A Good Time to Convert to Roth IRA?

[Gearhead Jim]

If your income is low enough to convert some or all of your "regular" IRA to a Roth, would this be a good time to do it? You'd be paying taxes on today's reduced value instead of the (hopefully) much greater value when the market has recovered and you are doing distributions.
Or, would this produce upside AND downside potential similar to simply rebalancing now? I'm not sure how to do the math on that one.
Is it 2010 when you can convert unlimited amounts to Roth, if the laws doesn't change?

 

[jIMOh]

When I convert, I sell $X of fund A in rollover and buy $X of fund A in Roth. This is not a rebalance, it is only a taxable event. Technically your asset allocation before and after should be the same.

 

[Rustic23]

Yes, it is the same, but what I think the OP meant was that rather than converting 500,000 last year, I only have 300,000 this year, so it would appear to be a good time to convert.

 

[RustyShackleford]

I sure wish there were a way to offset all my tax-loss harvests against
Roth conversions. But I don't think there is.

 

[Gearhead Jim]

Yes, it is the same, but what I think the OP meant was that rather than converting 500,000 last year, I only have 300,000 this year, so it would appear to be a good time to convert.

Yes, that's what I'm thinking. But is it in fact a good idea?

 

[jIMOh]

Yes, that's what I'm thinking. But is it in fact a good idea?

Up to the top of your tax bracket only is my advice.
Reference Room


Meaning if you are in 25% tax bracket and married, convert a max of 131,450
Meaning if you are in 15% tax bracket and married, convert a max of 65100

The caps above are for all taxable income, after adjustments and deductions.

Example, our Gross income is about 110k, we get about 45k of deductions each year, so taxable income is 65k. We have $100 of space to convert at 15% taxes (the 101st dollar is taxed at 25%).