AAII article - "Roth70" could be the best retirement tax strategy for many

Taxes
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{this is basically my plan… defer SocSec until 70, retire at 65, use taxable funds to Roth convert in those zero-income years, avoid IRMAA, keep distributing from IRAs into low brackets continuously even though not required to forestall later RMD problems, and I’m going to lose Married Filing Jointly tax status, so I have to race ahead of that}

From AAII Journal, November 2023

A Case Study: How to Reduce Marginal Tax Rates in Retirement

Our case study involves Betty, a single individual who was born December 2, 1960. She has a full retirement age of 67 years. Her primary insurance amount (PIA)—the amount she would receive monthly by claiming Social Security benefits at her full retirement age—is $2,400.

She has a financial portfolio worth $750,000, consisting of $650,000 in a tax-deferred account and $100,000 in a taxable account with a cost basis of $85,000. She will spend $4,825 in real (inflation-adjusted) terms per month (beyond Medicare premiums) beginning in January 2024,
which is when this analysis begins. Betty’s life expectancy is 90 years.

In the Roth 70 strategy, she claims her Social Security benefits at age 70 and follows a three-phase withdrawal strategy. Her portfolio lasts her 27-year life-span in retirement and her heirs inherit $23,067 of aftertax funds. Compared to the results from the conventional wisdom 70 strategy, this optimal
withdrawal strategy adds three years of longevity and $129,696 in total value.

…

William Reichenstein, Ph.D., CFA, is profess-
sor emeritus at Baylor University and head
of retirement research at Retiree Inc. Find
out more at www.aaii.com/authors/william-
reichenstein.

William Meyer is head of retirement income
at T. Rowe Price and president of Retiree
Inc., a wholly owned subsidiary of T. Rowe
Price. Find out more at www.aaii.com/
authors/william-meyer.

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This is a good analysis. Do you have a link where this can be found? Forum rules don’t allow posting articles wholesale, so mods are likely to take this down soon.

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Paywalled !

A Case Study: How to Reduce Marginal Tax Rates in Retirement | AAII

I deleted many paragraphs, hope they don’t take down the executive summary.

I went ahead and sprung $149 for MaxiFi which will do the calcs I need. I’m winging it and spreadsheeting it, but this is too important to mess up.

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In general I like the approach. I plan to have a 3 source income strategy for retirement.

Taxable income coming from real estate portfolio since i can offset with depreciation and pay very little taxes.

Retirement income coming from Roth IRA using dividend paying stocks, REITs, Preferreds and Bonds. Zero tax on the distributions of income.

Social Security I can take any time since I will retire well before 60 and don’t need it. I will probably take it early since it’s an 18 year break even and I will just put it in my estate for my kids.

I will end up in a lower tax bracket than during my working career but the same income level.

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HOLY MACKEREL

I had heard so many glowing things about MaxiFi … but after loading my data into I, I can’t make heads or tails of it. It’s extremely confusing, and it doesn’t agree with my other planner outputs, and it doesn’t really give me any additional leverage on IRMAA. I’m not going to renew! Fidelity is better, Flexible Retirement Planner is better, even FIREcalc is better.

Sheesh…

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I’m able to view the whole article if I use my firefox browser and click on the “reader view” icon, just to the right of the URL. Interesting strategy.