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RMD and possible Roth conversions

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  • #16
    Originally posted by LoboDO View Post
    Like the calculator..yes looks like I should probably triple conversion starting next year
    Here is Fidelity's.
    https://www.fidelity.com/retirement-planning/overview
    It allows additional planning factors and gives you the ability to see significantly below, below, and average returns as well as the withdrawal levels.
    The detail spreadsheet gives the results including the RMD's based on the assumptions and data you put in.

    The result is the same, the tax deferred will grow.

    David Graham at FiPhysician.Com has been used by some here. Hourly fee that you might want to consider.

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    • #17
      They might even dictate RMDS for Roths!!!

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      • #18
        David Graham I think just does advice/reviews; not managing acts

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        • #19
          Have you considered a SEPP until 59.5?

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          • #20
            Originally posted by GasFIRE View Post
            On a $4.5M account making yearly $100K Roth conversions is only going to slow the growth of your account. I suggest using this Schwab RMD calculator to give yourself a rough estimate:
            https://www.schwab.com/ira/understan...alculators/rmd
            With even modest growth you’re likely to end up with an 8 figure account in your 70s, with or without the $100K conversions. While a first world problem, with regards to Uncle Sam it’s either pay me now or pay me later. Currently the MFJ tax bracket for 24% is $330K. If you can pay the tax out of your taxable account, I would consider paying him now and fill up that 24% bracket.
            An easier way to calculate how much to convert is to subtract current age from 72, and to divide the total amount by the number of years, and this would give us a ballpark. Depending on the size of one's portfolio, 10-15 years might be enough to get high ROI vs. waiting for RMDs. Not too many docs will have more than 15 years to convert ~$5M account until age 72 anyway, so if one has 20+ years, converting over a longer period of time is great, but even if one does it over 10 years vs. 20, they'll still be far ahead. In some cases even 5 years is acceptable.

            Short answer is that nobody really knows how to do this optimally because this involves lots of assumptions and considerations, some of which are described here:

            https://www.whitecoatinvestor.com/me...sa-401k-plans/

            The only thing we can really do is compare various scenarios side by side. Compared with RMD scenario, Roth conversion (whether done over 20 or over 10 years, depending on the size of the account) will still win over the long term (even if the doc reaches a breakeven point and doesn't live long enough to realize positive gains), as there is estate planning to consider as well (which is what makes this so complex). I bet that over 20 years the results will be even better but probably not by a huge amount because the biggest savings come from prepaying taxes via Roth conversions vs. taking RMDs. I haven't ran the 10 vs. 20 year calculations (due to limitation of available tools), but the tax savings will definitely depend on the size of converted portfolio.
            Kon Litovsky, Principal, Litovsky Asset Management | [email protected] | 401k and Cash Balance plans for solo and group practices, fixed/flat fee, no AUM fees

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            • #21
              Depends a lot on how the tax scenario will be in 20+ years. If the ordinary income tax rates gets very high would it not be better to bite the bullet and convert more of the pre tax into Roth now, pay the taxes but enjoy tax free growth for 40+ years?

              The only caveat might be that they might enforce RMD for Roth or, horror of horrors, start taxing Roth !!!


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