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View Poll Results: Are You Doing or Planning a Roth Conversion?
Yes, I have started converting. 42 37.50%
No, but I am considering it and may do conversions. 32 28.57%
No, I have not converted any tax deferred accounts and do not plan to make conversions. 38 33.93%
Voters: 112. You may not vote on this poll

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Old 09-29-2010, 04:17 PM   #41
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Sounds like Trombone Al and I may be in the same good news/bad news situation. I'm officially poor - very little income this year. Good time to move some funds into the Roth tax free.
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Old 09-29-2010, 09:11 PM   #42
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I have not converted and do not plan to do so. I do not want to pay taxes now based on an assumption of what the tax situation may or may not be like 10 years from now (when I would have to start what I call MERDE distributions. Others know them as MRD distributions. I like my pronunciation better). For all I know there will be no income tax then and it will be replaced by one hell of a VAT rate...
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Old 09-29-2010, 10:28 PM   #43
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Quote:
Originally Posted by ejman View Post
I have not converted and do not plan to do so. I do not want to pay taxes now based on an assumption of what the tax situation may or may not be like 10 years from now (when I would have to start what I call MERDE distributions. Others know them as MRD distributions. I like my pronunciation better). For all I know there will be no income tax then and it will be replaced by one hell of a VAT rate...
Sure, because everyone knows the gov't would never take an opportunity to tax the same money twice. I am willing to bet there will be both an income tax AND a VAT, if anything changes. I will still come out ahead after converting in that case.
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Old 09-30-2010, 04:19 PM   #44
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I see that the responses are pretty even over the three categories.

I made a spreadsheet to model my income and conversions over the next 10 years or so. It appears to me that this year only (Due to SS payback) I will have some room in my 15% bracket, which I will use, and I also will use almost all of the 25% this year.

Thereafter, primarily because my RMDs and resumption of SS payments it appears that barring some truly bad luck, and figuring on -0- realized capital gains in my fairly large taxable account, I will always be in a marginal rate >15%, even if no adverse tax changes come about. So at least for a while, I will continue my program of conversions.

Ha
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Old 09-30-2010, 06:33 PM   #45
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I don't qualify for the Roth IRA, so a few years ago, when I found out I can do a conversion to a Roth IRA, I started contributing my after-tax money to non-deductible IRA's. I also moved all my rollover tax deferred deductible IRA's I had (rolled over from my old employers) into my current 401K so all I have left in my IRA's are after-tax contributions. Last month, I converted the IRA's (only after-tax was left in the IRA's) to a Roth IRA. Because I haven't had much gain due to the market downturn that happend a few years ago, I won't have to pay but a very small amount of taxes on the converted money.

It's only 15K, but still, I can dream that this 15K will snow ball to a huge amount of money by the time I need it - and I won't have to worry about tax consequences.

I guess I can do this conversion (open a non-deductible IRA and convert to Roth IRA) every year until they change the rules?
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Old 10-02-2010, 05:41 AM   #46
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Keep in mind that all conversions for this year need to be done by Dec.31, 2010. I just noticed this tidbit while reading an article about the conversions.
I had planned to make some decisions as I had my taxes prepared (after the first of the year) but now I see that want work. That leaves me converting while driving blind in a way.
I can always recharacterize later if I see I need to, that should add to all the fun and confusion.
Oh Well,
Steve
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Old 10-02-2010, 03:39 PM   #47
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It's done for this year - this will be my lowest earning year in which I could do the Roth conversion, so I jumped at it - my IRA didn't have a whole lot in it anyway as I've got mainly 403B, TSP or Roth and After Tax funds - was easier just to do it and have less to worry about - additionally, it becomes one of the 'after tax' buckets I can use during my transition phase to the pensions. I will have enough to worry about with the 403B and TSP withdrawals that I wanted to eliminate the IRA aspect. I do expect to pay some taxes on this conversion - and yes, I worry about what the gubmint could do in the future, however, they could also attack the tax deferred accounts, so who knows? Easier to look at your situation today and see if it makes sense - crystal balls tend to be opaque most of the time.
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Old 10-02-2010, 05:16 PM   #48
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Think I'll throw a question in here while we are doing this poll.
I'm sure this has been answered earlier in the year but I don't remember the rule. Guess the memory goes out the window with retirement.
I have one more IRA I plan to convert.
Will I owe taxes on the value the day I convert or the value at the end of the year?
Thanks people,
Steve
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Old 10-02-2010, 06:23 PM   #49
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Value is at the date of the conversion. That is why some people recharacterize (reverse) their conversion before filing their return. If the market tanks you can recharacterize and the reconvert at the lower values of the securities following the market tanking
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Old 10-02-2010, 06:25 PM   #50
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Fido recently posted on their site a pretty good discussion and example of dealing with the two year option for paying taxes on conversions. Needless to say, everyone situation is different but this article gives one a good review of the major variables to consider
https://guidance.fidelity.com/viewpo...-year-tax-rule
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Yes and thanks
Old 10-03-2010, 11:27 PM   #51
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Yes and thanks

Since ER, I've been converting for 4 years by topping off the 15% bracket while I'm too young for SS.

That looks bad to some since it is prepaying tax. To me it is just pushing money (perhaps tax free) into the future, continuing the delayed gratification that got me to the best years of my life, my FIREd years.

There is always risk in anything. Conversion is a type of diversification. I'm reducing some of my risk of paying higher taxes in the future.
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Old 10-04-2010, 04:40 AM   #52
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I have not begun conversion yet... but intend to do so.

I would recommend that anyone considering it do a thorough study of the rules to identify the considerations that are meaningful to them in the context of their circumstances.

It is helpful to setup several what-if scenarios in a spreadsheet to understand how to optimize one's plan.

Someone on this forum recommended Ed Slott's books. They are good primers.


Someone also recommended ORP... which includes the conversion scenario as a net income optimizer.


These two sources of info were very helpful.

Thanks to the forum members for sharing this information!
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Old 10-05-2010, 03:24 PM   #53
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My computer reminds me to convert in early January (for the upcoming year). Since all gains will never be taxed (as income anyway), this gives you a full extra year of appreciation for free. Same for HSA contributions.

Skeptical? Let's say that your funds go up by 100% in 2011. If you convert 10K on Jan 2, your Roth will have 20K in it that will not be taxed. If you convert on Dec 30, you will have 10K of gains left behind in your trad IRA which will be taxed when you withdraw it.

That's why I always tried to make my IRA and SEP-IRA contributions early in the year.
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Old 10-07-2010, 07:40 PM   #54
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haven't been able to find a job for 2 years now, no income, so i converted up to point of paying taxes. one silver lining to awful situation.
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