Quote:
Originally Posted by JoelJohnson
Does anyone have any experience with the "Retiree Portfolio Model" put out by the Boglehead group?
How about "Optimal Retirement Portfolio" (ORP)?
I'm trying to figure out if I should (and how much) of my IRA should be converted to a ROTH. Yes, I know there are no taxes on a Roth when you take it out, but, by converting a large IRA you are paying taxes now and are reducing your nest egg with the hope that you will make it up in the future.
The spreadsheet I mention helps with this, but it is very complicated.
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We do not know your age or your income needs.
If, you convert to a Roth you will pay your current tax rate on whatever amount you convert. You do not need to convert it all at once. When you reach age 70.5 you need to take minimum withdrawals from any regular IRA. The minimum withdrawal is calculated each year based on amount in the account AND YOU LIVING TO AGE 100.
Assuming you pass away before age 100, you can leave your IRA to your kids or??? They receive it tax free but are forced to take yearly withdrawals calculated based on them living to age 100. I have a small inherited IRA from my mother. It is like a gift that keeps on giving. I have it conservatively invested, the stock market has been good and after my forced withdrawal, I have more than the original amount.
Few, have bothered to see the obvious for an IRA. Assuming your tax bracket has always been 30%. You can earn a dollar but after taxes you only have .70 to spend.
As they pitch an IRA, rather than spending that .70 you can invest a full 1.00. Magic of compounding at say 7% it doubles every 10.28 years. For a regular IRA the rude suprise is you are forced to take it out of the IRA. If, you are still in the 30% tax bracket YOUR NET SPENDABLE DOLLARS IS EXACTLY THE SAME AS IF YOU HAD PAID THE TAX AND ONLY HAD .70. Enter the ROTH IRA, not avialable to us. It is available to younger people. You deposit after tax dollars into your ROTH and all of the growth as well as the after tax money you put in can be withdrawn FREE OF TAX.
YOUR ACCOUNTANT SHOULD BE ABLE TO BETTER EXPLAIN THIS TO YOU AND WILL HAVE FAR MORE KNOWLEDGE OF YOUR FINANCIAL AND FAMILY MATTERS.
All you need to know is exactly how long you will live, what the government will do about taxes AND INFLATION AND RETURNS ON YOUR MONEY DEPENDING ON WHERE YOU DECIDE TO PLACE IT and the correct answers are simple.
Only trouble is almost all of the information you must have is at best a guess.
We,ex-New Yorkers, moved to Florida and escaped a 6% STATE TAX, a 2% CITY TAX, real estate Tax on a far smaller home about 4x what we pay here