Recently retired at 53. Scanning the internet for information on ROTH conversions. Found this site and decided to join. By reading these forums I think I may have figured it out. Just wanna double check with someone to see if I got this correct. Wife still works and makes around 50k. I want to convert to top of 12% bracket so would I be able to convert about 30k or would I be able to do more and stay in 12 % bracket?
Hi from yooperland
- Thread starter chucky
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Welcome, Chucky.
The 12% bracket for married filing jointly ends at $83,550 of taxable income this year. (You may find this post helpful for brackets and such https://www.early-retirement.org/fo...-trigger-income-levels-for-2022-a-111659.html ) If you use the standard deduction of $25,900, that means you can have an adjusted gross income of $109,450 and still be in the 12% bracket. (i.e. 109,450 AGI - 25,900 Std. Deduction = 83,550 taxable income)
Thus, you subtract your wife's income (minus any 401k contributions she might make) and any other taxable income (like interest) from the $109,450. Assuming that your wife makes about $50k and does not contribute to a 401k, and assuming you have no other taxable income, that means you can Roth convert about $60k and pay tax on it at 12%.
The 12% bracket for married filing jointly ends at $83,550 of taxable income this year. (You may find this post helpful for brackets and such https://www.early-retirement.org/fo...-trigger-income-levels-for-2022-a-111659.html ) If you use the standard deduction of $25,900, that means you can have an adjusted gross income of $109,450 and still be in the 12% bracket. (i.e. 109,450 AGI - 25,900 Std. Deduction = 83,550 taxable income)
Thus, you subtract your wife's income (minus any 401k contributions she might make) and any other taxable income (like interest) from the $109,450. Assuming that your wife makes about $50k and does not contribute to a 401k, and assuming you have no other taxable income, that means you can Roth convert about $60k and pay tax on it at 12%.
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hopefullyoneday
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Welcome, Wife and I own property in De Tour and will be retiring there in a few years.
Mr._Graybeard
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Hi Chucky, my dad grew up in Trenary. I still have family in Chatham and Marquette.
What is your dividend/capital gain situation? Capital gains are taxed at 0% up to an AGI that is just a smidge under the top of the 10% ordinary tax bracket. Above that, Roth conversions not only cause themselves to be taxed, but because they push up the AGI above the 0% capital gains bracket, they cause an equal amount of capital gains to also be taxed at 15%. So your tax rate during this phase-in is 12+15 = 27%! Not a big deal if dividends/capital gains are small, but a painful surprise if you have a lot of them.
Search Kitces.com using terms like capital gains stacking to see some articles on the subject using terms like capital gains stacking (some articles are dated, but the concepts are applicable and he is a good writer and uses very clear graphics to illustrate the math).
There be dragons in the tax code.
Search Kitces.com using terms like capital gains stacking to see some articles on the subject using terms like capital gains stacking (some articles are dated, but the concepts are applicable and he is a good writer and uses very clear graphics to illustrate the math).
There be dragons in the tax code.
COcheesehead
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Loved the U.P. Hidden gem in the US.
travelover
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
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Yep. Driving over that bridge is like stepping out of a time machine - in a good way.
travelover
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
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No, they had to sell it in the last recession. It's in Sweden now.
Plan on converting about 400k out of my 401k into roth. Never thought about capital gains or dividends. I have my dividends reinvested so not really sure how much they even are every year. Just in about 4 index funds. Guess I have more research to do
Mr._Graybeard
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Sounds like you've been doing it right. Don't overthink it. Do the reinvenstment gradually to account for taxes and you'll be fine.
Stormy Kromer
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Welcome Chucky from a guy who gets his headgear from the UP.
Careful on doing a Roth conversion inside your 401K if you are using the rule of 55 to withdraw from it. In my 401K when I withdraw, they take parts of the withdrawal from all my different flavors of money, including a portion from my Roth money. Luckily my Roth is small, and the earnings even smaller and none of it was from a conversion so just a small amount should be penalized. However if I had done a big conversion, I believe everything that came out of that converted Roth would be penalized unless I'd held it for over 5 years. Because of this any conversions I do go into an external (non 401K) Roth account.
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gcgang
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Welcome, chucky.
My dad grew up in Newberry (and Ashland, Wi), about 100 years ago. Lol.
My dad grew up in Newberry (and Ashland, Wi), about 100 years ago. Lol.
mistermike40
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Hello and welcome from the lower peninsula.
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My great great grandfather was the mayor of Bessemer long ago.
aja8888
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Hi Chucky!
Three years ago, two friends and I built a boat at the Great Lakes Shipbuilding School in Cedarville!
Beautiful area. I also have family in Grand Rapids..
Three years ago, two friends and I built a boat at the Great Lakes Shipbuilding School in Cedarville!
Beautiful area. I also have family in Grand Rapids..
