Might be a good time for a Roth conversion (April 2025)

So let's say someone could possibly Roth convert 10% more of their portfolio today than at start of year (or alternatively the same amount at 10% less cost): it should not be done because that is "market timing"?

What is being missed here?
 
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I was planning on year end so i had a good estimate on income, but starting to guestimate those numbers now .
 
Koolau said:
If I may ask, what does your income have to do with your potential Roth conversions?
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For us, nothing really.... If anything, it cuts into our pension income to pay the taxes. Our meager (compared to some on here) IRAs are just an extra nest egg for BTD/ savings for the grandkids. Main reason to convert to Roths.
 
If you are converting cash, today is a good day to do a Roth conversion. If you are doing an in-kind Roth conversion, I believe there is sell and buy done by the broker on the day of conversion.
 
Montecfo said:
So let's say someone could possibly Roth convert 10% more of their portfolio today than at start of year (or alternatively the same amount at 10% less cost): it should not be done because that is "market timing"?

What is being missed here?
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I wouldn't necessarily call it market timing, but I guess it could be. It really doesn't matter what people call it.

If it makes sense to do Roth conversions, then do them. If not, then don't.

The goal of Roth conversions is to have more money. If the conversion accomplishes that, go for it.
 
In theory the time is now and doing in-kind conversions of my tech stocks would likely yield some benefits BUT: I am not sitting on a post tax pile of cash so I will need to pay for my living expenses and conversion incurred taxes by 1) realizing capital gains from the brokerage account (probably not a great idea right now), 2) withdrawing cash from ROTH (most likely) or 3) withdrawing cash from tIRA (I have plenty in both IRAs since I went on a selling spree late last year). In addition, there's the state income tax I would have to pay (I'm in NJ).

So I don't know....
 
I think if you had them planned for this year, and you set aside a plan for taxes, now is a good time within the year to at least do some of your planned conversions. That was what I was getting at in the OP.

Of course, this drop may also pull in some who were not considering it. That would tilt more to off-schedule timing which I don't do.
 
tenant13, if you are 62 or older and in the 12% tax bracket and married, NJ income taxes should not be a concern. I'm in this situation and have been converting for a few years, and my average NJ income tax is about $700 per year.
 
I’ve been accumulating cash in my inherited IRA. I plan to use this RMD to pay the taxes on my RMD and my Roth conversion. This way I get the full amount of my Roth conversion and not the net after taxes are withheld. I can also do a transfer in kind without selling anything at these levels. I know timing the market, lol
 
Exchme said:
Thinking you can guess the timing correctly is just plain old market timing.
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I agree with you. And yet. . .

If you were planning on doing a Roth conversion and haven't yet, why not take advantage of a sudden, steep market decline? Markets generally go up.

Now, holding off on a conversion because you think the market might go down, that's a different thing (to me). The first is reacting to events that have occurred, the second is trying to predict future events.
 
Exchme said:
Thinking you can guess the timing correctly is just plain old market timing. If stocks being down is a short term panic that will pass soon, Roth Conversions are a winner, if the current decline is the leading edge of a really bad downturn, they are a loser. Like most folks, some part of my lizard brain wants to believe I have special insight and can time the market better than everyone else, but sad experience shows I can't.

As a practical matter, I still work some on a part time basis and that income varies, so I can't tell in April what the year's income is going to look like, so I do conversions in December.
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How is a Roth Conversion a winner or loser in the circumstances you mention?

Remember, RC is an expectation that over a long period you pay less tax when you convert. At least that is my takeaway after reading many threads and articles.
 
I think this is an indication that fear of being a "market timer" is obscuring common sense.

Do you wait until markets rise...or wait for them to fall further to avoid the label?

This really needs to be reevaluated I think.
 
Montecfo said:
I think this is an indication that fear of being a "market timer" is obscuring common sense.

Do you wait until markets rise...or wait for them to fall further to avoid the label?

This really needs to be reevaluated I think.
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Exactly. This is not pouring new investment into the market and trying to "time it." This is basically an in-kind transfer that happens to have a potential tax benefit. It is very different than pouring cash into equities and changing your AA based on timing.

Many of us have Roth conversions scheduled for a few years before we take social security. We have a year long window to do it. Many people wait until the last weeks to do it so they can see their total income. Some get it over with early in the year. Others may do it once a quarter.

I usually do it when it is hot, in the summer, because I'm inside and have time. But my date floats. With this drop, I'm doing about 75% of it now.

There is a lot of peer pressure here and on Bogleheads to label someone a "market timer". Now I have something to do today. I'll sew a "MT" on my T-shirt.
 
And we need to keep in mind that while many of us consider "market timing" to generally be a mistake, it's not evil and shouldn't be called out as such.

Taking advantage of a market drop to do a Roth conversion is not (IMHO) market timing but YMMV.
 
Today's market is awarding tax-free gains to those who converted Friday or Monday.
 
We have been doing some conversions as the market goes down. I set trigger points along the returns spectrum and when the market moves through one of those, I convert a portion of the planned conversions for the year. When we hit correction levels, I converted. When we had investments hit the bear market level, I converted more. I wait until right at the close of market for the day to pull the trigger, as the closing NAV is what you get for the conversion amount.
I was just about to convert some VTI on the 8th, but just before the close, it moved away from the down 20% mark, so I stopped the transaction. We'll probably get another chance, but if not, I'll finish the rest of the year's conversions near the end of the year.
 
I've been maxing out my tax bracket with Roth conversions since 2011. This year is a bit different as I now have a modest RMD as income as well. No worries as my Roth is now 2.5x larger than my SEP/IRA.
 
YellowSubmarine said:
I've been maxing out my tax bracket with Roth conversions since 2011. This year is a bit different as I now have a modest RMD as income as well. No worries as my Roth is now 2.5x larger than my SEP/IRA.
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Nice. I've finally gotten my 401(k) down to about half my Roths. Rothed all my tIRAs back in the day and I use out of my 401(k) with my RMDs. Around 2.5X is a rough idea of a goal for me if I should live so long. Good on you!
 
No Roth, but I have just 4 more years to clean out an inherited IRA for my brother. I've been chipping away at it for several years but now seemed like a good time to trotttle up a bit more and get some things over that fence.
 
Well I pulled the trigger on 1/2 of my planned conversion for the year.
 
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