ira waterfall
i’ll be 72 in 3 months, still working part-time, might retire 2021, OR, in 1-3 years
Bob Carlson (“retirement watch”) eloquently describes how rmd s create a very real “ira waterfall” by age mid-80s.
irs tables show i will likely have 200-220 000 annual rmd (6% annual) at 80, (plus good pension, and, good social security).
result is much much higher future taxes (though in “inflated” value?), plus, no deductions
so, start roth conversions now, pay taxes now, because future rmd are so high,
PLUS, tax rates “might” (or, might not), go up,
(yes, watch not to push up current post-conversion marginal rates too high)
have one year expenses in rainy day saving, (plus continued monthly cash flow) plus some roth. all else is in 457b & tira
HELP, HELP.
IRA help, investment help.
thx alan, and others
Permalink Submitted by Alan - IRA critic on Thu, 2020-12-31 17:17
It’s probably too late now, but since your RMD for 2020 was waived, this would have been a great year to convert what would have been your RMD amount, maybe more. The new RMD tables that go into effect in 2022 will also help a little, maybe 6% reduction for RMDs 2022 and beyond. Although future conversions will increase your SS IRMAA and also expose you to the NIIT surcharges depending on your filing status (single v joint), you should probably be converting to the top of the 24% bracket now, and also consider moving to a low or no income tax state if you are in a high tax state now. In the big scheme of things however, you cannot avoid the bulk of the taxes without donating. You can do QCDs up to 100,000 per year and that will reduce your AGI and taxable income by a large amount.