Looking for advice on Roth conversion

[N02L84ER]

Quote:

Originally Posted by allan21 I'm not sure I'm posting correctly. I have a different question that is pertinent to this thread. I'm 65 and doing yearly Roth conversions to the top of the 22% bracket I don't have any non-IRA money to pay the taxes on the conversions, so I'm paying the tax with money from the conversion or Roth IRA money that has already been converted. * is there any advantage to either method? Converting to the top of the 22% bracket will not allow me to convert all of my non-roth IRA. I don't mind going into the 24% bracket but I'll still have to pay the taxes with money from the conversion or previously converted Roth money. When it comes time for RMD is is unlikely that my income will go into the 32% bracket. * Does it make any difference if I pay 24% on the yearly conversions or pay 24% on the RMD amount? I realize I don't know what the tax brackets will be in the future but I'm guessing the lower brackets will not be drastically higher.

* is there any advantage to either method? I see the same end result, but probably a little less effort on your part if you have the taxes withheld.


* Does it make any difference if I pay 24% on the yearly conversions or pay 24% on the RMD amount? If the tax tables revert in 2025 like they are currently scheduled, the 22% current bracket returns to 25% so paying the 24% now may have a slight advantage. You should also research IRMAA and decide if you are willing to pay the higher Medicare premiums associated with the larger conversions.

[pb4uski]

Quote:

Originally Posted by N02L84ER * is there any advantage to either method? I see the same end result, but probably a little less effort on your part if you have the taxes withheld. * Does it make any difference if I pay 24% on the yearly conversions or pay 24% on the RMD amount? If the tax tables revert in 2025 like they are currently scheduled, the 22% current bracket returns to 25% so paying the 24% now may have a slight advantage. You should also research IRMAA and decide if you are willing to pay the higher Medicare premiums associated with the larger conversions.

On the first part IMO it doesn't matter. At the end of the day the conversion amount less the tax ends up in the Roth and the tax ends up with the feds so I would probably favor having the tax withheld from the converion amount since it is one transaction rather than two.

I would not convert into any bracket higher than what i ultimately expect to pay once SS and pensions and RMDs are all online.... be it 22% or 24%.

I would normally agree that it would probably make sense to take IRMAA into consideration so that would be a ceiling of $169,999 in MAGI in 2019.... however, if you convert into the 24% bracket in 2019 and they propose an increase in Part B premiums for you in 2021, you can always appeal and say that your income will be lower in 2021 because you don't intend to convert that much. I suspect that you can only play that card once or maybe twice.

[pb4uski]

I've done some refinements to my tIRA run-off model and I "think" I finally have a long term Roth conversion strategy that I like.

Essentially what I have done is to create a strategy that levelizes taxes between now (64 going on 65) and age 90 and drains my tIRA by age 90. My overall effective tax rate (tax divided by income) ranges from 11.9% to 10.6%.

The effective tax rate on Roth conversions and RMDs range from 13.5% to 16.4% (a blend of 12% and 22%) and I can live with that and that effective tax rate is probably less than the marginal tax rate for my kids. I'll be doing Roth conversions after age 72 when RMDs begin.