I stopped working at 43, now 53, I have implemented my "clean up zone" last year as I realized the benefits of converting as much as possible to Roth accounts, BEFORE I start SS, which I will still do early. Wish I had looked into the multiple effect of where retirement income comes from decades ago. Don't know if I'll get it all converted before I start SS (which will be at 62 unless I am making too much money doing something I love), but I will never delay SS to 70. FAs ignore all the other parts of your life and just look solely at numbers, with assumptions you'll not only live very long (as most people will pass before they even reach the break-even point), but also ignore that you spend less after 70 in nearly every category except healthcare. Not worth giving up your most productive, active retirement years to only truly recognize the benefit of delaying in your most elderly years. Problem in this video is they want you to pay taxes early based on the assumption that rates will be higher in the future. Yet the tax savings shown is often just a few points....which could likely be made up from the fact that these hits will occur when your spending will statistically go down. Remember YOUR retirement should be more than just numbers that are the most efficient....that said start planning to skew those numbers to your benefit long before retirement.
Well Done as always. Great explanation on taking advantage of TCJA in the next 4 years. You get an extra 100,000 of conversion opportunity in the 22% tax bracket if filing MFJ, it then reverts to 32% in 2026. Would love to see you do a dive into the FAFSA area. Many of us with college age children in our 50s and 60s, trying to retire early, navigate ACA, and do Roth conversions. I haven't seen any of these type of videos from you, as this is a very complex thing to explain. Would love for you to break this down in layman's terms.
Well explained! I'm 60, retiring early by the end of the year. I could stay longer, but i'm tired. Survivor's benefit (so a bit of widow's trap) and small pension. my delayed SS at 70 will be a nice boost. Base income is reasonable (no debt helps) and taxes very low. Maxing out the 24% w/ roth conversions for 3 more years, cringing when I write those tax checks. But I'm looking at the rest of retirement... and I smile because I'll have what I need, very minimal taxes, and a very nice tax tax-free cushion. Nowhere near the "$$ needs" I'm told I'll die without, but I already live comfortably on less after paying off my mortgage and maximizing HSA and 401k funding. If you don't owe anyone, they can't take it away. (well, the government can take it away... but, I digress) When the much smaller RMDs start coming due, I don't think I'll need them. If I do, I'll take and pay the taxes. But I suspect I can make qualified charitable distribution to support causes I love, without ever having taken the tax hit.
@@lw9936 Congrats on making it through the conversions! My only regret is that I didn't know about this earlier, and I'll trust (tell myself to trust) that I'm buying my Roth at a discount, and I may make it through the conversion faster. Plus, I can always stay a bit longer or take my boss's offer of contracting for a year or two... Just think - all the fun of my job with none of the paperwork! (unless submitting invoices is "paperwork"!)
If you will be done with "Roth conversions" in the next few years, why continue to delay SS until 70?? Before you answer "because I don't need it" I would say that is all the more reason to take it earlier and start enjoying it and eat through your own assets slower. Delaying till 70, you not only don't get the money you passed on for those years, but you're the one paying for it out of your pocket (bit of a double whammy until you recoup -- and money that can be passed on to heirs while any untaken SS goes to the government) and the break-even (without a dime of interest) will take you into your early 80s (and it's not a true break-even because you paid for it with more valuable dollars in the near future for the deflated dollars valued 15 - 20 years later). Delaying when you don't need to is either a fear based decision for many or a somewhat greed decision with big eyes on that 24% increase (while ignoring that you paid big upfront money to gamble that you will get that. Also, most of your retirement years are just you getting back what you paid on the extra), which will never amount to as much as you paid upfront, even if you actually live long enough to come out ahead. To each their own, but I will never delay till 70. I hope to take mine before 65 (unless I am making too much money doing something I love) and I'll invoke the SS "No Loss Provision" that people who delay past 65 lose the ability to take. But even if that is missed I'll absolutely start at FRA of 67. Delaying is a losing bet where most people are dead before they even break-even.
"You don't need more money; you need a better plan." a great slogan- When using a semicolon to join two independent clauses, do not capitalize the first word of the second independent clause unless the word is a proper noun, e.g., The sky is blue; the birds are singing. Once again, a great video to rewatch and gain financial inspiration.
Thanks for the reminder to evaluate my plan. Looking at my "RMD Couples spreadsheet" I made, I found I need to really focus on my wife's IRA/401k accounts by converting / withdrawing / or doing QCDs (when she reaches 70 1/2). As she is 68, and I am 59...I need to focus on managing her IRA/401k accounts. I can wait until I retire in 5 or 6 years to deal with mine from age 65 to 70 while I wait to collect SS.
I plan on living off SS and IRA withdrawals to allow my other investments to grow and become tax free to my heirs. At age 63 there are 12 years before RMDs so withdrawals and growth will offset leaving me RMDs a bit over $100k per year. After 12 years of inflation, the RMD plus SS is the minimum to live on so I won’t have unnecessary withdrawals.
Great video! I'm trying to also compare potential ACA premium subsidy vs Roth conversions prior to starting medicare. I know you have a video that discusses this but I can't find it. Could you provide a link? Thank you!
I am waiting until 70 to file for SS. My wife is older and we retired together in 2016. I immediately opened a joint life annuity - which essentially started to draw down the somewhat substantial balance in my rollover IRA. I will do my Roth conversions in 2023, 2024 and 2025. Should go quick - as the "sequence of returns" in 2022 has left me with less to convert. (Hey - I will owe less in taxes - LOL).
What about the inflation adjusted numbers.? My taxes will be higher by 4% but the value of a dollar has decreased by 10 % in 5 years. So I am paying higher taxes on a dollar that buys less than today’s dollars. Isn’t this a consideration?
what does that strategy at 18:00 minutes do to the spendable income at 73+, as compared to no roth conversions? Are we limiting taxes at the expense of our day to day income?
Based on example you highlighted taking SS at 70 vice 62, 8 years early, you only lose $272.85/month. Now this sounds a lot to some, but I personally have pension which covers a lot of my retirement and getting SS early will allow me not to draw from my other investments, plus Break even around 79 years old, am I truly going to need more money over 80 years old. I will be active at my younger age and will want the money and over 80 you are very much less active. I will be taking mine at 62 yo. Food for thought.
Question: when we take our RMD, we plan to place the money in a Roth IRA. That would allow us to deduct the IRA deduction under part II the schedule 1 (form 1040), This would reduce our income . I’ve asked many people and no one seems to think this is an issue . What are your thoughts?
Nobody has a crystal ball as to future taxation, its just a guess. 1. You die before you take any, you lose 2. You die before you break even you lose 3. You keep more money in the market then you should to generate income, potential big loss(or alot of heartburn like today wishin you took SS and we out of the market) 4. You retirement depends on two SS when one spouse dies you lose. Take SS early and purchase an FIA Annuity with maybe 1/2 your IRA money with a good income rider. This will be a free annuity since sum of your early payments about equals what the premium is for the annuity and will result in more income at FRA if you turn on the income. Also annuity gives you a double payout for LTC. Heirs get anything you do not take out. Your lifetime payout will satisfy the RMD and have a little over to shelter in other accounts. You can also pay no taxes easily on $80k till both RMDs kick in. 1. The taxable account you have k-1 income and other return of capital ETFs. 2. Spend a little cash in taxable account(of course no taxes due) if you need to and let the deferred replenish you cash. 3. The standard deduction gives you a 27k safe haven plus another 3k carryover loss which most people have. Just because your SS becomes taxable does not mean you will pay income tax. Im doing this strategy taking one RMD now, when the second one kicks in I will pay a little. $143k of "income " paid zero tax for about 7 yrs, got about 3 yrs left. Im 40% in the market and 60% cash, so you have to be tax smart not agressive. You are right if you take money from your IRA too soon your hosed tax wise. Also buy an EV with a big tax credit that first big tax year, you will feel better! Retirement is about emotional reaction too, sense of control, not just guesstimate tax numbers! Yes you do not need more money, you need a better plan!
looks like you are smart, and well-informed. My wife and I jointly will have 3m in our 401k, plus 8k/m from pension, plus close to 8k from SS. I can not think of any way to avoid paying a lot of tax when we retire at 70, and start to draw money from all three resources. Can you suggest a way?
@@Peter-uo8zr depends on your planned annual expendatures minus the one time spending. Just guessing this is about 150-200k, 800k home, two nice lease cars, 10k annually vacation for a while! Dont be fooled moving to a no State tax state, feels good but property and sales taxes are high!
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I stopped working at 43, now 53, I have implemented my "clean up zone" last year as I realized the benefits of converting as much as possible to Roth accounts, BEFORE I start SS, which I will still do early. Wish I had looked into the multiple effect of where retirement income comes from decades ago. Don't know if I'll get it all converted before I start SS (which will be at 62 unless I am making too much money doing something I love), but I will never delay SS to 70. FAs ignore all the other parts of your life and just look solely at numbers, with assumptions you'll not only live very long (as most people will pass before they even reach the break-even point), but also ignore that you spend less after 70 in nearly every category except healthcare. Not worth giving up your most productive, active retirement years to only truly recognize the benefit of delaying in your most elderly years.
Problem in this video is they want you to pay taxes early based on the assumption that rates will be higher in the future. Yet the tax savings shown is often just a few points....which could likely be made up from the fact that these hits will occur when your spending will statistically go down.
Remember YOUR retirement should be more than just numbers that are the most efficient....that said start planning to skew those numbers to your benefit long before retirement.
Well Done as always.
Great explanation on taking advantage of TCJA in the next 4 years. You get an extra 100,000 of conversion opportunity in the 22% tax bracket if filing MFJ, it then reverts to 32% in 2026.
Would love to see you do a dive into the FAFSA area. Many of us with college age children in our 50s and 60s, trying to retire early, navigate ACA, and do Roth conversions. I haven't seen any of these type of videos from you, as this is a very complex thing to explain. Would love for you to break this down in layman's terms.
These are outstanding videos that take somewhat complex topics and explain them in a way that makes sense! Thanks for the great content!
Well explained!
I'm 60, retiring early by the end of the year. I could stay longer, but i'm tired. Survivor's benefit (so a bit of widow's trap) and small pension. my delayed SS at 70 will be a nice boost. Base income is reasonable (no debt helps) and taxes very low. Maxing out the 24% w/ roth conversions for 3 more years, cringing when I write those tax checks. But I'm looking at the rest of retirement... and I smile because I'll have what I need, very minimal taxes, and a very nice tax tax-free cushion. Nowhere near the "$$ needs" I'm told I'll die without, but I already live comfortably on less after paying off my mortgage and maximizing HSA and 401k funding. If you don't owe anyone, they can't take it away. (well, the government can take it away... but, I digress)
When the much smaller RMDs start coming due, I don't think I'll need them. If I do, I'll take and pay the taxes. But I suspect I can make qualified charitable distribution to support causes I love, without ever having taken the tax hit.
I like it. I'm 59 and have the same plan.
Linda - Well done
Linda, I did that too. Cutting big checks to Uncle Sam was painful! Not sure the Roth conversions will make money in today's market?
@@lw9936 Congrats on making it through the conversions! My only regret is that I didn't know about this earlier, and I'll trust (tell myself to trust) that I'm buying my Roth at a discount, and I may make it through the conversion faster.
Plus, I can always stay a bit longer or take my boss's offer of contracting for a year or two... Just think - all the fun of my job with none of the paperwork! (unless submitting invoices is "paperwork"!)
If you will be done with "Roth conversions" in the next few years, why continue to delay SS until 70?? Before you answer "because I don't need it" I would say that is all the more reason to take it earlier and start enjoying it and eat through your own assets slower. Delaying till 70, you not only don't get the money you passed on for those years, but you're the one paying for it out of your pocket (bit of a double whammy until you recoup -- and money that can be passed on to heirs while any untaken SS goes to the government) and the break-even (without a dime of interest) will take you into your early 80s (and it's not a true break-even because you paid for it with more valuable dollars in the near future for the deflated dollars valued 15 - 20 years later). Delaying when you don't need to is either a fear based decision for many or a somewhat greed decision with big eyes on that 24% increase (while ignoring that you paid big upfront money to gamble that you will get that. Also, most of your retirement years are just you getting back what you paid on the extra), which will never amount to as much as you paid upfront, even if you actually live long enough to come out ahead.
To each their own, but I will never delay till 70. I hope to take mine before 65 (unless I am making too much money doing something I love) and I'll invoke the SS "No Loss Provision" that people who delay past 65 lose the ability to take. But even if that is missed I'll absolutely start at FRA of 67. Delaying is a losing bet where most people are dead before they even break-even.
This is great content! I'm retiring in June at 57 and plan to implement the same strategy! Very timely for this video!
"You don't need more money; you need a better plan." a great slogan- When using a semicolon to join two independent clauses, do not capitalize the first word of the second independent clause unless the word is a proper noun, e.g., The sky is blue; the birds are singing. Once again, a great video to rewatch and gain financial inspiration.
Oh you sound like fun in social settings
@@edsteadham4085 Of course I am!
Thanks for the reminder to evaluate my plan. Looking at my "RMD Couples spreadsheet" I made, I found I need to really focus on my wife's IRA/401k accounts by converting / withdrawing / or doing QCDs (when she reaches 70 1/2). As she is 68, and I am 59...I need to focus on managing her IRA/401k accounts. I can wait until I retire in 5 or 6 years to deal with mine from age 65 to 70 while I wait to collect SS.
I plan on living off SS and IRA withdrawals to allow my other investments to grow and become tax free to my heirs. At age 63 there are 12 years before RMDs so withdrawals and growth will offset leaving me RMDs a bit over $100k per year. After 12 years of inflation, the RMD plus SS is the minimum to live on so I won’t have unnecessary withdrawals.
You should convert tax deferred investments to Roth acct.
Great video! I'm trying to also compare potential ACA premium subsidy vs Roth conversions prior to starting medicare. I know you have a video that discusses this but I can't find it. Could you provide a link? Thank you!
I am waiting until 70 to file for SS. My wife is older and we retired together in 2016. I immediately opened a joint life annuity - which essentially started to draw down the somewhat substantial balance in my rollover IRA. I will do my Roth conversions in 2023, 2024 and 2025. Should go quick - as the "sequence of returns" in 2022 has left me with less to convert. (Hey - I will owe less in taxes - LOL).
@@ex-muslimZafarSahil True- But I would give up a lot of healthcare benefits this year. I have to wait until next year.
What about the inflation adjusted numbers.? My taxes will be higher by 4% but the value of a dollar has decreased by 10 % in 5 years. So I am paying higher taxes on a dollar that buys less than today’s dollars. Isn’t this a consideration?
what does that strategy at 18:00 minutes do to the spendable income at 73+, as compared to no roth conversions? Are we limiting taxes at the expense of our day to day income?
Extraordinary presentation! Thank you.
Thank you Rick!
In short, do a proportional withdrawal before rmd 😊
Based on example you highlighted taking SS at 70 vice 62, 8 years early, you only lose $272.85/month. Now this sounds a lot to some, but I personally have pension which covers a lot of my retirement and getting SS early will allow me not to draw from my other investments, plus Break even around 79 years old, am I truly going to need more money over 80 years old. I will be active at my younger age and will want the money and over 80 you are very much less active. I will be taking mine at 62 yo. Food for thought.
Wow! Told ro do everything Wrong! I have friends doing it like this? I try to warn them? NO! They believe Their advisor. NOT ME?
Question: when we take our RMD, we plan to place the money in a Roth IRA.
That would allow us to deduct the IRA deduction under part II the schedule 1 (form 1040),
This would reduce our income .
I’ve asked many people and no one seems to think this is an issue .
What are your thoughts?
Do you have earned income at this point?
Also, you cannot deduct Roth IRA contributions. Do you mean the Retirement Savings Contributions Credit?
@@SafeguardWealthManagement thanks for replying. It would be an IRA
There Eric goes again taking the complexity and turning it into something useful for you to use.
0000
I'm dealing with this problem. I'm going to do Roth conversions pay the tax and maybe never draw SS.
Please slow down your speech; great content
Not sure if you are aware of it, but you can slow down the speed of playback in the settings.
Nobody has a crystal ball as to future taxation, its just a guess.
1. You die before you take any, you lose
2. You die before you break even you lose
3. You keep more money in the market then you should to generate income, potential big loss(or alot of heartburn like today wishin you took SS and we out of the market)
4. You retirement depends on two SS when one spouse dies you lose.
Take SS early and purchase an FIA Annuity with maybe 1/2 your IRA money with a good income rider. This will be a free annuity since sum of your early payments about equals what the premium is for the annuity and will result in more income at FRA if you turn on the income. Also annuity gives you a double payout for LTC. Heirs get anything you do not take out. Your lifetime payout will satisfy the RMD and have a little over to shelter in other accounts.
You can also pay no taxes easily on $80k till both RMDs kick in.
1. The taxable account you have k-1 income and other return of capital ETFs.
2. Spend a little cash in taxable account(of course no taxes due) if you need to and let the deferred replenish you cash.
3. The standard deduction gives you a 27k safe haven plus another 3k carryover loss which most people have. Just because your SS becomes taxable does not mean you will pay income tax.
Im doing this strategy taking one RMD now, when the second one kicks in I will pay a little. $143k of "income " paid zero tax for about 7 yrs, got about 3 yrs left. Im 40% in the market and 60% cash, so you have to be tax smart not agressive.
You are right if you take money from your IRA too soon your hosed tax wise.
Also buy an EV with a big tax credit that first big tax year, you will feel better!
Retirement is about emotional reaction too, sense of control, not just guesstimate tax numbers!
Yes you do not need more money, you need a better plan!
looks like you are smart, and well-informed. My wife and I jointly will have 3m in our 401k, plus 8k/m from pension, plus close to 8k from SS. I can not think of any way to avoid paying a lot of tax when we retire at 70, and start to draw money from all three resources. Can you suggest a way?
@@Peter-uo8zr depends on your planned annual expendatures minus the one time spending. Just guessing this is about 150-200k, 800k home, two nice lease cars, 10k annually vacation for a while! Dont be fooled moving to a no State tax state, feels good but property and sales taxes are high!