More Roth conversion questions...

[Luvdogs]

DH has about 1.5 mil (or had that amount last week) in his traditional 401k. I have about half that in a traditional 401K and IRA. We have much smaller amounts in Roths.

DH is 66 and I am 62. Also getting pensions and SS.

So I'm thinking of finally starting some Roth conversions. Our accounts are with Fidelity and Schwab.

Questions-

Should his Fidelity be transferred to a Fidelity Roth IRA or a Roth 401K? 401Ks are more "bulletproof" re lawsuits, etc but I'm in FL and have been told by our atty that IRAs are just as bulletproof. Any opinions on that?

But Roth 401Ks are subject to RMDs? I was not aware of that. Our mutual fund choices in the company 401K are good with cheap expenses. I "presume" that the Roth 401K choices would be the same...

If I additionally converted some of mine into my existing Roth IRA, do I still need to wait five years to withdraw? Although I do not intend to, wanted to know just in case.

These conversions will also bump us up on IRMAA brackets and 24% tax bracket so I want to make the larger moves so that only one of us gets hit with IRMAA (prior to me turning 65).

I have been back and forth whether it was worthwhile to do but with the SECURE act and the market drop, I think now is the time to do it.

Thanks.

 

[SecondCor521]

DH has about 1.5 mil (or had that amount last week) in his traditional 401k. I have about half that in a traditional 401K and IRA. We have much smaller amounts in Roths.

DH is 66 and I am 62. Also getting pensions and SS.

So I'm thinking of finally starting some Roth conversions. Our accounts are with Fidelity and Schwab.

Questions-

[1] Should his Fidelity be transferred to a Fidelity Roth IRA or a Roth 401K? 401Ks are more "bulletproof" re lawsuits, etc but I'm in FL and have been told by our atty that IRAs are just as bulletproof. Any opinions on that?

But Roth 401Ks are subject to RMDs? I was not aware of that. Our mutual fund choices in the company 401K are good with cheap expenses. I "presume" that the Roth 401K choices would be the same...

[2] If I additionally converted some of mine into my existing Roth IRA, do I still need to wait five years to withdraw? Although I do not intend to, wanted to know just in case.

[3] These conversions will also bump us up on IRMAA brackets and 24% tax bracket so I want to make the larger moves so that only one of us gets hit with IRMAA (prior to me turning 65).

I have been back and forth whether it was worthwhile to do but with the SECURE act and the market drop, I think now is the time to do it.

Thanks.

[Numbers added]

1. I have no opinion. I don't worry about lawsuits personally; I lead a low-risk lifestyle. Note that if you convert from his traditional 401(k) to a Roth 401(k) this will probably create ordinary income and you will owe income taxes on the converted amount.

I don't know about Roth 401(k)s being subject to RMDs. If so, I'd probably try to move that money to a Roth IRA if that were possible before RMDs were due.

2. No. You're over 59.5, so you can withdraw from any of your traditional IRA, Roth IRA, or 401(k) without penalties. Of course, withdrawals from traditional IRAs and traditional 401(k)s would create ordinary taxable income.

3. Note that IRMAA has a two year lag, so your conversions in 2020 will affect your IRMAAs for 2022. Also, the IRMAA amounts and brackets will now be adjusted for inflation.

Your reasoning regarding the SECURE Act, the market drop, and your age all seem to make sense to me.

 

[kaneohe]

[Numbers added]

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2. No. You're over 59.5, so you can withdraw from any of your traditional IRA, Roth IRA, or 401(k) without penalties. Of course, withdrawals from traditional IRAs and traditional 401(k)s would create ordinary taxable income.

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probably won't change the answer for you but the table below show the
>59.5 y.o. rules. If your oldest Roth was opened >5 yrs ago, you are ok.
If not there are taxes due on earnings.


Re: Roth IRA Rules - Table Approach
Posted by: KAWill (IP Logged)
Date: October 14, 2010 11:57PM

Roth IRA Distribution Table

.........................................
OVER AGE 59.5
LESS THAN FIVE YEARS SINCE OPENING FIRST ROTH IRA

Contributions: Tax-No ;Penalty-No
Conversions: Tax-No; Penalty-No (Taxable Portion)
Conversions: Tax-No; Penalty-No (Nontaxable Portion)
Earnings: Tax-Yes; Penalty-No

OVER AGE 59.5
FIVE YEARS OR MORE SINCE OPENING FIRST ROTH IRA

All Distributions Are Qualified

 

[SecondCor521]

^ right. I always assume the >5 years thing just because that's my situation, but I think that table you publish is correct.

 

[RetireBy90]

I found that 401Ks are subject to the IRS rules, limits, etc but also can have rules in addition for each specific sponsor. I had to convert my 401K to an IRA to have flexibility. I could do a complete withdraw or transfer to IRA or take withdrawals equal for my life expectancy.

Fidelity has zero cost funds now so cost shouldn’t limit your options.

 

[Sunset]

OP - You can move Roth 401K into a RothIRA (which I just call Roth) that way it won't be subject to RMD rules. This would be good to do.

You can rollover a regular 401K into a rollover IRA (if you have made non-deductible contributions to it, then you want those to split off into a Roth, but I don't know the details).

You should not simply convert your regular 401K into a Roth as the taxes would be sky high. I don't get any idea from your post that you are talking about how many thousands of $$ to covert to a Roth each year, which is why I caution to not do it in one shot.

People do conversions over many many years to keep within certain tax brackets.