Makes sense, and yes, Roth conversions would require paying taxes now. But letting it grow and minimal outflows from RMDs (eventually) would probably be a better play. She has the benefit of no taxes due to high 0% long term capital gains rates and a low withdraw annually fr9m the taxable account.Agree with other posters; usually the best course of action is to deplete taxable funds, then traditional IRAs, then Roth IRAs as far as minimizing lifetime taxes.
Given the relatively small amount of the Trad IRA and her very low taxable income, I think it actually makes more sense to do Roth conversions than to live off the proceeds. You mention trying to keep ACA subsidies, so you'd have to run a calculator to see how much you could convert annually and keep whatever level of subsidy is ideal, and also to keep her taxable income relatively low ahead of medicare premiums being set.
But I wouldn't be paying income taxes now simply to (hopefully) avoid income taxes in 13 years when RMDs begin - especially as by then she'll have the benefit of social security boosting her income. RMDs aren't the devil; people just hate paying taxes. And if that is the case then why would you want to pay them before you have to? You're basically just accelerating RMDs by draining the IRA before they are due. RMDs are just a mechanism for the IRS to make you drain the IRA so they can get their taxes. Don't do it till you have to if you don't need the money!
Statistics: Posted by Jake_W — Thu Jun 20, 2024 7:55 pm
