[retiredguy123]

Originally Posted by Boomer

Many years ago I had a CPA I loved. He loved me, too. (Not real love, not hubba-hubba love, just the kind of love between a CPA and a multi-faceted woman who loved to pick his brain and always showed up prepared. But he retired. (sigh) I then found another CPA and I liked him a lot, but he retired on me, too. (Hmmmm, should I be taking these CPA retirements personally?)

And so, now, I have a wet-behind-the-ears CPA who is also a lawyer in the office of our regular lawyer. He’s fine, but I have to teach him a little something once in a while — like how the way I do our QCDs is OK because of where the IRAs are on deposit.

(Of course, I took him well-sourced documentation on the subject to make sure he knew that this retired high school English teacher knew what she was talking about. . .And about that English teacher thing, yes, I know in my posts I bastardize the hellouta punctuation, but I know I am doing that and it’s OK. And I will never correct anybody else, unless it is to share a laugh about a funny typo. We all have them. Although, I do wish some people would double-space longer posts into paragraphs to make them more readable — to make them look less like a manifesto — but I digress.)

Anyway, the new young CPA is coming along nicely and I don’t think he will retire any time soon.

Long story longer — CPA #1 — you never forget your first — used to tease me a little about doing those Roth conversions before RMD age. He always said, “Why do you want to pay your kids’ taxes?” I would explain that it was not about anybody else’s taxes, and that I had projected taxable income, found some room to take a little more hit, and took the opportunity. (It just seemed like a good idea at the time. And I was right. But as I said earlier, I regret not doing more of those conversions while I could.)

I still project taxable income and buffer our RMDs with QCDs, especially if I think the next year is not going to bring any need for extra income. And when I reach a point where there could be a reason to keep more of the RMDs for ourselves, I will do that. But, for now, I stay well-aware of thresholds and IRMAA. . .I always picture IRMAA as that big mean girl who was always waiting to give me a hard time in PE class when I messed up, in even a slight way, on whatever the sport du jour happened to be. The only time I was ever any good at PE was trampoline time. Oh, well. . .

Uh, oh. . .I sure am digressing today, killing time, it looks like, so I better get back to real life, where I think I need to stop thinking about Roth conversions at this point in our lives.

But to answer your question, “Why now?” — it’s because sometime I might want a little extra ice cream on my cake.

Boomer

I agree with CPA #1. I never could justify a Roth conversion. But, my IRA assets have always been in bonds. I maintained my stock investments outside the IRA to take advantage of the lower capital gains rate. I had a friend who converted all of his IRA into a Roth so that his children could inherit his money tax free. It is also hassle free as compared to inheriting a traditional IRA.

Remember, that, if you ever have a huge medical bill, like assisted living, a nursing home, or home care, you can use money in your traditional IRA and take a medical tax deduction.

[Boomer]

Originally Posted by retiredguy123

I agree with CPA #1. I never could justify a Roth conversion. But, my IRA assets have always been in bonds. I maintained my stock investments outside the IRA to take advantage of the lower capital gains rate. I had a friend who converted all of his IRA into a Roth so that his children could inherit his money tax free. It is also hassle free as compared to inheriting a traditional IRA.

Remember, that, if you ever have a huge medical bill, like assisted living, a nursing home, or home care, you can use money in your traditional IRA and take a medical tax deduction.

About those inherited IRAs, the tax law changes seem to have tripped up some of that for beneficiaries. I just went through re-visiting beneficiaries on IRAs in relation to the tax law and a trust. Some places limit the contingents that can fit on the IRA (traditional) online form, so you have to have an “on-file” added. I found that a little aggravating. I needed only one more contingent line but it took an extra hoop to jump through to get it.

Boomer

[CoachKandSportsguy]

Originally Posted by Boomer

Many years ago I had a CPA I loved. He loved me, too. (Not real love, not hubba-hubba love, just the kind of love between a CPA and a multi-faceted woman who loved to pick his brain and always showed up prepared. But he retired. (sigh) I then found another CPA and I liked him a lot, but he retired on me, too. (Hmmmm, should I be taking these CPA retirements personally?)

And so, now, I have a wet-behind-the-ears CPA who is also a lawyer in the office of our regular lawyer. He’s fine, but I have to teach him a little something once in a while — like how the way I do our QCDs is OK because of where the IRAs are on deposit.

(Of course, I took him well-sourced documentation on the subject to make sure he knew that this retired high school English teacher knew what she was talking about. . .And about that English teacher thing, yes, I know in my posts I bastardize the hellouta punctuation, but I know I am doing that and it’s OK. And I will never correct anybody else, unless it is to share a laugh about a funny typo. We all have them. Although, I do wish some people would double-space longer posts into paragraphs to make them more readable — to make them look less like a manifesto — but I digress.)

Anyway, the new young CPA is coming along nicely and I don’t think he will retire any time soon.

Long story longer — CPA #1 — you never forget your first — used to tease me a little about doing those Roth conversions before RMD age. He always said, “Why do you want to pay your kids’ taxes?” I would explain that it was not about anybody else’s taxes, and that I had projected taxable income, found some room to take a little more hit, and took the opportunity. (It just seemed like a good idea at the time. And I was right. But as I said earlier, I regret not doing more of those conversions while I could.)

I still project taxable income and buffer our RMDs with QCDs, especially if I think the next year is not going to bring any need for extra income. And when I reach a point where there could be a reason to keep more of the RMDs for ourselves, I will do that. But, for now, I stay well-aware of thresholds and IRMAA. . .I always picture IRMAA as that big mean girl who was always waiting to give me a hard time in PE class when I messed up, in even a slight way, on whatever the sport du jour happened to be. The only time I was ever any good at PE was trampoline time. Oh, well. . .

Uh, oh. . .I sure am digressing today, killing time, it looks like, so I better get back to real life, where I think I need to stop thinking about Roth conversions at this point in our lives.

But to answer your question, “Why now?” — it’s because sometime I might want a little extra ice cream on my cake.

Boomer

Why a ROTH conversion, of which you are proud of your decision versus a perceived professional, is not at all the question, nor the history . . remember, cpas and tax prep professionals have a current tax minimization today motivation. Tax minimization strategy is what you did, which is not their strength most of the time.. . . for that you need a planning professional, very different animal, one looks forward, the other looks backward. Very well done, and no criticism of your move to ROTH.

But now that the conversion is done, the question is for wealth maximization in conjunction with tax minimization, under what future scenarios for those two constraints or goals, does it make sense to take any money out of a Roth, versus using other sources of wealth. .

to be clear, the question is a future scenario question, one of which you are struggling for the constraints listed above. (which is the difference between finance and accounting) I am a finance professional, who only looks forward, as I can't change history, but I can influence the future towards wealth maximization and tax minimization, which is the point of the question.

looking forward to your thoughtfulness on your future decisions

[manaboutown]

Back in 2002 I had an anomalous extremely low income tax year and the market was off so I took a leap of faith and converted my entire IRA to a Roth. Glad I did!

[dewilson58]

Just got an email today from an investment guy (who I have listened to over the years)..................."Given the slump in the market, you should convert some traditional IRA dollars to Roth."

[triflex]

Only annuity I would consider is a life annuity which can be quoted through Immediate Annuities - Income Annuity Quote Calculator - ImmediateAnnuities.com . There are no commissions for the most part and that is why no one ever hears of them.

The life annuity is easy to understand. You get a quote on how much you will get monthly based upon the invested amount. Just divide the monthly quote into how much you invested and divide by 12 to see how many years it takes just to recover your investment.

To me it still makes no sense to buy even that annuity because they are based on bonds I believe. It just makes too much sense to stay in the stock market.

I would only ever consider it via the highest rated insurance company they offer.

[CoachKandSportsguy]

Originally Posted by dewilson58

Just got an email today from an investment guy (who I have listened to over the years)..................."Given the slump in the market, you should convert some traditional IRA dollars to Roth."

what is the thought process behind that decision? just curious, is it to reduce future RMD in by creating a smaller IRA? but then if the market comes back, you are right back in the same situation. . . if your IRA was cut in half, would the mean to take out more? sounds like a tax minimization strategy of some sort.

just curious as i also look for hidden incentives. . and this one is a head scratcher for me. . so I must be missing something . .

[Boomer]

Originally Posted by CoachKandSportsguy

Why a ROTH conversion, of which you are proud of your decision versus a perceived professional, is not at all the question, nor the history . . remember, cpas and tax prep professionals have a current tax minimization today motivation. Tax minimization strategy is what you did, which is not their strength most of the time.. . . for that you need a planning professional, very different animal, one looks forward, the other looks backward. Very well done, and no criticism of your move to ROTH.

But now that the conversion is done, the question is for wealth maximization in conjunction with tax minimization, under what future scenarios for those two constraints or goals, does it make sense to take any money out of a Roth, versus using other sources of wealth. .

to be clear, the question is a future scenario question, one of which you are struggling for the constraints listed above. (which is the difference between finance and accounting) I am a finance professional, who only looks forward, as I can't change history, but I can influence the future towards wealth maximization and tax minimization, which is the point of the question.

looking forward to your thoughtfulness on your future decisions

I understand everything we own. A professional might have been able to show a bigger return, but we’re OK with our own decisions and our returns.

My wiring is such that I like taking the responsibility for investment decisions. In fact, I really do think we are all wired in whatever way when it comes to money. I don’t know exactly why I am wired with an interest in investing, etc., but I am glad I am, and Mr. Boomer is happy about it, too.

Giving somebody one percent, annually, taken quarterly, whether the accounts are up or down is not something we are ready to do.

I have been at this for decades — in a sort of comfort zone. Maybe boring, but a comfort zone.

I do have a philosophy of investing. It is simple and categorized and forward-looking — and backward-looking — because I think many investors often suffer from amnesia. And I pay attention. No spreadsheets or formulas involved, just making sure I completely understand what we own — and what those companies do — and how they are doing at doing it, along with general awareness of things I might need to be aware of — like taxes — and have been getting tax advice along the way. I understand cap gains very well and play them carefully.

Mr. Boomer and I have a backup plan if I get to the point where I start investing in Franklin Mint plates or Pez dispensers or Beanie Babies. We have interviewed a few planners and know who we will see if we feel like we need or want to.

The main aggravation I have now is that there is no return on cash in that moat I maintain around the stocks. Our parents could always get returns on CDs. I don’t think we will ever see returns on CDs again. But, even so, I know to never get us into the position of having to sell stocks to pay taxes — thus, the moat will continue to be around.

All advisors can claim big returns right now. Bigger than mine, no doubt. But the old bull has been running for a long time. He must be getting awfully tired — and there sure seem to be a lot of picadors around these days. Whatever happens, I will stay swaddled in our comfort zone with my unsophisticated approach, still making our own decisions, while we can.

Btw, I am now over the idea of looking further into Roth conversions at RMD age. The existing Roth will be there already — and all ready — if we want it for a tax-advantaged expenditure. But I still regret not doing more conversion before RMD age. But that’s just me and my whole picture wiring.

Thanks for the conversation.

Boomer

[dewilson58]

Originally Posted by CoachKandSportsguy

what is the thought process behind that decision? just curious, is it to reduce future RMD in by creating a smaller IRA? but then if the market comes back, you are right back in the same situation. . . if your IRA was cut in half, would the mean to take out more? sounds like a tax minimization strategy of some sort.

just curious as i also look for hidden incentives. . and this one is a head scratcher for me. . so I must be missing something . .

Thoughts: Market will be back, able to convert more dollars today. & Convert to maximize "lower" tax brackets.

[triflex]

I just quoted myself on a Life Annuity and it would take 44 years to recoup just the money I paid in. Putting me at 101 before I start to eat into the insurance company's assets.

I bought a big chunk of Goldman Sachs stock today. I'll take my chances with that.

[Boomer]

Originally Posted by dewilson58

Just got an email today from an investment guy (who I have listened to over the years)..................."Given the slump in the market, you should convert some traditional IRA dollars to Roth."

Wils, he might not have meant literal dollars. He might have meant that if you want to convert in-kind shares, you can get more shares out at a lesser gain in a down market and back into a Roth if you want to do that. Of course, if the share price then goes lower, the ROI might not happen for a while, especially when factoring in the face value of the committed shares that would be taxed on the way out of the traditional IRA.

At least, I think that’s what it means. I am pretty sure I am right about in-kind transfers so you don’t have to sell the stock. But it is entirely possible that I have no idea what I am talking about.

This is really a question for the OP. I just keep killing time today. (sigh). Besides, I think I must be the only one in this lineup who thinks conversion to Roth before RMD age — and only if the stars align — can be an excellent idea.

OP? In-kind is OK, right?

Boomer

[dewilson58]

Originally Posted by Boomer

Wils, he might not have meant literal dollars.

Not cash dollars...............stock dollars, a/k/a current value.

You can transfer stock, depreciated or not, that you hold in a traditional individual retirement arrangement or qualified retirement account into a Roth IRA.

When you convert a qualified account to a Roth IRA, you create taxable income in the conversion year. The income is taxable at your marginal rate. The taxable amount is the current value of the assets transferred, excluding any nondeductible contributions. The IRS has you value the conversion equal to the amount of taxable income you would create had you simply withdrawn the proceeds rather than converting them into a Roth IRA.

[Boomer]

Originally Posted by triflex

Only annuity I would consider is a life annuity which can be quoted through Immediate Annuities - Income Annuity Quote Calculator - ImmediateAnnuities.com . There are no commissions for the most part and that is why no one ever hears of them.

The life annuity is easy to understand. You get a quote on how much you will get monthly based upon the invested amount. Just divide the monthly quote into how much you invested and divide by 12 to see how many years it takes just to recover your investment.

To me it still makes no sense to buy even that annuity because they are based on bonds I believe. It just makes too much sense to stay in the stock market.

I would only ever consider it via the highest rated insurance company they offer.

Even on my favorite money show, WealthTrack on PBS, Christine Benz, Morningstar’s Director of Personal Finance, mentioned that some annuities are OK. If I am remembering correctly, she said that some annuities have more transparent language of in their contracts than others do. The reason I personally have avoided annuities is because I do not completely understand the various types and would rather just wing it with dividend stocks. But that’s just old buy-and-hold me. I know others who are comfortable with annuities though.

Christine Benz was interviewed on the January 14 episode which can be found on Consuelo Mack’s Wealthtrack YouTube stuff. That episode was a really good one. She also addressed withdrawal rates, along with alluding to the bumpy ride we could be facing until inflation calms down.

Boomer

[davem4616]

I'm totally in the camp of enjoying the money we put aside

kids are fine with that (like that would influence me)

[Boomer]

Originally Posted by dewilson58

Not cash dollars...............stock dollars, a/k/a current value.

You can transfer stock, depreciated or not, that you hold in a traditional individual retirement arrangement or qualified retirement account into a Roth IRA.

When you convert a qualified account to a Roth IRA, you create taxable income in the conversion year. The income is taxable at your marginal rate. The taxable amount is the current value of the assets transferred, excluding any nondeductible contributions. The IRS has you value the conversion equal to the amount of taxable income you would create had you simply withdrawn the proceeds rather than converting them into a Roth IRA.

Don’t know how old you are. Not my business. But I do not regret having done it in my younger days. Having to get past RMDs and then add it on on top makes it not as much fun to do.

Boomer