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Additional Roth vs tIRA / or Roth Conversion Consideration
Old 05-17-2019, 10:47 AM   #1
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Join Date: Aug 2014
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Additional Roth vs tIRA / or Roth Conversion Consideration

A lot of discussion of whether to consider Roth vs tIRA or Roth conversions is based around tax brackets. Increased IRMMA (Medicare premiums) is sometimes also brought to light in those discussions. I have recently found one more thing to consider that may complicate that decision. In Illinois, If you are 65+years of age and your total household income is <$65,000, you qualify for a tax assessment freeze. This does not freeze the actual Real Estate tax dollars, but the assessment value of your primary home that are used in the tax calculations.

RMD's count as income. Any amounts used in a Roth conversion are also counted as income in the year converted (just like federal 1040 income). In our case, our 2018 Roth conversion bumoed us over the 65k limit and we lost our tax freeze. This amounted to a savings of ~$1,000 last year. If we were to keep that freeze, the savings would only increase over the years.

Obviously, if one can be totally Roth by age 65, neither RMDs nor Roth conversion amounts would be included in one's post 65 income, possibly qualifying one for the freeze.

How this fits into anyone's planning is up to you. I'm just cautioning those considering Roth vs. tIRA or a Roth conversion to look beyond the simple "tax bracket while earning" vs "tax bracket in retirement" comparison often mentioned.
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