Quote:
Originally Posted by tcxr750
My understanding is that you could convert a portion of your conventional IRA every year instead of a full conversion into a Roth. This would lessen the impact on taxes. An accountant would have this information.
My issue with the conventional IRA that I didn’t realize until 70 1/2 is that the percentages that you are required to withdraw increase every year. The downside of this occurs during an economic downturn (Great Recession) when you would like to stop withdrawals but the RMD is still required on a conventional IRA.
There are a number of RMD calculators on the internet. You can plug in your numbers and watch the withdrawal percentages go up and your account value go down.
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Thank you tcxr, I did not know about the annual percentage increases.
As far as those down years are concerned, that is why leaving a moat of cash around stocks can be especially important at RMD age -- to avoid being put in the position of having to sell stocks to pay taxes.
Even though the ROI on cash is not much, at RMD age, investing in the cost of sleep could be counted as ROI. An additional hit in that down year stock selling scenario could be for dividend investors who buy and hold for dividend income. They could lose on both stock price and the income stream. As we all know, the bull never runs forever.
With an awareness of brackets and Medicare premium income thresholds, there is still time to project taxes to see if there is room for a conversion to Roth -- which for RMD agers can be done only after the RMD amount has been met. Could be worth looking at -- or not.
As I have made quite obvious in posts I have been writing, for some reason, I feel the need to preach about the potential benefit of using the QCD as part or all of the RMD. It can make such good sense in some situations. (I try not to preach in person about the wonders of the QCD -- though sometimes I can't help it.)
Here is a link to an article from Kiplinger that clearly lays out all the QCD stuff. (I like the style of Kiplinger articles -- short, clear, and nothing esoteric.)
Rules for Making a Tax-Free Donation from an IRA
Warning: My advice is worth exactly what you are paying for it. But if it has started you thinking, please get professional advice. I am not a CPA or a CFP or anything of the sort. For all anybody knows, I could be a retired high school English teacher.