I called my CPA friend. We talk retirement stuff all the time. She made the point that if you already are going to kick into the higher tax bracket down the road, then why convert into that bracket now? That’s what you are saying, right? I told her that I’d rather the Roth grow tax-free rather than growing in the IRA, but I guess she has a point – I’d be paying that tax rate at some point anyway so why the rush?
We definitely aren’t talking enough to worry about IRMAA and aren’t there yet age-wise, but, yes, duly noted.
Yes, that is what I was saying above in my roundabout way.
Have you looked at the current 22% versus 24%? Is there a chance that you could convert within the 22% today, and that if you did not convert some of the IRA today that the future RMDs along with your pension and Social Security would land you in the 24%?
Top of 22% / bottom of 24% is $201K MFJ.
Points in favor of converting would be creating tax advantaged inheritance for your children and buying ‘insurance’ against the tax brackets once the first spouse passes. 22% becomes 24% at $100K single filing. But the conversion argument is less compelling when the market is at an all time high.
If only we knew what will happen with tax rates, etc. Our pensions and SS will be well below the $201k cutoff. I guess the RMDs will depend on how much that dang IRA continues to grow, but I do think that we should stay below that.
One of us dying really has given me food for thought.
For people who think they might live a long time, I think planning too far into the future doesn’t even work. We have no idea what the taxes will be and what estate laws will be. It might be that over XX amount of money, the govt confiscates it. Who knows? I calculated that if we pass away in 40 years, at a fairly low rate of return, our kids get 44 million. Great. They’ll be in their seventies. Does it matter if it’s tax free, and will that still even be a possibility then, who knows?
I think we’re going to start giving to our kids now, while they can actually appreciate it and use it. They can invest this money on their own, do their own Roths and not have to deal with estate law. If we give it to them now, they’re guaranteed to get it. Nobody can defraud us out of it since we’re not senile yet.
That’s what H and I are doing. Both kids are married and fiscally responsible. Helping them buy a house in our HCOL area, and fully funding their retirement accounts while they’re young is huge.
I’m a fairly new widow, so I am still holding tight to my money while trying to gift!
D2 is remodeling a kitchen and I’ve said I’ll pay for the appliances. D1 has been informed the same money will be available on her planned house project.
I’m putting these items on my credit card because I might as well get the points!
Had dinner with one of my FAs tonight. I was asking whether we should be adjusting our portfolio to account for the proposed economic policies of the new administration (if they implement 20% tariffs generally and 80% for China and maybe others, there will be serious inflationary pressure and maybe a recession – think Smoot-Hawley). He had good arguments for being well-positioned – he made a number of adjustments over the last year. Raised percentage of small caps. Went from 80/20 to 60/40 equities to fixed income. Switched non-US from ETF to active manager who for the last year has been big on India and had very little Chinese exposure. Etc.
He suggested hybrid LTC, which I looked at a decade ago and thought was too complex and fee-laden. He also suggested using my RMDs to purchase 2nd to die insurance and placing the insurance inside an Irrevocable Life Insurance Trust (so it would be out of our estate).
Yeah, I don’t see a positive about paying for LTC insurance. It can be complicated and expensive, and if you can fund it yourself, why get it? If you need care, just pay for it on your own. Unless, of course, you feel certain that you’ll need it. But if you have children willing to help, or at least make sure that you can use your own money to be taken care of, that seems to be a better option.
Agree that LTC insurance can be troublesome to invoke benefits. (I saw this recently with a friend in memory care.) More flexibility to self-fund if you have a lot of savings.
One idea is to keep a good chunk of money in traditional IRA (ie not do Roth rollover). That way if there is a serious LTC need, the funds can be withdrawn but then the amounts over 7.5% would be medical deduction. Do confirm this idea with FA - I have no examples of anybody having done this.
If you are self-employed and especially if you continue to do part-time consulting work in retirement then the good thing about LTC insurance is that the premiums are tax deductible while any payments for care are tax free. I guess you might potentially be able to fund the premiums from an HSA after retirement if you have enough money in there?
YES—the WEP/GPO repeal bill. In 17 states collecting SS is considered double dipping if you have a teachers pension, even if you have worked outside of school for the required 40 quarters. My SS is reduced by over 2/3.
Even worse, my wife who does NOT have a government pension, only SS, will not receive a survivor benefit if I die first due to this law.
This really hurts those who go into teaching as a second career. They will not come close to a full teaching pension, but would make out OK with a modest pension AND SS from their work prior to becoming educators. As it stands now, they get their SS greatly reduced even though they spent half their careers NOT in education.
A former colleague of mine who entered teaching in his late 30s would have to teach well into his 70s to earn a full teacher pension, for example, and still his SS would be greatly reduced.
Of course, if someone spent their whole career teaching, having never paid into SS, they would not (rightly) collect any SS.
This is exactly my mom! Later in career government job, decent but not large pension. Dad died not collecting SS for that long, mom has never collected a dime of his.
It’s a law that imo affects women, who tended to go into teaching more than me, at a disadvantage due to this law.
My parents did not really understand this law, shame on them, but mom was very unprepared for losing all of dad’s SS. My parents while hard working were the first people in their families to even have a high school education.
Probably why I’m obsessed with figuring out Medicare and social security. More than I need to but I am not going to be unprepared
Hard to say if this law can pass the senate but I hope so
Folks…it’s not just teachers who are subject to WEP and GPO. It includes police, firefighters, and other public employees, including many federal employees.
And yes, this does factor into retirement planning because married couples need to know what will happen money wise when one spouse dies.
My situation somewhat similar as I worked paying into SS until I was about 40 and then got a state job paying into state pension. So I’ll retire end of this year from that state job NOT fully vested (but NOT wanting to stay there until early 70’s to get there!) but my pension will wipe out pretty much any SS I would get - though I did pay into SS for over 20 years. Since I’m taking a part time job starting 2025 and will be paying into SS again I’m going to wait until full retirement age 66.10 at least and see if that little extra time nets me anything in terms of SS.
H basically only worked for a pension job so I/we do have that cushion of if anything happens to him I will get % of his pension. Not complaining about that at all - only the SS part based on my work history!
And as said above, my position - a modest paying job but one that worked for our family much like a teacher salary might - isn’t netting a big pension. I do understand that in higher paying jobs the pension will still be a nice healthy $$$.