Roth Conversions : No Limit on amount?

[MrLoco]

Quick question on Roth Conversions. With equities depressed; this may be an ideal time to do roth conversions.
I realize there are income limitations for Roth contributions.
My question is on Roth Conversions.
I can convert as much as I want from a TRad. IRA to a Roth Ira? Correct?
Whether the amount is $10,000 or $1,000,000 there is no limit on the amount converted?

I understand taxes will be due for the tax year the conversion takes place. My question is : there are no restrictions, income limitations, etc. on the AMOUNT one wants to convert? Thank you.

 

[Sunset]

Yes, it's a great time to do Roth conversions compared to 2 months ago.
There is zero limit on Roth conversions -> you just pay tax on the income added.

 

[mountainsoft]

I can convert as much as I want from a TRad. IRA to a Roth Ira? Correct? Whether the amount is $10,000 or $1,000,000 there is no limit on the amount converted?

Correct. You can convert as much as you want from your traditional IRA to a Roth, as long as you can afford to pay taxes on the amount you convert.

Keep in mind the conversion is considered income and could bump you up into higher tax brackets. That's why most people limit how much they convert to stay within their current tax bracket. For example, if you earn 50K per year and are married filing jointly, you could convert up to roughly 28K and stay within the 12% tax bracket. Typically, you convert small amounts like this over a period of years to avoid paying more taxes than you need to.

With equities depressed; this may be an ideal time to do roth conversions.

Unless you're planning to change your asset allocation in the process, I don't know that the equity price would matter much for a conversion. If you sell shares at $5 per share in the traditional and buy shares at $5 per share in the Roth you should come out the same. The same rationale would apply at $10 per share or $15 per share. You're not buying low selling high, you're selling at X and buying at X, the end value would be the same (unless you encounter buy-in fees or something). Maybe I'm misunderstanding.

 

[Midpack]

Keep in mind the conversion is considered income and could bump you up into higher tax brackets. That's why most people limit how much they convert to stay within their current tax bracket. For example, if you earn 50K per year and are married filing jointly, you could convert up to roughly 28K and stay within the 12% tax bracket. Typically, you convert small amounts like this over a period of years to avoid paying more taxes than you need to.

Getting off track here, but I’d argue it’s worth considering converting up to the top of the bracket you expect to be in after age 70.5/72 with Soc Sec, RMD’s, dividends/STCG pensions or other income. Converting to the top of the 12% bracket is a relative no-brainer. Plenty of other threads about all that.

 

[SecondCor521]

Unless you're planning to change your asset allocation in the process, I don't know that the equity price would matter much for a conversion. If you sell shares at $5 per share in the traditional and buy shares at $5 per share in the Roth you should come out the same. The same rationale would apply at $10 per share or $15 per share. You're not buying low selling high, you're selling at X and buying at X, the end value would be the same (unless you encounter buy-in fees or something). Maybe I'm misunderstanding.

What you're missing is that the income taxes due would be lower if a person converted at $5 than at $10 or $15. Anywhere from half to one-third of the amount of taxes, which could be a significant source of savings.

Another way of looking at it is one can move twice to three times the number of shares from an IRA to a Roth for the same tax bill. OP is correct, I think, to see it as an opportunity.

 

[mountainsoft]

What you're missing is that the income taxes due would be lower if a person converted at $5 than at $10 or $15. Anywhere from half to one-third of the amount of taxes, which could be a significant source of savings.

Ahh.. Gotcha. I hadn't considered that. OP, disregard my response.

 

[free2020]

What you're missing is that the income taxes due would be lower if a person converted at $5 than at $10 or $15. Anywhere from half to one-third of the amount of taxes, which could be a significant source of savings.

Another way of looking at it is one can move twice to three times the number of shares from an IRA to a Roth for the same tax bill. OP is correct, I think, to see it as an opportunity.

Yet another way of looking at it is that the taxes you pay on conversion is paid back to your Roth account in due course by Mr. Market. The deeper the swoon and faster the return to normalcy the better for your Roth. It’s “almost” as if you built up a nest egg that Uncle Sam never touched. Like another poster said in this thread, for someone who doesn’t need to touch the Roth until after 70, this is awesome. Magic of compounding at its best.