Personal Finance (Not Investing) • KF Roth Conversion Plan

This seems to be a textbook case to why one should consider more Roth contributions during their working years. Boy, that is a big tax hit in the next couple of years that you have chosen to undertake!

I don't see it as a "big tax hit" at all. You got a "big tax savings" (actually a tax deferral) when you or your employer made the contribution. You (or your heirs) have to pay those deferred taxes eventually. So, do you want to choose the best time for you or wait until you have no choice (when you reach RMD age)?

I stand by my comment.

Now, the OP intention of converting $470k in two years seems to be driven, at least in part, by the fact that the TCJA will surcease at the end of 2025. I would watch this space.

The financial objective here should be to minimize taxes over the retirement period, but each retiree will have their own set of facts and objectives that may lead to override the tax minimization (e.g. avoiding the widow(er)'s penalty or inheritance wishes).

Still, my belief is that any Roth conversion plan ought to be plugged into a software to determine how to minimize lifetime taxes and then the retiree's objective can override the results. I believe the conventional wisdom is to convert through the 12/15% tax bracket or perhaps into the 22/25% bracket during the tax planning window (retirement start to the beginning of social security or other social income).

Of course, folks choose to ignore the conventional wisdom, if for no other reason than the unknowns are too unpredictable. I don't know if converting to the top (or into) the 24% bracket is a wise course or not.

I like the idea of entering the "knowns" into software and have used Pralana Gold, Right Capital, Projection Lab and making a deliberate decision on what is best course for my situation. And, while no calculator can be perfect, they are the best starting point for this type of question.

Statistics: Posted by ichee_marone — Sat Aug 24, 2024 7:03 pm — Replies 85 — Views 3724

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