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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%
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Poll-Are You Doing A Roth Conversion?
Old 09-27-2010, 09:53 PM   #1
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Poll-Are You Doing A Roth Conversion?

In 2008 I became eligible to do a Roth Conversion, and I have started this process. All of it will have to be done at 25% or higher, and I plan to stop each year at the 25% bracket limit. (At least under current tax rules). My plan is to convert as much as I can, and still stay withing the 25% bracket. By taking few or no capital gains, and due to having a lot of tax advantaged partnership income, some years I should be able to convert quite a lot. I also will try to avoid pushing MAGI high enough to trip another gotcha- higher Medicare premiums. I take the standard deduction, so both these thresholds are very similar. My taxable portfolio is not the most tax efficient, as I do a form of position trading. I see the conversion as a means to transform TIRA to Roth funds, at the cost of some of my fully taxable portfolio, as I will pay the tax due from my taxable accounts. Had I been able, I would have done the conversion before being so close to my RMD begining, but that was not available to me.

I will still have a good sized taxable account which I will use for buy and hold blue chips and MLPs, REITs,etc.. Then any (careful!) trading will be done in the Roth. I think it is possible to get paralysis by analysis, so I am going head long, feeling that although all my life I have hated to pay taxes early, in this case it will pay off.

What are others doing or considering?

Ha
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Old 09-27-2010, 10:03 PM   #2
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I am doing it since my taxable income is very less so I am converting with 0% tax rate (due to SD, PE, Child tax credit etc.).
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Old 09-27-2010, 10:10 PM   #3
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I started doing some 4 years ago when I retired. But since I am working PT this year I have to look harded to see if it will work for me.
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Old 09-27-2010, 10:26 PM   #4
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I rolled over a small traditional IRA to a Roth this year. Since I also retired this year I took advantage of a one time opportunity to put some money in a Roth by funding a Voluntary Contribution account just before retiring and then immediately withdrawing it after retiring and rolling it into a Roth. This is a benefit of the federal CSRS.
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Old 09-27-2010, 11:59 PM   #5
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I've rolled over lots without having to pay any tax on it at all. It seems too good to be true.
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Old 09-28-2010, 12:15 AM   #6
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I put in after tax money for a few years just so I could do it with little to no taxes... now that I am married, I can just put my money in (but do not as the budget is way to high right now)...


I did do a conversion way back in 2000 when you could spread it over two (maybe more) years...


Edit to add... did not answer the poll as there is NOT an option saying you are finished...
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Old 09-28-2010, 12:39 AM   #7
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Quote:
Originally Posted by Texas Proud View Post
I put in after tax money for a few years just so I could do it with little to no taxes... now that I am married, I can just put my money in (but do not as the budget is way to high right now)...


I did do a conversion way back in 2000 when you could spread it over two (maybe more) years...


Edit to add... did not answer the poll as there is NOT an option saying you are finished...
I hope in that situation you would just vote yes. (Option #1) It wouldn't seem to matter when you start or finish, just whether you are doing or have done it, may do it, or have no plans to do it.

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Originally Posted by TromboneAl View Post
I've rolled over lots without having to pay any tax on it at all. It seems too good to be true.
That is certainly an opportunity not to be missed! One other poster noted that he is also in this situation.

Ha
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Old 09-28-2010, 12:55 AM   #8
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Quote:
Originally Posted by powerplay View Post
I rolled over a small traditional IRA to a Roth this year. Since I also retired this year I took advantage of a one time opportunity to put some money in a Roth by funding a Voluntary Contribution account just before retiring and then immediately withdrawing it after retiring and rolling it into a Roth. This is a benefit of the federal CSRS.
I also converted a teeny little T-IRA to Roth this year, but I think I will do other conversions in the future after retirement. I worry about RMD's pushing me into a higher tax bracket when they kick in, or other withdrawals, e.g. needing a large amount in one year for something like a new car, so I plan to use conversions to shift money from tax-deferred to Roth before age 70-1/2 to reduce the size of eventual RMD's, spread the tax over more years and have tax-free money to draw on in case of a large expense.
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Old 09-28-2010, 01:02 AM   #9
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Originally Posted by TromboneAl View Post
I've rolled over lots without having to pay any tax on it at all. It seems too good to be true.
How'd you manage that? It does seem too good to be true!
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Old 09-28-2010, 07:08 AM   #10
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This year we're still in a high enough tax bracket for it not to make sense. We'll have to see how things shape up next year, but doing a conversion seems like it should be a good idea.

I have to admit, though, that I have a strong aversion to doing something that is going to increase my immediate tax bill and won't yield any benefits for another 30 years or so. 30 years is a long time for things to change on you . . . national sales tax, alien invasion, the rapture, whatever.
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Old 09-28-2010, 07:54 AM   #11
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Perhaps when my income and expenses are way down after I stop working.
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Old 09-28-2010, 09:46 AM   #12
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I voted not yet as I am pondering more formal conversions. Virtually all our income is taxable, the downside to pensions, so no tax free conversions for us, a less compelling proposition than the zero tax folks. I have begun withdrawals from my IRA but DW works a little, maybe $2k a year and that goes straight into her Roth. Kind of a rolling conversion.
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Old 09-28-2010, 10:02 AM   #13
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Interesting - I thought one had to convert the VC before retirement. Congratulations on your retirement!


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Quote:
Originally Posted by powerplay View Post
I rolled over a small traditional IRA to a Roth this year. Since I also retired this year I took advantage of a one time opportunity to put some money in a Roth by funding a Voluntary Contribution account just before retiring and then immediately withdrawing it after retiring and rolling it into a Roth. This is a benefit of the federal CSRS.
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Old 09-28-2010, 10:05 AM   #14
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Yep. It is really the only tax advantage thing that will save me money. I'll pay the tax over 2011 & 2012 when I slip into the next lower bracket. The bulk in my deferred acct will eventually bite me. Wish it was all in a Roth but that wasn't possible.
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Old 09-28-2010, 10:11 AM   #15
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I did a conversion the second year I retired since I was living off after tax savings and had some room in the 15% bracket. Once those funds were gone and I'm now drawing from my IRA and SS, no more room - and no more conversions.
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Old 09-28-2010, 11:07 AM   #16
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Quote:
Originally Posted by TromboneAl View Post
I've rolled over lots without having to pay any tax on it at all. It seems too good to be true.
This kind of thing really puzzles me. MFJ, two exemptions. Taking the SD and adding the exemptions gives $18,700. Add that to the top of the 0 bracket band of $16,700 and we get $35,400 as the highest permissible AGI. Unless some of your conversion is after tax IRA, the entire conversion is taxable and thus part of AGI. Say you converted $10,000, that means $25,400 of AGI avaiable for living expenses for two people in a large house. No matter how many worn-out pants you buy, it is hard for me to imagine how this is done.

I suppose you may be spending some taxable fund sales that were no gain, or even a loss.

I hope you will come on and explain more. I may just not know how to achieve something like this.

Ha
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Old 09-28-2010, 11:21 AM   #17
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I completed mine earlier in the year. Not expecting a big tax hit as a good portion of my contributions were non deductible also one of my REIT holdings has basically gone private, since no longer trades, its price per share went to zero, so my taxable basis I think will be very low.
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Old 09-28-2010, 11:40 AM   #18
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I wanted to last year, but I couldn't figure out how; which is a reason I am moving to Vanguard.
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Old 09-28-2010, 11:53 AM   #19
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After I retired, I dropped down a tax bracket. So now I convert enough to "fill up" my 15% bracket. When I start SS and run into RMDs, I think I'll be back in the 25% bracket. So it makes sense to pay 15% now instead of 25% then.
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Old 09-28-2010, 12:19 PM   #20
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This year we're still in a high enough tax bracket for it not to make sense. We'll have to see how things shape up next year, but doing a conversion seems like it should be a good idea.

I have to admit, though, that I have a strong aversion to doing something that is going to increase my immediate tax bill and won't yield any benefits for another 30 years or so. 30 years is a long time for things to change on you . . . national sales tax, alien invasion, the rapture, whatever.
DW/me went through the same exercise, and are not going to convert any TIRA holdings for the same reasons you outline.

Additionally, since the bulk of our remainder estate will be going to charity, our TIRA's will be given to our tax-exempt charities without them having to pay any tax. That means 100% of our bequests will be used for their "good works" rather than pay taxes.

If we need to tap into those TIRA's or the tax laws change, we will change our direction, as circumstances change.

So for now? No conversion.
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