No. of Recommendations: 0
Greetings, RJE1, and welcome. You wrote:

<<I had outlined my financial situation on Your Finances / Tax Strategies, Subject: Roth Conversion - help Post # 6283. I was directed to your post on this board of 1567. It appears to me that my situation may be like the last example. Hopefully, with good investments I'll stay in the same tax bracket. However, since this is money invested in a treasury zero at 7.5% guaranteed until age 59 1/2, I wonder if there are things that I am not thinking about. When I run calculators I have a hard time figuring out what to put in some of the questions. Also, just running the tax and fees for conversion on the Motley Fool calculator, I came up with a total tax of $70,350 (ouch). I frankly wonder if I could afford to pay that at $1458.33 a month if I payed out of "cash". Comments or suggestions would be appreciated as I try to think through the issues.>>

I can't recommend what you should do, but I can tell you that your tax bill (assuming your calculations are correct) ain't gonna be "…1,458.33 a month…" for 1998, but could be for 1999, 2000, and 2001. Assuming you're in a 28% federal and 7% state tax bracket (combined 35%), you're thinking of converting about $200K. Do that before 12/31, and you can spread the income over four tax years, the first being 1998. So this year you would declare an extra $50K in income, for which the estimated withholding of income taxes must be paid by 1/15/99. Thus, you have but one month to pay your estimated taxes on that $50K ($17.5K due for withholding?). In the subsequent years you can probably get away with quarterly estimated withholding on the $50K of income reportable in those years.

You're talking about a healthy hunk of change here. We know nothing about you or your desires and have far too little information on which to comment authoritatively. I recommend you seek out - quickly - the services of a fee only Certified Financial Planner who can run some conversion scenarios for you to make the choice easier. Better hurry, too, 'cause you're running out of time.

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