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- Nov 27, 2014
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- 9,207
Can someone please help me get started with understanding ROTH conversions? I wouldn't ask anyone to try to summarize something like this in a forum response, but some basic terminology, logic and strategy would be helpful as I think about this and do some research.
My situation is that most of my retirement money is in IRA/401K's that will be taxed when I withdraw the funds. I'm trying to understand if conversion would even make sense. My thought is that I will be drawing income at a level that will put me at or slightly over the lowest tax bracket. Therefore, I'm struggling to understand how drawing out money that I have to pay tax on at a higher tax bracket just to do a conversion is a benefit to me. Of course, I understand that if I expect tax rates to go up significantly in the future, this would be a no brainer. I also understand that for any money I can get in a ROTH quickly (I'm 54) will have the benefit of the investment income being tax free, but what other logic would make a conversion make sense?
Note, my current income prevents me from contributing to a ROTH but I do expect to work a few years after I turn 55 in a part time status and would therefore have to opportunity to do some ROTH funding out of earned income.
Thank you.
My situation is that most of my retirement money is in IRA/401K's that will be taxed when I withdraw the funds. I'm trying to understand if conversion would even make sense. My thought is that I will be drawing income at a level that will put me at or slightly over the lowest tax bracket. Therefore, I'm struggling to understand how drawing out money that I have to pay tax on at a higher tax bracket just to do a conversion is a benefit to me. Of course, I understand that if I expect tax rates to go up significantly in the future, this would be a no brainer. I also understand that for any money I can get in a ROTH quickly (I'm 54) will have the benefit of the investment income being tax free, but what other logic would make a conversion make sense?
Note, my current income prevents me from contributing to a ROTH but I do expect to work a few years after I turn 55 in a part time status and would therefore have to opportunity to do some ROTH funding out of earned income.
Thank you.