Although in general the plan looks reasonable another few thoughts.....Yes - in general the plan looks very reasonable.jeffyscott,Ah, I'd guessed it was all MM (as an emergency fund), since I didn't think there would be any stock fund that had 0% QDI (or if there were, that you'd be holding it in taxable).jeffyscott,
I am selling fixed income in taxable, there's no gains to speak of. This will reduce income and thus reduce ACA premiums.
But in the case of the OP, perhaps I misunderstood what they meant by "ordinary dividends". I took it to mean dividends from bond mutual funds or something, not stock dividends that are not qualified. Since they did not mention any QDI, it seems odd that there would be no QDI if they have stocks in taxable Image may be NSFW.
Clik here to view..
I have 400K to 600K in my taxable account. It is a combination of stock index funds and MMF. Yes, there might be some QDI in that 15K. To simplify the discussion, I just assume that they are all ordinary dividends.
KlangFool
So in that case, you can at least move the money market to tax deferred in order to reduce income when you are using the ACA. As I think some else has already noted, if there's an HSA eligible plan that works for you, it'll allow you to reduce taxable income by about another $10K.
We have somewhat similar assets but with pensions in addition to SS. We also have less in traditional accounts, thanks to retiring early and having several years to do conversions in the 12% bracket. But we were only able to do do them at 12% thanks to having insurance provided by a former employer, rather than the ACA. That is coming to an end soon and will bring our Roth conversions to an end in another year.
I was shocked, when in anticipation of the change, I took a look at the subsidies and how they would change if we continued with Roth conversions and found that we'd effectively be in about a 27% tax bracket. Prior to doing that, I knew that the subsidies were such that they limited the premiums to 8% or less of MAGI. So from that I had assumed that, at worst, our effective marginal tax bracket would be 20%, rather than 12%.
1) The income #2 of 40K per year may not last over the next few years.
2) The MMF will be spent down to pay the taxes on Roth conversion.
3) I would prefer to keep the Roth space for stock funds.
4) The money in the HSA will be in the MMF.
5) Yes, due to the ACA subsidy especially with the ACA subsidy cliff of 400% FPL, the limit on MAGI is around 80K to 90K.
6) Before Medicare, you worry about AC subsidy. After medicare, you need to deal with IRMAA?
7) As far as I can tell, my plan works in the big picture sense. Of course, the detail need to work out for 2025 in terms of my actual income. It may not be zero if I am recruited to do some part-time consulting work for my friend.
8) My 2024 plan can only work out in December with all the final severance pay stuff/
KlangFool
Putting all these numbers and goals in a detailed calculator will allow you to review the results for the life of the portfolio.
Then once you have that basline configured as you like it with your best fit drawdown and Roth conversions you can vary inputs and see what makes the potential choices go down and up - and most inportantly how far down and up.
- you are missing the draw rate (amount) which is needed for calculators or 'pad and paper'
- lower draw rates will favor larger conversion amounts
- you need to assign the goals for future funds (charity , heirs, spending)
if spending then the conversions will likely favor a moderate amount
if charity then the conversions will likely favor a minimum amount
if for heirs then the conversions will likely favor a larger amount
You really need to load all of the numbers and goals into one of the calculators to see the full results of choices out over the life of the portfolio.
Statistics: Posted by smitcat — Mon Aug 26, 2024 7:51 am