RunningBum
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
- Joined
- Jun 18, 2007
- Messages
- 13,249
You only have to pay taxes if you sell, if you invest for growth. Divvies are low. Like I said, I'm paying 22% for the next 10 years, qualified divvies 0-15%. Unspent money goes into growth funds, taxed only for capital gains, if I sell. Stepped up basis at death, 0% estate tax because less than $5 mil. 0% state tax to DW, 4.5% state tax upon death to my kids. At this point, I'm still in control.
Would I like the option of a Roth, hell yeah! But I gotta go with plan B because A doesn't show an advantage at this point.
I wasn't responding to you or your situation and I have no idea what your plan A or plan B is. All you've said was that no matter how much you convert, even $100K, you are still in the 22% bracket, which I don't believe because the 22% bracket isn't that wide.
Anyway, I was responding to meierlde's post:
One other way to look at it is if you compare the old and new limits in the old 25 and 28% bracket, depending on how large RMDs will be in a few years, if over 60, is to instead of doing roth conversions, just withdraw the money and save a few percent on taxes. Note if you invest in dividend paying stocks with the withdrawn money you pay 15% (unless in the top bracket) instead of paying whatever rate your dividends inside the non roth 401k pay at based upon the tax bracket.
My point is to do the conversion rather than just withdrawing, so that there's no future taxable income via dividends or cap gains. Sure, cap gains can be avoided if you never sell, but what if you have to for some reason? Do you really know the whole future? And dividends, while perhaps small, are subject to taxes. There's no disadvantage I see to the Roth conversion. At worst case it's a draw, but with potential for taxes on dividend and CGs it's more likely conversion gives an advantage.
Whether you should convert at all is a different question, but not the topic meierdle and I were discussing.
btw, if you are in the 22% bracket, you don't get any 0% on divvies. You might want to take a second look at your tax situation based on these inaccuracies.
No idea what you mean by still being in control. Are you not in control of a Roth?