I am a US Citizen and plan to move to Japan on a spousal visa at the end of this year. I am over 59.5 years old so I can withdraw from the traditional IRA without penalty (just have to pay the US income tax). The "traditional" thinking to reduce the RMD when I turn 70 in the US is to either do a Roth Conversion or draw down the IRA enough to stay in the low tax bracket. However, since Japan do not recognize the tax-free nature of Roth IRA, this does not seem like a good choice. So then my question is then why don't I just withdraw from the Traditional IRA first anyway to save the big RMD. If I never remit any distribution to Japan during the first 5 years, it will never count as income in Japan and I only have to pay the lower income tax bracket of the US. Later on after 5 years in Japan when I am a tax resident, then hopefully most of my income will be from capital gains in my regular brokerage accounts which the tax rates between Japan and US are more comparable.
Does that sound like a good plan or am I missing something? Basically, I want to take advantage of the 5 years of being consider a "non-permanent tax resident" in Japan to draw down my traditional IRA and avoid the RMD in US while lessen the impact of the high income tax bracket in Japan 5 years later when I become a "permanent tax resident" and have to count my world-wide incomes.
by Probus_Maximus