VG ROTH IRA Conversion calculator

[explanade]

http://www.archimedes.com/vanguard/roth/RothConsumer.phtml

It's telling me "Converting to a ROTH may not be right for you."


Not sure I understand. I have about 27k in tIRA and $40k in ROTH. All contributions have been after-tax, nondeductible. The tIRA balance has maybe $2k in gains. I converted in 2010 and it had built back up.

Now, I'm looking to convert because I am looking to FIRE next year and rollover my 401k. So doing it this year would prevent my cost basis from being reset (to a much higher figure) after I do the rollover, is my understanding.

So this calculator's conclusion seems to be wrong for this scenario.

 

[Animorph]

Did the calc know about your 401k? With $2k gains, you can probably do what you want without being too suboptimal. Without knowing everything, it seems like a very reasonable move.

The other thing I can think of is if your taxable income is going to be near zero without conversions, it may be thinking you can get your tIRA/401k money out at a very low tax rate after FIRE. That could be much better than converting now at a high tax rate, even with the small gain.

 

[GrayHare]

When the taxable amount of tIRA is small, convert it to Roth. By leaving it as tIRA you are *yikes* making all its gains taxable as ordinary income.

 

[explanade]

Yeah there is no place to enter anything about 401k.

So it's purely looking at your tIRA values, taxable income and assumptions about return and tax rate when you withdraw.

Yeah I figure the gain is modest at this point so might as well convert.