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So I have followed some of the RMD threads here with interest, as I am 70.5 this year and am finally facing the dragon. It occurs to me now, belatedly, that I was not as smart as I thought with all of this.

I am in the exceptionally fortunate position of having a phat IRA, and my RMD's will virtually assure me of bumping up into higher brackets. Add in rental income, social security, dividends and interest, and my marginal dollars will be percentaged bigly.

It also occurs to me that I have had several years in the past 20, since I retired, when my income was miniscule; before Social Security, after paycheck, and when all the stock gains were unrealized. (I also had a couple where the capital gains killed me, but that was in '99, and it turned out well, heh.) Heck, I had a couple years when I was in the famous 47% who paid no Federal tax at all.

So there were several years where I could have extracted monies from the IRA and remained in a low bracket, and just moved that money over to our regular brokerage and/or some of it into a Roth (I did do that, but small quantities, as I was permitted)

Anyway, if you have not yet hit the 70.5 goal line, thinking ahead, year by year, may enable you to knock many percents off the tax take if you do it strategically across time. (Yes, we had an accountant, who never mentioned any such thing. And occasional "sessions" with "financial consultants" who we did not hire, but who likewise never said anything like this, but who were only too eager to put our money to work in illiquid investments, annuities, or with some guy named Bernie somethingorother.)
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goofy:"I am in the exceptionally fortunate position of having a phat IRA, and my RMD's will virtually assure me of bumping up into higher brackets. Add in rental income, social security, dividends and interest, and my marginal dollars will be percentaged bigly."

Ah, yes, the tax man comes to collect. One way or other.

Fortunately, I did not have enough working time to stash a lot of cash into my IRA.....or should I say it's about 23% of my total assets, not counting the house. So....it spins off an RMD that is hitting the higher marginal bracket. Worse, between dividends, interest, any cap gains, it pushes me up to the second increase in Medicare and Drug Plan 'surcharges' costing me another $1500 a year.

I"m thinking of making charitable donations directly out of the IRA.

Let us say you have a million dollar IRA. You can direct your custodian to make, say, a $5000 donation, and it counts toward your RMD amount for the year. So instead of about $36,500 the first year, you would only have to then take $31,500. If you want to donate that much to one 501C type organization. No taxes due on it. Of course, you cannot then deduct it from your income tax return.



"It also occurs to me that I have had several years in the past 20, since I retired, when my income was miniscule; before Social Security, after paycheck, and when all the stock gains were unrealized. "

Well, in the past 17 years of retirement, my IRA more than doubled - so it grew and grew nicely. Sort of ballooned even though close to 50/50 - I lived off interest and dividends from my regular brokerage accounts. Probably could have converted some along the way at about the same bracket I am in now. Took SS early - had some serious health issues in early 60s...that took a year to solve.....and family tree for men tends to end before 80....so hoping to break the trend, but it really didn't seem like I'd reach the breakeven point of late 80s to come out ahead.

Now the IRA money RMD goes into the checking account but I'm having trouble trying to ramp up spending to spend it! Been LBYM for 50 years and likely to continue.


t.
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I am in the exceptionally fortunate position of having a phat IRA, and my RMD's will virtually assure me of bumping up into higher brackets.

Congrats! I hope my 401k/IRA grows enough that one day RMD's push me into a high tax bracket. First world problems, indeed... ;)
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I converted my IRAs to ROTH accts some years back.

It shouldn't be a chore in investing money you don't need to spend right now. Buy stocks or something paying more than your checking account.

Lucky Dog
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"Anyway, if you have not yet hit the 70.5 goal line, thinking ahead, year by year, may enable you to knock many percents off the tax take if you do it strategically across time. (Yes, we had an accountant, who never mentioned any such thing. And occasional "sessions" with "financial consultants" who we did not hire, but who likewise never said anything like this..."

Yep. I am 61 and this board has taught me more in the last couple of years than either my CPA or any of my 'financial advisors.'

When I was in law school back in 1902 the law professors harped on the fact that the most important skill was learning how to ask questions. If you know enough to know how to ask the right questions, then you can figure out the answers when you do your research.

Like you, I never knew enough about money to ask the right questions. I had spent the first 30 years of my career working to feed, clothe, house and educate my family while mindlessly putting what I could into tax advantaged accounts.

Now I am puzzling out a path that bears some resemblance to the one described by PSU on this board.

Neither jgcspouse nor I will take SS this year because we are both working and earning. We can't dodge the 33% tax bracket this year (I guess am bragging again, not complaining), but we can max her 403(b) and grow our taxable accounts in growth stocks with decent total returns and few taxes, tax advantaged dividend stocks and even some prvax (Va Municipal bond fund).

And I can continue to put together questions for when we do retire. What are the tax implications of cashing my whole life policy and putting it to work? (I think I know the answer now).

What are the tax implications of selling our beach house? If I take a loss, can I offset it against my gains on cashing my whole life policy thereby raising additional cash with minimal taxes? (I think I know the answer).

Then, when we are both retired, how much can I shift from my IRA to taxable accounts without jumping into the 28% tax bracket? (should be answerable with basic arithmetic).

Etc.

This board is helping me figure out what questions to ask.
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goofy:"I am in the exceptionally fortunate position of having a phat IRA, and my RMD's will virtually assure me of bumping up into higher brackets. Add in rental income, social security, dividends and interest, and my marginal dollars will be percentaged bigly."

Ah, yes, the tax man comes to collect. One way or other.


Mostly true, but the way I read posts like these is that one is in a higher tax bracket some years, and could have incurred some of that income in a low tax year, or even a year where there was "headroom" before hitting the first tax bracket. If you knew then what you know now, would you have done something different:
-Forgo regular IRA or 401k in favor of a Roth?
-Re-characterize IRA money as a Roth and pay taxes in a "low impact" year
-Withdrawn money from an IRA and invested it in stocks or low-turnover funds so as to pay long term cap gains rate vs. regular income rate
?

You can't know every future break point and rate, but we should try to make a "first order" approximation to see if there are clearly superior stratagems to continuing on as we're doing. One clear breakpoint is selling of a home, which has good capital gains treatment if it's been your primary home two of the previous five years. I saw one couple who moved to Florida and kept their old home, selling it after four years and *then* asked their financial guy how to make the sale tax free. Had they been aware of the rules, they could have saved a LOT of taxes.

In a way it's like tax deductions: If your deductions are right at the level of the standard deduction, can you draw some deductions into one year to exceed that and itemize, and leave the standard deduction for the year where you have way fewer deductions?
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