Capital Gains Tax Bump, RMDS, Soc Sec and taxes help

[JeffRome2023]

Big topic but after reading Kitces articles on the capital gains tax bump, I am wary of hitting the 27% tax conundrum. https://www.kitces.com/blog/long-term-c ... in-0-rate/

We are retired and have relatively simple tax input--I can manipulate how much ordinary income and capital gains we take each yearly quite easily. We are not taking Social Security for a 5 years--when I am 70. And are almost 8 years from RMDs. Basically, I want to figure out as simply as possible how much of each I should take from our brokerage accounts (and my wife still works part time) to minimize taxes now and in the future--meaning I'd like to spend down my traditional IRA as well. We have more in taxable accounts than IRAs--but a substantial amount in each. We use Vanguard for our brokerage account, mostly in ETFs. I want to keep us out of the 27% tax bump hit. And if possible avoid Roth conversions, but that is not off the table.

Is there any simple (I'm not a math or computer guy but have handled our investments for the last 25 years well enough) calculator or tool that will allow for this?

[FiveK]

Is there any simple (I'm not a math or computer guy but have handled our investments for the last 25 years well enough) calculator or tool that will allow for this?

The Tax estimation tools wiki describes several.

"Simple" is in the eye of the beholder. If you can do Excel at all, the "toolbox" one described there will show you your marginal tax rate pretty much automatically for your various options.

Otherwise, you might prefer one of the web-based options.

If you do try the Excel route, the Using a spreadsheet section of the Roth conversion wiki, and/or the Roth Conversion with Social Security and Medicare IRMAA article might be helpful.

[Exchme]

It's a complex problem, the simple solutions you are hoping for won't get you a useful answer as you have to look at projections of your whole future to estimate what makes sense to do today. Either you need to use one of the better calculator tools like the free Retiree Portfolio Model (at the wiki) or the paid Pralana (pralaretirementcalculator.com). Both have learning curves, so if you are not prepared to learn, then you should probably hire a one-time-fee planner to make a plan for you - just avoid the Assets-Under-Management fee model as that will cost you 10 times as much as paying cash for a plan.

[steadyosmosis]

It helps me tremendously that I do my own tax returns.
At least quarterly every year, I prepare a Form 1040 to determine my taxable actions toward my desired tax bracket.
More often as we get nearer 12/31 each year.
(Also, multi-year projections to ensure lifetime tax efficiency.)

[FiveK]

It's a complex problem, the simple solutions you are hoping for won't get you a useful answer as you have to look at projections of your whole future to estimate what makes sense to do today.

Some projections of one's future tax rates are needed for any reasoned choice of what one should go within this year's tax rates.

Those projections are subject to uncertainties in tax law, market returns, one's individual situation, etc.

Tools such as RPM, Pralana, etc., may be useful in unusual situations, or to people who like to analyze many "but what if...?" situations. Nothing wrong with that.

A simpler solution that is very likely to provide a useful answer is
1) take your best guess at your likely marginal tax rate after taking pensions, SS, and RMDs
2) use that rate as your target for the current year.

Again, no one size fits all, but complex models aren't always necessary to make a reasonable plan.

[Exchme]

It's a complex problem, the simple solutions you are hoping for won't get you a useful answer as you have to look at projections of your whole future to estimate what makes sense to do today.

Some projections of one's future tax rates are needed for any reasoned choice of what one should go within this year's tax rates.

Those projections are subject to uncertainties in tax law, market returns, one's individual situation, etc.

Tools such as RPM, Pralana, etc., may be useful in unusual situations, or to people who like to analyze many "but what if...?" situations. Nothing wrong with that.

A simpler solution that is very likely to provide a useful answer is
1) take your best guess at your likely marginal tax rate after taking pensions, SS, and RMDs
2) use that rate as your target for the current year.

Again, no one size fits all, but complex models aren't always necessary to make a reasonable plan.

But you already know the concepts and can tell at a glance what's trivial vs. important. OP is asking how to navigate the complexities of the tax code, there is nothing simple about that to inexperienced folks. I like complex models because they teach me how the various parts of the tax code, changes in life circumstances, expenses, investment returns, etc. fit together and affect the plan. So I not only make a plan, I gain a feel for how to adjust it as the future unfolds.

If OP is unclear on the concepts and doesn't want to learn about the nuances of the tax code and learn a tool implementing them, then I would recommend hiring a planner. A good planner would start by asking questions about charitable goals, protection in case of long term care needs, possible relocation/change in tax jurisdiction, major expenses to plan for, risk tolerance, how much optimizing they wish to do for heirs, any special needs of heirs, etc. That may be what's really needed in this case, it's probably more reasonable to hire a planner and get them to prepare a plan that can start to be implemented in 2024 than to create one from scratch and get up to speed before end of the year.

[FiveK]

Some projections of one's future tax rates are needed for any reasoned choice of what one should go within this year's tax rates.

Those projections are subject to uncertainties in tax law, market returns, one's individual situation, etc.

Tools such as RPM, Pralana, etc., may be useful in unusual situations, or to people who like to analyze many "but what if...?" situations. Nothing wrong with that.

A simpler solution that is very likely to provide a useful answer is
1) take your best guess at your likely marginal tax rate after taking pensions, SS, and RMDs
2) use that rate as your target for the current year.

Again, no one size fits all, but complex models aren't always necessary to make a reasonable plan.

But you already know the concepts and can tell at a glance what's trivial vs. important. OP is asking how to navigate the complexities of the tax code, there is nothing simple about that to inexperienced folks. I like complex models because they teach me how the various parts of the tax code, changes in life circumstances, expenses, investment returns, etc. fit together and affect the plan. So I not only make a plan, I gain a feel for how to adjust it as the future unfolds.

Understood that you like complex models. Personally, so do I (although "complex" can be in the eye of the beholder). But in general, just as index funds are fine despite Fear, Uncertainty, and Doubt proffered by financial advisors as a reason for AUM models, relatively simple tools are fine for deciding what to do "this year".

If OP is unclear on the concepts and doesn't want to learn about the nuances of the tax code and learn a tool implementing them, then I would recommend hiring a planner. A good planner would start by asking questions about charitable goals, protection in case of long term care needs, possible relocation/change in tax jurisdiction, major expenses to plan for, risk tolerance, how much optimizing they wish to do for heirs, any special needs of heirs, etc. That may be what's really needed in this case, it's probably more reasonable to hire a planner and get them to prepare a plan that can start to be implemented in 2024 than to create one from scratch and get up to speed before end of the year.

Nothing wrong with a one-time perspective from a good financial advisor (i.e., not a salesperson). Ironically, such perspective might be all the more valuable after one is reasonably up to speed on those issues - so the client can better understand the advice - but at that point the advice may not be needed.

Again, complex models may have a place for some, but given all the uncertainties in predicting the future accurately, improved precision from accounting for every input may not be worth the effort for others. As is often the case, "it depends...".

[cheese_breath]

... I'd like to spend down my traditional IRA as well...

"Spend down"? Convert to Roths and continue living off your taxible.

[sc9182]

Mo money - Mo taxes; there is not much legal-ways of getting around that!

As for OP’s question, a bit more detail (and perspective) shared here:
https://jsevy.com/wordpress/index.php/f ... hnut-hole/