Personal Finance (Not Investing) • Tax Minimization Strategy for Retirement

Have you determined that the ladder approach and/or the SOSEPP are superior to simply living off the brokerage fully (until SS/RMDs) and roth converting at a reasonable pace (e.g., not past charitable inclinations or LTC backstop), paying the conversion taxes also out of brokerage? That would seem to optimize roth by taking full advantage of zero tax drag on growth. I think your brokerage is still big enough to also support the handoffs to the kids for 10+ years.

I second the recommendation for Pralana. It will help compare strategies and optimize, e.g., how aggressively to use the step-up, depending on ultimate intended uses of funds and timing thereof.

I have not outside spreadsheet exercises in trying to minimize the tax brackets and income. Since I was planning on the SoSEPP, and the living expenses would be roughly half of what I would need to withdraw from 60-92 in order to deplete the taxable account. That would put me in the 32% bracket, versus handing over a tax deferred account at death to the 37 (or higher 39%+) bracket.

Thanks for the suggestion on Pralana, I don't know how easy it is to use but appreciate having a tool to do this in as having to manually do these via spreadsheet is tiring.

The Pralana tool is a great tool for your application - it has options for you to select 'auto optmize' for both drawdown strategy as well as Roth conversions to compare with whatever other ideas you may have at the time. Once you set up a baseline run you then can easily vary any input you like (age of demise of one spouse, draw rate, portfolio performance, etc) very quickly to 'test' all kinds of things that may be of interest. If you use Pralana I would suggest you run most of your various models without inflation so you can take any of the years (and any of the runs) and compare the 'ending' totals and balances by account type for value to your heir(s).
Everyone is different but the most effective tools like Pralana and RPM will likely take a few days of 2-3 hours each day to initially setup/ make a first run/ review / and understand most all of the results. After that the runs can be made very rapidly and compared or even charted for your use.
The results are not always intuitive so these tools can be very eye opening.

One other important note - for the overall goal (metric) and also with these tools the goal is not to minimize taxes.
The goal is to have the largest amount of after tax dollars (spendable by you or your heirs) over the lifetime of the entire portfoilio, adjusted for any inflation.

Statistics: Posted by smitcat — Thu Aug 22, 2024 6:22 pm — Replies 20 — Views 1283