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Hello!

Is there a difference if a stock is converted from a Traditional IRA to a Roth IRA before or after a split? Is it worth waiting for the lower price or does it not make a difference? I understand I pay taxes on the conversion.

Thank you!
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Is it worth waiting for the lower price or does it not make a difference?

Doesn't matter if you convert 50 shares of a stock at $300/share or 100 shares of a stock at $150/share. Either way it's $15000.

If you think the total value will change due to the split (ex. you expect the price to go up a bit because you think people will think the split is a good sign) then that difference in price would make a difference. IMO most any positive or negative impact to the price from a split gets priced in almost immediately when a split is announced, so I would not expect it to change in that way.
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Foo1bar,

Makes sense. Thank you for the response. I feel more comfortable about this.
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But down market is an opportune time to do a Roth conversion. You will pay less in taxes to covert a position now than later after share price recovers.
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But down market is an opportune time to do a Roth conversion. You will pay less in taxes to covert a position now than later after share price recovers.

I would also mention, when doing conversions, it's important to not let the perfect be the enemy of the good. When doing down market conversions, you probably will not hit the exact bottom of whatever you're converting. That said, when doing conversions in an up market, it's also very unlikely that you will hit the exact top. In either case, you should just pick a price that you will be comfortable paying the taxes for and do the conversion at that time.

AJ
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Yes, A down market, correct. Thank you.
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Hi AJ,

Yes, I agree. Good point. Thank you.
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But down market is an opportune time to do a Roth conversion. You will pay less in taxes to covert a position now than later after share price recovers.

I would also mention, when doing conversions, it's important to not let the perfect be the enemy of the good. When doing down market conversions, you probably will not hit the exact bottom of whatever you're converting. That said, when doing conversions in an up market, it's also very unlikely that you will hit the exact top. In either case, you should just pick a price that you will be comfortable paying the taxes for and do the conversion at that time.


Or, do what I did:
1. Convert half the amount you want to do that year in the first part of the year, and another half later. You're bound to miss the high and the low, but you might be able to minimize the "regret factor."
2. Allow for a third conversion if there's a super-low market at the end of the year, or make a larger second conversion than you originally planned. Caution--Be aware of IRMAA if you are 63 or older.

That's what I did in 2021, and was glad I did part early instead of waiting for the pullback that never came (that year). I also did that in March, missing the lowest low, but converting more shares for the same money than I'd have done with a larger 2021 conversion.

I just need to keep track of the conversions and have enough withheld from my quarterly IRA withdrawals to cover the additional taxes caused by the Roth conversions. I intend to convert a significant portion of my IRAs over a few years to pay taxes at 22% now rather than at 25% later, plus avoid RMDs. Plus, my model indicates that once I start Social Security, I'll be able to keep it at 50% taxable rather than 85% by drawing other living expenses partly from a taxable IRA and the rest from a Roth.
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Be aware of IRMAA if you are 63 or older.

For those who are not yet familiar with how Medicare Part B & D premiums are set, Income Related Monthly Adjustment Amount (IRMAA) are income based Medicare premiums. Medicare premiums are set in December based on your most recently filed tax return which would be for the previous calendar year. Premiums for 2022 were set in December 2021 based on tax return for 2020. The 2022 Part B increase can be as much as $408.20 per spouse in addition to the base $170.10 Part B premium.

There are reasons that you can request reconsideration. Retirement or decrease in hours for either spouse are common reasons for reducing IRMAA.
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Can a Roth conversion be done a couple of times a year -- or must there be a 12-month interval between conversions?

culcha
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Can a Roth conversion be done a couple of times a year -- or must there be a 12-month interval between conversions?

As already mentioned upthread, you can do multiple Roth conversions in a single year. The one year waiting period that you seem to be thinking of is for rollovers that are not trustee-to-trustee, and it applies to any and all non-trustee-to-trustee rollovers, including, but not limited to, HSAs and IRAs.

While a conversion is one type of a rollover, a conversion is typically is done either between accounts at the same brokerage, or done as a trustee-to-trustee conversion between brokerages. So, unless you are doing an atypical conversion by doing a rollover that is not trustee-to-trustee, you can do as many conversions as you want during a year.

AJ
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