All –
Wanted to get some thoughts from the group on some Roth conversion matters I have been thinking about.
Wife and I are in or mid 40s. We have plenty of assets both inside and outside of tax deferred accounts. There is a high probability that we will be in the highest income tax bracket for the rest of our life (which I have begrudgingly come to accept). I obviously have a number of years to go until retirement, but I am currently thinking of pulling the plug in the 55-60 range. We currently have ZERO in traditional IRAs and ~3M across various qualified plans (most of which I would likely have to roll to a traditional upon retirement).
Other than the potential movement of statutory rates (and whether conversations would even be an option at that point), if we (1) will not need the funds in the qualified accounts to live on for the remainder of our life (due to our taxable funds and a quazi pension) and generally think of it as funds that will go to others upon the death of my wife and I, and (2) otherwise have plenty of taxable funds to otherwise pay the tax bill upon conversion, it would seem to me that simply converting all of the qualified funds to Roth upon retirement and paying the tax may not be a horrible idea in our case. It would get all of those funds out of traditional, eliminate RMD, give it time to grow (there would also be plenty (hopefully…. I know) of time for the taxable account to build back up), and get a very sizable Roth to our heirs.
I know there is a whole lot of uncertainly w/r/t the tax law, our health, whether we will continue to generate the income we do, etc., but wanted to know if anyone has thought about this. Generally I see folks talking about conversation planning from the perspective of filling up tax brackets, but as I said, likely not an option for us. But simply converting in full seems like a pretty good deal (risk of tax rate movement aside) if you do not happen to be in need of the funds. I have run the numbers six ways to Sunday and it really comes down to the benefit our kidos will get, which we are 100-perent on board with.
Wanted to get some thoughts from the group on some Roth conversion matters I have been thinking about.
Wife and I are in or mid 40s. We have plenty of assets both inside and outside of tax deferred accounts. There is a high probability that we will be in the highest income tax bracket for the rest of our life (which I have begrudgingly come to accept). I obviously have a number of years to go until retirement, but I am currently thinking of pulling the plug in the 55-60 range. We currently have ZERO in traditional IRAs and ~3M across various qualified plans (most of which I would likely have to roll to a traditional upon retirement).
Other than the potential movement of statutory rates (and whether conversations would even be an option at that point), if we (1) will not need the funds in the qualified accounts to live on for the remainder of our life (due to our taxable funds and a quazi pension) and generally think of it as funds that will go to others upon the death of my wife and I, and (2) otherwise have plenty of taxable funds to otherwise pay the tax bill upon conversion, it would seem to me that simply converting all of the qualified funds to Roth upon retirement and paying the tax may not be a horrible idea in our case. It would get all of those funds out of traditional, eliminate RMD, give it time to grow (there would also be plenty (hopefully…. I know) of time for the taxable account to build back up), and get a very sizable Roth to our heirs.
I know there is a whole lot of uncertainly w/r/t the tax law, our health, whether we will continue to generate the income we do, etc., but wanted to know if anyone has thought about this. Generally I see folks talking about conversation planning from the perspective of filling up tax brackets, but as I said, likely not an option for us. But simply converting in full seems like a pretty good deal (risk of tax rate movement aside) if you do not happen to be in need of the funds. I have run the numbers six ways to Sunday and it really comes down to the benefit our kidos will get, which we are 100-perent on board with.
Statistics: Posted by Spedward — Thu Jan 23, 2025 5:07 pm — Replies 7 — Views 309