The Cash Flow Clock: For Retirees - Book - Page 70
The Cash Flow Clock
This does not mean that we shouldn’t utilize tax
deferred accounts, especially when our income is
high. It means we should not expect to simply
remain in those accounts for the rest of our lives. We
need to have a strategic tax plan.
A Tax Forecast is not a crystal ball that tells us our
future, but it can help us consider different scenarios
and how they will affect our tax liability. It can tell
us what tax brackets we are in now, what brackets we
will likely be in, and how those could change when a
spouse passes.
Each situation is unique. If our tax forecast shows
that our taxable income will stay under the standard
deduction for our lifetime, then there is no need to do
any Roth conversions. Any assets that will be used
for QCDs or donated to charity upon our passing
certainly shouldn’t be converted to Roth. There is no
reason to pay tax now if we (and our estate) can
avoid it altogether later.
But there are times when a conversion can be the best
thing to do. We have recommended Roth
conversions for employees and business owners early
in their career. Their income may be high, but it is
likely to increase. Their deductions are probably
high and are likely to decrease. If they can contribute
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