Tax Efficient Withdrawal Strategies to Reduce Taxes in Retirement

[@c7042]

Some would call me poor. My income is $31K/yr. I spend about $10K/yr. So my wealth increases by about $20K+/yr. I live simply with no debt. I'm a 74 year old veteran. My only pre-tax account has about $100K balance with RMD about $4K/yr. That $4K goes into another account, I don't spent it. I pay no income tax at all and my property tax is $0/yr also. I could spend 3 times as much and still be stable financially in the current economic climate. I'm OK. My total wealth is slightly greater than $500K. If everything crashes, I would still be OK because I have actually been really poor in the past and I know how to do that too.

[@CurlyTonya]

Excellent presentation! It’s so unfair that taxes get more complicated in retirement! My head is spinning….and I have a B.S. in Accounting.

[@stephenwright133]

This was very well done and aligns with my research into this topic. Some of my friends thought it was nuts for me to say I was delaying social security until 70. When I explained to them it was about tax planning, medical coverage pre age 65, and an overall decumulation strategy they started to get it.

[@ecs1749]

The caveat is - we don't know when we will "go"

[@stephenwright133]

@@ecs1749 You are correct. There are no guarantees in life. I can only plan based on what I know and what I’m comfortable with.

[@samc9156]

I am not sure I will wait until 70 for SS but watching this video and other ones by Eric has convinced me to delay SS for several years in order to at least convert a large portion of my 401K and IRAs to Roth. I knew I had a tax time bomb with the deferred accounts but I see the reality that converting a large portion now to take the tax hit without SS makes the most sense. Its especially important to convert now knowing that the tax brackets revert back in 2026 so its a definite tax increase at that time.

[@robdupree5687]

​@@samc9156But aren't Roth conversions limited to $7500 for 2023? I don't consider that a large amount compared to the whole account value.

[@godblessyou7376]

@@robdupree5687No, the amount you are referring to is the CONTRIBUTION limit to your Roth - not what you can convert into it. There are no limits to how much you can convert into it, but you have to pay taxes on whatever amount you choose to convert.

[@alr9967]

My father was responsible for running a profitable sawmill for many years. It was his job to get the most lumber yield from every saw log. That wall paper behind you… You don’t need more timber. You need a better plan

[@PH-md8xp]

😂😂

[@donmountford797]

We are retiring at 54 (year we turn 55) plan is to utilize 401k and brokerage until 59.5, balancing each to keep taxes in 12% bracket and qualifying for ACA. From 59.5 until will gradually move income from IRA and 401k avoiding using Roth and Brokerage unless needed to keep tax bracket in 12%. From 70 on, will use both SS and spouse SS and Roth/brokerage to keep taxes close to 0.

[@evargas9579]

Like your plan.. I was going to utilize almost a similar plan 401k and pension.

[@dougjuliehowell9675]

Fantastic! Extremely useful, intelligent and well thought-out. You’re the best source I’ve found on KZbin.

[@Mike_L45]

Eric I really enjoy your style of confering this information. Delaying SS to 70 isn't in the cards when your at 62 but still have 2 minor children at home thru to your 70th birthday. The children are eligible for SS checks if you claim at 62. I would love to see a video on this scenario because most older parents don't know about it.

[@berkeleytong6085]

I waited until I was 66 y/o but it was wonderful to get a monthly check that went directly into their 529. Also there is always the assumption that your health will hold out.

[@FakePersonna]

This is the BEST withdrawal strategy video! Thank you. I think you saved me a lot of taxes from RMD.

[@jefferydevens386]

Eric, excellent work. Thank you for sharing this like a teacher. The more you do this the better you get at it, and subsequently so too do those fortunate enough to watch and learn. Well done and well worth the time for your team to invest in. There is a tipping point that is reached (no one quite knows when) where all of these videos and presentations will begin to compound in returns. Keep up the work and stay the course.

[@SafeguardWealthManagement]

I really appreciate the kind words Jeffery. We won't be slowing down :) Thanks for taking the extra time for this comment. Means a lot

[@brianlane9534]

You covered exactly what I plan to do. 65 in 6 months. Filing single for the first time in a long time. Starting over. Fixed pension, convert as much to Roth as possible from 401 and willing to take the irmaa hit if it makes sense. Delay ss until forced to take it etc. lots of room left for 2023 to stay under the second irmaa tier, still room under first tier.

[@leoburgunder9201]

Special Thanks for the ACA section! My wife is retiring at 62 and we will lose her coverage. We are looking to tip toe thru this ACA zone by paying the ACA HSA high deductible premuims thru my S-corp business and still do some targeted roth conversions especially if the market tanks as in 2020. Traditional IRA's are $1 mil so we have only 10 years to convert before taking SS at 70.

[@alohawaiist]

4 months to A62, this “clear zone planning” is exactly I need to work on. Thank you!

[@keithmachado-pp6fv]

Great point on SS. I am delaying until 70 for the reason you mentioned. At least 15% will not be taxed for federal and zero in my state. So in the 25% bracket instead of 31% with state I only pay 21% for a 10% savings, thus I want to maximize that income and COLA.

[@keithmachado-pp6fv]

Always good content. I just retired and looked into Roth conversions but now thinking differently. If I divide my assets into 2 buckets, (which are about equal in total) tax deferred where either I or my heirs will pay tax and tax free or step up in basis where heirs pay no tax, which includes stocks, cash equivalents and life insurance. My tax deferred combined with SS and a pension is enough for me to live on even after paying tax for 30 years. So I will treat it like a salary as if I am still working and pay tax as I go. This will allow the non taxed bucket to grow so it becomes a higher % of the total so my heirs collect more tax free.

[@Sam-tg4ii]

Your well-designed slides massively help.

[@davidw7776]

Would love to see a forward tax strategies with forced income above $70k

[@SafeguardWealthManagement]

Will do in future videos!

[@wkrick]

The section at 37:22 on ACA planning for age 62-65 is very interesting. I was wondering if you have any videos that cover ACA planning and tax strategies for early retirement from, say, age 50 to 62 ?

[@scotthunt9653]

Very thought provoking presentation. Well done sir. Thank you for your time and efforts.

[@margaretmarshall3645]

This was FANTASTIC. It cleared up a number of things for me, and I had to go make a couple of changes to the Excel chart I’m using to estimate future taxes. I especially liked the list of considerations when tax planning, which helps make sure I’m not leaving anything out of my plan and that I’m watching for all the potential trigger points. Also the slide showing what considerations should generally rank higher in weighing alternatives. THANK YOU!

[@SafeguardWealthManagement]

Thank you so much for the kind words Margaret!

[@allenbazar2707]

Good advice in the catch up zone ..by delaying social security and using less recorded income more taxable income I went from $1550 dollars a month cobra health insurance to $0 monthly $0 deductible ACA /Medicaid insurance.Have to be careful how much of Ira tax deferred account are withdrawn.

[@onlywenilaugh6589]

Waiting on SS is a gamble on if you live long enough for not. Are you willing to take that gamble? People seem to be passing much young in my generation that previous so it doesn't appear to me we are actually living longer. Maybe one could take SS at 62 and invest it and then if they die early, at least the heirs will get some of it that the deceased has worked all their life paying into. If you need it, then you at least can take less from your retirement savings since you are getting SS and still leave a bit to the kidos. Everyone preaches delaying and the government hopes you do because they figure you will pass away before breaking even since Life Expectancy is 78 for a male and break even will likely be more like 81.

[@joselabiosa8892]

Excellent presentation. I like the framework you provided in this presentation. A lot of good food for thought. I was hoping you guys have a SaaS online to use for a reasonable fee of course. Thank you again!

[@Speedospearo]

aca strategy was extremely useful. Great information!

[@tbattist-yc8rj]

Great presentation! Glad to see the ACA benefit being integrated in planning. Most (including myself) don't see this one coming. Ouch!

[@flowersfrom7311]

Thank you for another great video! I wish you would offer paid consultations for those who manage their retirement plans themselves.

[@JKSNY24]

This was extremely helpful. Thank you!

[@g.ajemian4968]

This was a fantastic explanation, thank you for sharing this information,

[@miatafunrun3078]

Thank-You! Such good information.

[@irishlad6834]

This video just came up on my YT feed, playing in the background. While your points about withdrawal optionality and cleanup zones are well-considered, two obvious gaps in your presentation were: 1. The prevent value of paying a tax now vs. 10 years in the future. This is even more relevant now with the higher discount rates. 2. You assume people have no income from their taxable portfolios. This will tend to blow up the zero percent LTCG space. Without that 0% space and accounting for PV, how does your presentation change?

[@dancasey9660]

132% Social Security is only for those born before 1955. From 1955 until 1959 it's between 126% and 132% depending on which year you were born. How about living off cash first if you have it, and then doing Roth conversions. Deplete the cash and then fill it back up with withdrawals from Traditional accounts in later years but before age 70?

[@SafeguardWealthManagement]

You are correct in regards to SS. Regarding living off the cash... it will depend greatly on the situation. If someone has that much cash while still has large tax deferred balances, I would prefer to invest the cash and prioritize conversions but every situation is different

[@slimdawgwoof]

This is great stuff. Very helpful and educational

[@GiriGiri-pl1gf]

Hi Eric: This is very informative and very clean. Is there an Excel template you have where in one can enter the tax bracket one will be in and have suggested pull for a given income from Roth, vs Taxable vs Tax deferred...etc., including social security

[@chestcutter1468]

Excellent information. I may have to hire your firm in the near future.

[@gisellesanjose2618]

Eric, can you show a forward looking tax plan with forced income (pension) and more detail on incorporating SS? Most pensions range from $70-150k per year for state and fed employees.

[@f430ferrari5]

@Giselle. Social security benefits are cut via 2/3 of pension. Most high pension earners plus spouse won’t be able to get SS. Just Google Pension and social security offset

[@dh4589]

Does it ever make sense for someone that is retired in their 50's and taking ACA, to forgo subsidies to convert IRA to roth and make up the tax loss on growth of the roth? Or is it always better to wait for the "cleanup zone', when medicare kicks in, to do conversions?

[@SafeguardWealthManagement]

It depends on a person's situation. If someone has huge tax deferred balances and estimate RMDs are going to be large and destructive, it may make sense to prioritize conversions vs. a subsidy. It all depends on the situation.

[@EricMcDowellegm]

So glad to have found your channel! Thanks so much for what you do.❤❤t

[@jefflloyd394]

Great! And very thorough and well explained. Might mention in marriage QDRO (with younger spous) and QLACS and one off HSA payment as additional ways to reduce RMDs. Cheers Jef

[@edwardglatzmayer5466]

NIce presentation. However, it would be nice to see more examples and your recommended action plan. Including an explanation as to why they should follow that specific strategy. Nice job!

[@SafeguardWealthManagement]

Fair point. I was trying to avoid making this a 3 hour presentation. I am planning on recording case studies in terms of optimal withdrawal strategies

[@paulsackles1329]

Fantastic work Eric

[@carlfrederick8433]

Great job explaining complex topics.

[@SafeguardWealthManagement]

Thank you!

[@mike-nh]

Outstanding presentation! Thanks for the information. I look forward to watching your other videos.

[@SafeguardWealthManagement]

Thanks Mike!

[@gardeningforfunandlongevit6076]

Very informative thank you!!

[@vogeljennifer6318]

cannyou add a video like this if you must take social security disability (based on different ages, what accounts you should draw from and when)?

[@drbassface]

SS is protected to only pay 78% of its monthly benefits in the future. How do you see this affecting the concept of delaying SS?

[@dadmezz4024]

Would like to have seen. Numbers for us late 72 year old retiring folk...there have to be more then just me. Just found your channel. Thanks.

[@Waverunner47203]

I’ve got taxable, pretax, and Roth accounts. Which account should I take my “fun money” from? (fun money can be used any time…)

[@ryanmorris4995]

Great video! I project out our assets, income, expenses and taxes for life. I am inflating the standard deduction and tax brackets with inflation. Do most tax advisors’ software do this? This makes RMDs look not as bad as I would have thought.

[@d.b.2721]

Good explanation and advice!

[@user-ty2uz4gb7v]

What kind of sense does it make to tax social security which is itself funded by taxes to support retirees.

[@gaylep4404]

Great info, clearly explained. Thank you!

[@SafeguardWealthManagement]

Glad it was helpful. Thanks!

[@ireneochoa6972]

I need to watch a few times so I can absorb it

[@bobmoalli]

Nicely done. I'm not understanding what "life expectancy factor" I would use if withdrawing IRA at age 65? The table I'm using starts at age 70 or I guess in 2022 72. Do I use the first year for each year until I reach my withdrawal year?

[@stephenreinhart7393]

Loved the video. Nicely done. Easy to understand. I am 46 married and we both max out our 401K. Our goal is to retire at 55. Should we change our contributions to a Roth 401k?

[@SafeguardWealthManagement]

Hey Stephen, Great question! Although it would be tough for us to answer without knowing more about your situation. The main variables will be your current top marginal rate vs. your future tax rates.

[@gabbothis]

Stephen, It is highly likely that the Roth 401k will benefit you. Less true if the reduced amount of tax deferral jumps you into a higher current marginal tax rate. Do self directed Roth IRAs if you are allowed based on your income. Pay attention to expense ratios, they cut into your returns-ie use Vanguard, Blackrock or similar company with lower expenses.

[@jerryhufanda5791]

So so awesome. Thank you so much.

[@thomasm5922]

5th bucket is a pension.

[@RetrieverTrainingAlone]

$109,450 maximum gross income for 12% tax bracket Married Filing Jointly in 202 (standard deduction)

[@kwameamichel7770]

Wow… Great presentation!

[@SafeguardWealthManagement]

Thanks Kwame!

[@roballenroballen]

Maybe this is a dumb question, but when you say to withdraw from your IRA first and then from your taxable account and then from your Roth does that mean sequentially during the year or is there some way to designate certain income to be considered first, second then third when filing taxes?

[@PH-dm8ew]

Great session: Love you channel and the level of expertise. Is there a level of deferred assets below which roth conversion don't make sense? Say i have 850000 in deferred 401k with small pension say 32000 per year. I retire at 60. good chance i will stay in 12 % (or 15) bracket as Married filing jointly. Does doing a 40000 per year roth conversion make sense? does the growth in the roth conversion make the conversion strategy worth while? I have used some calculators that say it doesn't. What are your thoughts?

[@wcorey1]

I would like to see more about singles, Thanks

[@candycandy3005]

Thank you!!!!!!!!

[@Bmeri3]

Excellent!

[@dawnorbeck4686]

Very useful, thank you. Any advice on possibly delaying pension for 5 years and pulling from tax-deferred account instead? Pension increases 6% each year delayed up to age 65. We are currently 60/59. No COLA on pension. Thanks.

[@buyerbware25]

You should ask your financial planner about your situation, specifically about what happens when one of you turns 65. Delaying your pension seems like a sensible idea, but your financial planner should explain to you how to keep your Medicare premiums and taxes from both shooting upwards when you turn 65, and remember that the Democrats want the Trump tax cuts to end in 2025.

[@gabbothis]

Yep, that’s a complicated situation. (BTW-Democrats want to retain tax cuts for those making

[@lizs502]

I'm disappointed that this is so slanted to the contortions rich people need to do to avoid paying taxes. It started out saying everyone's situation is unique, so where are the realistic scenarios for all the people who have not been able to save millions for retirement?

[@ld5714]

Liz you just described me. I have not saved millions, not even one. As Eric says, my situation is unique and his info applies to me. I have done two conversions already and will continue for another 4 years. Suggest you watch this again and focus more on what he's explaining and less on what makes you feel it does not apply to you. Once you understand the process and reasons you will see how it applies to your situation. Good luck Liz.

[@ds94703]

What part of Wisconsin are you from?

[@jamesgray1469]

we are retired and going to do a roth conversion, to the max 24% bracket and 3 third irmaa penalty . I already contributed to my max roth for the year. The conversion will put me over the income limit for contributing to a roth. Can I convert 200K of tax deferred to roth by only contributing 186K to the roth and keeping 14k as cash, and is their a time limit for doing so?

[@f430ferrari5]

@James. Do you mind if I ask how old you and your spouse are? Why put yourselves in the 24% bracket even for one year. I don’t think you can do what you’re suggesting either put you can just rollover 186k and withdraw 14k at separate times during the year I believe. But please evaluate. It doesn’t sound like a good strategy to me.

[@HB-yq8gy]

Thank you great video. I use a taxation spreadsheet for my pension of $67000 & IRA distribution/Roth of $35000 we are still in the 12% tax bracket. Approx.$1500 Fed/NJ. We are MFJ 58 y/o Wife will retire end of the next year 2024 59.8 y/o. 2 plus years of cash of yearly expenses & distribution cost. Debt-free, medical covered wife has breast cancer she will take SS early at 62. I'm thinking to max up 22% until she starts SS at 62 y/o?

[@joycewright5386]

Did you make your taxation spreadsheet or is there a site I can download it? So sorry to hear of wife’s diagnosis.

[@HB-yq8gy]

@@joycewright5386 My replies are being deleted to you because of profits & marketing.

[@wcorey1]

Thanks Eric, this is the best planning that I have seen.The examples of the ACA planning and the catchup zone helped me. I would love to see more examples.

[@swright5690]

It’s raining knowledge….and it’s free. All you have to do is put a bucket outside and let Eric and Tony fill it.

[@SafeguardWealthManagement]

Hahaha, thanks Stuart. You're the man!

[@johnkumpelis1121]

Wow Eric, drop the mic! Well thought out video on this topic!

[@SafeguardWealthManagement]

Thank you John! I really appreciate it!

[@themusteach]

thank you for not talking so fast:)

[@priola7587]

This was a terrific presentation. I now understand the WHY behind my financial planner’s recommendations. He says that things will be preferable tax moves, but now I really get it. Thank you so much. I have a lot more confidence in the plan he provided.

[@davidhuang6607]

Thanks Eric. This is one of the best videos out there that I have watched. It has cleared out a few clouds over me. Really appreciate it.

[@allanc9472]

Thanks, great video. Seems like with a larger tax deferred account and need large ROTH conversion, you probably can forget about the ACA subsidy, subject to larger IRMAA penalties and better to delay S.S till 70. Would be nice to see a video for large accounts like $5M (maybe $2.8M in tax deferred, $1.9M in taxable (let says $0.9M LT gain), $0.3M Roth and 12 years to RMD. What will be the best tax efficient withdrawal to reduce taxes? I am sure married couple will do better than a single person since they can convert more in the same tax bracket.

[@SafeguardWealthManagement]

Great suggestion Allan. I am planning on doing some case study withdrawal strategy videos in the future. Something similar to this situation will certainly be on the case study list.

[@gdb5843]

Great video, I have the similar concern. How to decide the IRMAA level a single taxpayer with large tax deferred accounts should convert to? Thanks.

[@vk7875]

have similar situation 2.8 M taxable, 1.4 Deferred ( IRA/401k ), .3 Roth... Thinking of building Self managed Annuity from Fidelity and move large portion of 2.8M Taxable to Annuity to control the income 2.8 M taxable is generating due to dividends. This video is great. I was planning to use 60-70 10 years to move 1.4 Deferred to Roth at 100K each year ( keeping net under 80K after standard deduction ), while realizing Capital gains in Taxable at zero rate ( however Dividend income really throws it off the track ). Let next generation deal with Annuity related Taxes much later on in case they do not get high income. Its good problem to have to be in position to pay taxes.... :) ... Any other ideas...

[@MarkUnique]

I really enjoyed this ... ACA and Roth conversions are interesting ... I hope you cover singles more. Note that having a larger taxable account can mean a substantial forced dividends income source.

[@mikenorfleet7394]

This is a very comprehensive overview, and a great video - thanks. I’m curious - how many years out from retirement does it makes sense to start planning this? It seems like we’re all guessing at future lax laws right now, but if retirement is farther away, it’s more of a guess. Is it best >7 years out to just focus on balancing the tax allocation buckets as much as possible? New rules will be there when you get there…

[@moniquemonicat]

Excellent. Thank you; just what I needed to learn (take some gains while I'm in lower income during low fed tax time and before taking social security). I think you referred to it as "cleanup time." I only have 2 years to do this before RFA so this may mean I might want to take ss later so I can do some more clean up before ss. Liked and subbed!

[@vince8436]

This is basically the vidio I have looked for vor years. I have always thought about taxes in this way. Not a tax planner ut accumulated enough knowledge over the years to basically force myself to maximize every year possible into roths from close to when they started. I will be sharing this link with a bunch of people that I hope will watch because you explain it better than I ever could.

[@Woodstock625]

Just found your channel. Fantastic presentation. Appreciate your information on retirement tax planing and strategies. subscribed!

[@hankchang4067]

The best illustration I ever saw. Thank you🎉

[@PH-md8xp]

Excellent detailed presentation. Thanks

[@ericchang7706]

This was awesome! Everyone who wants to DIY their early retirement needs to watch, study and understand every aspect of this. Sadly, most people are looking for the "one size fits all" answer and won't take the time to comprehend all the moving parts involved.

[@SafeguardWealthManagement]

Thanks Eric!

[@josephj7991]

Yes! All connected and make tangled web tax trap! Cascade into tax Nitemare !

[@kbrabson]

So glad I'm a subscriber. I learn something every time. I made notes for my planning. 🙂

[@josephj7991]

Please do some for peep w smaller amounts? So many are for >$1million what about those w

[@ttiger9780]

WOW! This is very eye opening. I wish I had seen this ten years ago (71 years old).

[@thomasshreve750]

Excellent analysis and explanation.

[@SafeguardWealthManagement]

Thank you Thomas!

[@bryanpape1537]

One of the best videos on this topic I have seen. Thanks!

[@timjoygray]

Hi there! Great video. Just recently learned about roth conversions with your videos we watched. How does the job & tax cut apply when trying to convert our 401k to roth ira while employed? We called Fidelity & asked if we can convert and they said we couldn’t but We weren’t sure if the representative knew what she was talking about. Thank you soo much for all your great videos!!!

[@surangsiu7186]

Great Information!!! thanks. Now I have an idea of what to do to plan my tax strategy for each year.

[@ralphparker]

Nice presentation. A couple of times you emphasized "tax savings" but the real criteria to optimize is 'after tax' account value or utility. Working on converting my IRA to Roth prior to SS.

[@SafeguardWealthManagement]

Thank you Ralph! I mean them synonymously. Understand the distinction but know that we care about after tax wealth and distributions ultimately.

[@puravida5683]

Excellent segment! Knowledge is power! Especially, since I have 2 government pensions, government 401K, and social security. Fortunately, I also have tax free VA service-connected disability compensation.

[@brianh6680]

So a couple pays $7390 in taxes when taking no social security, and $5449 when taking at 62. You're advising they pay $7390 for an additional 8 years to reach an optimal tax rate of $312 at age 70. Tax wise, they'll break even on that after another 8+ years, but what about the opportunity cost for the $43K/yr that could have been compounding all that time? Like many, I have an RMD problem to clean up. But when I run the numbers, it is consistently worse for me to delay social security. The way I look at, social security is helping to pay the taxes on my Roth conversions and leaving more money in my taxable account.

[@jeffreyhall5033]

I like you guy good advise. But where if your only income right now is only Social Security. What are you supposed to do then? Come on You just said one sized doesn't fit all.

[@patrickoconnor2547]

Great video once again! Full explanation of the obstacles we will be facing. Fortunately, we have a modest Traditional IRA, good size Taxable account and small Roth. Gives us options to pay minimal taxes. Love your videos

[@boynton120]

Roughly How low do I need to reduce my 1.5 mil 401k to avoid XS RMD & 401K value creep from causing SocSec tax torpedo? Assuming married jointly filing with annual 47K SS benefit, & wife still working another 10 years earning $80k annually ? Would like to stay in 22-24% bracket ? Thant’s

[@1349bill]

Great video! we are in the withdrawal phase ages 74-77 puzzling about which buckets to use each year; any suggestions on software, videos or books would be appreciated.

[@DB-xp9px]

the catch w/ delaying SS is that u probably pulled your income to live on from an IRA which now has less $ growing in it vs starting to take SS at 62. that angle is rarely talked about in these videos. it's all 1 big complicated mess.

[@LetsNotBickerAndArgue]

Could you provide a link to your "Putting the Right Assets in the Right Accounts" video you mention at 28:05 please?

[@donb1183]

Tax avoidance isn't the goal, having money is the goal.

[@jonathandavidson2510]

you said to plan for what is going to happen in 25 years of retirement. How do you know what the tax laws/parameters are going to be in 5 years much less 25? Really interested in how you plan for that.