Roth IRA conversion and RMDs

Roth IRA conversion and RMDs

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  #31  
Old 04-02-2018, 07:55 AM
Boomer Boomer is offline
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Originally Posted by l2ridehd View Post
Couple of points. Remember that the money in an IRA has never been taxed. So withdrawals are now taxed at your post retirement income. A lot depends on your pre RMD income and how much is in IRA accounts. How much income do you get from pensions and SS and other investments. And the second big factor is your spouses age. When they figure out the RMD amount it is based on 70 & 1/2 (your age) plus your spouses age. If you married a younger women you will be shocked at how small the RMD is.

There are lots of variables and moving parts that you need to consider before doing this. I looked at this in depth and for me it didn't make sense. It may in another 3 years. I had the ability to defer income into a Jacobs trust when I was working which is paid out in annual installments after I retired. I got another 3 years of those payments. After that I will look at it again.
Good morning, l2ridehd,

Jacobs trust is a new term to me. I gave it a quick Google but I have not found it yet. I like learning stuff about taxes. (I have no idea why I do.)

For others who are reading this thread:

For those of you who are approaching the RMD age — or where both spouses will be there — you could be in for an aggravating, obnoxious surprise, maybe.

If you have been a good saver, in the market through all these good years, have other sources of income, and/or you have been a two-careers-couple whose IRAs combined are rather significant, your RMD could increase your income enough to throw you across the threshold where more is taken from your Social Security for Medicare premiums.

If you look up “Medicare Premium Rules for Higher-Income” you should find the official Social Security publication that explains this — actually pretty clearly even.

The premium increases are not based on taxable income but on MAGI. (Modified Adjusted Gross Income) If it looks like you are going to get hit, you might want to take a look at the RMD as a QCD. (Qualified Charitable Distribution) which can help with tax-planning. Your SS premium deduction for Medicare is based on your MAGI from 2 years ago.

Avoiding the increased Medicare premiums could be another reason to take a hard look at whether doing some Roth conversion (in addition to the RMD) makes sense — or not. You might have to watch that income line closely. Even though it seems like a lot, it looks like even a dollar over the line could cost you a big jump in your Medicare premium — two years later.

The QCD has been around for years, but was not made permanent (?) in tax law until the end of 2015. When that happened, tax planning became a little easier because people who could be affected used to have to wait to see if Congress would say it was OK each year. If a QCD can help your situation, make sure you understand the rules completely.

Even though this might not affect a lot of people, you might be surprised. It could be worth doing a little homework on this one.


(And, yeah, I know. I already wrote about this stuff in this thread a while back. Oh, well. Gimme a break. I have not had any coffee yet.)

Last edited by Boomer; 04-02-2018 at 08:44 AM. Reason: A little clarification necessary

  #32  
Old 04-02-2018, 08:39 AM
tagjr1 tagjr1 is offline
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  #33  
Old 04-02-2018, 01:22 PM
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l2ridehd l2ridehd is offline
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Good morning, l2ridehd,

Jacobs trust is a new term to me. I gave it a quick Google but I have not found it yet. I like learning stuff about taxes. (I have no idea why I do.)
Hi Boomer. A jacob's trust is a slightly modified version of a Rabbi trust. Very much like a 401K but can be used in addition to a 401K but you must make decisions at least a year in advance of what you will contribute and what and when you will take the distributions. So much more controlled then a 401K. And once you make the decisions they are cast in stone and cannot be changed.
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  #34  
Old 04-02-2018, 04:23 PM
Boomer Boomer is offline
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Originally Posted by l2ridehd View Post
Hi Boomer. A jacob's trust is a slightly modified version of a Rabbi trust. Very much like a 401K but can be used in addition to a 401K but you must make decisions at least a year in advance of what you will contribute and what and when you will take the distributions. So much more controlled then a 401K. And once you make the decisions they are cast in stone and cannot be changed.

Thank you, ride,

I just looked up Rabbi Trust, now that you have told me that it is similar. Interesting and a little historic in its origin, too.

In spite of the Rabbi Trust's somewhat possible potential for complications, I can see where it could be a good thing to have the opportunity to be able to use with a solid employer.

I learned something today on TOTV.
  #35  
Old 04-03-2018, 06:24 PM
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Speaking of taxes:

Along with our 2017 tax preparation, our accountant included a "Tax Reform Impact Summary."

This shows what our taxes would have been for 2017 had the new tax "cuts" been in effect and applied to the 2017 same, exact numbers. (simply an academic dry run -- just an "as if" with clear disclaimers in the intro) It cannot be an actual forecast. It can apply only what is known currently.

You might want to ask your accountant if the program used can run a "Tax Reform Impact Summary" to see if taxes would have been lower or higher for your 2017 return had the tax "cuts" been in effect -- or you might not want to know.
  #36  
Old 04-04-2018, 06:53 AM
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Mine did the same thing. You lose deductions but get a lower bracket. Total impact showed mine went up just a few $$. He also included some suggestions to help minimize the impact.

Probably for most folks they will be the same or slightly lower. Mine went up because of the limit on property tax deduction and the way rental property deprecation is handled. But I already plan to sell one of them next month anyway.
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  #37  
Old 04-21-2018, 06:45 PM
tcxr750 tcxr750 is offline
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What about just converting a portion of your account to a Roth? If your talking six figure dollar amounts or more I’d seek out an investment advisor and accountant dealing with high net worth individuals. Not to say that if you devoted enough time and research that you could come up with an answer and save money.
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