Often times OpenSocialSecurity will indicate that the optimal claiming strategy is for the lower earner to claim at 62 and for the higher earner to claim at 70, which maximizes payouts presuming you both live past some age. For me claiming at 70, I have to live to 82 for that to be the "maximum" payout; if either me or my spouse die before 82, it was a bad choice, but as @Raspberry-503 says, it's a statistical gamble. If you want to take that gamble and your wife is the lower earner, then she should likely claim at 62 and you should delay to 70. If you both have lower life expectancy than the Social Security annuity tables assume, you might both want to file at 62 (or her at 62 and you at 65/67, but not 70).1. She will likely start SS early (but most here appear to recommend waiting. Why?
If neither job has a healthcare plan that will extend for both of you into retirement, you should likely start pricing out ACA plans on your state exchange so you have an idea of how your expenses in early retirement will change. With close to $5M in assets and planning to draw at least $100K/yr from a pre-tax (inherited) IRA, you might pay a higher amount for ACA plans than lower-income folks would... I don't really know how those work, but it's worth pricing them out so you know how they work and how it fits your planned budget.2. He plans on retiring in about 6 years (age then will be 62). Maybe longer if health care costs scare us. He will not have a SS (state employee) (or pension). Will likely annuitize most of his Traditional TIAA account shortly after retirement. Thoughts?
Typically the best time to do Roth conversions is when your in the lowest tax bracket of your lives. For many retirees, this is when there's no taxable income (both retired) and before either spouse claims SocSec. You're not in this situation, since she will be retired, but drawing $100K/yr from the inherited IRA which is fully taxable, plus he's still has W-2 earnings for 6 years. Subsequently there may not be a great time to do Roth conversions, esp. if you're both claiming SocSec at 62, which just means assessing whether Roth conversions even make sense. See the Wiki topic on Roth Conversions: Whether, When, and How Much to Convert.3. Need to convert to Roth. Wait until after both are retired?
I will say there's added flexibility to having Taxable, Tax-Deferred, and Tax-Free accounts in meaningful percentages of total assets (if you can only afford to convert <20% of total assets over some period of years, it might not be worth bothering).
Call a representative at Vanguard or talk to your CPA to confirm this next statement about RMD Rules for Inherited IRAs. If the original IRA owner died prior to 1-Jan-2020, your options are RMDs based on life-expectancy or 5y rule. Changing custodians does not change when the original owner died, so you should be free to roll this to Vanguard.4. Would be nice to roll over the inherited IRA to Vanguard to have lower ERs but I’m not sure we’d continue to be grandfathered in on the RMDs based on her lifespan rather than the newer rule of 10 years payout.
1) The 7% stake in Lockheed individual stock (Her Trad IRA) represents more single-company risk that doesn't seem offset by a commensurately higher rewards. I'd exchange that Lockheed stock into the S&P-500 index as soon as possible.5. Any advice on portfolio/strategies?
2) You are holding nominal bonds (VFISX and 30y T-Bonds) in the Taxable account, which doesn't adhere to Tax-Efficient Fund Placement, but that's an optimization that may not be worth fussing over at the 24% Fed tax bracket. If you did want to optimize that we can discuss ways to do that entirely in Taxable, or through a effective swap in Taxable & her 401k.
3) You're holding an S&P-500 Index (VFIAX) in Taxable and in Tax-Deferred (Her 401k, Her Trad IRA), which can run afoul of the Wash Sale Rule. That can happen as follows:
a) You sell some S&P-500 at a loss in Taxable for tax-loss harvesting or just for some spending money.
b) You inadvertently buy some S&P-500 in any tax-advantaged account through automatic contributions and/or reinvestment of distributions within ±30 days of the loss sale date that happened in Taxable.
You now have a wash sale and the loss in Taxable is disallowed on your next 1040 tax return; the loss may or may not be flagged as disallowed on your 1099B, but regardless it's your responsibility to file accurately. You can fix this by:
i) exchanging S&P-500 in Taxable to Total Stock Market (VTSAX) and avoiding the whole issue,
ii) -OR- turning off automatic contributions/reinvestment in the two Tax-Deferred accounts just for S&P-500 (may not be easy, certainly not preferred choice),
iii) -OR- by not selling S&P-500 in Taxable at a loss (may require specific identification cost basis rather than average cost basis).
Unfortunately, the cleanest option to avoid the entire issue would come with a capital gains tax bill since Taxable S&P-500 is 8% of your total portfolio.
Statistics: Posted by bonesly — Mon Jul 29, 2024 2:45 pm — Replies 3 — Views 527