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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 Yesterday, 11:13 AM
DAVES DAVES is offline
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Quote:
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 Yesterday, 11:38 AM
retiredguy123 retiredguy123 is offline
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Quote:
Originally Posted by DAVES View Post
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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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