Hi,
I REALLLY like your site! There are a lot of great ideas and I have read through many of your articles and forum posts and learned a lot.
Through 30+ years of savings and investing, our investment accounts have done very well. My wife and I are 60 and 59. We are both retired as of this year. I am looking for advice on how to minimize taxes through our lifetime and how to minimize estate taxes. In all honesty, I never thought our estate would be big enough to worry about the estate tax but now I am pretty sure it will.
Approximate Current Values:
Traditional IRA - 4,000,000
Roth IRA - 950,000
Brokerage - 1,800,000
Real Estate - 750,000 (includes two rental homes)
We are buying health insurance through the ACA. Our estimated income this year is 150K so we get a decent subsidy. Family of 4.
Next year my plan is to convert about $33100 (24800 standard deduction + 8300 HSA contribution) from a traditional to Roth IRA and then harvest about 80000 long term gain and pay no tax. What a deal! This also allows me to still get a pretty good ACA subsidy fpr 2022. Since the "enhanced" ACA benefit is set to expire after next year, subsequent years will look very different. We will be well over the ACA cliff so will ignore it.
Starting in 2023, my though is to convert about $300,000 to a Roth each year, paying $54,000 in taxes per year until we have to start taking RMD's. I plan to convert an amount that takes us to the top of the 24% tax bracket. This will move about 3M to a Roth IRA over the next 10 years. I will pay the taxes and pay for our living expenses out of our brokerage account so will probably never need to touch the Roth IRA's. We will also delay SSN payments until full retirement age. Once we begin taking RMD's we will probably use that for our living expenses and not need to take much from the brokerage accounts. It may still be a good idea to convert more to a Roth each year while taking RMD's.
From the spreadsheet I created, converting 3M to a Roth will result in over $1M less lifetime taxes, not to mention leaving a lot of money to our heirs without tax consequences when they withdraw it. However, paying .5M taxes in the next 10 years reduces future earnings by well over 1M, which is where I get confused as to what the best option is.
Any suggestions or comments, other than we should have retired 5 to 10 years ago?