Current Situation:
- Age 43, single, no dependents - Retired this year - 1.3m in brokerage (50% untaxed earnings) - 700k in 403(b) - 140k in ROTH
I am receiving small distributions from a retirement account over the next 10 years that will keep me afloat, and can be supplemented with cash from brokerage and contribution in ROTH if needed.
Objectives:
- to get affordable ACA healthcare, ideally until Medicare kicks in after 20 years - tax efficient conversion of 403(b)
Challenges:
- To get inexpensive healthcare, income level should be around 200% Federal Poverty Line (FPL), which is around 45k total - This would leave ~30k for ROTH conversion in my case (after 15k income from retirement distribution and dividends) - However, with 700k in my 403(b), growth in that account will likely outpace annual conversions of 30k
Strategy:
- 2 large ROTH conversions over the next 2 years (200k each). - In those 2 years I will get ACA healthcare without premium tax credits. - Having cut my 403(b) into half, I will then do 30k conversions annually until all is converted or I’m eligible for Medicare.
I can always adjust the conversion size and also do capital gains harvesting in my brokerage if need be.
Benefits:
It seems preferable to me to convert more early while I’m generally still quite healthy and have a larger chunk in ROTH, which can grow tax free, rather than having a ballooning pre tax 403b. Also the benefit of very good and pretty inexpensive healthcare over the next 2 decades is comforting when getting older (as long as congress plays along)
Would love to hear criticisms and suggestions. Specifically if people in similar situations have done something similar or different and why. Thanks very much!
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