I would appreciate the input of those far more adept at understanding Roth conversions than I will ever be...
I am 58, single, and have about $500K in my Roth IRA. I have about $1.3M in my TIRA. Both accounts were rolled over from my former empl*yer 401Ks about five years ago.
I am currently living off of dividends and withdrawals, which are both taken from my taxable portfolio. If I want, I can likely live off of my taxable portfolio for the rest of my life, assuming a 4% withdrawal rate. My plan, however, is to increase spending right about now, and eventually draw down on the IRAs. I have sufficient cash in taxable accounts to pay tax bills for conversions. If I should need more cash to pay taxes, I could sell securities from my taxable portfolio.
The most recent tax return I have (2018) has me making $5500 in interest and $45,000 in ordinary dividends, of which $25,000 are qualified dividends. (Using rounded numbers here.) Counting some income from Schedule 1, line 22, my Total Income is about $55,000. My AGI is $55,000. My Taxable Income is $38,000. I anticipate that these numbers will remain more or less the same for the foreseeable future.
Being single, I plan to leave my estate to charity, a family member or two, and a few good friends, if they survive me.
I suspect that with the recent stimulus packages, tax rates will only go up from their current levels.
I have made a good-faith effort to read (and re-read) many ER.org posts on Roth conversions. But I am (surprise!) uncertain about whether it's smart to convert.
With my taxable income at $38,000, I only have $2,125 to to hit the top of the 12% bracket for 2019 and 2020.
1. Should I do Roth conversions into the 22% bracket on an annual basis?
2. If I decide to convert to the top of the 12% bracket (a $2,125 conversion amount), and I end up miscalculating my taxable income, my only downside is that I have to pay 22% on the amount of taxable income that goes into the 22% bracket, correct?
3. My accounts are at Schwab. If I decide to convert, do I just call a Schwab rep, and is the rollover easy to do?
4. If i do the rollover, do I then just calculate my taxes on the capital gain amount of the rollover, and add that amount to my estimated taxes for the quarter in which the conversion occurred, paying those taxes with cash from my taxable portfolio?
5. Since I'm 58, I have at least 14 years to do conversions, correct? (I'm thinking of doing about $35,000 of conversions per year, roughly to the top of the 22% bracket -- a total conversion of about $500K.)
6. Am I missing anything?
Thanks in advance for your wisdom.
I am 58, single, and have about $500K in my Roth IRA. I have about $1.3M in my TIRA. Both accounts were rolled over from my former empl*yer 401Ks about five years ago.
I am currently living off of dividends and withdrawals, which are both taken from my taxable portfolio. If I want, I can likely live off of my taxable portfolio for the rest of my life, assuming a 4% withdrawal rate. My plan, however, is to increase spending right about now, and eventually draw down on the IRAs. I have sufficient cash in taxable accounts to pay tax bills for conversions. If I should need more cash to pay taxes, I could sell securities from my taxable portfolio.
The most recent tax return I have (2018) has me making $5500 in interest and $45,000 in ordinary dividends, of which $25,000 are qualified dividends. (Using rounded numbers here.) Counting some income from Schedule 1, line 22, my Total Income is about $55,000. My AGI is $55,000. My Taxable Income is $38,000. I anticipate that these numbers will remain more or less the same for the foreseeable future.
Being single, I plan to leave my estate to charity, a family member or two, and a few good friends, if they survive me.
I suspect that with the recent stimulus packages, tax rates will only go up from their current levels.
I have made a good-faith effort to read (and re-read) many ER.org posts on Roth conversions. But I am (surprise!) uncertain about whether it's smart to convert.
With my taxable income at $38,000, I only have $2,125 to to hit the top of the 12% bracket for 2019 and 2020.
1. Should I do Roth conversions into the 22% bracket on an annual basis?
2. If I decide to convert to the top of the 12% bracket (a $2,125 conversion amount), and I end up miscalculating my taxable income, my only downside is that I have to pay 22% on the amount of taxable income that goes into the 22% bracket, correct?
3. My accounts are at Schwab. If I decide to convert, do I just call a Schwab rep, and is the rollover easy to do?
4. If i do the rollover, do I then just calculate my taxes on the capital gain amount of the rollover, and add that amount to my estimated taxes for the quarter in which the conversion occurred, paying those taxes with cash from my taxable portfolio?
5. Since I'm 58, I have at least 14 years to do conversions, correct? (I'm thinking of doing about $35,000 of conversions per year, roughly to the top of the 22% bracket -- a total conversion of about $500K.)
6. Am I missing anything?
Thanks in advance for your wisdom.
Last edited: