quote:

Originally posted by PHPaul:
Ah.

I don't have a W2 income, just SS and my Navy pension. Is that considered "earned income"?

I'm not up on the definition of "earned income," but I'm certain an RMD from a traditional (not Roth) IRA will be considered taxable income.

For me RMD starts this year, but for the past five years we've been making withdrawals from the IRA (former 401K) and it's all taxable income. I also have a military reserve pension, SS, and a federal civil service pension so we probably gross a lot more than you.

Yup, I know the RMD is taxable, they take it out before they send you the check (or direct deposit). You can specify a % or dollar amount when you do the paperwork.

quote:

Originally posted by PHPaul:
Yup, I know the RMD is taxable, they take it out before they send you the check (or direct deposit). You can specify a % or dollar amount when you do the paperwork.

Or, you can take your RMD with absolutely no taxes taken out of it and pay it either with Quarterly or on April 15 or thereabouts.

Vegas, baby.
Or, I am sure some tractor has been calling your name.
Take your wife out to dinner once per week for the entire year.
You can't take it with you!
You earned it, do something for yourself.

You could use all or some the RMD to make a qualified charitable distribution and 'take it off' your taxes.

See the "Why Medicare Surcharges Can Shock Retirees" posting in The Lounge.

"To start, a QCD is a smart, and perfectly legal, way to reduce your taxes. If you’re at the point where you’re required to withdraw funds annually from your IRA, you can exclude that withdrawal from your adjusted gross income on your tax return if you give the money to charity."

Some might argue that, when one gets to the age of an RMD, maybe it's time to start spending it

quote:

Originally posted by ensigmatic:
Some might argue that, when one gets to the age of an RMD, maybe it's time to start spending it

That's the conclusion I've come to for a few reasons:

1. I live (quite comfortably) on about $45K a year. No mortgage, no credit card debt, no health care expenses (retired military plus Medicare), reasonable property taxes (<$2000) and one car payment.

2. The gross RMD is roughly $1400, or about $1200 after prepaying taxes. Hardly a life-changing amount of money.

3. While it's "never too late" to start saving, @71 with perhaps 15 years left on this mudball, there just doesn't seem to be much point.

That probably falls under the "poor people have poor ways" adage, but there it is. I'll just tuck it in savings for the inevitable "Oh, shit" moments.

Right now I-bonds are earning 8%. You can purchase up to 10k per year. Check out Treasury Direct. Rates change every 6 months

quote:

Originally posted by stuffgeek:
Right now I-bonds are earning 8%.

Currently 7.12% on new I-bonds, with a new rate coming May 1st, 2022.

Just keep in mind that I-bonds aren't completely liquid, which sounds like it may be a consideration based on some of PHPaul's prior statements. You can't cash them in at all within the first year, and if you cash them within the first 5 years there's a penalty to the interest earned.

In addition, that attractive 7.12% current rate is totally due to the high variable inflation portion of the I-bond rate. Whereas the fixed interest portion of the I-bond rate is currently 0%. This means that, as federal interest rates rise and inflation drops in the future (which is quite likely/nigh-inevitable), your I-bonds would start earning less than 7.12%, and I-bonds bought today would also end up earning less than those bought at a different time with a higher fixed interest rate.

Granted, even significantly less than 7.12% is going to be better than just sticking it in a 0.001% savings account, if liquidity isn't a concern.

This message has been edited. Last edited by: RogueJSK,

RogueJSK thanks for the interest correction. If someone is think about a CD, I- Bonds might be a better tool

quote:

Originally posted by PHPaul:

quote:

Originally posted by ensigmatic:
Some might argue that, when one gets to the age of an RMD, maybe it's time to start spending it

That's the conclusion I've come to for a few reasons:

1. I live (quite comfortably) on about $45K a year. No mortgage, no credit card debt, no health care expenses (retired military plus Medicare), reasonable property taxes (<$2000) and one car payment.

2. The gross RMD is roughly $1400, or about $1200 after prepaying taxes. Hardly a life-changing amount of money.

3. While it's "never too late" to start saving, @71 with perhaps 15 years left on this mudball, there just doesn't seem to be much point.

That probably falls under the "poor people have poor ways" adage, but there it is. I'll just tuck it in savings for the inevitable "Oh, shit" moments.

I’m just retired, and would describe our retirement situation as similar to described above. Beginning this calendar year we are activating the Guaranteed Income Feature of my work 401k. We’re taking it as one payment yearly, so at this point we’ll be ahead in overall cash liquidity. Unless we have an immediate need(planned or unplanned, depending on circumstances) we will have near term excess cash. We discussed taking a portion of this cash and investing. Currently we do have brokerage accounts(both regular and tax sheltered) with mutual funds. Our financial advisor has stated that other clients also use the same mutual funds as a savings vehicle, fairly liquid, plus fairly good returns. YMMV, but if the $1500 or so is not needed in the near term, this might be a good approach. Or you could buy more 9mm.

quote:

Originally posted by stuffgeek:
If someone is think about a CD, I- Bonds might be a better tool

Agreed.

Interestingly, I went back and looked up the current composite rates of some of the older I-bonds. The ones sold early on in the late 1990s and early 2000s had a 3% to 3.6% fixed interest rate. So they're currently earning double-digit returns of around 10% to 10.7%, thanks to their relatively high fixed rate plus the currently high variable rate. Not too shabby. (For this 6 month period, at least... There have been periods in the past where they've earned 0%, like May-November 2009.)

https://www.treasurydirect.gov...s_iratesandterms.htm

quote:

Originally posted by mikeyspizza:
If you’re 70 ½ or older, you can't make a regular contribution to a traditional IRA.

Yes you can. That changed in 2020. There's no longer an age limit for Traditional IRA contributions. It's the same as the Roth IRA now.

Check out the IRS link you provided, under "IRA Contributions After Age 70 1/2".

quote:

Originally posted by RogueJSK:

quote:

Originally posted by mikeyspizza:
If you’re 70 ½ or older, you can't make a regular contribution to a traditional IRA.

Yes you can. That changed in 2020. There's no longer an age limit for Traditional IRA contributions. It's the same as the Roth IRA now.

Thank you, I stand corrected.

You may consider opening a taxable account with Vanguard. I hold this fund (among others) Vanguard Dividend Growth Fund (VDIGX). Invests in companies with history of increasing their dividends. I am NOT an expert, just consistent.

quote:

Originally posted by PHPaul:
I'll just tuck it in savings for the inevitable "Oh, shit" moments.

sounds like a good plan.

or perhaps some donation(s) to local charities you align with.

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