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Old 08-29-2012, 06:16 PM   #61
Recycles dryer sheets
Join Date: Nov 2005
Posts: 355
Roth conversions are the tax-sheltered version of tax loss harvesting in taxable accounts. I convert from whichever traditional IRA mutual fund is down the most.

For a specific taxpayer, if it is clear that you will owe later taxes in a higher tax bracket, then convert during those years prior to SS or other delayed income sources. If the situation doesn't fit or doesn't appeal to you, don't bother. I like converting in the 15% bracket, knowing that at the top of that bracket my average tax for MFJ is 10.8%.

Adjusted Gross Income is important for figuring muni bond income with your marginal tax rate, but your average tax rate matters for Roth conversions. Those average tax rates are low enough for me to take the risk of early tax payments. This is just another form of delayed personal consumption that has worked well in the past for me, with no guarantee that it will work every time in the future. YMMV

As mentioned earlier, for a married couple, they can have $90.2K of 2012 income before bumping out of the 15% bracket. That is the Married Filing Jointly deduction with two exemptions added to the top of the 15% bracket.

For MFJ, $36.9K is the top of the 10% bracket and you two are paying 4.7% tax on that amount of income.

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Old 09-01-2012, 05:07 AM   #62
Recycles dryer sheets
Join Date: Apr 2004
Posts: 106
The Roth has a major advantage over the std IRA for your beneficiaries, ie. son, daughter etc.

Also, the std IRA RMDs for a surviving spouse can be pretty high.

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