Someone asked me this morning what I’m doing with my “idle cash”. He had just bought a 3-month US Treasury Bill at 3% rather than letting it sit in a MMF at 1.5%.
I did about 20 minutes of work with Excel and learned that the best place for my idle cash was likely to be the Federal taxes on a larger Roth conversion. With the markets down, I can transfer a larger percentage of my traditional IRA to a Roth for the same tax payment.
Minimizing the “Skim” – the key to retiring early.
Someone asked me this morning what I’m doing with my “idle cash”. He had just bought a 3-month US Treasury Bill at 3% rather than letting it sit in a MMF at 1.5%.
I did about 20 minutes of work with Excel and learned that the best place for my idle cash was likely to be the Federal taxes on a larger Roth conversion. With the markets down, I can transfer a larger percentage of my traditional IRA to a Roth for the same tax payment.
Not sure why you think I’d be upset about that. I’ve been strongly advocating for people to look at doing Roth conversions up into the 24% bracket while the TCJA rates are in place ever since the TCJA occurred. Worst case, if Congress passes legislation to make the TCJA cuts permanent, you may pay 24% on something that might have ended up costing you 22% if you’d waited. But I think that the more likely case, since the TCJA adds to the deficit, and, at some point, Congress is going to want more money to spend, is that Congress will let the TCJA rules expire, and what was your 22% bracket will increase back to 25%, which is still above the 24% that doing conversions into the 24% bracket will cost you now.
I will say that you do need to be mindful of the NIIT tax that kicks in at $200k for singles and $250k for MFJ, since that will make the highest marginal rate 27.8% rather than 24%