Sorry for the hyperbolic title.
I am in the happy situation where I have a large IRA balance as well as a large investment in I bonds. I am still 17 years away from RMD's. Unfortunately, the RMD's start the same year that the last of the I bonds mature. As a result, I could have a very large tax bill that year.
I am thinking about potential solutions.
1. I could cash in the I bonds early. But, I hate to do this because the fixed interest rate is great and I've averaged 5%+ on the bonds. But, one or two years could help with tax bracket creep, etc.
2. I could try to move part of the IRA into a Roth IRA. I am just starting to look into this option. I've never qualified to make a straight Roth IRA deposit because of income limits. So, I'm not sure if there is a way to move over a significant amount of the IRA. And, of course, I'm also not sure it makes sense to advance the taxes. This question could get more compelling if we have a tax decrease. But, right now, my bracket may be similar now and after retirement.
I am wondering if this group could point me to resources where I can read up on IRA to Roth IRA transfers and the pluses and minuses of such. Of course, I would also be grateful for any wisdom that you can share.
A quick question: If your tax rate will be the same now and at RMD time, it doesn't make any sense to advance the taxes, right? I'm still working on that question as it is pretty difficult to predict tax policy in 17 years. But, conceptually, I think I have it right.
Final question: Is there a tax bracket over which you would not try to make an IRA to Roth IRA transfer?
Thanks for your thoughts.
I am in the happy situation where I have a large IRA balance as well as a large investment in I bonds. I am still 17 years away from RMD's. Unfortunately, the RMD's start the same year that the last of the I bonds mature. As a result, I could have a very large tax bill that year.
I am thinking about potential solutions.
1. I could cash in the I bonds early. But, I hate to do this because the fixed interest rate is great and I've averaged 5%+ on the bonds. But, one or two years could help with tax bracket creep, etc.
2. I could try to move part of the IRA into a Roth IRA. I am just starting to look into this option. I've never qualified to make a straight Roth IRA deposit because of income limits. So, I'm not sure if there is a way to move over a significant amount of the IRA. And, of course, I'm also not sure it makes sense to advance the taxes. This question could get more compelling if we have a tax decrease. But, right now, my bracket may be similar now and after retirement.
I am wondering if this group could point me to resources where I can read up on IRA to Roth IRA transfers and the pluses and minuses of such. Of course, I would also be grateful for any wisdom that you can share.
A quick question: If your tax rate will be the same now and at RMD time, it doesn't make any sense to advance the taxes, right? I'm still working on that question as it is pretty difficult to predict tax policy in 17 years. But, conceptually, I think I have it right.
Final question: Is there a tax bracket over which you would not try to make an IRA to Roth IRA transfer?
Thanks for your thoughts.