance, I look forward to having to pay Medicare premiums, even if I do have to pay extra due to IRMAA.

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