How the hell are we supposed to retire?

Oops. Looks like I misread the 2025 HSA limits ($4300 + $1000 catch-up), although I did think it was possible so I'm not surprised. I thought (hoped) the $1000 catch-up would apply to me since I turned 55 this year so I had set my paycheck withdraw amount to hit the $5300 number, but apparently you have to start the year at age 55... so I hit the $4300 max contribution limit with today's paycheck. Oh well...

My plan is to keep building up my HSA account to pay for post-retirement medical expenses.
 
Any recommendation on software/service that helps on IRA to ROTH conversion plans or even a cfa/cfp that will help without trying to sell me products that folks can recommend. Hoping to retire in 4 yrs, while wife is going to retire in 7yrs so we have health coverage. It would also be helpful if the cfa/cfp are tax advisor to see if conversion should start now or after I retire.
 
dvaidya said:
Any recommendation on software/service that helps on IRA to ROTH conversion plans or even a cfa/cfp that will help without trying to sell me products that folks can recommend. Hoping to retire in 4 yrs, while wife is going to retire in 7yrs so we have health coverage. It would also be helpful if the cfa/cfp are tax advisor to see if conversion should start now or after I retire.
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@thegock

You need to take advantage of low income time, so there will be math!
 
dvaidya said:
Any recommendation on software/service that helps on IRA to ROTH conversion plans or even a cfa/cfp that will help without trying to sell me products that folks can recommend. Hoping to retire in 4 yrs, while wife is going to retire in 7yrs so we have health coverage. It would also be helpful if the cfa/cfp are tax advisor to see if conversion should start now or after I retire.
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Patrick said:
@thegock

You need to take advantage of low income time, so there will be math!
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The math portion is what has me somewhat comfortable using the CFA. For anybody using the public marketplace for health insurance if they don't extend the ACA subsidies the cost difference is huge. We aren't yet, but planned on using it once my wife retires next year. Now that the gov't subsidies have not been renewed our monthly expense would jump to about $2500 for the same coverage. If we can play with the taxable income reported that number can come way down and I figure they have a better handle on how to do this the right way.
 
dvaidya said:
Any recommendation on software/service that helps on IRA to ROTH conversion plans or even a cfa/cfp that will help without trying to sell me products that folks can recommend. Hoping to retire in 4 yrs, while wife is going to retire in 7yrs so we have health coverage. It would also be helpful if the cfa/cfp are tax advisor to see if conversion should start now or after I retire.
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The basics: Conversions are taxable. If you convert while working you’ll pay more tax. If you file jointly then same deal. The conversion will be on top of the combined salary. In general the best time to do a conversion is when you’re both retired but before social security. So you’ll still be taxed but at a much lower rate.

I don’t really know much more than that. I haven’t needed to do that math yet but I’m fairly confident you don’t want to convert anything while still drawing a salary.
 
dvaidya said:
Yeah, the math portion is what has me confused so looking for help.
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I will also throw in that @Fire Lord Jim posted his strategy in here-
He fills up his current tax bracket, so no incremental tax rate.

Good news - NJ does not tax IRA w/d if you paid tax on them before contributing.
(ie, you made the contribution in NJ - it was taxed on its way in)
 
Norm said:
The basics: Conversions are taxable. If you convert while working you’ll pay more tax. If you file jointly then same deal. The conversion will be on top of the combined salary. In general the best time to do a conversion is when you’re both retired but before social security. So you’ll still be taxed but at a much lower rate.

I don’t really know much more than that. I haven’t needed to do that math yet but I’m fairly confident you don’t want to convert anything while still drawing a salary.
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This is where the maths suck. If you're trying to keep yourself in a lower tax bracket once retired, the conversion can bump you right back to where you were before you retired. Really depends upon how much you have in taxable vs. non-taxable accounts to live off of and which you're drawing from. More maths.
 
Bike N Gear said:
This is where the maths suck. If you're trying to keep yourself in a lower tax bracket once retired, the conversion can bump you right back to where you were before you retired. Really depends upon how much you have in taxable vs. non-taxable accounts to live off of and which you're drawing from. More maths.
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So ok, sure. At the same time, this can also be translated as, "Man, I have so much money in retirement I'm taxed like I'm still making a full time salary."

It's not the worst problem to have.
 
Patrick said:
I will also throw in that @Fire Lord Jim posted his strategy in here-
He fills up his current tax bracket, so no incremental tax rate.

Good news - NJ does not tax IRA w/d if you paid tax on them before contributing.
(ie, you made the contribution in NJ - it was taxed on its way in)
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Unfortunately, all of it was converted from 401k to IRA when I moved jobs in NJ. It’s seems that NJ taxes 401K contribution but no idea how I am going to differentiate what went in and what are gains since I wasn’t thinking about detail records 🤦🏽‍♂️
 
Norm said:
So ok, sure. At the same time, this can also be translated as, "Man, I have so much money in retirement I'm taxed like I'm still making a full time salary."

It's not the worst problem to have.
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I don’t think anyone wants to pay more taxes no matter how much you have. My point was more about it not being so simple as waiting.
 
Santapez said:
Basically I think I need to "live" in Florida for a few years while doing Roth conversions?
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The best place to do that is South Dakota, especially if you plan to travel domestic or internationally for 184 days out of the year (RV lifestyle). You do not have to live in the state to be considered a resident.

From research so far you have to spend 1 night in hotel/rv park/camping/airbnb (anything that shows you spent a night and paid for it I believe) etc so you can get a drivers license, car registration, voter registration. You also have to sign up for mail forwarding service with street address like DakotaPost. DakotaPost also helps you with drivers license and car registration including RV. You can renew your drivers license once online or mail but will have to spend another night in SD for the 2nd renewal. Licenses are valid for 5 yrs.

You can still have a residential place in NJ but it’s not considered your primary as long as you do not spend 183 days in NJ during the year.
Wyoming is another state that does not expect you to stay in the state to be considered resident of the state.
 
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dvaidya said:
The best place to do that is South Dakota, especially if you plan to travel domestic or internationally for 184 days out of the year (RV lifestyle). You do not have to live in the state to be considered a resident.

From research so far you have to spend 1 night in hotel/rv park/camping/airbnb (anything that shows you spent a night and paid for it I believe) etc so you can get a drivers license, car registration, voter registration. You also have to sign up for mail forwarding service with street address like DakotaPost. DakotaPost also helps you with drivers license and car registration including RV. You can renew your drivers license once online or mail but will have to spend another night in SD for the 2nd renewal. Licenses are valid for 5 yrs.

You can still have a residential place in NJ but it’s not considered your primary as long as you do not spend 183 days in NJ during the year.
Wyoming is another state that does not expect you to stay in the state to be considered resident of the state.
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Not being at my home for more than 183 days is the real issue.

Otherwise, spending time every year in Badlands isn't the worst thing but also during the season I don't want to leave home.

At the end of the day I'm not sure of:

A) I have enough money that changing my tax address makes any sense. Not sure how much I'd be converting and my state tax will be 3.99% tax bracket when this happens (I'm in NC right now). Maybe it makes sense if I convert all in one year, but much less so if I convert over a number of years?
B) I'm wondering how much states actually track that 183 days. Sure for people that have huge incomes they may be suspicious, but I'm not some wall street banker. I'm assuming they only go after people who have sizeable incomes.
 
Santapez said:
Not being at my home for more than 183 days is the real issue.

Otherwise, spending time every year in Badlands isn't the worst thing but also during the season I don't want to leave home.

At the end of the day I'm not sure of:

A) I have enough money that changing my tax address makes any sense. Not sure how much I'd be converting and my state tax will be 3.99% tax bracket when this happens (I'm in NC right now). Maybe it makes sense if I convert all in one year, but much less so if I convert over a number of years?
B) I'm wondering how much states actually track that 183 days. Sure for people that have huge incomes they may be suspicious, but I'm not some wall street banker. I'm assuming they only go after people who have sizeable incomes.
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Typically, government tax compliance offices will weight their audit rates toward the right tail of expected values
 
dvaidya said:
Unfortunately, all of it was converted from 401k to IRA when I moved jobs in NJ. It’s seems that NJ taxes 401K contribution but no idea how I am going to differentiate what went in and what are gains since I wasn’t thinking about detail records 🤦🏽‍♂️
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Make it up like you own it
Have an accountant sign off
Not a problem
 
Santapez said:
Not being at my home for more than 183 days is the real issue.

Otherwise, spending time every year in Badlands isn't the worst thing but also during the season I don't want to leave home.

At the end of the day I'm not sure of:

A) I have enough money that changing my tax address makes any sense. Not sure how much I'd be converting and my state tax will be 3.99% tax bracket when this happens (I'm in NC right now). Maybe it makes sense if I convert all in one year, but much less so if I convert over a number of years?
B) I'm wondering how much states actually track that 183 days. Sure for people that have huge incomes they may be suspicious, but I'm not some wall street banker. I'm assuming they only go after people who have sizeable incomes.
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Yeah, the reason that I had all of that information handy had to do with me exploring being digital nomad and working from Europe.

No idea, how states will track.
 
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dvaidya said:
Yeah, the reason that I had all of that information handy had to do with me exploring being digital nomad and working from Europe.

No idea, how states will track.
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If I were to do the digital nomad thing and part of that was registering in a particular state for tax reasons, I'd keep a log of my travels. While I'd guess the chances of getting audited are unlikely, having records in case you do would probably save you from a lot of aggravation.
 
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