[CoachKandSportsguy]

Originally Posted by dougjb

Social Security will become totally tax free....when cows fly!

I like it, low expectations .

How do you make your golf drive look great?
start out by assuming its a lost ball. .
and then when its in the fairway,
joyousness abounds !

[SaucyJim]

In a similar "calculator" mode for a Roth conversion right now. I have ZERO W2 income and am married. Neither of us on social security. Here are my thoughts for a 100% tax-free IRA -> Roth conversion:

Max out HSA with single contribution: $9550 (family w/$1000 catch-up)
Take standard deduction for my spouse and myself: $30,000

So, I can "safely" move $39,550 at ZERO tax, right?

That leaves me with:

* 10% tax bracket on next $23,850 of rollover ($2385 tax)
* 12% tax bracket on next $73,100 of rollover ($8772 tax)

Combined, you get an $11,157 tax on $96,950 -- overall, an 11.5% tax rate to convert all those IRA funds for tax-free income of the funds, which are all positioned in income-producing positions.

So, if you add in the $39,500 tax-free conversion, we're going to convert a total of $136,450 IRA to Roth with only $11,157 in taxes. If my calculations are correct, that's, ultimately, a 8.18% tax on the total conversion. Right?

Please chime in if I have something wrong here. I've run this past my tax guy, but my confidence in him has waned in recent years, as he's further down the aging path than I at this point.

Go!!

[Dexterconfetti]

Can you run scenarios for singles on SS. Especially IRMMA.

Thanks.

[CoachKandSportsguy]

Originally Posted by SaucyJim

In a similar "calculator" mode for a Roth conversion right now. I have ZERO W2 income and am married. Neither of us on social security. Here are my thoughts for a 100% tax-free IRA -> Roth conversion:

Max out HSA with single contribution: $9550 (family w/$1000 catch-up)
Take standard deduction for my spouse and myself: $30,000

So, I can "safely" move $39,550 at ZERO tax, right?

That leaves me with:

* 10% tax bracket on next $23,850 of rollover ($2385 tax)
* 12% tax bracket on next $73,100 of rollover ($8772 tax)

Combined, you get an $11,157 tax on $96,950 -- overall, an 11.5% tax rate to convert all those IRA funds for tax-free income of the funds, which are all positioned in income-producing positions.

So, if you add in the $39,500 tax-free conversion, we're going to convert a total of $136,450 IRA to Roth with only $11,157 in taxes. If my calculations are correct, that's, ultimately, a 8.18% tax on the total conversion. Right?

Please chime in if I have something wrong here. I've run this past my tax guy, but my confidence in him has waned in recent years, as he's further down the aging path than I at this point.

Go!!

Looks basically good, and any error in too much IRA conversion wouldn't be tax catastrophic. .
Not totally clear, you are saying that you have zero income for 2025? no 1099, no interest and dividend income, no capital gains income and you can live in the villages paying 50K a year in living and food expenses?

What source of funds are you using to pay expenses that is not taxable? and you must have some funds earning taxable income?

[SaucyJim]

Originally Posted by CoachKandSportsguy

Looks basically good, and any error in too much IRA conversion wouldn't be tax catastrophic. .
Not totally clear, you are saying that you have zero income for 2025? no 1099, no interest and dividend income, no capital gains income and you can live in the villages paying 50K a year in living and food expenses?

What source of funds are you using to pay expenses that is not taxable? and you must have some funds earning taxable income?

I have liquidity to pay my bills even without consulting. My consulting income is via my corporation where I contributed to keep it afloat for a couple of decades while working full-time. So, I can now earn against those contributions, taking them as distributions. The money was already taxed, so it's a tax-neutral transaction. I'm continuing to consult (10-15 hours a week), so I don't need to have any sort of earnings, otherwise. My dividends are reinvesting so the monthly income continues to rise when I finally pull that trigger. My wife is eligible for social security, but we're waiting to let the monthly amount grow since her mother lived to 90. My dad is 89 and still kickin' (poor mom), so I'm also going to hold off on starting social security for a couple of extra years -- though I don't really have to.

I hope that explains things. Or I'm going to jail. LOL!!

[CoachKandSportsguy]

Originally Posted by SaucyJim

I have liquidity to pay my bills even without consulting. My consulting income is via my corporation where I contributed to keep it afloat for a couple of decades while working full-time. So, I can now earn against those contributions, taking them as distributions. The money was already taxed, so it's a tax-neutral transaction. I'm continuing to consult (10-15 hours a week), so I don't need to have any sort of earnings, otherwise. My dividends are reinvesting so the monthly income continues to rise when I finally pull that trigger. My wife is eligible for social security, but we're waiting to let the monthly amount grow since her mother lived to 90. My dad is 89 and still kickin' (poor mom), so I'm also going to hold off on starting social security for a couple of extra years -- though I don't really have to.

I hope that explains things. Or I'm going to jail. LOL!!

Nice, well done, carry on, you don't need my advice, as some anon finance tax planning poser. .

[Mundol]

The other thing to consider is holding a higher cash position as a senior to preserve your capital. Some have talked about making huge investment returns in a IRA but that differs when you are older. Depending on your need to pass inheritance to others, avoiding a 2 yr lag on Irma for Medicare etc, you don’t want high RMD at higher tax rates. That may force you into a charitable trust etc.

At a certain age and financial position you want to enjoy the fruits of your labor and reduce the stress of events you can’t control like stock market fluctuation, political changes, and wars or pandemics.

[rsmurano]

The above calculations are very simple and don’t include any dividends and short term and long term gains that most people receive at our age. Plus, when you have a high income, your Medicare payments can go up to $800 a month for 2 years, and if you are young, your medical insurance subsidies go away.

So in the above calculations, add $50k in dividends to your calculations, check out what you will be paying in current taxes and future medicare/subsidies. Then some people make 6 digits in dividends, what will that do to your calculations. I look at doing an Roth conversion every year and that’s why I won’t be converting anything to a Roth except in a deep recession or if the income tax rates go away or go way low.

[CoachKandSportsguy]

Originally Posted by rsmurano

The above calculations are very simple and don’t include any dividends and short term and long term gains that most people receive at our age. Plus, when you have a high income, your Medicare payments can go up to $800 a month for 2 years, and if you are young, your medical insurance subsidies go away.

So in the above calculations, add $50k in dividends to your calculations, check out what you will be paying in current taxes and future medicare/subsidies. Then some people make 6 digits in dividends, what will that do to your calculations. I look at doing an Roth conversion every year and that’s why I won’t be converting anything to a Roth except in a deep recession or if the income tax rates go away or go way low.

The assumptions were stated,
the warning was stated as a simple exercise for thoughts about changes in the future tas status of Social Security, nothing more.
The post was not targeted to High net worth individuals, looking at the assumptions and parameters, which people want to constantly inject from their individual situations.

A subsequent post included the effect of dividends when tax free Social Security is implemented.

The entire discussion was discussing the effect of tax free SS income on the ability to increase Roth conversions prior to RMDs for the non net worth individuals simply explained.

Nothing the post recommended any action today as the Social Security tax status has not changed.

[SaucyJim]

Originally Posted by CoachKandSportsguy

Nice, well done, carry on, you don't need my advice, as some anon finance tax planning poser. .

Okay, Anon Tax Planner. But do not forget that it was your original calculations that inspired me to restate and clarify my own plans. You are a far cry from, yet, another complaint about snow-birders, round-abouts, and golf cart LED lights.

A breath of fresh air, indeed!