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Subject:  Roth Conversion Alternative Date:  11/27/2021  9:20 AM
Author:  inparadise Number:  105351 of 108263

On the tax strategies board they were discussing tax deductions for charitable gifts. This caught my eye: In addition, you can use a Qualified Charitable Contribution (QCD) to donate as much as $100,000 to qualified charitable organizations each year once you are over the age of 70.5. The IRA custodian transfers the contribution directly from your IRA to the charity. The QCD is a non-taxable distribution from your IRA.

I am sure this is not news to many of you, but while I had heard the term before I never had my AHA moment. We've been making Roth Conversions these past few years while in early retirement, and are trying to figure out if we should continue to do so next year due to DH turning 63 and the 2 year look back for Medicare. Am still super early in that analysis, but the above gives me a second escape if we wind up with larger taxable RMDs than desired.

My nature is to be a planner on steroids, and I get comfort from trying to figure out all our options and possible consequences to our options. If that's not your gig, simply press ignore thread now.

I admit to not having envisioned the rate at which our TIRAs have grown, and how continued growth, (which may not happen,) could balloon our RMDs in 10 years. Admittedly, I am not happy at possibly having to pay a higher tax bracket on funds that we put into IRAs with the expectation of being in a lower tax bracket in retirement. Yes, first world problem, and I am in problem solving mode for this unanticipated consequence of maxing out our IRAs, not complaint mode. We also recently did our will and family trust, at the time wrestling with contributions to charity. It seemed impossible to me to figure out who and how much to give away when we don't know how much we will use before our demise, what charities may crop up between now and then, and what place our kids will be in need-wise at that time.

These QCDs seem like a great solution to both "problems," and take away the angst of trying to figure it all out years ahead with limited knowledge of our future. I can see our figuring out how much in excess our RMD is in our goals for taxes and determining that if we donate $X to charity it will bring down our tax rate as well as make donations during our lifetime, in a way that minimizes risk of donating too much triggering financial need down the road if something happens. We can have family meetings to discuss who to give it to that year, involving the kids, and eventually possibly grandkids, in the process. Being able to do this annually will allow us to change our path if our situation changes.

I realize that tax law can change, but this seems like a good way to not let taxes get out of control, create yet another way for the family to interact, and allow us to give money to charity during our life while protecting our financial future at the same time. Seems like a valid alternative to doing Roth Conversions, at least past 63.

I am not a tax pro. Am I missing anything? Any unintended consequences to consider?


hoping this can trigger thoughtful discussion and not personal attacks
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