My wife and I both have our IRAs. Mine is worth about $2.3M now. Hers is a few 100s of thousands. By the time I retire it will be worth a lot more assuming all goes well.

Question is after age 72 which is a few decades away, I have to take out 4% as RMD every year. That itself could be 100s of thousands even maybe a 1 Million a year. I won't even be able to spend it or enjoy it as much.

What are some things I should be doing now as smart tax moves? Any life advice on how to spend/manage IRA money?

I would like to hear from folks, especially those in their 70s who are in this situation right now.

Roth IRA? Roth 401k? We make more than the 228k to open a Roth. What else can I do?

(Good problem to have!)

infinity ag said:

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My wife and I both have our IRAs. Mine is worth about $2.3M now. Hers is a few 100s of thousands. By the time I retire it will be worth a lot more assuming all goes well.

Question is after age 72 which is a few decades away, I have to take out 4% as RMD every year. That itself could be 100s of thousands even maybe a 1 Million a year. I won't even be able to spend it or enjoy it as much.

What are some things I should be doing now as smart tax moves? Any life advice on how to spend/manage IRA money?

I would like to hear from folks, especially those in their 70s who are in this situation right now.

Roth IRA? Roth 401k? We make more than the 228k to open a Roth. What else can I do?...... The RMD is not 4 percent every year. It increases every year based on life expectancy "factors." Check that out.

(Good problem to have!)

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infinity ag said:

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My wife and I both have our IRAs. Mine is worth about $2.3M now. Hers is a few 100s of thousands. By the time I retire it will be worth a lot more assuming all goes well.

Question is after age 72 which is a few decades away, I have to take out 4% as RMD every year. That itself could be 100s of thousands even maybe a 1 Million a year. I won't even be able to spend it or enjoy it as much.

What are some things I should be doing now as smart tax moves? Any life advice on how to spend/manage IRA money?

I would like to hear from folks, especially those in their 70s who are in this situation right now.

Roth IRA? Roth 401k? We make more than the 228k to open a Roth. What else can I do?

(Good problem to have!)

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The amount you must take in RMDs each year will vary, the life expectancy tables reflect one factor in the calculation, but also the amount is based on the account balance at the end of the prior year. If it goes down enough, the distribution amount will go down, despite the impact of the life expectancy table factor.

It is unlikely you will be taking $1 million a year. I have dealt with many folks who were subject to taking their RMD, and nobody was remotely close to that amount.

You should be considering Roth conversions up to 24% bracket if you're below that income level.

I aspire to have such problems.

Also RMDs aren't "use it or lose it" there is nothing stopping anyone from putting the money right back into the stock market with what's left after paying taxes <- lots of doom and gloomers like to overlook that fact and I have seen tons of retired people do just that with their RMDs.

I didn't interpret it that way. I think he's thinking about the massive tax liability that will come with having a huge RMD every year.

It can create planning nightmares when you start to consider the effects on your Medicare premiums, your social security taxation, capital gains taxation and more.

My personal goal is to retire and have a healthy income but pay little to no income taxes. Effectively I'd like to look like I'm broke.

permabull said:

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infinity ag said:

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Question is after age 72 which is a few decades away, I have to take out 4% as RMD every year. That itself could be 100s of thousands even maybe a 1 Million a year. I won't even be able to spend it or enjoy it as much.

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Step 1 is learn how RMDs work

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Agreed! I thought it was some 3.88% each year but I'll confirm on that.

JohnLA762 said:

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Unfortunately, this question would have been much better asked at the beginning of the journey, as "what bucket" you invest in is just as important as how much you invest.

I'm quite certain this is a drive-by troll job…

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Agreed with the first paragraph. But I do everything on my own, I have never hired any advisor. Which is why I either do my own researching or I post in places like this to get different perspectives that I might have missed on.

I don't know why you think I have been trolling. I told you exactly what my personal IRA is valued at today in the original post. 2023 has been my best year ever in terms of gains (I don't sell much from my taxable accounts) so the way I calculate my "gains" is the difference in the value from 1 Jan to 31 Dec. It is in a few millions this year. 2022 was my worst year where I lost value of 4.8M. 2021 was a great year which was why I was able to tolerate the loss.

This is my 24th year of investing, I am not greenhorn. I have been making good returns only post 2014.

Anyway, please answer the question instead of wondering if I am trolling or not.

permabull said:

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Also RMDs aren't "use it or lose it" there is nothing stopping anyone from putting the money right back into the stock market with what's left after paying taxes <- lots of doom and gloomers like to overlook that fact and I have seen tons of retired people do just that with their RMDs.

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Yes, got this. Same as I had thought.

nactownag said:

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I didn't interpret it that way. I think he's thinking about the massive tax liability that will come with having a huge RMD every year.

It can create planning nightmares when you start to consider the effects on your Medicare premiums, your social security taxation, capital gains taxation and more.

My personal goal is to retire and have a healthy income but pay little to no income taxes. Effectively I'd like to look like I'm broke.

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Yes, let's say that in x years when I turn 72 or whatever, I am forced to take RMDs. Let's say that I keep with my current pace and my IRA is worth $20M. I can't see the future but it is in the realm of possibility. So my RMD would be about $800k. I will pay a few 100ks toward tax when I take out the RMD.

So my question is, is there anything I can do now to take advantage of the laws to put myself in a better position to reduce those taxes? All this is new territory to me and as I said, I don't hire any advisor. I just don't trust them.

jja79 said:

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I aspire to have such problems.

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I don't know anything about you or even your age, but pay off all your debt first if you have. I paid off my house after 8 years in 2018. No debt since. Focus on index funds. Don't listen to wealth "advisors" on picks. Do your own research and first answer if you want to have "fun" in the stock market or to make money. Advisors' advice is only good in terms of using the laws to your advantage. As in this RMD question for example. Their investment picks are usually one size fits all in order and designed to protect themselves in case you lose money and decide to sue or something. At least that is what I see. I worked for a famous financial data company and saw what really went on and it turned me off from moving into a career in finance. I decided to stay in high tech. I think the entire industry is working to protect itself and keep their lights on. This is my opinion, no one needs to agree with me.

nactownag said:

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You should be considering Roth conversions up to 24% bracket if you're below that income level.

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Is this the same as "Backdoor Roth" conversion? If so, someone mentioned it and it is on my todo list to look into.

one safe place said:

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infinity ag said:

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My wife and I both have our IRAs. Mine is worth about $2.3M now. Hers is a few 100s of thousands. By the time I retire it will be worth a lot more assuming all goes well.

Question is after age 72 which is a few decades away, I have to take out 4% as RMD every year. That itself could be 100s of thousands even maybe a 1 Million a year. I won't even be able to spend it or enjoy it as much.

What are some things I should be doing now as smart tax moves? Any life advice on how to spend/manage IRA money?

I would like to hear from folks, especially those in their 70s who are in this situation right now.

Roth IRA? Roth 401k? We make more than the 228k to open a Roth. What else can I do?

(Good problem to have!)

---

The amount you must take in RMDs each year will vary, the life expectancy tables reflect one factor in the calculation, but also the amount is based on the account balance at the end of the prior year. If it goes down enough, the distribution amount will go down, despite the impact of the life expectancy table factor.

It is unlikely you will be taking $1 million a year. I have dealt with many folks who were subject to taking their RMD, and nobody was remotely close to that amount.

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The amount will vary but the percentage does not vary, is that correct? It is 3.88% or something. So if your IRA value goes up, then the 3.88% is worth more. And vice versa.

I am nowhere close to $20M-$25M in my IRA but I might be by the time I am 73. So in that situation, if the value is 25M, then 4% of that is $1M.

Or have I made a mistake in my calculations?

No. This is saying you should take money in your Ira that is pre tax and convert it to Roth IRA.

And you should consider hiring an advisor. Not just an investment advisor but someone that can also advise on tax planning.

The percentage you have to take out goes up each year too. It's not a straight 4% of the balance each year. The percentage goes up over time.

I'm not doubting your numbers because that's doable by that age. I would absolutely recommend you get an advisor at this point though so you don't screw yourself on taxes. Damn easy to do when you start getting into big numbers.

Backdoor Roth just means you can run an end around on the Roth income limits by putting the annual max into a Traditional IRA and then immediately transferring it to a Roth IRA. However, there are tax implications if you already have money in a Traditional IRA that you've been holding.

IslandAg76 said:

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Wut??

<<<My wife and I both have our IRAs. Mine is worth about $2.3M now. >>>

But this year you made a few million and last year lost $4 million??

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I forgot to point that out in my post. So his portfolio was $6M+ but now only $2M+. I would be quite upset about that.

JohnLA762 said:

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Based off your previous post:

-At 37.5 you were worth 350k.
-You're 52 now, as you will be 72 in a few decades.
-You're worth 2.5 million now.
-You're estimating you will be worth 20 million in 20 years.

Forgive me for wondering if it is a troll job. Maybe I was really hopeful, as I would really like to believe someone at this juncture in their financial journey would not be asking questions that should have been asked 30 years ago…

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Who told you I am worth 2.5M now? I am a good number more than that.
My IRA is worth 2.3M.
And yes, in at 37.5 I was worth 350k when I calculated it using Mint. From then I have invested very diligently, taking a lot of calculated risks that paid off.

I have other investment accounts too. Plus my house.

This is what happens when people don't have reading skills and make assumptions about people they don't know and call them trolls.

nactownag said:

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No. This is saying you should take money in your Ira that is pre tax and convert it to Roth IRA.

And you should consider hiring an advisor. Not just an investment advisor but someone that can also advise on tax planning.

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Thank you for your reply! Maybe I do need an advisor for such planning.

RebAg13 said:

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The percentage you have to take out goes up each year too. It's not a straight 4% of the balance each year. The percentage goes up over time.

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OK thanks for the info, I thought it was a straight 3.88% which is what an online calc told me. Will look into this.

YouBet said:

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I'm not doubting your numbers because that's doable by that age. I would absolutely recommend you get an advisor at this point though so you don't screw yourself on taxes. Damn easy to do when you start getting into big numbers.

Backdoor Roth just means you can run an end around on the Roth income limits by putting the annual max into a Traditional IRA and then immediately transferring it to a Roth IRA. However, there are tax implications if you already have money in a Traditional IRA that you've been holding.

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I get nothing by lying. I have been on this board for decades (1999 or so) and have gotten some good stock tips here. Like DYII back in 2001 which made me good money comes to mind. And LVS also. I think if I do a search here I might find those posts where someone recommended it and I benefited.

I have made a lot of mistakes too. But I am smart enough to persevere and apply logic to situations. I am an engineer, so I love this problem solving. My MBA gives me some more finance skills.

So as you say, I am in the territory where I might get screwed with taxes but then I don't do a lot with my taxable accounts. Just my IRAs where I buy and sell. That is why I find RMDs worrisome at this point because it would be taxable. New territory.

Thanks for your reply, I will need to look into backdoor Roth some more and see if and how I can use it. I had a Roth back in 1999 which I closed a long time ago.

IslandAg76 said:

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Wut??

<<<My wife and I both have our IRAs. Mine is worth about $2.3M now. >>>

But this year you made a few million and last year lost $4 million??

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Exactly. What do you find surprising about this? Last year was my worst year ever. This year is my best year but I have not yet made up for last year. 2022 was a terrible year for everyone. S&P itself was down 20%.

By "made", I purely mean the value of holdings. I do not do any post tax calculations.

Anyway, I am tired of this silly conversation and needing to justify. If you think I am a troll, then okay, just move to other non-troll threads.

My question was about RMDs, I am not here to be interrogated about my finances. If you can help, then reply, else move along please.

Quote:

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My personal goal is to retire and have a healthy income but pay little to no income taxes. Effectively I'd like to look like I'm broke.

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Mine too (although I'm already retired). What's your strategy to do that?

All of my retirement funds go to Roth accounts even though I am in 32+% bracket I just bite the bullet.

I plan to have enough in Roth accounts plus social security(?) that I can be comfortable tax free then I'll have tax free withdrawals from life insurance lirp policies and worst case I'll be able to take a margin loan against securities if I want to avoid cap gains taxes.

But of course there's a small amount of cap gains I can realize every year at a relatively low or potentially zero tax rate so I'll likely do that every year to increase my cost basis.