donheff
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
I have ignored Roth conversions because DW and I are in fairly high income tax brackets. I have a substantion pension that is essentially fully taxable and DW has large tax deferred accounts and a $30K taxable income level that will (may) continue for many years into "retirement." I just assumed the immediate tax hit of converting to Roth would not be worthwhile. Our situation is that about 75% of our portfolio is in tax differed accounts (IRAs, 401Ks, Thrift). The rest in after tax. We have no Roths because until the recent changes in law we were at high tax brackets and could not contribute.
I have assumed our best approach to withdrawal would be to draw down our taxed accounts and then switch over to the tax deferred accounts (and higher tax).
But... for the first time I ran ORP and saw that it appears to recommend converting large amounts to a Roth over the next 4 years while essentially exhausting the after tax accounts (to pay taxes and living expenses). It then has us start pulling from the Roth and the tax defferred starting in 5 years and running for the next 16 years, after which the Roth is depleted and we switch over to withdrawals solely from the tax deferred accounts.
This is a fairly radical departure from what I assumed made sense. It certainly throws all the steady 3-4% withdrawal scenarios aside since it counsels larger initial expenditures to pay taxes on big conversions). So far I haven't researched this to any significant degree but I did some quick calculations at a calculator that purports to answer whether you should convert and it, too, at first glance appears to counsel conversion.
I am curious about whether others in heavily deferred situations with large taxable pensions have looked into this. Anyone out there converting major chunks of IRAs/401ks to a Roth while at high tax brackets?
I have assumed our best approach to withdrawal would be to draw down our taxed accounts and then switch over to the tax deferred accounts (and higher tax).
But... for the first time I ran ORP and saw that it appears to recommend converting large amounts to a Roth over the next 4 years while essentially exhausting the after tax accounts (to pay taxes and living expenses). It then has us start pulling from the Roth and the tax defferred starting in 5 years and running for the next 16 years, after which the Roth is depleted and we switch over to withdrawals solely from the tax deferred accounts.
This is a fairly radical departure from what I assumed made sense. It certainly throws all the steady 3-4% withdrawal scenarios aside since it counsels larger initial expenditures to pay taxes on big conversions). So far I haven't researched this to any significant degree but I did some quick calculations at a calculator that purports to answer whether you should convert and it, too, at first glance appears to counsel conversion.
I am curious about whether others in heavily deferred situations with large taxable pensions have looked into this. Anyone out there converting major chunks of IRAs/401ks to a Roth while at high tax brackets?