Become Hi and Lois' Financial Advisor

[ncbill]

With all due respect, I don't understand why Roth conversions are so popular, or why they receive so much attention in the retirement-planning literature. Yes of course, there is merit in figuring out how to legally minimize our taxes... but it seems to me, that (1) the assumptions are speculative, and (2) the amounts in question are small.

I would humbly suggest that if Hi and Lois are hypothetically going to chat with a financial advisor, that instead of Roth conversions, they focus on things like their portfolio asset allocation, their withdrawal strategy, whether they should own a house or rent in retirement, what to do about wills/trusts/inheritance and so on.

Apart from the 'widow's tax' issues, Hi & Lois do have children.

I've mentioned this before but I deeply regret not Roth converting mom's IRA back during her illness.

But back then I just assumed it would be spent for her care.

And in hindsight, there might not have been any tax owed given her high level of medical expenses.

Unfortunately, since I didn't that my inherited IRA now throws off 5 figures in ordinary income each year.

Which affects the ability to Roth convert both my & spouse's tax-deferred accounts.

 

[junkanoo]

Apart from the 'widow's tax' issues, Hi & Lois do have children.

I've mentioned this before but I deeply regret not Roth converting mom's IRA back during her illness.

But back then I just assumed it would be spent for her care.

And in hindsight, there might not have been any tax owed given her high level of medical expenses.

Unfortunately, since I didn't that my inherited IRA now throws off 5 figures in ordinary income each year.

Which affects the ability to Roth convert both my & spouse's tax-deferred accounts.

Let me preface this by remembering that we are talking about 'first world problems' here - aided by a long bull market ... as many people would be glad to be inheriting ... anything.

*IF* your mother (or more likely, her POA) didn't use her T-IRA assets to pay for her significant medical expenses ... wow, that was a mistake. Now, would it have been better for you to have footed the bill on the additional taxes for your mom to do Roth Conversions? Not unless your sibling(s) were willing to split that cost (assuming they benefited from her will the same as you did).

However, you've written recently that your mom's T-IRA was small and has grown over time. You *could* have used those funds you were willing to spend on her tax bill to pay off your inherited assets in the first couple of years. Then, that subsequent growth would be growing in your taxable account as we speak (preferably with little/no tax drag) and be done with those RMDs.

 

[ncbill]

Let me preface this by remembering that we are talking about 'first world problems' here - aided by a long bull market ... as many people would be glad to be inheriting ... anything.

*IF* your mother (or more likely, her POA) didn't use her T-IRA assets to pay for her significant medical expenses ... wow, that was a mistake. Now, would it have been better for you to have footed the bill on the additional taxes for your mom to do Roth Conversions? Not unless your sibling(s) were willing to split that cost (assuming they benefited from her will the same as you did).

However, you've written recently that your mom's T-IRA was small and has grown over time. You *could* have used those funds you were willing to spend on her tax bill to pay off your inherited assets in the first couple of years. Then, that subsequent growth would be growing in your taxable account as we speak (preferably with little/no tax drag) and be done with those RMDs.

Would have been a hefty marginal tax bracket had I done that soon after her death, before I retired.

Planning now to just take the RMDs (based on my life expectancy) and let the rest ride for any LTC expenses.