pb4uski
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
It is a. But unless one has a crystal ball that is the best that you can do and I agree with many here that in the future it is more likely that tax rates will be higher than lower, so using todays 2017 Tax Act rates is conservative. And add to that that if DW or I die before RMDs kick in that the remaining spouse will be in a much higher single tax bracket unless we remarry (won't be me!).
The arbitrage is the marginal tax rate on a Roth conversion done today... increase in tax divided by the conversion amount. For us for 2021 that will be ~11.5%.
The comparison is to the projected marginal tax on an RMD... in our case in 2027... I'm estimating 15.3% (based on current tax rates, knowing that tax rates may well be higher).
While the difference in 2021 is a modest 3.8%, on $80k of conversion that is $3k.... well worth a couple of hours work... plus the benefit is likely understated since tax rates are scheduled to increase between now and 2027.
The arbitrage is the marginal tax rate on a Roth conversion done today... increase in tax divided by the conversion amount. For us for 2021 that will be ~11.5%.
The comparison is to the projected marginal tax on an RMD... in our case in 2027... I'm estimating 15.3% (based on current tax rates, knowing that tax rates may well be higher).
While the difference in 2021 is a modest 3.8%, on $80k of conversion that is $3k.... well worth a couple of hours work... plus the benefit is likely understated since tax rates are scheduled to increase between now and 2027.
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