I will look into what you've given for information. I read the first sentence and mulled it over a lot. To me it says a Roth trumps saving income taxes now. Am I reading it correctly?The goal is to maximize after-tax income rather than minimize taxes. It’s a multi-year approach. For example, one may do Roth conversions this year (raising taxable income) in order to reduce taxable income and taxes/IRMAA etc. in future years.
Consider investing the Taxable account’s 11% cash in a S&P 500 fund which will generate qualified lower taxable dividends than the ordinary dividends from a higher-yielding money market fund. Offset this by exchanging equity for fixed income in a tax deferred account.
Longer term consider moving as much of your additional savings/holdings from Taxable to Roth. Roth accounts grow tax free. Not having a high amount of taxable income from Taxable dividends/interest in retirement will help reduce taxes, increase ACA subsidies in early retirement, reduce IRMAA MAGI, etc.
Does Her 403b allow mega backdoor Roth?
Your MFJ MAGI may be getting close to the cutoff for direct Roth contributions. She can do a future backdoor Roth if she rolls over Her Traditional IRA into her 403b, if it accepts rollovers in. The slightly higher ER for FXAIX in the 403b is not an issue. His SIMPLE IRA makes him not a good candidate for a backdoor Roth due to pro-rated taxes.
As for the 11% cash into an S&P 500, doesn't that take it out of liquidity? Or is it that we'd have to pay taxes on any gains but it's still liquid, as in a brokerage account? I guess I don't quite understand qualified lower taxable dividends vs ordinary dividends from an HYSA/HYMM?
The following part (Offset this by exchanging equity for fixed income in a tax deferred account.) has me also stumped. Thank you for any insight for a novice like myself.
The rest of your reply makes sense, such as the ACA and IRMAA. I've never heard of them but now that you pointed it out, I looked them up and learned why you said it. Thanks.
I don't know about a mega backdoor Roth but I will find out.
As for the MJF MAGI, I'm guessing you are asking about what was addressed in the reply after you, what our MAGI was in 2023. It was $137K. Will be higher in 2024, probably around $10K +/-.
Statistics: Posted by cabinover — Sun Feb 18, 2024 4:58 pm