Anyone Regret doing a Roth Rollover ?

[RetiredHappy]

The "ROI" to do ROTH conversion includes giving up taxable account money and future growth of this money for immediate taxes vs. continuing to pay taxes of such money in the taxable account for dividends and capital gains.

We pay alot of taxes on dividends and capital gains in our taxable accounts and for most part, we do not tap into our taxable accounts for living expenses. If I have my druthers, I would have preferred to have all investments in ROTH and IRA. We do not own a single ROTH account as we never qualified income-wise to fund ROTH when we were working.

 

[Sunset]

The "ROI" to do ROTH conversion includes giving up taxable account money and future growth of this money for immediate taxes vs. continuing to pay taxes of such money in the taxable account for dividends and capital gains.

We pay a lot of taxes on dividends and capital gains in our taxable accounts and for most part, we do not tap into our taxable accounts for living expenses. If I have my druthers, I would have preferred to have all investments in ROTH and IRA. We do not own a single ROTH account as we never qualified income-wise to fund ROTH when we were working.

For us, the problem was the type of investment.

We also had lots of tax surprises from various mutual funds, they always sent us a statement of (surprise) declared capital gains.
They never sent a statement of declared capital loss.

We over a number of years sold off the mutual funds and bought ETF's of the same funds.
Now we get hardly any tax surprises, no declared capital gains (that I can think of) and can control when we have a capital gain. We do still get dividends, but they are not a surprise and never were.

 

[RetiredHappy]

For us, the problem was the type of investment.

We also had lots of tax surprises from various mutual funds, they always sent us a statement of (surprise) declared capital gains.
They never sent a statement of declared capital loss.

We over a number of years sold off the mutual funds and bought ETF's of the same funds.
Now we get hardly any tax surprises, no declared capital gains (that I can think of) and can control when we have a capital gain. We do still get dividends, but they are not a surprise and never were.

You are absolutely right. Our situation is a little more complicated as our investments are managed by a wealth management firm. Some years they throw out alot of capital gains and other years aren't too bad. There is also an instrument which I bought directly through the firm which generates 6-digit capital gains every 5 years when it matures.

 

[Paulz]

I've been doing them for 4-5 years with no regrets. Well, my only regret is I can't do a conversion within my 401k and I can't access that 401k for another 4 years to do more conversions.

 

[fishfactory]

Only regret is being too aggressive with conversions for the past 3 years. I retired at 55 and have been filling the 24% bracket, following i-orp extended version recommendation. But I have now realized that my tax rate in later years even after starting SS and RMDs will likely be below that figure. It does not make sense to me to convert now at a higher tax rate than later, unless you are seriously worried about the widow tax trap. I am now modeling to flatten the tax rate for rest of life using smaller roth conversions. I have found RightCapital software very helpful in this exercise.

 

[egleys]

I hold over 100 different equities. Back in March of 2020 I moved all of the most serious losers in my portfolio into a Roth from my IRA. The Roth is up 250% since that time. They are not the same companies I held in that portfolio since the move other than about 20% of them. I sold and bought other tickers if I saw a quicker path to a recovery with another company. There will be another serious drop in the not too distant future. That's the time to do it.

 

[Joe1954]

Not doing any Roth rollovers

I wish I had contributed more to Roth’s when I was working, but the reduced tax bracket was too good to overlook (at that time). Spending as much or more annually in the 6 years since I retired, so Roth rollovers are out of the question. The market has been good for all of us, but we are looking to withdraw less to stay in a lower tax bracket. I HOPE the new administration does not change tax policies on both Roth and IRA accounts

 

[rathail]

Okay, I must be dense. What is the issue with the stimulus checks. They take the money back. I left off the one payed Dec. through Feb. (I got mine in Feb. 2021) so I did not count it for my 2020 taxes. I got a nice letter asking for that exact amount of money more from me. It is just a loan. The Feb. stimulus check was for one month before the IRS asked for it back.

 

[RetiredHappy]

Okay, I must be dense. What is the issue with the stimulus checks. They take the money back. I left off the one payed Dec. through Feb. (I got mine in Feb. 2021) so I did not count it for my 2020 taxes. I got a nice letter asking for that exact amount of money more from me. It is just a loan. The Feb. stimulus check was for one month before the IRS asked for it back.

Stimulus check is not a loan. Did you make too much 2019? I have not heard of people getting asked to return stimulus check.

 

[RunningBum]

Okay, I must be dense. What is the issue with the stimulus checks. They take the money back. I left off the one payed Dec. through Feb. (I got mine in Feb. 2021) so I did not count it for my 2020 taxes. I got a nice letter asking for that exact amount of money more from me. It is just a loan. The Feb. stimulus check was for one month before the IRS asked for it back.

How is this in any way related to Roth conversions? Start a new thread and be a little clearer with your info.

 

[Sunset]

Okay, I must be dense. What is the issue with the stimulus checks. They take the money back. I left off the one payed Dec. through Feb. (I got mine in Feb. 2021) so I did not count it for my 2020 taxes. I got a nice letter asking for that exact amount of money more from me. It is just a loan. The Feb. stimulus check was for one month before the IRS asked for it back.

If you had less than 150K income for a couple then the stimulus check was a tax free gift, not a loan, technically a refundable tax credit.

I watched carefully our income, and made sure the roth conversion didn't push us over the 150K.
It phased out pretty quickly and at $174K a couple got nothing, or had to repay it.

 

[rathail]

Stimulus check is not a loan. Did you make too much 2019? I have not heard of people getting asked to return stimulus check.

I know they 'say' you don't have to pay it back. But turbo tax tried to get me to put the Feb 2021 funds in the 2020 return. It was a 1 to 1 difference. The 'loan' was my word, call it what you want but they get the money back. It did not reduce the first 2020 funds they paid out. Why did they send the second check out then?

 

[SevenUp]

I know they 'say' you don't have to pay it back. But turbo tax tried to get me to put the Feb 2021 funds in the 2020 return. It was a 1 to 1 difference. The 'loan' was my word, call it what you want but they get the money back.

The point is that if you got it early, you don't also get it when you file your return. So yes, every dollar you got early is a dollar you don't get when you file. But you aren't paying anything back.

 

[rathail]

How is this in any way related to Roth conversions? Start a new thread and be a little clearer with your info.

A number of posters were stating concerns about getting the stimulus checks. SORRY if I was wondering why.

 

[JeKa]

The only reason to I can think of to regret doing a Roth conversion is if your income ends up being too high and you get kicked into a higher tax bracket. I had that happen last year, due to a massively successful year with my side gig as well as an unexpected house sale. I had done a Roth early in 2019, based in my normal-ish income level. Since they had changed the law a couple of years earlier and got rid of the ability to recharacterize I was stuck.

Even so, I don't really regret it. I just regret paying more taxes than I'd have had to otherwise. I've learned my lesson. Since I have unforeseeable income I just need to wait until the last quarter of the year before I do the conversion.

Exactly the reason I schedule my Roth conversions in Dec. At that time I know approximately where I am tax wise.

 

[Perryinva]

This will be the first year it makes sense to do a conversion for us. (DW’s SS & our taxable pensions mean we always have income that kills the lowest tax brackets if there is any other earned income). We are in the “sweet spot” until I decide to collect SS, which as mentioned by others as the “problem” , along with RMDs when they hit, provides significantly more income than we can use, which will grow in a taxable account, where we plan to have it earn lower taxed LTCGs.

The plan is to go up to the first IRMMA tier in December. There may be some added income this year so until I know that amount, I am waiting.

 

[Dtail]

Exactly the reason I schedule my Roth conversions in Dec. At that time I know approximately where I am tax wise.

Same here for my DGF.

 

[pb4uski]

I split the difference. This year I did my Roth conversion in January but left some leeway for surprise income. I'll top it off in late December once I have a better read on our tax situation for 2021.

 

[indiajust]

No regrets. I love having all my non-taxable eggs in one Roth basket.

 

[truenorth418]

I converted too much in 2020 and didn't qualify for the stimulus checks as a result. UGH.

I also missed out on stimulus checks due to Roth conversion.

Plus, after paying a substantial amount of income tax from my taxable account for the rollover, I now find myself facing substantial capital gains taxes in my taxable account if I want to rebalance the funds now sitting in the Roth to stocks - else suboptimize the Roth by holding cash or bonds there.