Big IRA accounts

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
letsgobobby
Posts: 12113
Joined: Fri Sep 18, 2009 1:10 am

Re: Big IRA accounts

Post by letsgobobby » Mon Feb 18, 2019 9:24 pm

Deleted
Last edited by letsgobobby on Thu Apr 18, 2019 1:18 am, edited 1 time in total.

Topic Author
elainet7
Posts: 211
Joined: Sat Dec 08, 2018 1:52 pm

Re: Big IRA accounts

Post by elainet7 » Tue Feb 19, 2019 8:08 am

no but looked at the site
two options-pay more taxes now with distributions or roth conversions
even with 300k income, federal tax is effectively 18% or 54k
will buy more munis

Topic Author
elainet7
Posts: 211
Joined: Sat Dec 08, 2018 1:52 pm

Re: Big IRA accounts

Post by elainet7 » Thu Feb 21, 2019 5:17 pm

at 300k income the effective tax rate is 54k or 18%!
[OT comment removed by admin LadyGeek]

User avatar
TomatoTomahto
Posts: 9069
Joined: Mon Apr 11, 2011 1:48 pm

Re: Big IRA accounts

Post by TomatoTomahto » Thu Feb 21, 2019 5:19 pm

Elaine, I know you’re relatively new here, but you surely know that political statements are not allowed.
Okay, I get it; I won't be political or controversial. The Earth is flat.

User avatar
LadyGeek
Site Admin
Posts: 55793
Joined: Sat Dec 20, 2008 5:34 pm
Location: Philadelphia
Contact:

Re: Big IRA accounts

Post by LadyGeek » Thu Feb 21, 2019 7:38 pm

This thread is now in the Personal Finance (Not Investing) forum (retirement planning).

As noted by TomatoTomahto, this is a "no politics" forum. See: Politics and Religion
In order to avoid the inevitable frictions that arise from these topics, political or religious posts and comments are prohibited.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

Topic Author
elainet7
Posts: 211
Joined: Sat Dec 08, 2018 1:52 pm

Re: Big IRA accounts

Post by elainet7 » Sun Feb 24, 2019 8:50 am

ric Edelman on recent podcast felt roth conversions are generally a wash
still unsure but might do some partial conversions yearly

MikeG62
Posts: 1945
Joined: Tue Nov 15, 2016 3:20 pm
Location: New Jersey

Re: Big IRA accounts

Post by MikeG62 » Sun Feb 24, 2019 9:19 am

cherijoh wrote:
Mon Feb 11, 2019 12:10 pm
elainet7 wrote:
Sun Feb 10, 2019 8:18 pm
we have IRAs traditional around 4.15 million and 150k in roths and 725k in munis
Any suggestions to minimize tax bite which really is less than 20%(effective tax rate)
age 68-69 Fla residents SS income 46k joint tax free 30k/yr
should I do some roth conversions
You pretty much lost your window to do "inexpensive" Roth conversions by taking SS before 70. FYI - effective tax rate is meaningless when you are making a decision about whether to add taxable income (e.g., doing a Roth conversion).
^This.
Real Knowledge Comes Only From Experience

CppCoder
Posts: 898
Joined: Sat Jan 23, 2016 9:16 pm

Re: Big IRA accounts

Post by CppCoder » Sun Feb 24, 2019 9:21 am

DrGoogle2017 wrote:
Tue Feb 12, 2019 11:42 am
bloom2708 wrote:
Tue Feb 12, 2019 11:22 am
This is a side thought. How do you get $4 million in Traditional IRAs?

Even with starting when the Traditional IRA started and 401k started, hitting maxes, generous matches, 100% stocks how do you get $4 million.

Would it have to be a company stock of Apple or Alphabet or some scenario where you invest in the company stock and it explodes in value?
SEP IRA, like some doctors can put in larger amount, maybe 25% of their salary.
A qualified pension plan can be rolled over into a tIRA as well. That could easily be about half of the $4 million tIRA. When it gets too much beyond that amount (don't know the exact limits), I think you are exceeding the amount of a pension that can be qualified, and that part cannot be rolled into a tIRA.

scifilover
Posts: 251
Joined: Sun Apr 14, 2013 12:56 pm

Re: Big IRA accounts

Post by scifilover » Sun Feb 24, 2019 9:32 am

You possibly should consider longer term growth effects via one of the calculators on this site. It doesn't sound like you are going to spend the RMD's, so those funds will accumulate in your taxable account. You plan to purchase more munis and that may be good. The real issue is the longer term growth of that big IRA. It seems likely to me that even after taking RMD's, your IRA will exceed $5.5 million by age 80. With a couple of above average growth years it could be much more... You can do the numbers as you mentioned you have a fin calc. At age 80, the RMD divisor is 18.7, producing a possible RMD of around $300k. If one of you dies, the single tax rate can be punishing. The current low tax rates sunset in a few years as well. You are going to pay more for Medicare no matter what you do, just a lucky consequence of being consistent in saving and investing.

The Stone Wall
Posts: 16
Joined: Thu Mar 22, 2018 1:18 pm

Re: Big IRA accounts

Post by The Stone Wall » Sun Feb 24, 2019 10:17 am

Your federal tax burden will far exceed any IRMAA cliffs ahead, so I would not even consider IRMAA in your case. You can do some Roth conversions but it is a bit late to make large differences in the outcome since even moderate growth in the IRA will be significant. One way to slow the growth would be to increase bond holding in the IRA, but limiting growth seems counter to your past history of good decisions. As suggested previously, QCD's seem to be an excellent choice for you to reduce your tax burden. Congratulations.

Topic Author
elainet7
Posts: 211
Joined: Sat Dec 08, 2018 1:52 pm

Re: Big IRA accounts

Post by elainet7 » Sun Feb 24, 2019 5:22 pm

might do 80k roth conversions yearly and pay 24%

Topic Author
elainet7
Posts: 211
Joined: Sat Dec 08, 2018 1:52 pm

Re: Big IRA accounts

Post by elainet7 » Sun Feb 24, 2019 5:29 pm

if I do a roth conversion, will put assets in bonds intermediate and long term funds; not stocks as I would hate a big loss after converting
thinking of having 300k in Roths for healthcare if needed one day

bsteiner
Posts: 4196
Joined: Sat Oct 20, 2012 9:39 pm
Location: NYC/NJ/FL

Re: Big IRA accounts

Post by bsteiner » Sun Feb 24, 2019 5:40 pm

You might consider doing Roth conversions to the extent you can in a tax bracket less than, equal to, or not too much higher than the tax rate that would otherwise apply to the distributions.

Topic Author
elainet7
Posts: 211
Joined: Sat Dec 08, 2018 1:52 pm

Re: Big IRA accounts

Post by elainet7 » Mon Feb 25, 2019 7:48 pm

Rereading retire secure by Lange
He does show how the Roth conversion at age 65 will be greater than not doing it
After 20 years a 100k conversion yielded a gain of about 50 k and after 30 yrs, 200k
A good book to read for retirement planning

Topic Author
elainet7
Posts: 211
Joined: Sat Dec 08, 2018 1:52 pm

Re: Big IRA accounts

Post by elainet7 » Mon Feb 25, 2019 7:51 pm

Will not be much much growth as there is about 659k in stocks out of 5m
Goal is to preserve capital and provide income without touching principal

User avatar
willthrill81
Posts: 11864
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

Re: Big IRA accounts

Post by willthrill81 » Mon Feb 25, 2019 8:18 pm

I would be tempted to do Roth conversions to the top of the 24% bracket as long as possible.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

User avatar
Peter Foley
Posts: 4924
Joined: Fri Nov 23, 2007 10:34 am
Location: Lake Wobegon

Re: Big IRA accounts

Post by Peter Foley » Mon Feb 25, 2019 8:37 pm

You only mention munis in your taxable account. Do you hold mutual funds that have appreciated as well?

My thinking: You have a couple years to try to mitigate the large RMD effect. Roth conversions and qualified charitable contributions have already been mentioned.

If you have appreciated stock or stock mutual funds in your taxable account you could make a large contribution to a donor advised fund to help create a low income year or two during which you could do Roth conversions. Put enough in the donor advised fund to cover your charitable contributions until you start RMDs. Maybe for IRRMA purposes try to stay below $214,000 in MAGI.

DrGoogle2017
Posts: 2528
Joined: Mon Aug 14, 2017 12:31 pm

Re: Big IRA accounts

Post by DrGoogle2017 » Mon Feb 25, 2019 8:38 pm

It’s a very confusing thread. I originally thought OP just started this thread but not taking any advice here. Now OP is changing her mind by reading some books. I thought that’s what we said all along.

Topic Author
elainet7
Posts: 211
Joined: Sat Dec 08, 2018 1:52 pm

Re: Big IRA accounts

Post by elainet7 » Tue Feb 26, 2019 1:23 pm

will do roth conversions to fill 24% bracket
from lange's book retire secure the benefit to the kids that inherit it is enormous

lazydavid
Posts: 2376
Joined: Wed Apr 06, 2016 1:37 pm

Re: Big IRA accounts

Post by lazydavid » Tue Feb 26, 2019 1:54 pm

Jack FFR1846 wrote:
Mon Feb 11, 2019 4:12 pm
Pay over MSRP for a Porsche 911 GT3 RS.
Nonsense, this is still bogleheads....he should at least try to get it for straight-up MSRP. :D

Topic Author
elainet7
Posts: 211
Joined: Sat Dec 08, 2018 1:52 pm

Re: Big IRA accounts

Post by elainet7 » Tue Feb 26, 2019 5:57 pm

Well SCHWAB has a ROTH IRA CONVERSION CALCULATOR
In my case converting 60k will result in a 5k gain after 20yrs invested conservatively, about 5% return

Topic Author
elainet7
Posts: 211
Joined: Sat Dec 08, 2018 1:52 pm

Re: Big IRA accounts

Post by elainet7 » Sun Mar 24, 2019 7:42 pm

with the schwab ira conversion calculator a conversion in my case does not make sense for me
for an inheritance its a no brainer to do for my kids
will do some keeping it to 24% tax rate

retire2022
Posts: 858
Joined: Tue Oct 02, 2018 6:10 pm
Location: NYC

Re: Big IRA accounts

Post by retire2022 » Mon Mar 25, 2019 7:37 pm

Op

check out this thread some of the issues related to your case could be worth reading:

viewtopic.php?f=2&t=276183

User avatar
celia
Posts: 9513
Joined: Sun Mar 09, 2008 6:32 am
Location: SoCal

Re: Big IRA accounts

Post by celia » Mon Mar 25, 2019 11:45 pm

elainet7 wrote:
Mon Feb 11, 2019 7:57 pm
just bought 5 BKRB to get 7% auto ins discount
This is a good move but could be a bigger purchase. Berkshire Hathaway doesn't pay out any dividends, so any of this purchased in a taxable account won't impact your taxes as long as you hold onto it. If you can live without selling it, your heirs would get a stepped up value and they can decide whether to sell or not.

You can slow down the growth in your tax-deferred accounts by holding all your bonds in there. That will help slow down your future RMDs. And your Roths should hold stock funds so you can get the most tax-free growth in there.

Topic Author
elainet7
Posts: 211
Joined: Sat Dec 08, 2018 1:52 pm

Re: Big IRA accounts

Post by elainet7 » Tue Mar 26, 2019 11:47 am

having a big ira is fine with me and being in the 24% marginal bracket but an effective tax rate under 20% with no state tax
just did a small partial roth conversion wh ich I will do yearly

Topic Author
elainet7
Posts: 211
Joined: Sat Dec 08, 2018 1:52 pm

Re: Big IRA accounts

Post by elainet7 » Wed Jun 19, 2019 7:40 pm

will do more roth conversions
taxes will go higher and my goal of leaving a boatload to kids will be greatly diminished if the money has to be distributed in 10years

Topic Author
elainet7
Posts: 211
Joined: Sat Dec 08, 2018 1:52 pm

Re: Big IRA accounts

Post by elainet7 » Thu Jul 11, 2019 4:12 pm

great time for roth conversions to fill 24% bracket

User avatar
celia
Posts: 9513
Joined: Sun Mar 09, 2008 6:32 am
Location: SoCal

Re: Big IRA accounts

Post by celia » Thu Jul 11, 2019 4:27 pm

elainet7 wrote:
Sun Feb 10, 2019 8:18 pm
we have IRAs traditional around 4.15 million and 150k in roths and 725k in munis

Where are the muni's held? taxable, tax-deferred, Roth?

Since the growth is tax-free when they are invested in your own state, it only makes sense to hold them in taxable. In tax-deferred IRAs, they will be taxed as ordinary income as they are withdrawn (unless given to a charity via QCDs). In Roths, you are wasting the space they take up since the asset that is expected to grow the most should be in the Roth.
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.

User avatar
celia
Posts: 9513
Joined: Sun Mar 09, 2008 6:32 am
Location: SoCal

Re: Big IRA accounts

Post by celia » Thu Jul 11, 2019 4:36 pm

elainet7 wrote:
Sun Feb 24, 2019 5:29 pm
if I do a roth conversion, will put assets in bonds intermediate and long term funds; not stocks as I would hate a big loss after converting
thinking of having 300k in Roths for healthcare if needed one day
Roth should hold only stock funds. You don't need to do any withdrawals from there as you HAVE TO WITHDRAW from tIRA first. Who cares if the markets go down and you "lose" some money in Roths? You won't be selling in the Roth, as that would only lock in your loss. Eventually, the markets will go back up and you will be glad you held only stock funds. In fact, if the market took a dive, that is the best time to withdraw from the tIRA. You would be able to remove more shares for the same tax hit.

Example: If you are planning an RMD/Roth conversion of $50K and the shares are $10 each, when the market drops by 50%, you would be able to withdraw/Roth convert $50K worth of $5 shares. When they return to their regular price, it is as if you paid half price on the taxes since you paid taxes on $50K that is now worth $100K!

Think of the Roths as something saved for your heirs, as long as they are people (with birth dates) rather than organizations.

As far as future expensive health care needs, that should be paid from your RMDs as that part of the RMD won't be taxed (as long as the medical expenses are over 10% of your AGI and you itemize.)
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.

User avatar
celia
Posts: 9513
Joined: Sun Mar 09, 2008 6:32 am
Location: SoCal

Re: Big IRA accounts

Post by celia » Thu Jul 11, 2019 4:48 pm

elainet7 wrote:
Tue Mar 26, 2019 11:47 am
having a big ira is fine with me and being in the 24% marginal bracket but an effective tax rate under 20% with no state tax
just did a small partial roth conversion wh ich I will do yearly
Small Roth conversions won't even make a dent in your RMD, since the tIRA is likely growing more each year than how much you withdrew for a Roth conversion.

With a big-valued account, you need to think BIG!

elainet7 wrote:
Wed Jun 19, 2019 7:40 pm
will do more roth conversions
taxes will go higher and my goal of leaving a boatload to kids will be greatly diminished if the money has to be distributed in 10years
The kids who inherit can stretch out the Roth RMDs over THEIR lifetime with the final distribution usually due when they are in their late 80s. By paying the taxes now, the Roth can grow many, many years tax-free.
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.

Topic Author
elainet7
Posts: 211
Joined: Sat Dec 08, 2018 1:52 pm

Re: Big IRA accounts

Post by elainet7 » Fri Jul 12, 2019 6:56 am

all our munis are in taxable
according to lange who has written Extensively on roth conversions, universally he says its a win win to convert

User avatar
celia
Posts: 9513
Joined: Sun Mar 09, 2008 6:32 am
Location: SoCal

Re: Big IRA accounts

Post by celia » Sat Jul 13, 2019 2:00 am

elainet7 wrote:
Fri Jul 12, 2019 6:56 am
according to lange who has written Extensively on roth conversions, universally he says its a win win to convert
That is because you will pay the same taxes on the withdrawal if you put it in taxable or into Roth. With that in mind, why would you want future growth to be taxed (in taxable) when you could have had tax-free growth (Roth)?
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.

afan
Posts: 4269
Joined: Sun Jul 25, 2010 4:01 pm

Re: Big IRA accounts

Post by afan » Sat Jul 13, 2019 5:18 pm

You would want the future growth to be in tax deferred accounts if the tax rate when withdrawn would be lower than when earned or when converted to Roth.

Each person has to estimate current and future income, applicable effects on other things like Medicare rates and decide whether they should convert. For some people converting saves money. Those who will be in lower brackets after retirement, even with RMDs, may be better off not converting.

Estate tax considerations could make conversions pay, accepting an income tax hit in order to reduce or eliminate state or federal estate taxes.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

bsteiner
Posts: 4196
Joined: Sat Oct 20, 2012 9:39 pm
Location: NYC/NJ/FL

Re: Big IRA accounts

Post by bsteiner » Tue Jul 16, 2019 9:01 pm

elainet7 wrote:
Tue Feb 26, 2019 1:23 pm
will do roth conversions to fill 24% bracket
from lange's book retire secure the benefit to the kids that inherit it is enormous
He is correct. I came to the same conclusion in my articles in the April 2013 https://www.kkwc.com/wp-content/uploads ... r_ATRA.pdf and June 2018 https://www.kkwc.com/wp-content/uploads ... ations.pdf issues of Trusts & Estates.

I just read Jim Lange's new book "Retirement Plan Owner's Guide to Beating the New Death Tax" which will be coming out soon. (I'm one of the reviewers.) He continues to emphasize this. He points out that under the Tax Cuts and Jobs Act of 2017, the 24% bracket on a joint return goes up to over $300,000 through 2025, which allows many IRA owners to do Roth conversions at a modest tax rate.
elainet7 wrote:
Tue Jul 16, 2019 7:25 pm
when the rules can change in the middle of the game, some gain and many lose
As Jim Lange and I have discussed, reducing the tax rates and expanding the joint return brackets provides an opportunity for many IRA owners to do Roth conversions at modest tax rates.

We can't discuss proposed changes in the law here, but Jim Lange discusses them in his upcoming book.

bsteiner
Posts: 4196
Joined: Sat Oct 20, 2012 9:39 pm
Location: NYC/NJ/FL

Re: Big IRA accounts

Post by bsteiner » Wed Jul 17, 2019 7:31 am

Someone called to my attention that Jim Lange's new book is available on Amazon in the Kindle edition for 99 cents: https://www.amazon.com/Retirement-Owner ... way&sr=8-1. (He/she should have posted it publicly to claim credit for finding it.) It will soon come out in other versions.

delamer
Posts: 8430
Joined: Tue Feb 08, 2011 6:13 pm

Re: Big IRA accounts

Post by delamer » Sat Jul 20, 2019 11:06 am

bsteiner wrote:
Wed Jul 17, 2019 7:31 am
Someone called to my attention that Jim Lange's new book is available on Amazon in the Kindle edition for 99 cents: https://www.amazon.com/Retirement-Owner ... way&sr=8-1. (He/she should have posted it publicly to claim credit for finding it.) It will soon come out in other versions.
Thanks for the tip. Just downloaded via the Bogleheads’ Amazon link.

Topic Author
elainet7
Posts: 211
Joined: Sat Dec 08, 2018 1:52 pm

Re: Big IRA accounts

Post by elainet7 » Sat Jul 20, 2019 4:01 pm

you can contact james lange for a paper copy

User avatar
LilyFleur
Posts: 334
Joined: Fri Mar 02, 2018 10:36 pm

Re: Big IRA accounts

Post by LilyFleur » Fri Aug 16, 2019 3:56 pm

TomatoTomahto wrote:
Tue Feb 12, 2019 6:35 am
Yes, it’s an admittedly first world problem, but it’s a problem. RMD percentages go up every year. We also “over-saved,” and are somewhat addressing that by spending on home improvements, contributing to Roth 401k rather than traditional, gifting before we die, etc.
+1
I most likely will never drive a fancy sports car (I tried hard to do this...but what I really wanted for my mid-life crisis car was a loaded Honda!)

Due to the wonderful influence of this website, I did the RMD calculator for the first time. Whew. I will be doing Roth rollovers for the next ten years. And, I am going to do the home improvements and enjoy them!

User avatar
TomatoTomahto
Posts: 9069
Joined: Mon Apr 11, 2011 1:48 pm

Re: Big IRA accounts

Post by TomatoTomahto » Fri Aug 16, 2019 4:18 pm

Due to the wonderful influence of this website, I did the RMD calculator for the first time. Whew. I will be doing Roth rollovers for the next ten years. And, I am going to do the home improvements and enjoy them!
Doing home improvements: $$$
Doing home improvements to make home suitable for aging in place (ADA): $$$$$
Doing home improvements without worry or stress: priceless!

Congrats on planning your Roth conversions
Okay, I get it; I won't be political or controversial. The Earth is flat.

Topic Author
elainet7
Posts: 211
Joined: Sat Dec 08, 2018 1:52 pm

Re: Big IRA accounts

Post by elainet7 » Sat Aug 17, 2019 9:05 am

the govt encouraged us to save for retirement and we did it big time s tarting from day 1
James Langes' books are important sources for all investors and he will answer your emails

Post Reply