Quote:
Originally Posted by Tom52
what needs to be considered to make the best educated decision?
Tom
|
Clearly, there are a lot of unknowns here. What will be the future tax rates (anybody here betting they will go down?) How much will your tIRAs and 401(k)s grow to by the time you have to pay RMDs? This is very difficult to estimate (heck, they could go down in value - think of all the taxes you will save
) Will you move to a higher or lower taxation state after you retire? So, figuring what your future tax bill will be is problematic at best.
Alan's suggestion is probably the most conservative approach.
Just a couple of other wrinkles to consider: When will your income go back UP during retirement due to taking SS? Don't forget that SS can (probably will) affect your tax bracket - especially when added to your RMDs. So, when you take SS may depend upon when you do your Roth conversion(s). IOW, you probably should only do a conversion in the window between when you both retire and when you begin your SS.
Will you have enough after-tax money set aside if and when you make Roth conversions to pay the extra taxes then? Paying the taxes with after-tax money gives you a bump up in the value of your Roth over its tIRA equivalent.
Honestly, I love Roths so much that my inclination would be to do the Roth now unless you can pretty convincingly show that your tax RATE will go down in the future when you retire. Roths have flexibilities that tIRAs don't have. Yes, you can convert later, but that also starts the 5-year clock again on when you can withdraw proceeds (not the original investment).
I didn't mean to muddy the waters, but I hope I did give a few things to consider. Oh, and YMMV.