The Intersection of FIRE and Disney

[Frwinkley]

As in you'd put more funds into your 401k/IRA's or you'd do more Roth or? Would love to hear more about what you would do differently.

I can't speak for the poster you asked the question of, but we are hoping to do some Roth conversions while our income is lower (just pension income), prior to collecting social security.

 

[georgina]

As in you'd put more funds into your 401k/IRA's or you'd do more Roth or? Would love to hear more about what you would do differently.

Agree with Frwinkley that it is good to try to reduce the pre-tax 401k and IRA money so the required distribution at age 73 is not too big. Converting some to a Roth IRA each year can soften the blow. DH retired at 63 and didn't start taking social security until age 70, so we had 7 years of lower income to try to reduce the amounts. I didn't convert it, just made some withdrawals, same income tax is due either way.

DH worked for the same company for 37 years and had a large 401k, which we rolled into an IRA when he retired. His company's matching contributions were in stock. In my research I stumbled upon the Net Unrealized Appreciation rule for the stock, when you roll it all out entirely you only have to pay ordinary income tax on the cost basis, and pay lower capital gains rates on the rest when you sell it sometime in the future. So at the time of the stock withdrawal, we only had to pay ordinary tax on 20% of the value, as 80% was gain. Haven't sold any of it yet, but I've been using it for charitable donations so we don't have to pay any more tax on it.

 

[wabbott]

I agree with the previous two posters about converting IRA/401Ks to Roths prior to RMD (Required Minimum Distribution) age, and when/if there is a period of low income. In retrospect, we should have done some of this.

 

[QueenIsabella]

Yeah, I WISH I could do Roth conversions! There's just no "low tax bracket" space for us! (Waaah! First world problems!).

On the good side, we've been strongly encouraging the kids to invest in their Roths. DD21 has a Roth 401k at work that she puts 10% into--company match is in a regular 401k, but it helps. And both my girls are getting windfalls this year--payouts from trusts set up by their grandmother that hit at certain times. I've mentioned to both that, since this was "found money", throwing the max into their Roth for the year was a good thought. On the good side, DD29's fiance, who's a finance guy, had already told her she needs to up her Roth game (she does have a retirement account through her job).

 

[wabbott]

Part of the issue I had with Roth IRAs is the old, old CPA proclamation that one should "never, ever" pay taxes before they're due. That was taught in accounting classes because one never knows what the next legislative/congressional session would bring in future changes, and might affect your situation.

Also, I was leery of the Powers That Be reneging on their promise of not taxing withdrawals in the future. It wouldn't be the first time.

 

[dawnball]

We are just staying the course and not moving anything around... kind of a Boglehead approach. One thing that has come up for us recently after having a death in the immediate family is lighting the fire under all of us to get trusts/wills set up, find a good match in a lawyer, etc... fun times.

What is FIRE philosophy about inheritance, do you aim for no money left when you die, or aim for inheritance for the next gen? As an intersection of FIRE and Disney thread, I want the next gen to have both a love of going to Disney (and the memories), and to get some money. lol

You can't really aim for either of those, to be honest. We aimed for a 95% chance of not running out of money (aka the Trinity study). There's a small chance we'll go broke (although that chance gets smaller every year. There's a much larger chance we'll be leaving a lot of money.

Since both of our parents were also FI (although not all RE), we've seen it from the kid side too. That's caused us to make decisions like supporting our kids at college. They don't need to work during school and will graduate with no debt, an excellent credit score, multiple years of fully-funded Roth IRA, and a car that's older but well maintained, familiar and reliable. They've worked summer jobs and had internships and I preferentially hire them 1099 for my small business so they have a good nest-egg. That's significant privilege, and they should be able to make a good start from there.

 

[dawnball]

I agree with the previous two posters about converting IRA/401Ks to Roths prior to RMD (Required Minimum Distribution) age, and when/if there is a period of low income. In retrospect, we should have done some of this.

Roth conversions are fantastic to surf the ACA subsidy/cost sharing windows.

There's also retaining enough to fill the 12% tax bracket and considering whatever bracket you're in for low-income years. So for 2025, we're looking at ~$47K individual. If I were turning 73 in 2025, I'd have a life expectancy of 26.5 years. So if that's my only taxable income I'd be looking for $1.2- 1.3M in IRA/401K value for the 12% bracket.