Optimal Maximum Retirement Account Balance? FIRE Considerations? Avoiding Taxes

My RMD would probably be around $100-125k/yr assuming very conservative growth and somewhat depleted balances by age 72. To be honest, I’m currently too ignorant of how real estate in an IRA would be treated vs. RMD to figure out how it’d work.

We’re currently living fine on about $60k/yr (albeit in a very cheap COL area). Probably a bit less once our kids are out of the house.

Our combined 403b are around $2.5M currently, about $2M of it being 403b, and $500k being Roth 403b. I’m skipping the $150k HSA since use of it is pretty clear cut. We’re vested in a small company pension of $20k/yr. With social security at the current projected levels (conservatively $50k/yr, likely more if we delay taking it until 70.5) we’re covering our basic expenses. And knowing myself, I’m guessing it’ll be hard switching from savers to spenders even if we can afford it. So the odds of a significant Traditional IRA balance are pretty high and I’d love to be able to minimizes taxes on it for us and our kids. But it looks pretty challenging to do.

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Why are you delaying Social Security until 70.5? It is my understanding that the Social Security payout amount only appreciates until 70. By waiting that extra 6 months wouldn’t you be leaving money you could have with no benefit?

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You may be correct. I meant delaying until it no longer appreciates. Somehow I must have confused the old limit for RMD and Social security last increase. I have a bit of time before that so I should be able to figure it out on time. :wink:

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I am waiting until I turn 70 before claiming SS. This will maximize the SS payments we will receive. That SS amount will also be increased by the cost of living. Giving us some inflation protection. At some point in the near future I expect inflation to become a factor that will effect us all. I also expect inflation to cause adjustments to the tax schedule allowing more of my relativity stagnant IRA savings be withdrawn tax free.

By delaying the SS payments they will increase by +/- 8% a year. Where else can you get a 8% return today? This will allow me to increase the amount of IRA withdrawals I can get tax free since my my income will be lower during this period. Plus this will also qualify us to get the majority property taxes paid returned from the state of Michigan. A win, win, win.

My wife is a year younger than me. When she turned 66 she started collecting SS. I am in the age bracket that allows me to file a restricted application for SS benefits. So as of now I’m collecting half of my wife’s SS while my SS benefit is increasing until I reach 70. When I reach 70 both my and my wife’s will be increased another plus.

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It’s not an 8% return. It’s an 8% increase in monthly payments.

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Your Social Security is in essence a investment held by the government. So by delaying the payments you are increasing the investment. So future cost of living increases will increase by the size of that investment. A larger admittedly incalculable return increase because future cost increases are unknown.

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INtereesting question.

I found this on that topic:

They claim :
" The IRS will allow you to distribute part of the property to yourself via grant deed, which effectively means your IRA will own part of the property, and you will own the percentage that has been distributed."

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I have to imagine that results in an absolute tax nightmare.

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Actually it may be simpler than it sounds. Since the taxable value of in-kind distributions is determined by the current fair market value of the investment holdings that are being taken in-kind, wouldn’t you be taxed on the fair market value of the percentage being distributed by the RMD? In turn, whatever percentage is required to be distributed in-kind should depend on the specific RMD amount so you may be taxed on the same amount as if you just withdrew cash.

I’m more referring to dealing with just a portion of whatever real estate related deductions you’d otherwise have been able to take on a normally held property.

But that complexity aside, I would have thought that directly-owned real estate is one of the worst things to put in an IRA, since you lose the accompanying tax benefits that are generally associated with real estate investing.

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What tax benefits? The passive loss write-off? If the property is completely or almost paid off or fully depreciated, there shouldn’t be a loss.