I am having a difficult time determining if we should continue Roth conversions while working.
I am concerned about having a large (for me) amount in tax deferred accounts and the high taxes it will create later.
Of the 1.975M retirement funds, 1.41M is deferred. I think that is about 67% of our funds deferred.
We will be barely in the 22% tax bracket this year and any conversions will be at 22%.
I will be retiring this year or next, but I have a small business that could bring in nearly as much as I make at my W2 now. I intend to continue this business until 70yo. So, there may not be any low income years before Social Security. If we do not make enough money to keep us at the 22% threshold, I will withdraw enough tax deferred to keep us there.
The reason I think I need to do the conversions is that with RMDs we will be in the 25% tax bracket and then when one passes, the 28% bracket.
It seems like there is going to be money left over when we die and the kids that are doing well, will not need the extra tax burden either.
I have been through the wiki and still am at a loss.
I have posted our information below in case it is helpful in the decision making process. (If you see anything wrong there please say something.)
700K home paid off.
Expected annual expenses of less than 100K after taxes. Including health care.
No home expenses looming, only optional improvements.
His Social Security @70yo is approximately 46K.
Her Social Security PIA $2,200 (27K) I am Not sure when she will take it due to continued working.
She intends to continue self-employment until at least 65yo in a helping profession she loves. 55K net.
Emergency funds: Yes, in checking plus ROTH if things really get out of hand.
Debt: None
Tax Filing Status: Married Filing Jointly
Tax Rate: 22% Federal barely, 00% State
State of Residence: Washington
Age: Him 63, Her 58.5
Desired Asset allocation:
70% stocks / 30% bonds
Desired International allocation: 20% of stocks
The approximate size of our combined total retirement portfolio is 1.975M.
Current retirement assets
Taxable: 00% cash, with the exception of about 40K in checking.
Total husband retirement accounts- 1.427M
His 401a and 457b combined/mirrored 689K
16% Fidelity 500 Index: 0.02 FXAIX 346K
9.7% Fidelity Total International Index: 0.06 FTIHX 174K
7.8% Dodge and Cox Income 0.33 (DOXIX) 142K
Company match? 5% of gross = $5500 per year
His PERS 3 Defined contribution plan is 125K (I think I will convert this to a WA state TAP annuity upon separation????)
1.5% Washington State Bond Fund Bloomberg Barclays Intermediate Credit Index benchmark .12??? ER
1.5% US Large Cap Equity fund S&P 500 benchmark 0.0 ER
1.4% US Small Cap Equity fund Russell 2000® Value Index benchmark .02 ER
2% Global Equity index MSCI ACWI IMI Net Dividend Return Index benchmark .03 ER
0.4% His HRA VEBA in a generic 2040 Target fund 12K.
Pension 13K annually, cola to 3%. 100% survivor.
These current employer accounts are approximately 79/21 with 27% International
I have changed my future contributions to 50% US, 0% INT, 50% BND, to slowly move the international down and bond up.
His Roth IRA at Fidelity 408K
% 41K VANGUARD TOTAL INTL STOCK INDEX ADMIRAL CL VTIAX .11
% 345K VANGUARD TOTAL STOCK MARKET INDEX ADMIRAL CL VTSAX .04
0.1% NOV INC (NOV)
His Rollover IRA at Fidelity 193K
% 168K VANGUARD TOTAL BOND MARKET INDEX ADMIRAL CL VBTLX .05
% 23K VANGUARD TOTAL INTL STOCK INDEX ADMIRAL CL VTIAX .11
His Defined Benefit PERS 3 (pension) Approximately 13K per year COLA @ age 65. 100% survivor.
Total wife retirement accounts- 546K
HER Rollover IRA at Fidelity 374K
201K Vanguard Bond Index BND
12K Vanguard Small Cap Value VBR
115k Vanguard Index fund VTI
30K Vanguard International index fund VXUS
HER Roth at Fidelity 157K
151K Vanguard Total Market VTI
Her Solo 401K at Fidelity 16K
______________________________________________________________
New annual Contributions
$30.5K his 457b
$5.4K his 401a Employer Match goes in the 401A.
$5.5K his defined contribution to PERS 3
$8K his Roth IRA
$8K her Roth IRA
$16K her Solo IRA in 2023, future ??
Available funds in his 401A & 457B
BOND
Dodge and Cox Income X (DOXIX) .36
PIMCO Real Return Institutional (PRRIX) .47
TIAA-CREF High Yield Bond Institutional (TIHYX) .36
BALANCED/ASSET ALLOCATION
Vanguard Target Retirement 2020 Investor (VTWNX) .08
Vanguard Target Retirement 2025 Investor (VTTVX) .08
Continues with same fund family all the way to 2070
U.S. STOCK
JPMorgan US Equity R6 JUEMX .44
MainStay Large Cap Growth R6 MLRSX .63
Fidelity Extended Market Index FSMAX .05
JPMorgan Small Cap Equity R6 VSENX .79
Goldman Sachs Small Cap Value R6 GSSUX .93
INTERNATIONAL/GLOBAL STOCK
DFA Global Equity Portfolio Instl (DGEIX) .44
American Funds EuroPacific Growth R6 (RERGX) .46
I am concerned about having a large (for me) amount in tax deferred accounts and the high taxes it will create later.
Of the 1.975M retirement funds, 1.41M is deferred. I think that is about 67% of our funds deferred.
We will be barely in the 22% tax bracket this year and any conversions will be at 22%.
I will be retiring this year or next, but I have a small business that could bring in nearly as much as I make at my W2 now. I intend to continue this business until 70yo. So, there may not be any low income years before Social Security. If we do not make enough money to keep us at the 22% threshold, I will withdraw enough tax deferred to keep us there.
The reason I think I need to do the conversions is that with RMDs we will be in the 25% tax bracket and then when one passes, the 28% bracket.
It seems like there is going to be money left over when we die and the kids that are doing well, will not need the extra tax burden either.
I have been through the wiki and still am at a loss.
I have posted our information below in case it is helpful in the decision making process. (If you see anything wrong there please say something.)
700K home paid off.
Expected annual expenses of less than 100K after taxes. Including health care.
No home expenses looming, only optional improvements.
His Social Security @70yo is approximately 46K.
Her Social Security PIA $2,200 (27K) I am Not sure when she will take it due to continued working.
She intends to continue self-employment until at least 65yo in a helping profession she loves. 55K net.
Emergency funds: Yes, in checking plus ROTH if things really get out of hand.
Debt: None
Tax Filing Status: Married Filing Jointly
Tax Rate: 22% Federal barely, 00% State
State of Residence: Washington
Age: Him 63, Her 58.5
Desired Asset allocation:
70% stocks / 30% bonds
Desired International allocation: 20% of stocks
The approximate size of our combined total retirement portfolio is 1.975M.
Current retirement assets
Taxable: 00% cash, with the exception of about 40K in checking.
Total husband retirement accounts- 1.427M
His 401a and 457b combined/mirrored 689K
16% Fidelity 500 Index: 0.02 FXAIX 346K
9.7% Fidelity Total International Index: 0.06 FTIHX 174K
7.8% Dodge and Cox Income 0.33 (DOXIX) 142K
Company match? 5% of gross = $5500 per year
His PERS 3 Defined contribution plan is 125K (I think I will convert this to a WA state TAP annuity upon separation????)
1.5% Washington State Bond Fund Bloomberg Barclays Intermediate Credit Index benchmark .12??? ER
1.5% US Large Cap Equity fund S&P 500 benchmark 0.0 ER
1.4% US Small Cap Equity fund Russell 2000® Value Index benchmark .02 ER
2% Global Equity index MSCI ACWI IMI Net Dividend Return Index benchmark .03 ER
0.4% His HRA VEBA in a generic 2040 Target fund 12K.
Pension 13K annually, cola to 3%. 100% survivor.
These current employer accounts are approximately 79/21 with 27% International
I have changed my future contributions to 50% US, 0% INT, 50% BND, to slowly move the international down and bond up.
His Roth IRA at Fidelity 408K
% 41K VANGUARD TOTAL INTL STOCK INDEX ADMIRAL CL VTIAX .11
% 345K VANGUARD TOTAL STOCK MARKET INDEX ADMIRAL CL VTSAX .04
0.1% NOV INC (NOV)
His Rollover IRA at Fidelity 193K
% 168K VANGUARD TOTAL BOND MARKET INDEX ADMIRAL CL VBTLX .05
% 23K VANGUARD TOTAL INTL STOCK INDEX ADMIRAL CL VTIAX .11
His Defined Benefit PERS 3 (pension) Approximately 13K per year COLA @ age 65. 100% survivor.
Total wife retirement accounts- 546K
HER Rollover IRA at Fidelity 374K
201K Vanguard Bond Index BND
12K Vanguard Small Cap Value VBR
115k Vanguard Index fund VTI
30K Vanguard International index fund VXUS
HER Roth at Fidelity 157K
151K Vanguard Total Market VTI
Her Solo 401K at Fidelity 16K
______________________________________________________________
New annual Contributions
$30.5K his 457b
$5.4K his 401a Employer Match goes in the 401A.
$5.5K his defined contribution to PERS 3
$8K his Roth IRA
$8K her Roth IRA
$16K her Solo IRA in 2023, future ??
Available funds in his 401A & 457B
BOND
Dodge and Cox Income X (DOXIX) .36
PIMCO Real Return Institutional (PRRIX) .47
TIAA-CREF High Yield Bond Institutional (TIHYX) .36
BALANCED/ASSET ALLOCATION
Vanguard Target Retirement 2020 Investor (VTWNX) .08
Vanguard Target Retirement 2025 Investor (VTTVX) .08
Continues with same fund family all the way to 2070
U.S. STOCK
JPMorgan US Equity R6 JUEMX .44
MainStay Large Cap Growth R6 MLRSX .63
Fidelity Extended Market Index FSMAX .05
JPMorgan Small Cap Equity R6 VSENX .79
Goldman Sachs Small Cap Value R6 GSSUX .93
INTERNATIONAL/GLOBAL STOCK
DFA Global Equity Portfolio Instl (DGEIX) .44
American Funds EuroPacific Growth R6 (RERGX) .46
Statistics: Posted by Workinprogress — Tue Mar 05, 2024 11:11 pm — Replies 4 — Views 553