Posted: 12/19/2025 4:11:15 PM EDT
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I am now 67 years old and semi-retired. I have set myself up to have almost no earned income on the books for this year, so I'm considering drawing from my IRA since I (should) be in the lowest tax bracket i may ever be in. Dont really need the money, but i dont see a better opportunity regarding taxes and it looks like I could draw out up to about $60k @ the 12% with my SS income. Damn I wish .gov would get rid of the tax on SS. My reasoning (besides the low taxes) is the same as to why I started drawing SS this year. Tomorrow isn't promised. I still have my Roth invested and it will take some years to empty the IRA - right about the time to RMD. Am I wrong ? |
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No you’re not. Also not everybody needs a financial advisor, so ignore the FP. Withdraw whatever amount fills up the 12% bracket and put it in a brokerage account. Invest as you wish and take long term capital gains down the road at 0% or 15% when you want to use the money. Filling up lower than your normal tax brackets anytime you can is smart money management. |
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Originally Posted By MarkBinSC: I would take the proceeds and do Roth conversions. The money can grow tax free, whereas a regular brokerage account will be taxed on the growth. |
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Originally Posted By Morgan321: 5 year rule - Roth conversion funds must remain in the Roth for 5 years or else you pay the penalty for early withdrawal. Originally Posted By Morgan321: Originally Posted By MarkBinSC: I would take the proceeds and do Roth conversions. The money can grow tax free, whereas a regular brokerage account will be taxed on the growth. Since he is over 59.5 years old, the 5 year rule timer per conversions no longer applies. There is no income tax or penalty for withdrawal of a conversion amount if you are over 59.5. If someone else will inherit the money, Roth is still the best inheritance account, as it can grow tax free for the beneficiary for an additional 10 years and then withdrawn without any tax or penalty issue. One of the mistakes my Dad made was not withdrawing/converting money in their IRA when he could do so tax free. Their income was based on SS and a small pension, which resulted in a taxable income around $14k, but a standard deduction of ~$29k. They could have withdrawn or converted around $15k per year from their IRA's during this time tax free. When Dad passed, Mom's standard deduction got chopped in half, and now any IRA withdrawal or conversion is taxable, and now into the 12% bracket. While 12% isn't bad, any withdrawal or conversion now results in MORE of her SS becoming taxable due to how the rules work for taxable SS being based on other/total "income". So the net result of her taking money from an IRA is around 20% in tax. So yeah, I am a fan of structuring IRA withdrawals or Roth conversions to reduce future tax liability, especially considering the possibility of a lone spouse in the future (widow / widower). Roth will have the advantage of no capital gains when you access the money, and much better inheritance vehicle. Now, speaking of capital gains.... this might be a non-issue if your income is low enough, as MFJ income under $96,700 will not pay any capital gains anyway.... but again - Roth is better since it is mostly restriction free after 59.5 years of age, assuming the first Roth account ever opened for the individual was funded with "something" at least 5 years ago. |
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Originally Posted By FALARAK: But if he already has existing money in the Roth that he can withdraw, who cares? Unless having immediate access to this money without penalty is a requirement. If someone else will inherit the money, Roth is still the best inheritance account, as it can grow tax free for the beneficiary for an additional 10 years and then withdrawn without any tax or penalty issue. One of the mistakes my Dad made was not withdrawing/converting money in their IRA when he could do so tax free. Their income was based on SS and a small pension, which resulted in a taxable income around $14k, but a standard deduction of ~$29k. They could have withdrawn or converted around $15k per year from their IRA's during this time tax free. When Dad passed, Mom's standard deduction got chopped in half, and now any IRA withdrawal or conversion is taxable, and now into the 12% bracket. While 12% isn't bad, any withdrawal or conversion now results in MORE of her SS becoming taxable due to how the rules work for taxable SS being based on other/total "income". So the net result of her taking money from an IRA is around 20% in tax. So yeah, I am a fan of structuring IRA withdrawals or Roth conversions to reduce future tax liability, especially considering the possibility of a lone spouse in the future (widow / widower). As to doing a Roth conversion or withdrawal and then taxable brokerage investment..... that really only comes down to "is it ok to have each Roth conversion inaccessible for a 5 year waiting period?" Roth will have the advantage of no capital gains when you access the money, and much better inheritance vehicle. Now, speaking of capital gains.... this might be a non-issue if your income is low enough, as MFJ income under $96,700 will not pay any capital gains anyway. THIS is what I am weighing. Hadn't dug into the ROTH conversion details yet, but thank you for framing what it could look like. I think it makes sense to convert and wait it out the 5-years. Withdraw from current ROTH if needed (unlikely) and get tax free growth in 5-years on the conversion. Now to just crunch the conversion numbers to keep it all in the lowest tax bracket. |
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Originally Posted By bondservant2: THIS is what I am weighing. Hadn't dug into the ROTH conversion details yet, but thank you for framing what it could look like. I think it makes sense to convert and wait it out the 5-years. Withdraw from current ROTH if needed (unlikely) and get tax free growth in 5-years on the conversion. Now to just crunch the conversion numbers to keep it all in the lowest tax bracket. If you have an existing ROTH Ira, one strategy is when you convert your IRA to Roth, create a new Roth ira that will hold ONLY the 5 year holding funds. That way you are not co-mingling live funds with delayed funds. Then you can tap that primary Roth account at will with no qualms and then in 5 years, tap the other Roth account that has timed out. |
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Originally Posted By SkiandShoot: If you have an existing ROTH Ira, one strategy is when you convert your IRA to Roth, create a new Roth ira that will hold ONLY the 5 year holding funds. That way you are not co-mingling live funds with delayed funds. Then you can tap that primary Roth account at will with no qualms and then in 5 years, tap the other Roth account that has timed out. The IRS sees all Roth accounts as a single account. So the only reason to do that, would be just to make it a little easier to ensure you don't tap the 5 year restricted conversion money (assuming you were UNDER 59.5) HOWEVER - When taking money from multiple Roth IRAs, the IRS treats them as one total account, forcing distributions in a strict order: first Your Contributions (tax/penalty-free anytime), then Conversions/Rollovers (oldest first, subject to 5-year rules for people under 59.5), and finally Earnings (tax/penalty-free only if qualified: age 59½ and 5-year rule met for earnings). You can't pick and choose which Roth IRA to pull from; the money comes out of these "pots" sequentially across all your Roth accounts. So that strategy wont work (multiple accounts) if you want to take contributions from the first account, then earnings from the first account. So all you can tap is contributions, PERIOD, until your first 5-year conversion has been satisfied (if under 59.5). Therefore, there is really no benefit to multiple accounts at all. |
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Originally Posted By bondservant2: THIS is what I am weighing. Hadn't dug into the ROTH conversion details yet, but thank you for framing what it could look like. I think it makes sense to convert and wait it out the 5-years. Withdraw from current ROTH if needed (unlikely) and get tax free growth in 5-years on the conversion. Now to just crunch the conversion numbers to keep it all in the lowest tax bracket. If you're sure you won't want to use the money within 5 years then convert all you can to fill up your desired tax bracket. You're also a prime candidate for taxable investing - long term gains at 0% up to $100k and then 15% above that... if there's any chance you might want to use the money within 5 years I'd strongly consider taxable investing. Be aware of the fact that more income from withdrawals/conversion might make more of your SS taxable as well as IRMAA. You have to balance those costs with your individual RMD situation to minimize your tax bill. Multiple roth IRAs will only complicate matters - 99.99% chance you'll have less hassle down the road if you stick with a single roth ira. |
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Originally Posted By MtnWest: If the Roth account has already existed for 5 years. The 5 year conversion wait doesn’t matter. It goes away at 59 1/2. There are multiple 5 years rules and each one can have multiple applications. A newly created roth ira must have existed for 5 years before you can make withdrawals. Converted funds must remain in the roth ira for 5 years before they can be withdrawn. Both of those cases apply even if you are older than 59.5. Violate any 5 year rule and you will have to pay taxes and/or penalty depending on the situation. |
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Originally Posted By MtnWest: If the Roth account has already existed for 5 years. The 5 year conversion wait doesn’t matter. It goes away at 59 1/2. I completely forgot that is correct. The five-year rule for conversions no longer applies at his age. I’ll go back and correct my previous posts. In a case like this, it doesn’t make any sense at all to withdraw and place in taxable brokerage, you should convert to Roth. Both have the same taxable consequence (withdraw vs convert), but Roth gives you better options in the future across the board. (tax free growth, no capital gains risk, better inheritance container) |
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Originally Posted By Morgan321: Incorrect. There are multiple 5 years rules and each one can have multiple applications. A newly created roth ira must have existed for 5 years before you can make withdrawals. Converted funds must remain in the roth ira for 5 years before they can be withdrawn. Both of those cases apply even if you are older than 59.5. Violate any 5 year rule and you will have to pay taxes and/or penalty depending on the situation. You might want to review the rules on that. |
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[b] You're also a prime candidate for taxable investing - long term gains at 0% up to $100k and then 15% above that... if there's any chance you might want to use the money within 5 years I'd strongly consider taxable investing. Can you expound on this ? As in pay the tax on a withdrwal and move the money into a traditional IRA ? What advantage would this have over a Roth conversion ? |
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Originally Posted By bondservant2: Can you expound on this ? As in pay the tax on a withdrwal and move the money into a traditional IRA ? What advantage would this have over a Roth conversion ? I was incorrect in that I mistakenly thought you had to wait 5 years to withdraw Roth IRA contributions, but you don’t have to at your age. So there’s no tax benefit for you. |
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In this thread we learn why you pay an experienced professional for advice. So many wrong answers on the Roth holding and conversion rules. All stated authoritatively. Morgan321 has already given multiple incorrect answers. And keeps going. |
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Originally Posted By USMC2111: In this thread we learn why you pay an experienced professional for advice. So many wrong answers on the Roth holding and conversion rules. All stated authoritatively. Morgan321 has already given multiple incorrect answers. And keeps going. I would like to think that the AR15.COM Brotherhood is for sharing our expertise, and knowledge while patiently correcting each other for benefit. So if you have anything to add, correct and guide us - please do. |