I'm facing a conservative projection of 560k+ in RMD's even if I converted 100k per year starting today. However it's a very hard pill to swallow taking a huge tax hit now at age 50. The total tax contains 1 month ACA premium, because I would be jumping off of Medicaid in December.
For 2025 I'm curious which AGI scenario would you pick (LTCG is long term capital gain):
- AGI 99,900:
- LTCG 63900, 31k Roth Conversion. Total Tax 2854.86 Rate 2.86%.
- LTCG 35000, 60k Roth Conversion. Total Tax 4875.88 Rate 4.88%.
- AGI 128,200:
- LTCG 92200, 31k Roth Conversion. Total Tax 5694.46 Rate 4.44%
- LTCG 63300, 60k Roth Conversion. Total Tax 8571.65 Rate 6.69%.
- AGI 200,000 (larger LTCG provides money to pay for the tax):
- LTCG 164k, 31k Roth Conversion. Total tax 21287.86 Rate 10.64%.
- LTCG 95k, Roth 100k Conversion. Total Tax 29078.86 Rate 14.54%
- AGI 300,000 (larger LTCG provides money to pay for the tax)::
- LTCG 167k, Roth 128k Conversion. Total Tax 54117.81 Rate 18.04%
- AGI 400,000 (larger LTCG provides money to pay for the tax):
- LTCG 167k, Roth 228K Conversion, Total Tax 82820.86 Rate 20.71%
For 2026 I was originally aiming for the scenario below because the tax rate was a SWEET 1.5%, but then I dug deeper into my current RMD situation. When taking into consideration the yearly ACA premium for higher income levels I was hitting a total Tax rate of 28%+. That makes the decision much more difficult.
- 2026 AGI 73430, 31k Roth Conversion.
- LTGC 37430, 31k Roth. Total tax 1104.85 Rate 1.5%
Also, what website/software are you using to project the impact of Roth conversions on future RMDs. Right now I'm just using spreadsheet.
RMD nightmare later vs biting the tax bullet now.
byu/NotAnotherRebate infinancialindependence
Posted by NotAnotherRebate
8 Comments
This is officially in CPA fiduciary territory
I have no opinion on your scenarios, but I am using ProjectionLab to model my Roth Conversations and impact on RMDs, IRMAA, and taxes.
Edit: ProjectionLab
I don’t think there’s enough info to answer and is complicated enough you’re probably going to want to model it in software designed to plan for things like RMDs.
I plan to spend a lot from our 401k’s between the ages of 59.5 and 75.
Have you considered that?
IRMAA is a bitch though.
You are complaining that your RMD is $560k/year????
What rate of growth is being used to get that RMD number? I’m sure CPAs consider this, but given that growth isn’t remotely guaranteed I’d use a very pessimistic growth number and then tax optimize there. If the number is off in the positive direction then you’ve won and who cares if you pay more in taxes. If it’s pessimistic it’s unlikely that you lose which is the doubly whammy of bad, not only are your investments down but you paid tax you probably didn’t have to.
What’s your actual purpose with all this money, anyway? Your numbers suggest you have way more than you need for the remainder of your life, which means you’re going to leave behind a large estate.
Do you have heirs you want to leave this to? If so, then some cross-generational tax planning might make sense. Which might mean you paying taxes now, or them paying taxes later, or some of both.
But mostly you’re in “this is a fake problem” territory. Imagine if, during your working life, your employer had offered you a huge bonus, one that you would have lost 50% of taxes. Would you have turned it down for that reason? Of course not – it’s still a fat check after taxes.
Well, that’s where you are. Granted you got there through poor planning (or wild good luck) but it’s the same position nonetheless. You are getting lots of ‘bonus’ money. Who cares about the taxes – it’s not going to hurt your way of life at all.
how many people in your family? Are you taking into account that the extended subsidies are very likely going away next year, so you will get *zero* subsidy in 2026 and beyond if your AGI is more than 400% of the FPL?
This argues that you should either stay just under the line, or if you’re thinking about going over it, go far enough over that you can get some years where you don’t have to go over it.
I don’t kow about you, but for me, going over the cliff next year would be about a 14k hit, and the whole thing happens when you go *$1* over the cliff. That’s why they call it a cliff. When you say you’d have 560k+ in RMDs, do you mean you’d still have 560k in your traditional IRA/401k accounts if you converted 100k/year and got normal future returns? Or that you’d have so much that you’d be forced to pull out 560k+ as your RMD every year?
560k isn’t all that terrible, it’s low enough that you could use QCDs to reduce your taxable RMDs to zero easily if you have some charitable intent.
Also if that’s the residual with normal expectations after withdrawing 100k/year for 25 years, you’re really looking at a huge variation in what you’ll actually have. And when you have bigger RMDs that means your portfolio did average or better, which means taxes become one of those good problems. It’s way more important to maximize your after tax benefits in the potential futures that don’t turn out so well (the ones in which 100k/year conversions drain your IRA entirely).
Also note that you’ll have ~10-11 years in between ACA and RMDs where you can pull out more without worrying about the ACA subsidy. There is still IRMAA for medicare to consider but that’s probably going to cost less than the ACA subsidy loss, and it happens at a higher AGI over several steps.