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Is it silly to use Roth money and do Roth Conversion.
Old 12-06-2021, 11:00 AM   #1
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Is it silly to use Roth money and do Roth Conversion.

I need to generate about $94,000* for next years spending.
I'm going to the top of the 22% tax bracket with Roth Conversions.
I can generate some income selling taxable long term capital gains, But I want to minimize that because I have a margin loan and with the markets in turmoil, I don't want to get close to the margin call area.

Is it silly to pull Roth money for spending while doing Roth Conversions to reduce IRA money in anticipation of RMDs? I still have 5 years before RMDs.
Why I think it might be wise,

If the market continues at 10% growth, I would still have a substantial IRA balance 5 years from now, even though I maximized Roth Conversions.



So, does, withdrawing and contributing to a Roth make sense with my scenario?Edit: for After thought,

Or do I just spend the IRA money?


* The $94,000 does include $28,000 to pay that taxes on Roth Conversions.
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Old 12-06-2021, 11:02 AM   #2
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No, just withdraw from IRA and spend it.
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Old 12-06-2021, 11:04 AM   #3
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No, just withdraw from IRA and spend it.
Thanks, you were quick, I posted then decided to edit and you beat my edit.
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Old 12-06-2021, 02:53 PM   #4
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Actually, I don't think it is silly at all... even though the net impact is the same as withdrawing from the tIRA for spending.

In fact, that was my plan for a short while in early 2020... I did a conversion for about 90% of what I expected to be able to convert for 2020 in January and then was doing small monthly withdrawals for spending.

I was looking at it as being no different from doing withdrawals for spending and then doing Roth conversions to the top of the 0% capital gains bracket.

The withdrawals from the tax-deferred accounts, which was the main objective would be the same either way.
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Old 12-07-2021, 10:23 AM   #5
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I'm in a similar situation. I'm considering converting last of the regular ira stocks, mutuals, and ETFs leaving just fixed income maturing bond ladder in regular ira and a couple annuities. I'm considering doing some sort of loan to keep my taxable income down regarding the conversion this year. I want the regular Ira account basically just down to annuities by the RMD age of the younger of us such that the payment is the RMD amount.

Even if I don't get a Heloc or other asset backed loan as it seems loans from credit unions (in two) could be as low as 7%. Assuming the Roths grow by 7% I keep my Medicare costs lower and have stopped the capital appreciation in the regular ira.
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Old 12-07-2021, 11:47 AM   #6
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I have done some conversions and some outright withrawals, but trying to stay under the 24% bracket. I figure out my anticipated spend, the convert/withdraw to the limit. I'm waiting for the IRS rules for 2021 depreciation to do my 21 taxes, to make the final push. We have not withdrawn from the Roth,however.
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Old 12-07-2021, 12:57 PM   #7
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Another question from the OP.
My plan today is to withdraw $190k from an IRA, about half is for expenses and half will go into my Roth.

Do I transfer the IRA into my taxable account and then half to my bank and the other half into my Roth. Do I make separate transactions, a sell for bank funds and a sell for my Roth. I guess I'm confused between a Transfer and a sell.
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Old 12-07-2021, 02:01 PM   #8
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Quote:
Originally Posted by Time2 View Post
Another question from the OP.
My plan today is to withdraw $190k from an IRA, about half is for expenses and half will go into my Roth.

Do I transfer the IRA into my taxable account and then half to my bank and the other half into my Roth. Do I make separate transactions, a sell for bank funds and a sell for my Roth. I guess I'm confused between a Transfer and a sell.

You want to directly roll your conversion funds into your Roth. So I suggest you do separate transactions.
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Old 12-07-2021, 02:39 PM   #9
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You want to directly roll your conversion funds into your Roth. So I suggest you do separate transactions.

What do I do if I want to sell VTSAX from my IRA and contribute VTI into my Roth?


Getting late, I made my spending withdrawal, probably have to wait until tomorrow do the Roth conversion.
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Old 12-07-2021, 02:42 PM   #10
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What do I do if I want to sell VTSAX from my IRA and contribute VTI into my Roth?


Getting late, I made my spending withdrawal, probably have to wait until tomorrow do the Roth conversion.

You can transfer the VTSAX in kind into your Roth. Then sell it and buy VTI when the cash is available for trading.
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