[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.

[retiredguy123]

In my opinion, it doesn't make financial sense to convert to a Roth. Delay paying taxes on the traditional IRA for as long as possible because you will have more money invested. The only argument I have heard in favor of converting is, if your tax bracket is lower than your heirs, and you want to maximize their inheritance. In that case, you can convert to a Roth, and effectively increase the after tax inheritance by paying a lower tax rate on the money than your heirs would pay.

[biker1]

Roth's don't have RMDs so that may be a factor for some people.

Originally Posted by retiredguy123

In my opinion, it doesn't make financial sense to convert to a Roth. Delay paying taxes on the traditional IRA for as long as possible because you will have more money invested. The only argument I have heard in favor of converting is, if your tax bracket is lower than your heirs, and you want to maximize their inheritance. In that case, you can convert to a Roth, and effectively increase the after tax inheritance by paying a lower tax rate on the money than your heirs would pay.

[villagetinker]

Biker1, you beat me to it, my current plan is to take the RMDs and put those into a ROTH based IRA.

[Villageswimmer]

Originally Posted by villagetinker

Biker1, you beat me to it, my current plan is to take the RMDs and put those into a ROTH based IRA.

One cannot contribute to a Roth (or anyIRA) unless one has earned income. RMDs are not earned income.

Find a wealth of info on this topic at bogleheads dot com .

[retiredguy123]

///

[birdiebill]

You can not take the RMD and convert it to a Roth. A Roth Conversion occurs when you take a normal distribution from the IRA, pay the taxes either with a portion of the distribution or from other sources of money, and convert the total/remainder of the distribution to a Roth. An RMD from a normal IRA can not be converted. Money converted to a Roth can not be withdrawn for five years without a penalty. There is no RMD for a Roth.

We chose to convert our IRA's to a Roth about eight to ten years ago, converting a portion each year. We paid taxes on the conversion out of other funds so we could convert each entire distribution to the Roth. The Roth/IRA funds are not needed for our monthly/yearly expenses, so they can grow tax free for any future needs. At the time we did the conversions, we had higher than normal charitable contributions which made the tax situation on the IRA conversions more palatable.

[autumnspring]

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.

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

[villagetinker]

Originally Posted by Villageswimmer

One cannot contribute to a Roth (or anyIRA) unless one has earned income. RMDs are not earned income.

Find a wealth of info on this topic at bogleheads dot com .

OK I need to check this out.

[retiredguy123]

To me, Roth conversions don't make financial sense unless you are sure that you will pay a lower tax rate on the converted money as compared with the tax rate you will pay later. Delay the tax payment for as long as possible, and let the money grow.

[JoelJohnson]

How many of you knew that your SS could be taxed up to 85%? It's true! It depends on your Adjusted Gross Income (AGI).

Villageswimmer mentioned "bogleheads dot com", a very good site on all this.

Yes, you need to know how long you will live, what the stock market will do and what Washington will do to make a good decision. So we make some assumptions - we will live to the average age, taxes will go up and the stock market will revert to the mean.

If I convert my IRA over the next few years before I collect SS, I know what my taxes will be. If the tax table doesn't change, I know what my taxes will be in the future. Taxes will change, we just don't know by how much or when, but they will go up.

Yes, I will "lose" money on the conversion in the short term, but, if I let the ROTH grow, it will support me in my old age when health care prices go up.

I think we have a good debate going here, please let me hear more on this.

[retiredguy123]

One thing to consider is that medical costs are tax deductible if they exceed 10 percent of your income. This includes a large portion of the cost for assisted living and all of the nursing home costs. The assisted living facility will calculate how much of their charges are considered medical costs, which can about 60 percent of the facility charges. So, you can use taxable traditional IRA money to pay these costs, and it will be tax deductible.

[Bogie Shooter]

Always listen to arm-chair financial advisor quarterbacks.............

[retiredguy123]

Originally Posted by Bogie Shooter

Always listen to arm-chair financial advisor quarterbacks.............

Well, isn't that what this posting site is all about? Free advice and worth every penny.

[Bogie Shooter]

Originally Posted by retiredguy123

Well, isn't that what this posting site is all about? Free advice and worth every penny.

That remains to be seen.