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So I have been creating spreadsheets to crunch the numbers and using online calculators to verify, and I can’t find a reasonable scenario where I wouldn’t be ahead to convert my large (to me) deductible Traditional IRA to Roth. I am in the fortunate situation where I could pay the tax bill for the conversion from proceeds from a taxable stock account. Even considering that it bumps me to the 32% tax bracket in 2018 it still seems to be the best decision for maximizing my future after tax income along with the added benefit that it gives me more flexibility. Am I missing something?

Unless you are going to be in the 32% bracket in future years, I would suggest instead doing multiple partial conversions over enough years to keep you in the 24% bracket for all of the conversions.

Since the current year tax consequences are a 6 figure impact, I am stressing about this decision. I have met with numerous financial planners over my 20 year investing career and am always disappointed in their lack of insight. Seems like I usually pay for someone’s advise that is less knowledgeable than me. 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?

If, in the future, you will be in a lower bracket than 24% without doing the conversion, it would be a bad idea to do the conversion at 24% or higher.

Unless you want to convert the entire account* so that you can take advantage of the back-door Roth contribution, or are building up more traditional accounts through contributions to a current 401(k), I would suggest that you may want to keep some of the account in traditional form. While you will be required to take RMDs once you reach 70 1/2, under both the current tax rules, and the rules that the old rules that are currently scheduled to return in 2026, you can still have a fairly substantial taxable income without bumping into rates higher than 24% - 25%, so paying rates as high as 32% now in order to completely avoid taxes later doesn't make sense.

*Another way to eliminate a traditional IRA so that you are able to do back-door Roth conversions would be to roll some/all of the traditional IRA into your current 401(k). So, if you want to do a back-door Roth conversion for 2018, you could do a partial conversion of your IRA - low enough to keep you within the 24% bracket, and then roll the rest of the IRA into your 401(k) before the end of 2018.

AJ
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