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Question for the Money Doctors

Question submitted on Aug 15, 2021.


I'm married, 68 yrs old retired with about $90k/yr unearned income from pensions and Social Security. Also, wife and I adopted 2 grandkids with social security income. I have a small 401k in TSP, about $60k. I would like to rollover to an IRA with Fidelity, then move about $10k per year into a ROTH or Brokerage depending on which is more advantageous. I would want to add monthly amounts to this rollover.
Purpose is to insure spouse has enough to be financially secure if I pass away and save for my adopted kids for college. What do you think?


What you are proposing is taking $10,000 per year from your IRA and either converting it to a Roth IRA or depositing it into your brokerage account.

From a tax standpoint, both moves will mean the $10,000 is additional taxable income.

If it goes into the Roth, it will grow tax free and not be subject to Required Minimum Distributions.

If it goes into the brokerage account, you can do anything you want with that money.  Any income it generates will be added to your taxable income or if invested and increases in value, you will pay capital gains tax on the growth.

I am not sure if it makes sense for you to increase your taxable income.  There is no additional tax if you leave the money in your IRA and let it grow tax deferred.   You will be required to start taking your Required Minimum Distributions when you are 72.

Take a look at the cost of life insurance and naming your wife as beneficiary to help your wife become more financially secure.

If this is too expensive, consider buying Second to Die life insurance with the children as the beneficiaries.  This may be less expensive because it will only pay upon the death of the 2nd spouse.

Good luck!

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