Are Roth conversions worth it for us?

[Scuba]

Keep in mind that you can't touch the account for 5 years after the last rollover. I got laid off in the GFC and used mortgage deductions to counter the income created by the rollovers. I spent 6 years doing serial rollovers, now I have 2 more years to wait, but I'm only 54. If you rolled piecemeal for 5 years and then had to wait 5 years to access the money... you might be dead or otherwise need the funds.


It just seems a bit late in the game, and it sounds as though you have a fair amount of complexity to deal with.

I agree, it would have been nice to do this earlier, but even through 2018 we are still in the 22% bracket. Even higher when we were working. Did not make sense to start earlier, and may not even make sense now.

 

[indiajust]

Well, from emotional and planning standpoint, you sound prepared and knowledgeable. You are willing and able. You have enough on the taxable side to cover any issues that might arise. You can afford to do nothing, but are willing to put in a bit of effort to avoid future tax risk. The costs are in complexity and tax paperwork. Put the plan on a piece of paper. Since the money is more/less break even... how do you like to spend your time? Perhaps this is more of a nuanced personal decision than a financial one. Regardless of outcome, you are FI and ER secure. A good place to be.

 

[gauss]

If you are over 59 1/2 and the Roth has been established for more than 5 years you can withdraw as much as you want anytime that you want.

+1

Actually the requirement is ANY Roth that was established in your name at least 5 years ago -- and over age 59 1/2 of course.

 

[RunningBum]

Keep in mind that you can't touch the account for 5 years after the last rollover. I got laid off in the GFC and used mortgage deductions to counter the income created by the rollovers. I spent 6 years doing serial rollovers, now I have 2 more years to wait, but I'm only 54. If you rolled piecemeal for 5 years and then had to wait 5 years to access the money... you might be dead or otherwise need the funds.

I don't think that's right at all. According to Kitces, and he references the tax code, each conversion has it's own 5 year period. https://www.kitces.com/blog/underst...s-for-roth-ira-contributions-and-conversions/ I've read the same elsewhere.

Also, you can always touch it, it just may cost you an early withdrawal penalty.

 

[Scuba]

Well, from emotional and planning standpoint, you sound prepared and knowledgeable. You are willing and able. You have enough on the taxable side to cover any issues that might arise. You can afford to do nothing, but are willing to put in a bit of effort to avoid future tax risk. The costs are in complexity and tax paperwork. Put the plan on a piece of paper. Since the money is more/less break even... how do you like to spend your time? Perhaps this is more of a nuanced personal decision than a financial one. Regardless of outcome, you are FI and ER secure. A good place to be.

Yes, we do feel fortunate, albeit there are many uncertainties in the future. I don’t like spending my time crunching numbers and doing paperwork; however I’m willing to if there is significant benefit. We are going to talk it over once more with our CPA, and raise the question about whether there is a bigger benefit in our case if one of us passes away young and the survivor remains single for a long period of time. Assuming the answer to that doesn’t encourage us to move forward with Roth conversions, we’ll probably skip it.