Read on the topic at Fairmark.com. If your TIRA is not large, or you do not have longevity, you will have less of a tax problem with RMDs. Years ago, Scott Burns wrote about the "torpedo tax" on income of pension, plus SS, plus RMDs, so run the numbers to see what happens to your income tax starting after age 70.
Having retired at 55, and prior to starting SS, I have been doing partial conversions of my TIRA to RIRA each year.
In 2012, for Married Filing Jointly, 7600 of deductions, 11900 of exemption, and 70700 to the top of the 15% bracket, totals 90200 of income with 9735 of tax due, is an average tax rate of 10.8%. As others mentioned, do you think that rate will be less in the future?
If you guess slightly too high on the conversion amount, you pay only a little more tax when your income barely spills into the next higher tax bracket.
As Nords noted, your conversion must be done prior to the end of the calendar year, not the April 15th due date for IRA contributions. Your estimated tax payment on the conversion is due a couple of weeks after the end of the quarter, in this case, the end of year.
Someone wrote that Roth conversions are a form of tax loss harvesting of tax sheltered accounts. You can choose to convert shares of whatever is down the most, or whatever has the most expected long term growth.
Roth conversions is prepaying future taxes at a reduced rate. To me, that is not much different than saving job income for retirement spending. It is still delayed gratification with a future benefit.
Having retired at 55, and prior to starting SS, I have been doing partial conversions of my TIRA to RIRA each year.
In 2012, for Married Filing Jointly, 7600 of deductions, 11900 of exemption, and 70700 to the top of the 15% bracket, totals 90200 of income with 9735 of tax due, is an average tax rate of 10.8%. As others mentioned, do you think that rate will be less in the future?
If you guess slightly too high on the conversion amount, you pay only a little more tax when your income barely spills into the next higher tax bracket.
As Nords noted, your conversion must be done prior to the end of the calendar year, not the April 15th due date for IRA contributions. Your estimated tax payment on the conversion is due a couple of weeks after the end of the quarter, in this case, the end of year.
Someone wrote that Roth conversions are a form of tax loss harvesting of tax sheltered accounts. You can choose to convert shares of whatever is down the most, or whatever has the most expected long term growth.
Roth conversions is prepaying future taxes at a reduced rate. To me, that is not much different than saving job income for retirement spending. It is still delayed gratification with a future benefit.
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