Another Roth Conversion Question

[Montecfo]

And it's about having a slush fund for large purchases without adding to your taxable income for the year.

Sure, but at what cost? You can always have that, at any time just by paying the tax.

(I know you may simply be saying you get psychic enjoyment from having a pot of money you have paid tax on).

 

[RunningBum]

Sure, but at what cost? You can always have that, at any time just by paying the tax.

For myself, I plan my conversions to be done at a reasonable tax rate.

Tapping my tIRA "at any time" may have to be done at a much higher rate, maybe bumping me into a higher IRMAA tier or over an ACA cliff (if that comes back).

I'd rather plan it. I'm going to pay tax on the deferred money sooner or later.

 

[sengsational]

Our son and two grands will also get tIRA funds on the expectation that their net tax rates will be lower than ours currently. Note they are young enough that there is no IRMAA, SS taxation, or other ancillary issues.

The stew is beginning to stick to the bottom of the pot...when your grands show up at college, those assets they own will eliminate some/all financial aid.

 

[OldShooter]

The stew is beginning to stick to the bottom of the pot...when your grands show up at college, those assets they own will eliminate some/all financial aid.

Actually to be brief I glossed over the fact that all of the bequests will actually go into trusts with the grands and DS as beneficiaries.

 

[sengsational]

The stew is beginning to stick to the bottom of the pot...when your grands show up at college, those assets they own will eliminate some/all financial aid.

Thinking more about this, the kids can drain the IRA at low tax rates or kiddie tax rates before they go off to college. As long as they get the 10 year drain done before they go off to college, it doesn't impact. Stew still thick, but not stuck.

 

[sengsational]

Actually to be brief I glossed over the fact that all of the bequests will actually go into trusts with the grands and DS as beneficiaries.

That's even better.

 

[OldShooter]

That's even better.

Yes. Using trusts also avoids putting serious money directly into young and naïve hands.

 

[TheWizard]

Sure, but at what cost? You can always have that, at any time just by paying the tax.

(I know you may simply be saying you get psychic enjoyment from having a pot of money you have paid tax on).

I'm in the upper part of the 24% federal tax bracket, so if I had to withdraw an extra $50k from tax-deferred, two things would happen:
1) a good portion of that extra $50k would be taxed in the 32% bracket
2) I would get into the next higher IRMAA tier two years hence

I'd like to avoid both of those things...