I’m thinking I should start converting some of my traditional IRA to a Roth. Due to my tax bracket, it didn’t make sense to do so in recent years. Seems like if I’m going to do it I should start in 2024 and move chunks annually until I start drawing SS.
The biggest reason to do so is that most of my assets are in taxable or tax deferred accounts, and it would be good to have some diversification in terms of tax treatment. I’m of the opinion that taxes are sure to increase in the future, so moving some while my income is relatively lower seems like a good idea.
Coincidentally I stumbled across this older post in another thread today that describes part of my rationale for wanting to convert some of my Traditional IRA to a Roth.
Another tax minimization thing I did in 2022 and used again this year: I set up a Donor Advised Fund. If you regularly make charitable contributions you can concentrate them into a single calendar year or 2 and disburse them when you choose to over time.
The biggest negative to me is a higher expense drag than standard brokerage accounts, but it’s worth the tax advantages IMO.
Example: say you regularly make charitable contributions of 5k annually. What if you donated appreciated stock worth 50k at once into a DAF and dispersed it over 10 years?
Also contributed about $4k to a Roth IRA. Our HH income increased nearly 40% this year.
In about 5 years we’ve taken our original $220k mortgage down to a balance of $150k and our brokerage is at $121k. By this time next year the mortgage should be about $135k and the brokerage about the same. If I keep paying down at this rate it will be gone in 12 years total by 2030, or I could lump-sum it earlier but likely will not. It’s not the smartest play, but I’d like to be done with all that.
Closing out the year at $1.494M. That is 3x as much as 2015.
Weird that I amassed $500K during the first 44 years of my life, and added twice that during the next 8.
I’ve seen folks say that in terms of time, $300k is halfway to a million. Probably about right with a reasonably constant savings rate. My savings rate started ramping up around 2015 and really ramped up around 2018 or so. Plus some pretty good returns since then, I’m up over 3x in the last five years.
There are small ish 3 row vehicles, like the Toyota Highlander, Mitsubishi Outlander, Subaru Ascent. But they could be a bit cramped so check it out thoroughly first.
Between maxing out my HSA across my last seven paychecks, taking out the most my plan will allow for 401k plus catchup contributions and all, my net pay this time was 9% of the gross. My kids will have bigger paychecks.
The HSA, yes. Fidelity imposes % of pay limits to the amount I can contribute to the 401k. The objective is to either find an appealing part time income stream or just keep my taxes relatively low to minimize ACA contributions.
Learned something new today: the saver’s credit. If my AGI is <$46K and I put $4,000 in an IRA the government will CREDIT ME up to $2,000. The percentage shrinks rapidly between $46K-$76.5K but it is still available.
An AGI of $46,000 and a standard deduction of $29,200 leaves me with $16,800 of taxable income, for which the taxes would be 10% of that or $1,680. the saver’s credit would extinguish the tax altogether. (self-employment taxes can’t be extinguished).
Of course, I may find acceptable part-time work and throw these plans in the trash.
I’m adjusting my contributions, see how low I can make my net pay.
I think % of income limits are set by your employer but implemented by fidelity. It’s usually to save payroll the hassle of negative paychecks/taxes when someone sets aside 100% of a check into their 401k
Get that saver credit!!! Enjoy your retirement, say no to part time work