Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Timing a Roth conversion
Old 04-16-2014, 01:21 AM   #1
Dryer sheet aficionado
 
Join Date: Nov 2013
Posts: 41
Timing a Roth conversion

I have about $20k that I want to convert from an IRA to a Roth IRA, because u will likely be in a higher tax bracket during retirement. The IRA money is mostly bonds/safer money, and I'm thinking the Roth should be an S&P 500 or Extended Market index as I may never need the money and would be looking for longer term growth. My question is on timing: I'd like to buy the stocks when the market dips, but it never seems to really go down these days - and when it does, I'm not paying attention and miss it. Should I just pull the trigger now and convert, figuring it's a long-term investment, or wait it out for a market correction?
__________________

__________________
Sanbenito1 is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 04-16-2014, 06:49 AM   #2
Thinks s/he gets paid by the post
 
Join Date: Jan 2006
Posts: 2,933
...........or convert in pieces, recharacterizing later if desired, and re-converting , being sure to wait the appropriate time before doing this.........................

how will you be in a higher tax bracket during retirement?
__________________

__________________
kaneohe is offline   Reply With Quote
Old 04-16-2014, 07:23 AM   #3
Thinks s/he gets paid by the post
mpeirce's Avatar
 
Join Date: Feb 2012
Location: Columbus area
Posts: 1,595
Or average into the market over the next year. This avoids the angst of trying to time the market.
__________________
mpeirce is offline   Reply With Quote
Old 04-16-2014, 07:26 AM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 16,461
In the long run, it probably doesn't matter and you'll really never know so do what you are most comfortable with. If it were me, I would at least move the money from the IRA to a money market fund in the Roth in one swoop and then value average $2,000 a month until the $20,000 is fully invested in the stock fund of your choice.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
pb4uski is offline   Reply With Quote
Old 04-16-2014, 10:15 PM   #5
Dryer sheet aficionado
 
Join Date: Nov 2013
Posts: 41
Good ideas- thanks all!
__________________
Sanbenito1 is offline   Reply With Quote
Old 04-18-2014, 07:35 PM   #6
Confused about dryer sheets
greyhat's Avatar
 
Join Date: Apr 2014
Posts: 8
What's the overall point of the conversion? When you convert you have a taxable event; why not just cash out the IRA then?


Sent from my iPhone using Tapatalk
__________________
greyhat is offline   Reply With Quote
Old 04-18-2014, 07:42 PM   #7
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 16,461
Because the Roth will grow tax free even if you're in a high tax bracket (which is not uncommon once SS, pensions and RMDs start).

If you took it an put it in equities in a taxable account if you are in the 15% tax bracket or lower that would likely be tax-free as well since qualified dividends and long term capital gains are taxed at 0%.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
pb4uski is offline   Reply With Quote
Old 04-18-2014, 07:47 PM   #8
Thinks s/he gets paid by the post
steelyman's Avatar
 
Join Date: Feb 2011
Location: Triangle
Posts: 3,218
I think a conversion is an option if you expect to leave money to heirs. I have Roths, but don't expect to convert traditional money. That's a personal choice and merits thought.
__________________

steelyman is offline   Reply With Quote
Old 04-18-2014, 07:47 PM   #9
Confused about dryer sheets
greyhat's Avatar
 
Join Date: Apr 2014
Posts: 8
Well there is no free lunch with Uncle Sam; converting would allow for tax deferred growth of earnings and subject to Roth rules, tax free distributions of earnings afterwards. However if you won't likely need the money then the question becomes, "who will benefit from the conversion?" Sure you may avoid paying taxes on dividends & gains in a Roth but will that be at a cost to your heirs? There are no tax basis step-ups in a Roth.


Sent from my iPhone using Tapatalk
__________________
greyhat is offline   Reply With Quote
Old 04-18-2014, 07:49 PM   #10
Thinks s/he gets paid by the post
steelyman's Avatar
 
Join Date: Feb 2011
Location: Triangle
Posts: 3,218
But isn't a Roth not taxed?
__________________

steelyman is offline   Reply With Quote
Old 04-18-2014, 08:00 PM   #11
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 16,461
Quote:
Originally Posted by greyhat View Post
Well there is no free lunch with Uncle Sam; converting would allow for tax deferred growth of earnings and subject to Roth rules, tax free distributions of earnings afterwards. However if you won't likely need the money then the question becomes, "who will benefit from the conversion?" Sure you may avoid paying taxes on dividends & gains in a Roth but will that be at a cost to your heirs? There are no tax basis step-ups in a Roth.


Sent from my iPhone using Tapatalk
Think before you type. A step up in basis is redundant since distributions are generally tax-free to the person who inherited the Roth.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
pb4uski is offline   Reply With Quote
Old 05-09-2014, 11:35 PM   #12
gone traveling
 
Join Date: May 2014
Posts: 153
Convert. You don't have to do it all at once. If you are young and trade, you may want to have a trading account and forego future IRA contributions or excessive 401k.
__________________
LongPrime is offline   Reply With Quote
Old 05-10-2014, 12:54 PM   #13
Thinks s/he gets paid by the post
 
Join Date: Jan 2008
Posts: 1,495
Quote:
Originally Posted by Sanbenito1 View Post
I have about $20k that I want to convert from an IRA to a Roth IRA, because u will likely be in a higher tax bracket during retirement. The IRA money is mostly bonds/safer money, and I'm thinking the Roth should be an S&P 500 or Extended Market index as I may never need the money and would be looking for longer term growth. My question is on timing: I'd like to buy the stocks when the market dips, but it never seems to really go down these days - and when it does, I'm not paying attention and miss it. Should I just pull the trigger now and convert, figuring it's a long-term investment, or wait it out for a market correction?
Lots of relevant information missing:

1) How old are you now?
2) What's your current tax bracket?
3) Can you convert in stages thereby preventing you from jumping into the next tax bracket (i.e., 15% to 25%)?
4) What leads you to believe you will be in a higher tax bracket during retirement?
5) Do you plan to delay Social Security?
6) How old will you be when you plan to retire?
7) What's your ratio of after tax to tax-deferred monies currently?
8) Do you have an ISP?
9) Have you thought through your AA (you mention extended markets) and risk tolerance?
10) Most importantly, why are you trying to time the market when all research shows it's not humanly possible?
__________________

__________________
Options is offline   Reply With Quote
Reply

Tags
roth, timing


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Roth IRA options/timing inquisitive FIRE and Money 11 12-17-2014 11:02 AM
Can I do a Roth IRA conversion if my AGI is over the Roth limit? starsfan18 FIRE and Money 20 01-03-2012 03:39 PM
Roth - Traditional - Roth Conversion??? CorporateSoldier FIRE and Money 4 03-10-2011 10:07 PM
Strategy for Roth 401k to Roth IRA conversion and withdrawals sweng85 FIRE and Money 9 04-21-2009 11:28 PM
head of household/Roth conversion unclemick FIRE and Money 13 08-03-2004 09:43 AM

 

 
All times are GMT -6. The time now is 10:40 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.