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Hi CuriousQ
Appreciate the point you make, but I'm just being curious. The condition you describe yourself in is, in my working years experience, quite common. Retiring at 59 to 64, which is early for most. No pension and no social security usually puts such a couple deep in the 12%, if not the 10% bracket, not the 22% bracket. Of course, there could be other sources of income such as installment sales, rentals, Inherited IRAs, etc. But for most, this is the ideal time to do large RIRA conversions.

Example:

Retired couple age 62 with one $30,000 pension and $5,000 in qualified dividends and long term capital gains (QD+LTCG). No other income subject to taxation with Social Security not planned until age 67. Ordinary income of $30,000 - $25,100 standard deduction = $4,900 of taxable ordinary income plus stacked on top of this, $5,000 QD+LTCG = $9,900 taxable income. The top of the 12% bracket for 2021 is $81,050, which leaves $71,150 of 12% 'Headroom', of which leaves $66,150 of ordinary income taxed at 12% with a Roth conversion and the $5,000 of QD+LTCG. That would be a sizable Roth conversion for most, particularly if done year after year up to first Social Security year. And the $5,000 of QD+LTCG stacked on top would be taxed at 0%.

Pushing this up to the top of the 22% bracket for married filing jointly, and the numbers start getting big....for most retired households (certainly not to Jeff Bezos)

Top of 12% bracket: $81,050
Top of 22% bracket: $$172,750

Total ordinary income at 22%: $172,750 - $81,050 = $91,700. Add this to the Roth conversion amount at 12% of $75,150 = $166,850, pushing the $5,000 QD+LTCG up but still taxed at 15%. That's a lot of Roth conversion for most, but it certainly can make sense if your employer plan rollover is well up into the 6 or even 7 digits and/or you expect a large jump in household income in the next few years.

A couple of other comments.
Social Security and Medicare taxes (FICA) are taxed on earned income, not un-earned income such as the ordinary income from a TIRA to RIRA conversion.

As to the financial benefit/penalty of using conversion dollars to pay the tax (have the IRA custodian withold x% and send to the IRS) vs using money from a taxable account, I'd encourage you to take a look at my friend Financial Dave's articles on this at Seeking Alpha. IMHO, it doesn't matter that much...but that's me.

https://seekingalpha.com/author/financialdave#regular_articl...

BruceM
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