On the other side of that one I know a couple of people that have been banking on that inheritance and a prolonged nursing home stay took it all. Then those people have nothing, haven’t developed any financial discipline, and still find a way to blame everyone else
You may consider doing some back door Roth conversions right now while taxes are on sale. That will also help with not having more of your Social Security income taxable when you pull it. When you do the Roth conversions, it’s not a bad thing, to wait till the market dips and convert on a lower portfolio value.
I am wishing I had moved some last April when the market had covid.
Any money that you put into the Roth IRA that is principal, can come out anytime without penalty or tax. Assuming you’re over 59 1/2. You have to have a Roth IRA open for at least five years before any interest can come out of the account without issue. If you’ve had a Roth for over five years, you’re golden.
This is one dilemma I had with setting up a trust. With an irrevocable third party managed trust that essentially takes away a lot of your control over your assets and only gives you access to the income derived from those assets vs. the assets themselves, then you can essentially get assets out of your name and set yourself up to qualify for Medicaid if you need long term care. Otherwise, you have to exhaust nearly all of your assets before Medicaid will kick in, leaving nothing for your heirs. I elected not to do this. I’m hoping for a more sudden/rapid demise…On the other side of that one I know a couple of people that have been banking on that inheritance and a prolonged nursing home stay took it all. Then those people have nothing, haven’t developed any financial discipline, and still find a way to blame everyone else
Correct. I should preface my post with “always consult with your cpa before doing tax work”. Many CPA’s even forget about this rule. Unfortunately, it still confuses many tax professionals with tax laws constantly changing. Also, each conversion, no matter when in the year was made, is counted like it was done Jan 1st of the year. So if you made a conversion in August 2021, the IRS looks at it as if she made the conversion on January 1, 2021, so that five-year rule on the interest applies from January 1, 2021 to five years later.
Here is a little exercise to help with the “need for a new truck“. Assume you will lose 50% of the price/value of the truck while you own it. Assume financing costs you 4-6% per year (yes, even with 0% financing deals I’m afraid). Now, take that money and put it in a retirement investment of your choice for 15yrs @ 6% and co pare the difference at 15 yrs. that money in the retirement fund is what that new truck is REALLY costing you. If you are on track with your goals and have some cushion, buy the truck. If not, I would argue you can’t afford it and should wait. Even I this era of chip shortages and empty dealer lots, they are making new trucks with new features every day. There Will be a nice shiny one on the lot whenever you are ready to drop the cash....but those Marketing people make this difficult sometimes...since this is all they have to do every single day!...and they are pretty good at what they do.I turn 48 in July.
My wife and I went and saw a financial planner the other day. He said we had plenty of savings to live comfortably the rest of our lives. We just had to be dead by August 1st.
Thanks. I’ve been doing conversions when I have a low income year and that’s what my CPA told me. Is there anything preventing you from doing these conversations after you retire?
That’s too depressing. If I took the money I paid for my Tesla in 2015 and instead bought TSLA stock, it would be worth almost $1.5M today.
Nope. And it’s probably more ideal. Be aware that Roth conversions can alter your Medicare premiums, 2 years after the fact.
Please elaborate. Like dummy it down as best as you can.
Yep, and like my buddy who is getting the exchange ins for 150.00 learned, he will delay taking SS a couple years because he said it will bump up his rates because SS counts as $$$ on the exchange
In our family the rule is to do better for your kids than your parents did for you. There is no reason why that rule should ever stop. While generational wealth may be a product of that rule it is not the intent.
This reminds me of my other retirement question... if you do find yourself in that situation in a year where you are not working can you make an IRA contribution to reduce your AGI?Medicare premiums are based on AGI (line 11 of 2020 tax return) from two years prior. 2019 AGI is used to determine 2021 Medicare Part B premium. Over $176k AGI for a married couple increases Medicare premiums by $60/month. Converting $1 too much to Roth in a year could cost an extra $720/yr in Medicare premiums.
Costs
What you pay for Medicare will vary based on what coverage and services you get, and what providers you visit.www.medicare.gov
