kannon
Recycles dryer sheets
Hello All -
While watching a PBS Infomercial it got me thinking about Roth IRAs - specifically - conversion to a Roth IRA from our 401/403's and Traditional IRAs.
My wife and I will be fully retired the end of this year. With our pension and delay of SS till age 70, I put together a financial plan spreadsheet. One tab focuses on Income Tax. With our planned income, we will have a few years at a 15% marginal tax rate, more at 25%, but eventually in our 70s with the RMD we will be shot into the 33% marginal tax rate.
Here's my thinking. We have a few years of what I call "tax headroom" - amount of money before we move into the next tax bracket. It seems "logical" that during those year's we take advantage of the "head room" to convert or IRAs to Roth IRAs. Thinking is that if we don't do anything and wait for the RMD, we will be in a higher tax bracket.
I know we will lose dollars to the tax pay out and lose those potential growth - my estimate is about 4% growth (we are only about 30% in equities). I ran an IRA conversion calculator on Vanguard and the amount saved was significant.
One other feature I like is that if we move funds to a Roth IRA it will be good for our kids which we hope to leave an inheritance.
Regardless, it appears a complicated analyst. Was hoping to understand all of the factors before I start modifying my spreadsheets.
Thanks
Kannon
While watching a PBS Infomercial it got me thinking about Roth IRAs - specifically - conversion to a Roth IRA from our 401/403's and Traditional IRAs.
My wife and I will be fully retired the end of this year. With our pension and delay of SS till age 70, I put together a financial plan spreadsheet. One tab focuses on Income Tax. With our planned income, we will have a few years at a 15% marginal tax rate, more at 25%, but eventually in our 70s with the RMD we will be shot into the 33% marginal tax rate.
Here's my thinking. We have a few years of what I call "tax headroom" - amount of money before we move into the next tax bracket. It seems "logical" that during those year's we take advantage of the "head room" to convert or IRAs to Roth IRAs. Thinking is that if we don't do anything and wait for the RMD, we will be in a higher tax bracket.
I know we will lose dollars to the tax pay out and lose those potential growth - my estimate is about 4% growth (we are only about 30% in equities). I ran an IRA conversion calculator on Vanguard and the amount saved was significant.
One other feature I like is that if we move funds to a Roth IRA it will be good for our kids which we hope to leave an inheritance.
Regardless, it appears a complicated analyst. Was hoping to understand all of the factors before I start modifying my spreadsheets.
Thanks
Kannon