hi, first post
A little background info. Both my wife and I are in the highest tax bracket so we want to shelter as much as possible from (IMO) unfair taxation.
We are 42 (me) and 40 (wife) and plan on retirement early (ie. age 50, 51, 52, 53 depending on the market and how our investments are doing).
When retired, we'll be living off both retirement and non-retirement (tax sheltered) investments, but our 'income' from retirement accounts will be taxed as income at the highest tax rate (still)
We have two sizable roll-over IRAs which I could convert to Roth in the few years. This is my question, but any other advice would be appreciated.
at retirement our nest egg would be something like
-1/3 non-retirement (ie. taxible) account.
-1/3 401K (ish) (ie. tax shelter money counted as income on withdrawl)
-1/3 from this current roll-over IRA which can either stay in a normal IRA (ie. subject to income tax or converted to a Roth).
The question is this: the money to convert is sizable and so would come off the non-tax shelter account so that would be less but the upside is that the Roth will be tax free on withdrawl.
Currently our income bars us from a Roth, but the new rule change takes effect here is what I would be talking about..
Roth IRA Provision Effectively Eliminates Income Limits on Roth IRAs Establishes Major New Tax Shelter For High-Income Households, Revised 5/15/06
A little background info. Both my wife and I are in the highest tax bracket so we want to shelter as much as possible from (IMO) unfair taxation.
We are 42 (me) and 40 (wife) and plan on retirement early (ie. age 50, 51, 52, 53 depending on the market and how our investments are doing).
When retired, we'll be living off both retirement and non-retirement (tax sheltered) investments, but our 'income' from retirement accounts will be taxed as income at the highest tax rate (still)
We have two sizable roll-over IRAs which I could convert to Roth in the few years. This is my question, but any other advice would be appreciated.
at retirement our nest egg would be something like
-1/3 non-retirement (ie. taxible) account.
-1/3 401K (ish) (ie. tax shelter money counted as income on withdrawl)
-1/3 from this current roll-over IRA which can either stay in a normal IRA (ie. subject to income tax or converted to a Roth).
The question is this: the money to convert is sizable and so would come off the non-tax shelter account so that would be less but the upside is that the Roth will be tax free on withdrawl.
Currently our income bars us from a Roth, but the new rule change takes effect here is what I would be talking about..
Roth IRA Provision Effectively Eliminates Income Limits on Roth IRAs Establishes Major New Tax Shelter For High-Income Households, Revised 5/15/06
The tax reconciliation bill conference agreement gives the appearance of retaining the current income limits on who can make contributions to Roth IRAs. In reality, however, the legislation changes the Roth IRA rules in a way that effectively eliminates the income limits on these contributions. As a result, all income limits on the use of Roth IRAs would in effect be dismantled by the legislation
The reconciliation bill conference agreement would eliminate the income limits on Roth IRA conversions starting in 2010, while leaving the income limits on Roth IRA contributions in law. But by lifting the income limits on conversions, the conference agreement provision effectively eliminates the income limits on contributions to Roth IRAs as well, by making possible a two-step process that circumvents those limits. High-income households first would be able to contribute several thousand dollars every year to a non-deductible traditional IRA, for which there is no income limit. Then, starting in 2010, they could convert their non-deductible IRAs to Roth IRAs
The Senate Finance Committee issued the following press release:
The conference agreement would allow all taxpayers, regardless of income, to convert their traditional IRAs to Roth IRAs. Under current law, only taxpayers with income below $100,000 per year may do so. The provision is effective for taxable years beginning after December 31, 2009. Taxpayers who convert their IRAs in 2010 would have two years to pay the resulting tax. Taxpayers who convert their IRAs in 2011 and beyond would have one year to pay the resulting tax. The provision does not sunset.