Retirement

UNCatTech said:
$690 a month for one person?

Is that normal or average?
Click to expand...
I posted the IRMAA chart is posted on this thread on the previous page. It is based on your AGI two years prior to the current tax year. It is a surcharge you pay In addition to the base cost of Part B.
 
UNCatTech said:
$690 a month for one person?

Is that normal or average?
Click to expand...
That's just me and my wife's is taken out of her SS so I'm thinking it is similar. We sold land and it pushed our income for one year over or to the top of the rate. We're hoping it goes back to normal next year. It's been painful for sure.
 
farce said:
I posted the IRMAA chart is posted on this thread on the previous page. It is based on your AGI two years prior to the current tax year. It is a surcharge you pay In addition to the base cost of Part B.
Click to expand...
Thanks, I read that and have no clue what IRMAA is. Guess I need to take the retirement 101 class in the next few years.
 
One screwed up part of the IRMAA thing is that you don't know what the brackets will be two years down the road when your current year's MAGI will dictate your Medicare premium.
I originally planned to wait until 70 but given my genetics I decided to claim SS at 68 years, two months. I figure I've got two pots of money. One I can leave to my heirs and one of which my wife will only get half. Might as well spend that one first..
We did $30k each in Roth conversions last year but at that rate I'll never make a meaningful dent in it
I think I'm going to focus on just converting hers as she'll probably live longer and benrfit more from the deferral.
 
Hmmmm, this thread is making me realize how little I've thought this stuff out. I'd never even heard of IRMAAs, and had not really thought much about required minimum distributions.

I kinda figured I just save up a big pot of money, and it will all work itself out. Which I guess is technically true... just not in a cost/tax efficient manner.

So far I've ignored Roth IRAs because I made too much to qualify... but now I'm wondering if I should consider a backdoor one... or if it's too late to be worth the effort and I've missed the boat.

I already have various amounts in an IRA, a 401k, a post-tax brokerage account, a variable annuity, and a company stock account... it already feels over complicated.
 
NYCBlueBlood said:
Hmmmm, this thread is making me realize how little I've thought this stuff out. I'd never even heard of IRMAAs, and had not really thought much about required minimum distributions.

I kinda figured I just save up a big pot of money, and it will all work itself out. Which I guess is technically true... just not in a cost/tax efficient manner.

So far I've ignored Roth IRAs because I made too much to qualify... but now I'm wondering if I should consider a backdoor one... or if it's too late to be worth the effort and I've missed the boat.

I already have various amounts in an IRA, a 401k, a post-tax brokerage account, a variable annuity, and a company stock account... it already feels over complicated.
Click to expand...
I would definitely recommend utilizing the Backdoor Roth IRA if you can. I don't think it's ever too late to invest in one. Especially using a good brokerage like Fidelity or Vanguard, you can get some awesome, low-cost index funds available. Even if you did something like just throw all of your IRA money into something like the Vanguard S&P 500 Growth ETF. It's actually a really simple process in practice- it looks and sounds complicated but it isn't. I've been doing it for the last two years. Just be aware of the pro-rata rule.
 
Last edited:
CFordUNC said:
I would definitely recommend utilizing the Backdoor Roth IRA if you can. I don't think it's ever too late to invest in one. Especially using a good brokerage like Fidelity or Vanguard, you can get some awesome, low-cost index funds available. Even if you did something like just throw all of your IRA money into something like the Vanguard S&P 500 Growth ETF. It's actually a really simple process in practice- it looks and sounds complicated but it isn't. I've been doing it for the last two years. Just be aware of the pro-rata rule.
Click to expand...
First I've heard of the pro-rata rule, so yet another new thing for me. However my IRA account includes only money rolled over from 401ks, so it should not apply to me. My IRA should be 100% pre-tax.

Now that said, one of the reasons it feels "too late" to convert to a backdoor Roth is that I'm assuming whatever I converted would be taxed based on my current ordinary income tax rate... which is quite high.

I guess I could wait to do it until I find wife number 32, but for now my income as a single guy with no kids would put the conversion at a high tax rate (unless it gets capital gains tax treatment, then that's an entirely diff story).
 
No love for rentals? 95% of my retirement income will come from rent.

Honestly, it helped me, with a modest inheritance, be semi retired now at 44. I used the real estate equity to secure loans to by a couple of retail businesses in which I work about 10 ish hours a week.
 
Purple Nurple said:
No love for rentals? 95% of my retirement income will come from rent.

Honestly, it helped me, with a modest inheritance, be semi retired now at 44. I used the real estate equity to secure loans to by a couple of retail businesses in which I work about 10 ish hours a week.
Click to expand...
Real estate can be an effective way to make money... but it also can be a lot of work unless you pay a management company to manage it for you... in which case it takes longer before it pays off.

I'm curious what sort of retail businesses you can keep running well with only 10ish hours a week required.
 
Purple Nurple said:
No love for rentals? 95% of my retirement income will come from rent.

Honestly, it helped me, with a modest inheritance, be semi retired now at 44. I used the real estate equity to secure loans to by a couple of retail businesses in which I work about 10 ish hours a week.
Click to expand...
Nope. I hated being a landlord and I've attempted it several times when I've bought a new house and decided to keep the old one. Right now I own one house other than the one I live in and my father in law lives in it. When he is no longer with us (but he may well outlive me!) we will either sell it or remodel it into a summer home (it is in a lakeside community on Lake Erie between Cleveland and Toledo.) I also prefer the liquidity of equities over real estate. Investment real estate is definitely not for me.
 
NYCBlueBlood said:
Real estate can be an effective way to make money... but it also can be a lot of work unless you pay a management company to manage it for you... in which case it takes longer before it pays off.

I'm curious what sort of retail businesses you can keep running well with only 10ish hours a week required.
Click to expand...
I get that. When I first started, I did everything myself. Now I pay management companies and it’s much easier just waiting for a monthly deposit.

I own 2 liquor stores in Myrtle Beach and employee 3-4 employees. I’m mostly managing/controlling inventory. I could spend more time in the stores, but I’m trying to be present for my son before I’m uncool in his eyes.
 
NYCBlueBlood said:
First I've heard of the pro-rata rule, so yet another new thing for me. However my IRA account includes only money rolled over from 401ks, so it should not apply to me. My IRA should be 100% pre-tax.

Now that said, one of the reasons it feels "too late" to convert to a backdoor Roth is that I'm assuming whatever I converted would be taxed based on my current ordinary income tax rate... which is quite high.

I guess I could wait to do it until I find wife number 32, but for now my income as a single guy with no kids would put the conversion at a high tax rate (unless it gets capital gains tax treatment, then that's an entirely diff story).
Click to expand...
Your rolled over 401ks now residing in an IRA are subject to the pro rata rule. There is an easy fix if your current 401k allows. Look for an option to roll your current IRA into your 401k. That will then allow you to do a regular backdoor roth. If your 401k allows you to roll in your IRA, then it may also allow you to do a mega backdoor roth. That isn't offered by every company, but you want to look in the 401k plan documents for an option to do after tax contributions and a Roth conversion or in service withdrawals of after tax contributions.

The regular backdoor roth would work like this: Contribute up to your annual limit to an IRA, post tax so nothing new taxwise, then convert that contribution to a Roth IRA. It takes a few days for the contribution to clear so if you hold it in a money market account you'll earn a few bucks of interest. Roll everything into the Roth. You'll get a 1099 at the end of the year for just the interest portion. Ex. Contribute $5k to IRA. Earn $4 interest before the conversion. Convert $5,004 to Roth and your 2024 1099 will be for $4.

You should also note that there are 2 separate 5-year rules for Roth accounts. The first is generally that you have to have the money in the Roth account for 5 years before you can withdraw the gain tax free, contributions can be withdrawn. This no longer applies when you turn 59 1/2 even if you have not held the account for 5 years. The second is that in order to take advantage of the tax free aspect of a Roth account, you need to have contributed to a Roth account more than 5 years ago. This does not go away when you turn 59 1/2. You can have multiple Roth accounts with multiple brokerage houses, so long as you contributed to one of them 5+ years ago the rule is satisfied for all of your Roth accounts. For flexibility's sake, it's a good idea to set up a Roth IRA and fund it with at least a couple bucks even if you aren't going to regularly fund it just to get that second 5-year rule out of the way.

*edit-On the 5 year rules, for both it's 5 tax years. Even if you contribute on December 31st, that gets counted as a full tax year, so it could really be just over 4 calendar years. The First 5 year rule that is only for conversions but again it goes away if you are over 59 1/2.
 
Last edited:
dcphx said:
Your rolled over 401ks now residing in an IRA are subject to the pro rata rule. There is an easy fix if your current 401k allows. Look for an option to roll your current IRA into your 401k. That will then allow you to do a regular backdoor roth. If your 401k allows you to roll in your IRA, then it may also allow you to do a mega backdoor roth. That isn't offered by every company, but you want to look in the 401k plan documents for an option to do after tax contributions and a Roth conversion or in service withdrawals of after tax contributions.

The regular backdoor roth would work like this: Contribute up to your annual limit to an IRA, post tax so nothing new taxwise, then convert that contribution to a Roth IRA. It takes a few days for the contribution to clear so if you hold it in a money market account you'll earn a few bucks of interest. Roll everything into the Roth. You'll get a 1099 at the end of the year for just the interest portion. Ex. Contribute $5k to IRA. Earn $4 interest before the conversion. Convert $5,004 to Roth and your 2024 1099 will be for $4.

You should also note that there are 2 separate 5-year rules for Roth accounts. The first is generally that you have to have the money in the Roth account for 5 years before you can withdraw the gain tax free, contributions can be withdrawn. This no longer applies when you turn 59 1/2 even if you have not held the account for 5 years. The second is that in order to take advantage of the tax free aspect of a Roth account, you need to have contributed to a Roth account more than 5 years ago. This does not go away when you turn 59 1/2. You can have multiple Roth accounts with multiple brokerage houses, so long as you contributed to one of them 5+ years ago the rule is satisfied for all of your Roth accounts. For flexibility's sake, it's a good idea to set up a Roth IRA and fund it with at least a couple bucks even if you aren't going to regularly fund it just to get that second 5-year rule out of the way.

*edit-On the 5 year rules, for both it's 5 tax years. Even if you contribute on December 31st, that gets counted as a full tax year, so it could really be just over 4 calendar years. The First 5 year rule that is only for conversions but again it goes away if you are over 59 1/2.
Click to expand...
I make too much to contribute annually to a Roth ira. I max my 401k and assumed this mean I also couldn't add to a traditional ira... suddenly i think i'm mistaken.

So I can contribute to a trad ira even if i'm maxing my 401k limits and making too much to contribute to a Roth, it would just be non-deductible, yeah? But then what happens tax-wise to this non-deductible money i have in a trad ira when i'm in my 70's at start withdrawing?

I'm partly wondering why you'd do backdoor roth vs just adding non-deductible $ to a trad ira.
 
gregh1 said:
I make too much to contribute annually to a Roth ira. I max my 401k and assumed this mean I also couldn't add to a traditional ira... suddenly i think i'm mistaken.

So I can contribute to a trad ira even if i'm maxing my 401k limits and making too much to contribute to a Roth, it would just be non-deductible, yeah? But then what happens tax-wise to this non-deductible money i have in a trad ira when i'm in my 70's at start withdrawing?

I'm partly wondering why you'd do backdoor roth vs just adding non-deductible $ to a trad ira.
Click to expand...
You can do backdoor Roth

Non-deductible contributions to a traditional IRA are not tax advantaged on either end. Backdoor Roth IRA contributions grow tax free forever.

With the current rules that are in place, everyone is “eligible” for a Roth IRA, it’s just that if you make too much money, you have to do the back door mechanism. But you end up in the exact same place as if you’d just done a Roth IRA contribution all along.
 
Purple Nurple said:
No love for rentals? 95% of my retirement income will come from rent.

Honestly, it helped me, with a modest inheritance, be semi retired now at 44. I used the real estate equity to secure loans to by a couple of retail businesses in which I work about 10 ish hours a week.
Click to expand...
I mean this light-heartedly but it's the inheritance that helped you, not the real estate, lol.

(Real estate is certainly an option if you have access to plenty of capital and that's your thing. But I think most advisors would not recommend it as anything other than a luxury, "sure if you can afford it" portion of a retirement plan. And personally I have no desire to get involved with property management and having tenants.)
 
NYCBlueBlood said:
First I've heard of the pro-rata rule, so yet another new thing for me. However my IRA account includes only money rolled over from 401ks, so it should not apply to me. My IRA should be 100% pre-tax.

Now that said, one of the reasons it feels "too late" to convert to a backdoor Roth is that I'm assuming whatever I converted would be taxed based on my current ordinary income tax rate... which is quite high.

I guess I could wait to do it until I find wife number 32, but for now my income as a single guy with no kids would put the conversion at a high tax rate (unless it gets capital gains tax treatment, then that's an entirely diff story).
Click to expand...
If you are philanthropically inclined at all, and if you reach a point in retirement where you don’t really need the income from it, a great use of an IRA is to either gift it outright to a charitable organization of your choice or to take advantage of a QCD (qualified charitable distribution) from your RMD (required minimum distribution). Either way you can significantly reduce your federal income tax liability by doing so, and the charitable organization receives the entirety of the gift tax-free. As an example, I’m in the wealth management space and I’m working with a client who wants to gift both his and his wife’s IRAs entirely to charity, because the IRAs are so substantial (multiple seven figures each) that their children/heirs would be hit with a major tax bomb.
 
gregh1 said:
I make too much to contribute annually to a Roth ira. I max my 401k and assumed this mean I also couldn't add to a traditional ira... suddenly i think i'm mistaken.

So I can contribute to a trad ira even if i'm maxing my 401k limits and making too much to contribute to a Roth, it would just be non-deductible, yeah? But then what happens tax-wise to this non-deductible money i have in a trad ira when i'm in my 70's at start withdrawing?

I'm partly wondering why you'd do backdoor roth vs just adding non-deductible $ to a trad ira.
Click to expand...
The Roth account will grow tax free and does not have any RMD requirements. It will continue to grow tax free forever, including when your heirs inherit it. When the heirs inherit a Roth IRA, they need to withdraw the money within 10 years but there still is no RMD requirement and all of the money coming out is tax free. So they can keep it in the Roth growing tax free for 10 years before they have to address it at all.

Traditional IRA pre-tax money, everything coming out is taxed. There is a RMD when you turn 72-75 which can be an issue if your distributions/SS/RMDs push you into a tax bracket/IRMAA bracket you don't want to be in. When your heirs inherit, they have to withdraw in 10 years and take RMDS each year and pay tax on all of the withdrawals. Depending on when they inherit, it could be during higher income years pushing them into a tax bracket that is unfavorable.

Post Tax Traditional IRA is the same as the pre-tax but only the gain is taxed when withdrawn, the initial contribution is not. But at least there is no tax as it grows. So long as you don't have an existing pre-tax IRA, there is no real downside to converting the Post-Tax IRA contribution to a Roth IRA assuming that it is a longer term investment that you know will stay there at least 5 (tax) years.

If you are mixing pre-tax and post tax IRA's, there are a number of problems starting with the custodian doesn't have to keep track of what funds are pre-tax and what are post tax. If you cannot roll your IRA into a 401k, it just isn't worth the hassle of doing a post tax IRA (IMO). When you withdraw, I believe the current rule is that it is pro-rata, ie you cannot withdraw the post tax first.

If you have an existing traditional post tax IRA, you want to roll it into a 401k before trying to do a backdoor roth. If you cannot do that, you may not want to bother with the post tax traditional, it's not a large amount and you may be better off just putting that same money into a brokerage account.
 
You must log in or register to reply here.
Back
Top