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  #16  
Old 11-13-2019, 12:10 PM
Boomer Boomer is offline
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Originally Posted by LuvtheVillages View Post
The Qualified Charitable Donation can be a valuable way to manage this situation. The funds have to go directly to the charity. This will satisfy the Required Minimum Distribution, not affect your Adjusted Gross Income (thus avoiding taxes and possible Medicare premium increases) and also support a cause that is important to you.

If you support your church with monthly contributions, or your church's building fund, you can pay the entire year's obligation with this one transfer.

I have thought for a long time that churches, during stewardship drives, should include a brief explanation of the QCD to make more people aware of it so they can learn more, if interested.

This is especially true in TV where there are so many thriving churches supported by retirees — some who have reached or are getting close to 70 and 1/2. Providing wider knowledge of the QCD could result in a win-win.

Last edited by Boomer; 11-13-2019 at 12:16 PM.
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  #17  
Old 11-13-2019, 01:34 PM
retiredguy123 retiredguy123 is online now
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Darn it, rg123, we were having a fine conversation and then you had to go all tribal on me.

I could respond by saying that I do not agree with your theory. I could go on to point out that it looks to me like a chunk of change from the tax law is in the hands of corporate CEOs who too often choose to drive much of it into stock buybacks to inflate share price.

I realize the fact that I do not like the top-heavy use of a lot of that money makes me a bit of an enigma, to some, because I have an interest in the market.

Oh well, rg, it was fun to discuss a little econ with you, but then you decided to try to take me down that road to nowhere. It would be a waste of time for both of us.
Sorry, but I think you may have read more into my post than I intended. The OP was asking for opinions about whether or not to do a ROTH conversion. I was just answering your specific question about stocks, and expressing an opinion about the pros and cons of the ROTH conversion. One advantage to the ROTH conversion is the ease with which your children can inherit the ROTH without paying any income tax, or the burden of hiring a CPA to figure out how to deal with the complicated IRS tax rules regarding an inherited Traditional IRA. I was also providing the reason why the medical tax deduction exclusion was increased fron 7.5 percent to 10 percent. No intent to go down a road to nowhere, or to discuss corporate CEOs at all. Just trying to stay on topic.
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  #18  
Old 11-14-2019, 09:44 AM
tcxr750 tcxr750 is offline
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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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  #19  
Old 11-14-2019, 09:47 AM
gatorbill1 gatorbill1 is offline
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Take the money and go on an extra vacation trip
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  #20  
Old 11-19-2019, 10:34 AM
Boomer Boomer is offline
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Originally Posted by tcxr750 View Post
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.
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.

Last edited by Boomer; 11-19-2019 at 10:54 AM.
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  #21  
Old 11-27-2019, 05:05 AM
Gcskh@hotmail.com Gcskh@hotmail.com is offline
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You cannot take RMD monies from your IRA and turn around and put them in a Roth IRA.
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  #22  
Old 11-27-2019, 06:13 AM
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l2ridehd l2ridehd is offline
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There are many options for you and everyone's situation is a bit different. A lot depends on your current taxable income, your RMD amount, your medicare premium, and your estimate tax burden over the next several years. If you trust your CPA than follow his advice. You should always ask about QCD's, Roth conversions and any other options you and your CPA can think of, but taxes are hard to avoid. I personally could never make a IRA to ROTH conversion work. Even using the backdoor method didn't make sense.

When I retired I had a 10 year tax problem due to a rabbi trust. This also caused me to end up with the highest medicare payments allowed. And now it is causing RMD's to be taxed at the highest rates. I got two more years until the trust is fully paid out and I can develop a different plan. My current RMD goes 100% to taxes and for the first time in my lifetime I got a tax refund. I basically use it to pay my estimated quarterly taxes. In two more years I will change that and look at the ROTH and QCD's again.

One other point to bring up and that is the Medicare amount looking at 2 years past AGI. That is how they do it. However if you can demonstrate that your AGI will have a dramatic change in taxable income, the local SS office can and will adjust the amount you pay in medicare premiums. When I receive my last rabbi trust payment I will take that zero balance statement to the SS office and get my medicare payment reduced for the following tax year. It will drop that monthly hit from around $500 to around $120. So about a $4000 annual savings. This would include the part D penalty savings.

I only point these options out to demonstrate that it is a complicated question and getting a good CPA that you trust to review all options is your best choice.
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  #23  
Old 12-05-2019, 11:13 AM
DAVES DAVES is offline
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Originally Posted by RedChariot View Post
It's that time. I must start to take the RMD. We don't need the additional income yet. Both have defined pensions and Social Security. My options seem to be take the money and place into a taxable fund or withdraw and place in Roth account. CFP states I have to take a large tax hit, but never pay tax again if I transfer to the Roth. It will sit there and grow. CFP is trustworthy and has proven this over the years. Looking to see if others have done the Roth conversion from a traditional IRA. THANKS.
.

My view is you are always better off paying taxes later. If you convert your IRA to a Roth and since you state you have a pension, you are likely in a 30% bracket on your last dollars.
Assuming your IRA is 10,000, the true number does not matter
You convert it all and your 10,000 is now 10,000-30%=7,000.
Actually it is worse than that as that 10,000 is added to your taxable income.

You may want to explore leaving your IRA to your heirs as an inherited IRA. They inherit it at it's current value so no one pays tax on the gains. Yes, they will need to take a withdrawal every year-a minor pain but a gift that keeps on giving. The RMD is calculated based on you living to 100. So, there is likely to be a left over balance to use in your will as an inherited IRA.
It is not much money but that is what my mother did for my sister and I.
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  #24  
Old 12-05-2019, 11:38 AM
retiredguy123 retiredguy123 is online now
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Originally Posted by DAVES View Post
.

My view is you are always better off paying taxes later. If you convert your IRA to a Roth and since you state you have a pension, you are likely in a 30% bracket on your last dollars.
Assuming your IRA is 10,000, the true number does not matter
You convert it all and your 10,000 is now 10,000-30%=7,000.
Actually it is worse than that as that 10,000 is added to your taxable income.

You may want to explore leaving your IRA to your heirs as an inherited IRA. They inherit it at it's current value so no one pays tax on the gains. Yes, they will need to take a withdrawal every year-a minor pain but a gift that keeps on giving. The RMD is calculated based on you living to 100. So, there is likely to be a left over balance to use in your will as an inherited IRA.
It is not much money but that is what my mother did for my sister and I.
I agree with avoiding paying taxes as long as possible.

But, when you say that, with an inherited IRA, no one pays tax on the gains, that is not really correct. If you have a fully taxable Traditional IRA, your heir will pay tax at their ordinary income tax rate when they withdraw the money.

And, actually, the RMD is calculated based you living to be 115+, not 100.
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