Originally Posted by ronocnikral
D, your plan sounds fine as long as your assumptions hold true. how much money do you plan to hold on the sidelines so you can do these conversions? and how much time w*rking does that translate to. and if you plan to always be in the 15% tax bracket, what's the point of converting in the same tax bracket you always plan to be in? if you plan to somehow significantly increase your spending power without w*rking over 5-40 years, I am all ears...
Seems like we are slightly hijacking this thread, but I guess it is good conversation for the OP as well.
I don't have it all worked out, but we currently have a 401K worth 400,000 and two traditional IRAs worth 90,000 and 55,000. We are not eligible for Roth IRAs right now because of income level, and it is painfull to convert the traditionals to Roths because they have little basis (even though I know the conversion income limits were lifted in 2010). I also know about the backdoor approach by hiding the IRA in a solo 401K if you want to start your own business, but seems like a lot of work.
So in 6 years? Maybe we will have 700K in the 401K with our 21,000 contribution plus some market luck. The IRAs will probably be on the order of 250K total by then. Taxable account should be around 500K.
The point of converting is that when we start to draw SS, if a large portion of our income is from Roth then we should pay little tax on the SS payments, and also it gives us greater flexibility having the Roth vs having it all still in the 401K and IRAs. Also, there may be some years where without the 72T money or IRA conversion we would not even owe tax (is possible I guess). Seems like those are good times to get money from a tax deferred account.