Would appreciate thoughts on investing IRA rollover

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Topic Author
sndral
Posts: 5
Joined: Thu Jul 11, 2019 12:32 am

Would appreciate thoughts on investing IRA rollover

Post by sndral » Sun Jul 14, 2019 3:19 am

Emergency funds - yes/$77,000 in checking
Debt - none (mortgage paid off on home, no car loan, no credit card debt)
Tax filing status - single
Tax rate - not really sure as I just retired this year, I believe after this year, which will be higher due to lump sum vacation/sick leave payments, my tax rates will be fed 24% & state 9.3%, until I have to start taking RMDs in 5 years & then they may go up.
State of residence - CA
Age - 65
Desired asset allocation - ? per Vanguard
45% bonds
55% stocks
Current retirement assets -
Taxable - Government pension (low 6 figure) 87% of highest 12 month salary/COLA capped @ 3% w/ any over 3% banked & payable in lower COLA years
Partially taxable (% by fed, 0 by state) - social security net after IRMAA brings gross take home to 110% of highest salary
Non taxable - Vanguard Rollover IRA (from 457(b)) - $862,000 w/ 6% in VEIRX and 94% in short term reserves.
Questions:
1) I need to get the rest of the former 457(b) money invested, for the bond portion I’m considering VBTLX - Vanguard total bond market index fund (expense ratio .05) & VTABX - Vanguard total Int’l Bond index (expense ratio .11) & would appreciate thoughts.
For an International stock option I’m considering putting 10% into VTMGX - Vanguard Developed Markets Index (expense ratio .07) and putting the rest of the % into a domestic index fund.
During market downturns while I was dollar cost averaging into the 457(b) I just stayed the course & kept putting $ in, although watching my ‘money’ disappear from 07-09 sucked, @ that point I was about 90% in stocks. I upped my % bonds during the last 5 years - but only got to 20%.
2) More generally, I don’t really need the IRA money, in fact my net take home is now almost double what it was while I was working because I’m no longer putting $ into deferred comp., retirement, social security, etc. Given that, what are the pros/cons of taking some out on annual basis and moving those funds into a taxable Vanguard account starting next year rather than waiting until RMD time in 5 yr.s?

mhalley
Posts: 7144
Joined: Tue Nov 20, 2007 6:02 am

Re: Would appreciate thoughts on investing IRA rollover

Post by mhalley » Sun Jul 14, 2019 3:56 pm

If you don’t need the money, what about converting it to a Roth instead of putting it in taxable? It results in lower rmds, plus is better for any heirs who might inherit the Roth.

Topic Author
sndral
Posts: 5
Joined: Thu Jul 11, 2019 12:32 am

Re: Would appreciate thoughts on investing IRA rollover

Post by sndral » Sun Jul 14, 2019 5:56 pm

mhalley wrote:
Sun Jul 14, 2019 3:56 pm
If you don’t need the money, what about converting it to a Roth instead of putting it in taxable? It results in lower rmds, plus is better for any heirs who might inherit the Roth.
Thanks - I didn’t realize I could do that!
I realized a few years ago that I was likely to be in a higher tax bracket after retirement and wished I’d done a Roth (although for awhile I made too much money for a Roth.) I thought about just going to a Roth when I rolled it all over and paying the taxes, but the taxes seemed prohibitive & I didn’t research much as things were so hectic at work (I was doing 60-80 hr. weeks, which at 64/65 isn’t easy.)
I didn’t realize that I could just convert some to a Roth!
I just did a little googling - so it looks like I can move any amount of $ into a Roth, as long as I pay the taxes, on a yearly basis as long as I like?
Last edited by sndral on Sun Jul 14, 2019 8:59 pm, edited 1 time in total.

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Wiggums
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Joined: Thu Jan 31, 2019 8:02 am

Re: Would appreciate thoughts on investing IRA rollover

Post by Wiggums » Sun Jul 14, 2019 6:06 pm

mhalley wrote:
Sun Jul 14, 2019 3:56 pm
If you don’t need the money, what about converting it to a Roth instead of putting it in taxable? It results in lower rmds, plus is better for any heirs who might inherit the Roth.
I agree with this suggestion.

You have a great pension with cola. That’s a nice problem to have. Congratulations! Unfortunately, RMDs will increase your taxes. you can calculate your RMDs today and add it to your most recent tax (software) to see the impact if the RMD was required today.

Topic Author
sndral
Posts: 5
Joined: Thu Jul 11, 2019 12:32 am

Re: Would appreciate thoughts on investing IRA rollover

Post by sndral » Sun Jul 14, 2019 9:23 pm

Wiggums wrote:
Sun Jul 14, 2019 6:06 pm
...
I agree with this suggestion.

You have a great pension with cola. That’s a nice problem to have. Congratulations! Unfortunately, RMDs will increase your taxes. you can calculate your RMDs today and add it to your most recent tax (software) to see the impact if the RMD was required today.
Thanks, yes I’ll be running several scenarios I think, now that I have a clearer idea of the options. Or maybe I’ll cash in on that college education I paid for and ask my son the Econ major to do it - he loves his spread sheets - after all, he’ll be inheriting whatever I don’t spend 8-)

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BL
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Joined: Sun Mar 01, 2009 2:28 pm

Re: Would appreciate thoughts on investing IRA rollover

Post by BL » Sun Jul 14, 2019 10:28 pm

Just in case you missed it, you can give to charity with part or all of your RMD, or up to $100k/year with QCD (qualified charitable distributions).

lakpr
Posts: 1887
Joined: Fri Mar 18, 2011 9:59 am

Re: Would appreciate thoughts on investing IRA rollover

Post by lakpr » Sun Jul 14, 2019 10:29 pm

Where will you be getting your health care from? If it is MediCare, be aware of the IRMAA surcharges that are assessed based on what you declared as income two years prior. So large Roth conversions adversely affect your IRMAA premiums 2 years later. If the retiree health care benefits are from the University or State you worked for, you might want to look into what their rules are.

Topic Author
sndral
Posts: 5
Joined: Thu Jul 11, 2019 12:32 am

Re: Would appreciate thoughts on investing IRA rollover

Post by sndral » Sun Jul 14, 2019 11:14 pm

lakpr wrote:
Sun Jul 14, 2019 10:29 pm
Where will you be getting your health care from? If it is MediCare, be aware of the IRMAA surcharges that are assessed based on what you declared as income two years prior. So large Roth conversions adversely affect your IRMAA premiums 2 years later. If the retiree health care benefits are from the University or State you worked for, you might want to look into what their rules are.
Wow, this retirement thing is a whole new world! So my IRMAA will probably go up in 2021 anyway because I was reducing my AGI by maxing my 457(b) contribution 2 years ago.
No retiree health care benefits in my system, that’s part of the reason I kept working until I was eligible for Medicare, retirees in my system used to get a stipend to be used towards health care premiums, but that went away in 2007.
Thanks, one more number to add.

Topic Author
sndral
Posts: 5
Joined: Thu Jul 11, 2019 12:32 am

Re: Would appreciate thoughts on investing IRA rollover

Post by sndral » Sun Jul 14, 2019 11:22 pm

BL wrote:
Sun Jul 14, 2019 10:28 pm
Just in case you missed it, you can give to charity with part or all of your RMD, or up to $100k/year with QCD (qualified charitable distributions).
Yes, I have a lot to learn. I’ve been volunteering for over a dozen years at a non profit.

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