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IRA Conversions
Old 01-25-2010, 11:48 AM   #1
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IRA Conversions

Are folks on this forum planning any IRA to Roth conversions?
I haven't noticed a lot of discussion on the subject.
If so how will you pay the taxes due? Quarterly or something else?
Do you see it as a big advantage going forward? Feel free to use/read and share your crystal ball visions of future taxes? Or what ever is forming your decision.
Looking forward to everyone's thoughts, hoping its not a dud post on my part.
Steve
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Old 01-25-2010, 12:16 PM   #2
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Originally Posted by Stevewc View Post
Are folks on this forum planning any IRA to Roth conversions?
I haven't noticed a lot of discussion on the subject.
If so how will you pay the taxes due? Quarterly or something else?
I plan to do the conversion. I plan to pay $0 in taxes since (a) all my TIRA contributions were non-deductable and (b) my IRA value is less than my basis. I wish I could also claim some negative income, but suspect I won't be able to :-(... I think this is one of those cases where we get taxed if we "win" and get nothing if we "lose".


Quote:
Do you see it as a big advantage going forward? Feel free to use/read and share your crystal ball visions of future taxes? Or what ever is forming your decision.
Looking forward to everyone's thoughts, hoping its not a dud post on my part.
Steve
It's not necessarily an advantage tax-wise (esp. because I am currently in high tax bracket and I plan to be in a low one upon retirement). Since I have traditional 401(k), Roth would be more of a diversifier for me. I AM quite concerned about how it would be treated by other countries however - if I move out of US, I would not want the after-tax Roth money to be taxed on withdrawals by another country.
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Old 01-25-2010, 01:05 PM   #3
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Quote:
Originally Posted by Stevewc View Post
Are folks on this forum planning any IRA to Roth conversions?
I haven't noticed a lot of discussion on the subject.
If so how will you pay the taxes due? Quarterly or something else?
Do you see it as a big advantage going forward? Feel free to use/read and share your crystal ball visions of future taxes? Or what ever is forming your decision.
Looking forward to everyone's thoughts, hoping its not a dud post on my part.
Steve
(FAQ archive) Should I convert my IRA/401(k) to a Roth or not?
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Old 01-25-2010, 01:07 PM   #4
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ewwww... basis is a consideration I overlooked. I am retiring this year, and my husband next year in April. Most of our IRA was nondeductible. Income will be minimal in 2011 and 2012, as we are only in mid 50's and will have just a small pension initially, DH 3-4 moonths of earnings in 2011-plus whatever earnings the market brings. Most of our money is in tax deferred accounts however.

Anyone find some good online calculators for this?
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Old 01-25-2010, 02:18 PM   #5
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Originally Posted by bizlady View Post
Anyone find some good online calculators for this?
*Tap tap* "Check-check-one-two-three... is this thing turned on?"
Guide to Roth IRA, 401k and 403b Retirement Accounts from
(FAQ archive) Should I convert my IRA/401(k) to a Roth or not?

The individual issues with a Roth conversion are generally too complex to reduce to plugging numbers into an online calculator. But once all the conversion issues have been figured out then, if necessary, the specific amount of the tax can be calculated off of a Form 8606.
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Old 01-25-2010, 10:18 PM   #6
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Nords,
Thanks for all the links and info.
Steve
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Old 01-26-2010, 03:22 AM   #7
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I've been converting since my ER in 2005. No issues of non-deductible money, so relatively more straight forward. I think the real issue is whether you think your tax rates are going to be higher or lower in the future. I've been betting that they will be higher. At best, they might be the same which, for me, still favors converting as my RMDs in a few years will probably push me into a higher bracket at that time. Any one who thinks rates will stay the same (I hope you are right) will probably be wrong IMHO. If Congress does nothing, rates will soon increase. If they do SOMETHING, you can almost bet it won't be to lower taxes. Just my 2 cents worth, of course. YMMV
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Old 01-27-2010, 08:51 AM   #8
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Looks like Bud Hebeler has put out a new spreadsheet:
Free Programs

He's done a very thorough job with his other articles & products. I haven't tried this one (I know we'll be in a higher tax bracket when spouse's pension kicks in) so if any of you find this useful please let us know... and the link could be added to the FAQ Archives.
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Old 01-27-2010, 11:08 AM   #9
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Originally Posted by Koolau View Post
I've been converting since my ER in 2005. No issues of non-deductible money, so relatively more straight forward. I think the real issue is whether you think your tax rates are going to be higher or lower in the future. I've been betting that they will be higher. At best, they might be the same which, for me, still favors converting as my RMDs in a few years will probably push me into a higher bracket at that time. Any one who thinks rates will stay the same (I hope you are right) will probably be wrong IMHO. If Congress does nothing, rates will soon increase. If they do SOMETHING, you can almost bet it won't be to lower taxes. Just my 2 cents worth, of course. YMMV
I'm with you on the tax situation. I did my first conversion last year (first time I was eligible). But I'm very concerned about the feds finding other ways to tax Roth withdrawals. VAT springs to mind, along with means testing. But I still see it as a relatively safe bet, paying taxes now at a lower rate than I anticipate later. My problem is I have a lot of money in pre-tax IRAs, so it's going to take a long time to convert a significant amount of it. Oh well, just got to (quoting a wise man) "stay agile, mobile, and hostile".
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