Retirement Savings and Benefits
Questions and comments about IRAs, 401k accounts, social security, and other forms of retirement savings and benefits.
Tax & Estate Planning
Posted by: b1_lee, April 16, 2017 08:45PM
I am retired, in 28% bracket, have a 7 figure traditional 401k, won't collect SSA benefit until 70 (4 yr from now).

My goals are :- pay lowest tax over my spouse & my life time, able to pay long term care expenses when need (not plan to buy this expensive insurance) & leave 2 children with Roth IRAs for them to stretch. What actions should I take now until done?

Q1 - Should I begin convert some 401K annually until it is depleted?

How much should I convert before 70 & after 70?

Should I convert up to my 28% or up to 33% before & after 70?

Should I stay below 250,000 AGI to avoid the 3.8% tax? 0.9% should not apply since I won't have earned income, right?

Since Medicare Part B & D have tier premium, which tier should we aim for before & after 70?

How much should we take these Medicare premium into consideration for our overall strategy?

Are there programs show the outcomes for above strategies?

Are there other strategies we should consider?


Q2 - In general, is it better for us to pay tax to convert as much 401k to Roth IRAs or leave my children with traditional IRAs & have them to pay tax themselves (they will end up with 28% tax bracket)?


Q3 - If we decide to convert some 401k to Roth IRA annually, should we pay tax from other sources vs withhold tax from 401k?

What is trade off & long term effect as one way will drain 401k account faster & deal with fewer RMDs vs able to create larger Roth IRAs & deal with more/larger RMDs?

How does one decide which strategy to implement?


Q4 - When one reached 70.5 & start RMD annually, must the first distribution be designated as RMD before one allow to do Roth conversion?

Can one spread annual RMD over multiple distribution within the same year?

Can one interwine distributions with RMDs & Roth conversion within same year?


Q5 - If I were in a different tax bracket, have different amount in 401k, goal to benefit us over children or goal to benefit children over us, etc.
how would these affect the answers for about questions?


Q6 - Are there books/articles/websites, etc. that help/guide one get better handle on the subjects?

Re: Tax & Estate Planning
Posted by: Sven, April 17, 2017 08:14PM
This is a six course banquet of very sophisticated questions. I do not have enough knowledge in several of the areas to say much that would be based on personal experience, as opposed to conjecture. I have been through Roth conversions and RMD's and understand what the income they generate can do to the rest of your tax return.

Our goal, like yours, is to pass wealth down to our children. It is now easier what with what the feds have done, and, as of next year, there is no longer an estate tax where I live. There are areas where I have a pretty good sense of how the estate planning/tax game is played, but I am afraid in the words made famous on "Shark Tank", I'm out. I hope you are lucky enough to have one responder who can help you through all of your areas. It's going to be a long thread, because each questions is intertwined with the other questions.

Re: Tax & Estate Planning
Posted by: Drewremedy, April 20, 2017 10:18PM
IF the End game is such that you are likely into Federal estate tax territory ...then tax math suggests completed gifts earlier .

ANd 529 plans are one quirky place you can make a pile of gifts onto family tree and take them all back if your needs or desires change ..
And decent rats of return if you pick plans with care .

Low taxes s by itself not a good naked goal...efficient transfer of wealth isma better big picture.

All is well into,somebody hits a nursing home at say $11,000 a month

Re: Tax & Estate Planning
Posted by: wanttoknow, May 2, 2017 07:40PM
b1_lee,

With regard to the I.R.S. rules regarding retirement accounts, I have found the following books to be very helpful:

"IRAs, 401(k)s & Other Retirement Plans" by Twila Slesnick - 2015 is latest edition.

"Go Roth!" by Kaye A. Thomas - 2015 is latest edition.
Mr. Thomas goes beyond just the I.R.S. rules. He is also the proprietor of this website.



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