CRLLS
Thinks s/he gets paid by the post
Crazy idea #236:
I am wondering if there is ever a reason to forego any taxable investment account. Consider someone who has nothing but tIRA’s and Roths, and is over the magical 59-1/2 age. Could it ever make sense to convert the tIRAs completely to Roth?
Ignore the immediate tax vs spread out taxes for a moment. If all savings were in a Roth, it would grow tax free. Withdrawals are penalty free. SS would be taxed at zero or close to zero considering today’s standard deduction MFJ of 24,800, or 27,400 for seniors.
With this no/low income, as seniors they could apply for a tax assessment freeze on their home, virtually stopping or severely lowering the rate of increases on their real estate taxes. Another benefit is, if they do not outlive their investments, the remaining Roth will pass on to their heirs at no tax, which should not disrupt their plan at least for another 10 years based on the new law. I know they will have to eventually convert it to something other than the inherited Roth and pay taxes on the growth of that.
There could be 30-40 years of future growth/withdrawals with the possibility of no income taxes; no or low RE tax growth; and some estate benefits by doing this.
I must be missing something. There must be some catch beyond the income tax now vs spread out. Yes? No?
I am wondering if there is ever a reason to forego any taxable investment account. Consider someone who has nothing but tIRA’s and Roths, and is over the magical 59-1/2 age. Could it ever make sense to convert the tIRAs completely to Roth?
Ignore the immediate tax vs spread out taxes for a moment. If all savings were in a Roth, it would grow tax free. Withdrawals are penalty free. SS would be taxed at zero or close to zero considering today’s standard deduction MFJ of 24,800, or 27,400 for seniors.
With this no/low income, as seniors they could apply for a tax assessment freeze on their home, virtually stopping or severely lowering the rate of increases on their real estate taxes. Another benefit is, if they do not outlive their investments, the remaining Roth will pass on to their heirs at no tax, which should not disrupt their plan at least for another 10 years based on the new law. I know they will have to eventually convert it to something other than the inherited Roth and pay taxes on the growth of that.
There could be 30-40 years of future growth/withdrawals with the possibility of no income taxes; no or low RE tax growth; and some estate benefits by doing this.
I must be missing something. There must be some catch beyond the income tax now vs spread out. Yes? No?