. I got brave enough to take a peek at my brokerage balances and was relieved to see my overall balance was only down $5,000 compared to the pre-tariff idyll in early March. I had to log in as I needed to restart automatic withdrawals from my settlement fund for monthly income. I had paused auto withdrawals in favor of taking some income from a taxable fund I have, mainly because the amount of taxable dividends and cap gains on the taxable mutual fund was getting to be a bigger number and I never knew what it was going to be til tax time, so it was kind of unpredictable and not very helpful when trying to calculate total income (desirable for a variety of reasons), so I had decided to shrink the balance some.
But I've since concluded that taxable mutual funds can be helpful to have on hand in case you are, for instance, near the top of your desired tax bracket but need income that is not fully taxable like traditonal IRA distributions are. Long-term dividends and capital gains from a taxable mutual fund are taxed at the lower capital gains tax rate.
So my plan is to draw income for the rest of the year (and the next 7 years actually) from my traditional IRA funds. Continuing to do this for 7 years should substantially lower my required minimum distributions when the time comes. I will stick to a fixed amount withdrawn each month, and should I have any leftover money in what I have withdrawn I would use it to do and pay taxes on small Roth IRA conversions. (I could happily use unspent funds on home improvements and or fun vacations/trips should the opportunity arise.)
I used the very helpful AARP RMD Calculator. The last time I used it was in January 2025, which is not that long ago, but I wasn't sure I had used my latest monthly income figure at that time, so my estimated tIRA balance that's subject to RMDs could have been off.
So I redid my calculations and yes, the new RMD estimate is lower, at $12,300 starting at age 73 compared to $16,000 that i calculated in January. Which just kind of confirms my original feeling all along that doing a lot of Roth IRA conversions before age 73 may not be necessary for me. $12,000 a year is not a ton of money, and I need money to live on anyway, so that, plus roughly the same amount from my annuity, plus about $43,000 from Social Security will give me a comfortable income.
The closer I get to RMD time, the more accurate my projections will be, so since I'm still 7 years out, I'll want to run these numbers annually to see how they change. Or don't.
All that being said, Roth IRA money is the best place to be since it's tax-free, so I wouldn't mind adding to the Roth IRA portion of my assets. Right now I've got roughly 53% in traditional IRAs, 29% in Roth IRAs and 18% in taxable mutual funds.
I've done a few Roth conversions in prior tax years but I think they were pretty small and I didn't keep track so I'd like to see if I can go through old tax returns and tally up how much I've converted in the past and to remind myself how to do it on the 1040 form. Every little bit helps.
In other news, I got through to Home Depot about the door installation. They were out here a week ago to measure the entry dimensions, but I hadn't heard a peep from them since. Of course they required payment over the phone in full first, and it was quite a bit more than the original estimate of the "baseline" labor cost I was given due to new trim, inside and out, caulk and so on. At this point, I just want to get it done, but the earliest date she could give me was end of June. This has been one of the more trying projects I've done around here.
May 31st, 2025 at 05:59 pm 1748714367
Looks like you have a good understanding of how to leverage money you saved in non retirement accounts to keep income below the next bracket to move some money to Roth accounts - which are excluded from RMD as well as growing tax free.
RMD changes every year as the amount of money in your account changes and your life expectancy changes.Good idea to check annually.
June 4th, 2025 at 08:25 pm 1749068716
June 4th, 2025 at 08:37 pm 1749069449
So one thing I'm wondering about is which one of these withdrawal scenarios would be better for, let's say, a $60,000 annual income:
1. Taking the full standard deduction + the deduction for age 55+, which totals $17,000 for a single person, from my traditional IRA, add in the $12,600 from my annuity and then I would withdraw $30,400 from my taxable mutual funds.
2. Withdraw $47,400 from my traditional IRA to fill up to the top of the 12% bracket (for singles) of $48,475, then with the $12,600, my income would still be $60,000.
I'm inclined to do #1 because I don't want to draw down my taxable mutual funds too quickly. I only have about $200,000 in taxable mutual funds.
What do you think?
June 6th, 2025 at 02:44 pm 1749221053
It's a personal thing - the fear I have is the uncertainty around future tax rates. I'd like to set myself up over time to have nontaxable funds (Roth) to draw upon when I need to spend a large lump sum.
There is an income threshold (I can't remember what it is.) where SS, or 85% of it, is taxed. It would be nice to have tax-free SS income when it starts but that threshold may be very low. Are you familiar with it?
June 6th, 2025 at 03:39 pm 1749224355
That being said, if I did choose to withdraw $30,400 annually from my taxable mutual funds, they would not be depleted for about 6.5 years, which is long enough to get me past age 70 when I'd already have started collecting Social Security, so my income would already be sufficient for my needs. However, I think I still prefer option #2 because I would rather be drawing down my traditional IRA to ensure RMDs are pretty low when I start taking them at 73. I don't have to worry about RMDs with taxable mutual fund distributions.
And yes, up to 85% of Social Security is taxable if your income is over $34K as a single, or over $44k as a married couple. It IS a very low threshold. I don't see any way around that though.
Some states also tax SS income. In my state of CT, SS is 100% tax free if you have an income under $75K a year. (Same goes for annuity payouts.) And starting next year, traditional IRA withdrawals will also be 100% state tax-free. They're doing a gradual phaseout, so this year, just 75% of my traditional IRA income is tax-exempt and I will have to pay tax on the remaining 25%..