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how much Roth conversion to make?
Old 11-15-2016, 05:51 PM   #1
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how much Roth conversion to make?

If I don't find work in 2017, I will need to convert some tIRA money to Roth IRA so that I have taxable income above 138% of the FPL.
This would be $16,395 rounded to the nearest dollar.

Most of my conversion from tIRA to Roth will be taxable.

How much do I have to convert to get me to $16,395 ?
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Old 11-15-2016, 06:10 PM   #2
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Calculate your estimated 2016 Obamacare MAGI before any Roth conversion (generally tax-return AGI but with some adjustments). Then take the difference between that number and your target.

If your marginal tax rate on conversions is lower than what you expect your future tax rates to be it might be worthwhile to over-convert and take advantage of those lower rates. Even if you convert more than you wanted, you can correct it by recharacterizing (effectively undoing) a portion of the conversion.
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Old 11-15-2016, 06:55 PM   #3
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I worked a temp job in 2016 so the 2016 MAGI won't be accurate.
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Old 11-15-2016, 07:19 PM   #4
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I would use real tax software to do this. Also, I don't think there is any sin or harm in overshooting this by a few hundred dollars.
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Old 11-15-2016, 07:21 PM   #5
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Sorry, I meant 2017, not 2016. Why can't you wait until late 2017 to do the conversion?
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Old 11-15-2016, 07:39 PM   #6
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How much do I have to convert to get me to $16,395 ?
Convert exactly $16,395 and pay the tax from an after tax account. Otherwise, you are sacrificing retirement funds.
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Old 11-16-2016, 06:49 AM   #7
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Sorry, I meant 2017, not 2016. Why can't you wait until late 2017 to do the conversion?
I do intend to wait, but I am still not sure how to approximate how much to convert to get to my target amount.
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Old 11-16-2016, 06:50 AM   #8
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Convert exactly $16,395 and pay the tax from an after tax account. Otherwise, you are sacrificing retirement funds.
I wlll be paying the tax from an after-tax account.

So, is it as simple as $1 to $1 on the conversion? For some reason, I thought it was more complicated.
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Old 11-16-2016, 06:53 AM   #9
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I wlll be paying the tax from an after-tax account.

So, is it as simple as $1 to $1 on the conversion? For some reason, I thought it was more complicated.
It is only more complicated if you have previously made non-deductible traditional IRA contributions, but you would know that because you would have filed Form 8606 (unless you forgot to).
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Old 11-16-2016, 07:24 AM   #10
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I do intend to wait, but I am still not sure how to approximate how much to convert to get to my target amount.
You need to do a pretend tax return with no Roth conversion to get your estimated AGI, then adjust it if needed to get your MAGI, and then calculate the difference from the target. If anything, overestimate the conversion amount because you can always recharacterize if you overdo it.
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Old 11-16-2016, 12:29 PM   #11
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You need to do a pretend tax return with no Roth conversion to get your estimated AGI, then adjust it if needed to get your MAGI, and then calculate the difference from the target. If anything, overestimate the conversion amount because you can always recharacterize if you overdo it.

Thank you.

I hope it does not come to that, but I like to be prepared.
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