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My mother retired early this year, and has $6500 earned income and will have about $6500 investment income. This places her in the 15% bracket. I am thinking of advising her to rollover $40k in dedctible IRA's to Roths, which will add $10k to her income for 4 years. As long as her investment income stays within $15k for the next 3 years, which it will, she will pay 15% in taxes on the rolled over funds. She has enough in other IRA and non-IRA investments to probably place her in a higher tax bracket in her lifetime. So this is a strategy to reduce some of her tax burden, and to give her better withdrawal options from IRA's.

Is this a sound strategy? With the drop in the market, the current value of the rollover candidates are lower, making it an attractive option right now. I haven't come up with any big negatives. My mother does have enough cash flow to support the additional tax burden or estimated payments. I would welcome comments, especially supportive. :-)

Thanks,
ASimpatico
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Asimptico asks:

My mother retired early this year, and has $6500 earned income and will have about $6500 investment income. This places her in the 15% bracket. I am thinking of advising her to rollover $40k in dedctible IRA's to Roths, which will add $10k to her income for 4 years. As long as her investment income stays within $15k for the next 3 years, which it will, she will pay 15% in taxes on the rolled over funds. She has enough in other IRA and non-IRA investments to probably place her in a higher tax bracket in her lifetime. So this is a strategy to reduce some of her tax burden, and to give her better withdrawal options from IRA's.

Is this a sound strategy? With the drop in the market, the current value of the rollover candidates are lower, making it an attractive option right now. I haven't come up with any big negatives. My mother does have enough cash flow to support the additional tax burden or estimated payments. I would welcome comments, especially supportive. :-)


If you've run the numbers and are convinced that five years from now your mother's marginal tax rate will increase, then on the surface a conversion today while she is in the 15% tax bracket makes sense to me. Why pay a higher tax on the income and the earnings later when you can pay a lower tax on the income today and take the earnings tax free in the future?

Regards….Pixy

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