UnThreaded | Threaded | Whole Thread (2) | Ignore Thread Prev Thread | Next Thread
Author: buznitz One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75384  
Subject: Million Dollar IRA Date: 12/26/2001 2:30 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 2
If one has (or will have) about one million dollars in 401K's and regular IRA's and will be facing RMD in three years, is there any rationale to convert to Roth IRA's (happen to be lucky by converting from stocks to fixed income 2 to 3 years ago)? The tax bill will be about $350K leaving $650K in the Roth (conversion funds would have to be used to pay taxes). RMD in three years will be $40K per year (taxes of $10K per year at 25%). With the new estate tax and inheritance rules what is the most foolish approach? Thanks
Print the post Back To Top
Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 32919 of 75384
Subject: Re: Million Dollar IRA Date: 12/26/2001 3:09 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 1
Buznitz asks:

If one has (or will have) about one million dollars in 401K's and regular IRA's and will be facing RMD in three years, is there any rationale to convert to Roth IRA's (happen to be lucky by converting from stocks to fixed income 2 to 3 years ago)?

It depends on how you will pay the income taxes due, how soon you will tap into the money, and the overall size of your potential estate. It's possible if you don't really need the money to live on that conversion will make sense. It's also possible that it won't.

Given the size of the accounts involved, were I in your shoes I would visit a fee-only CFP who uses the Brentmark Pension and Roth IRA Analyzer to run a few scenarios using a full and partial conversion for you. At nearly $500, the software may be too expensive for personal use, but many CFPs use it for their clients. IMHO, it's one of the best -- if not the best -- programs for such an analysis.

Regards..Pixy

Print the post Back To Top
UnThreaded | Threaded | Whole Thread (2) | Ignore Thread Prev Thread | Next Thread
Advertisement