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Mega Roth Conversions?
Old 06-07-2016, 05:40 PM   #1
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Mega Roth Conversions?

Hi all,

I'm about 2 years away from the starting line. For these last years, I am/will be stashing the equivalent of 2-3 years of budget into a cash account to use as living expenses at the beginning. All other investments are taxable brokerage, tIRA and 401K (no Roths)

This means that I should be able to have essentially zero income in at least the first year, and if I don't want to replenish the stash the first year, maybe two years worth.

Should I do the mega Roth conversions up to the 0% limit (~18K) each year (seems a waste of a zero income year), or go for the 10% limit, 15%, or something else?

What variables do I look at to make this choice?

I do plan to convert all possible to Roths over time as *I* think taxes are likely going to go up over my 35-40yr non-working life.

Thanks for any thoughts or comments on my idiocy....

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Old 06-07-2016, 06:17 PM   #2
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Not enough info given, but I am converting up to top of 15% bracket. Another variable is what you are doing for health insurance. If you have no government or corporate insurance, then PPACA is your friend and you need to stay below the 400% of poverty OMAGI. Depending on the year, it is about in the $62,500 range. Others on this site have enough in 401k and pre-tax IRA that they are more concerned with RMD's. They go to the top of the 25% tax bracket.

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Old 06-07-2016, 06:18 PM   #3
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One way to study your options is to run I-Orp. One of its run options is to optimize use of your money by minimizing taxes over your lifetime. The use of Roth conversions is included. I-orp will recommend the level of Roth conversions each year if they make sense in your situation. You will find several threads on this topic and good input from various philosophies.

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Old 06-07-2016, 09:09 PM   #4
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Make an estimate of your marginal tax rate after age 70 when tIRA/401k RMD's are required and SS and pensions are all on line. 15%? 25%? More?

Then convert up to the top of that tax bracket, or at least the one below it. That's a very rough estimate in lieu of your own detailed calculations. You only need to convert until you run out of taxable money.

I have zero income except for fund distributions. I've been converting up to 250k AGI, avoiding AMT and ACA investment taxes. A few more years of that and we will drop out of the 25% bracket for most of the rest of retirement. If we live past 100 the Roth accounts will be our only remaining investments.
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