urn2bfree
Full time employment: Posting here.
- Joined
- Feb 14, 2011
- Messages
- 852
I have been thinking more and more about the intricacies of Roth conversions.
I am really wondering if Roth conversions may end up being more trouble than they're worth.
First of all I am waiting for my wife to stop working so we can have the lowest income possible. Then I figure we try to convert to the top of whatever bracket we are in - so far so good. But this will generate extra taxes, presumably paid from non IRA money. That means taking more money from taxable which could increase income and lower the actual room for withdrawing from traditional IRa
But wait, it gets worse. My tIRA holdings are generally the ones without dividends or capital gains. (Bonds, etc) But Roth IRA holdings being never taxed again are best made up of dividend and capital gains producers, so to keep my asset allocation in balance I will have to move the pieces around leaving me creating MORE capital gains when I sell some of the taxable account holdings to balance out the new holdings in the Roth. And then I have to buy more of those income producing assets that used to be in my tIRA but will now be in taxable account.
I do have a substantial tIRA, 30% of my holdings, but it is not clear to me how much I will really save with Roth conversions, when it is all said and done.
Help me understand the calculus, please.
I am really wondering if Roth conversions may end up being more trouble than they're worth.
First of all I am waiting for my wife to stop working so we can have the lowest income possible. Then I figure we try to convert to the top of whatever bracket we are in - so far so good. But this will generate extra taxes, presumably paid from non IRA money. That means taking more money from taxable which could increase income and lower the actual room for withdrawing from traditional IRa
But wait, it gets worse. My tIRA holdings are generally the ones without dividends or capital gains. (Bonds, etc) But Roth IRA holdings being never taxed again are best made up of dividend and capital gains producers, so to keep my asset allocation in balance I will have to move the pieces around leaving me creating MORE capital gains when I sell some of the taxable account holdings to balance out the new holdings in the Roth. And then I have to buy more of those income producing assets that used to be in my tIRA but will now be in taxable account.
I do have a substantial tIRA, 30% of my holdings, but it is not clear to me how much I will really save with Roth conversions, when it is all said and done.
Help me understand the calculus, please.