Suggestions for overlapping 401's

maifleur01October 26, 2010

We are a couple of years away from the problem but wish to start looking as possibilities. Hubby is 5 years older than I am and for 5 years the mandatory withdrawals from our 401's will overlap. If it happened tomorrow most of the funds would be eaten by taxes any suggestions on how to limit the tax bite.

If I was to do it over I would have put as much money as I could in a Roth because the taxes we now pay are much more than what I would have paid paying taxes back then.

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Tax deductable donations to your church or other qualifying organization.
You should be able to substitute the withdrawals for what you are now giving in cash. How best to do this depends on how your IRA(s) are invested.

    Bookmark   October 26, 2010 at 12:34PM
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Have you actually done the calculations? Given today's tax rates, it doesn't seem possible that most of the funds you withdraw "would be eaten by taxes." In addition, you probably have the ability to convert some or all of the 401k accounts to Roth accounts by paying taxes now under the new tax rules, and giving yourself some flexibility in the future.

I suggest you talk with an accountant or financial planner before you do anything, particularly because what works best in one state is not necessarily what works best in another. If you are truly looking at large financial impacts, the best expenditure you can make is to pay a professional for advice rather than looking for people in this forum to throw out specific ideas based on the very limited info you provided.

    Bookmark   October 26, 2010 at 1:46PM
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It has been years since we have taken anything other than the standard deduction so we donate because we want too not for any tax reason.

Since I have 7 more years before I start drawing if I just leave my 401 as it is with no increase the calculations estimate between $25 to $40K additional during that time period. I was hoping that someone that had a similar situation would provide information on how they handled it. I am more concerned about Federal Taxes rather than State. The only advice I have received from financial planners is for products that they push and suggestions to move to Roth. I definately agree on the Roth.

    Bookmark   October 26, 2010 at 6:16PM
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If you can't find a financial planner who offers good advice without trying to sell you something, consult an accountant who does personal tax returns.

    Bookmark   October 27, 2010 at 1:40PM
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You've left this until rather late - if you're going to do a Roth conversion, the favorable treatment of splitting the tax bill over two years is only applicable to a Roth set up this year (2010).

You can contact the Garrett Planning Network for an independent, fee only CFP who can advise you. But again, it takes time to interview 2 or 3 CFPs and then decide which one you want to work with, so your time frame is rather tight with the end of the year looming.

Or, as kudzu9 suggests, a personal referral to a good tax advisor might also work. No matter what you choose, I suggest you find someone ethical, reliable, and expert as soon as possible.

    Bookmark   October 27, 2010 at 11:05PM
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