I am 75 years old. My wife is 71. I have conventional IRA's totalling about $350000 and my wife has IRA's of about $140000.I have been taking the minimum required withdrawals for the past four years. My wife will start this year.My question: Are there any conceivable advantages to either or both of us converting to a Roth IRA?
[[I am 75 years old. My wife is 71. I have conventional IRA's totalling about $350000 and my wife has IRA's of about $140000.I have been taking the minimum required withdrawals for the past four years. My wife will start this year.My question: Are there any conceivable advantages to either or both of us converting to a Roth IRA?]]Conceivable? Perhaps. Apparent? Not necessarily. The taxes that you would pay on these conversions would be very, very large...larger than you could ever recoup in the form of tax free income in later years.BUT...If you have estate tax problems or considerations, this may be a very valuable option. Dodging the 55% estate tax by getting hit with a 39% income tax might be a good trade off. Also, if your beneficiaries of theese IRA funds are in higher tax brackets, they'll have to pay high taxes on these IRA funds anyway. So you might as well take the hit now. And, making the tax payment now may reduce your total estate, and may actually leave more funds available to your beneficiaries.But this is an estate tax matter that you really need help with. It is a complete package, since the conversion would not necessarily make sense for you alone, but may make sense when viewed in an entire estate planning package. So I would certainly suggest that you take this matter up with a qualified estate planning pro. In the meantime, you might want to check out the Fairmark tax site (http://www.fairmark.com) where you'll find a more complete dicussion on the issues of the conversion for the elderly and how estate taxes are impacted.TMF TaxesRoyWant to learn more about taxes and investing? Then we have a deal for you!! The Motley Fool Investment Tax Guide is now available through Fool Mart. Be the first one on your block to own this masterpiece. There is still time available to do that tax planning (and tax saving) before the end of the year. So just click on this link (http://www.foolmart.com/market/product.asp?pfid=MF+013+I) to read more about this amazing collection of tax information. (Apologies for the shameless plug…but it is a pretty good book…if I do say so myself). In addition, if you would like to visit the Taxes FAQ (Frequently Asked Questions) area, click on http://www.fool.com/school/taxes/taxes.htm and you'll be right at the home page. Pay special attention to the "archives" section. Check it out. Finally, if you need to get to the IRS web site, click on http://www.irs.ustreas.gov to go directly there.
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