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Investing/Strategies / Retirement Investing
|Subject: Re: To Roth or not when making very little?||Date: 8/11/2011 7:01 PM|
|Author: JAFO31||Number: 69412 of 75381|
StockGoddess: "At 40-something my new philosophy is Roth it all. I don't want to pay taxes when I retire and if I can afford the extra tax now, while still working, better now than later."
Then you better hope that "Fair Tax" or some other consumption based tax does not replace all or part of the income tax. How about pay income tax now (with the Roth) and then pay consumption tax when withdrawn and spent?
"Also there's the forced distribution in regular IRA's at 70-something, and I plan to live at LEAST 30 years past that, so I don't want to be forced into yanking funds at 70 if I'm still flush enough to let it ride."
Pet has already covered this.
Age 70 RMD = 1/ 27.4 = 3.6496%
Age 80 RMD = 1 / 18.7 = 5.3476%
Age 85 RMD = 1 / 14.8 = 6.7568%
Age 90 RMD = 1 / 11.4 = 8.7719%
Age 92 RMD = 1 / 10.2 = 9.8039%.
Unless you are extremely wealthy outside of IRA assets or are working for significant income after age 70, it seems unlikely that RMDs, while theoretically a problem, will ever actually be a problem for most people.
For example, in 2004, the median net worth for those familes in the USA were $232k for those with HOH age 60-69, $183k for those with HOH age 70-79, and $188k for those with HOH 80+.
Right off the top, RMD are a non-issue for half the population.
In 2004, the median net worth to be in the top 25% for those familes in the USA were $699 for those with HOH age 60-69, $489 for those with HOH age 70-79, and $536 for those with HOH 80+.
I would suggest that really means it is a non-issue for 75%.
In 2004, corresponding top 10% numbers were $1,522 for those with HOH age 60-69, $1,106 for those with HOH age 70-79, and $1,149 for those with HOH 80+.
And those were total net worth numbers, not traditional IRA value numbers. Even if you assume that 1/2 of net worth was in traditional IRA, RMDs for even the top 10% are not particularly scary.
Now maybe you income has been much higher. Or perhaps you have been working at MS or some similar kind of company for years and acquiring company stock years ago at considerably lower prices (in which case you need to learn about NUA and distributions in kind, but that is another story). But I still suggest that the concern is mostly theoretical and not likely to be an issue for the great majority of people.
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