This year I will debate on Roth conversions to the top of the 15% bracket or just below the PTC cliff. However, I do not due tax gain harvesting since I believe in my case the roth conversion is more valuable than harvestinglosses. In fact I continuously work on harvesting capital losses and have banked about 100k... so little need for LTCG harvesting. Yes I realize that someday I will have to realize these.
To the OP, what is best really depends on your situation. I am about 55%/45% after tax/tax preferenced. I hold most of my equities in taxable accounts mostly in ETFs. I do not hold MF in taxable account since they can have large unexpected distributions (broad index funds may be an exception). Much of the equity distributions have tax advantages (Q-divy). I mostly put fixed income in T-IRA. fixed income mostly is taxes as normal income which is the same rate as tIRA withdraws. It also tends to grow slower than equities in general. I use my limited Roths for higher risk/return investments (not that I take extreme risks).
Dividing it up this way, the tIRA may not out grow the conversions in the long run. I am also considering if to take larger roth conversions.
One must also consider that the rules/laws may change. So all these plans may change with the flick of a pen in Washington. I'm not trying to anger the moderator gods, but one must stay somewhat flexible as tax laws and benefits can change almost as fast as our situations.
Maybe I'm a little different having more after tax $ than total IRA $ which may lead me to different thinking. Or maybe I just don't have a clue as the right thing to do.
Good luck
Converting roths while tapping taxable and delaying SS is one strategy for what is known as tax bracket management, in an attempt to smooth out taxes over the PF life. Regarding future tax law changes, the idea is to take advantage of
today's tax laws in utilizing tax management strategies as we have no idea what changes will occur in the future. What is
not suggested is to ever convert if your future taxes will be lower than your taxes today, because you are accelerating taxes unnecessarily. For most people, this favors roth conversions due to the SS/RMD's "tax torpedo". Further, roths will fall outside of future tax reforms (unless of course roth RMD's become required which is a distinct possibility) in that they are
tax-free, which is a very good reason to convert and get money out of those retirement vehicles that
will be subject to reforms (taxable, tax-deferred).
Michael Kitces has an excellent post on roth conversions [-]which I'm too lazy to go dig up. [/-]here:
https://www.kitces.com/blog/using-systematic-partial-roth-ira-conversions-and-recharacterizations-to-fill-the-lower-tax-bracket-buckets/
This year I got really fancy, and did what is known as the roth conversion "horse race" (see the BH forum for excellent explanations on how to do this): did 3 roth conversions in 3 different asset classes (stock/int'l stock/bond) in January. In December, recharacterized the two losing roths, and kept the winning roth worth the most money (thus converting the most shares).
At the same time, I
tax gain harvested about $7K at the time I pulled out next year's expenses from taxable, and it did not increase my taxes. Again, I am only doing roth conversions up to the 15% tax bracket. I'll pay less than $600 in taxes this year for my trouble.
None of this was as hard as I thought it would be and I was
really proud of myself for having pulled it off successfully. If
I can figure it out,
anyone can.