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Subject:  Re: Roth IRA conversion question Date:  4/21/2018  1:41 PM
Author:  bighairymike Number:  20598 of 21412

So I’m asking this board if anyone has experience with this. In what scenario would it be a bad idea to convert from a deductible traditional IRA to a Roth IRA when you can pay the current tax bill with outside funds?

Thanks for your help! - 2020investor


I have been doing this is pieces each year for several years. Rather than doing a conversion all at once, I compute an amount to convert that will take me to the top of the 25% bracket. With the new tax law, my target for this years conversion is to top off the 24% bracket. By spreading your conversions over multiple tax years, you may not have to kick up into the 32% marginal rate.

Another angle I looked at was how much will I still have in the traditional IRA by the time RMD's kick in at age 70 1/2. My concern was RMD's making my SS taxable. When I did that calculation I learned my other income was going to make my SS taxable anyway, so it became a moot point.

Another angle that I have been thinking about lately but haven't put a spreadsheet to is to convert a much larger amount now and trigger the additional marginal tax rate. This may be favorable if you assume there will be much higher investment returns over the next 5 or 6 years under a Trump economy. If I convert slowly then most of those capital gains will be taxed as ordinary income coming out of the traditional IRA in annual pieces versus being tax free if those gains occur in my Roth.

Food for thought.

Good luck!
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