Quote:
Originally Posted by rsmurano
IMO, the best time to do a Roth conversion is when the stock market/your holdings are down 30-50% then you aren’t paying all the capital gains as you would be paying if the market was high. If we enter a deep recession next year and the market tanks, then it might be right to do it.
Remember there are other issues when doing this conversion. You can’t take any money out of it for 5 years. Also, the income you generate on this conversion you will have to be in that tax bracket for 2 years paying higher Medicare premiums, after 2 years they use your current income.
For me, I would only consider this conversion if I was caught in the stock market and it dropped 50%, and I had enough money in my taxable accounts to hold me over until I can withdraw from the Roth.
Also remember they adjusted the age you have to take rmd out now. I think for me it’s 75 years old. In the next 8 years, they might adjust it even higher
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Couple of things… you don’t have to convert ALL of your IRA assets. Keep some in traditional IRAs and pull it out at low tax rates.
You can withdraw any converted dollars if you are over 59.5 and if the Roth IRA has been open for 5 years dated to Jan 1 of the year it was opened. I just opened mine last year and will only be doing a ladder conversion of about 1/3 before I start taking ACA healthcare money, then do more when I am 65+. I feel the 20+ years of zero tax growth will far exceed the higher IRMAA costs.
Plus I am thinking about the wife after I die and she is filing taxes as a single or the other way around with RMDs are coming out with more money than one person can spend in a year.
Also, RMDs are still 72.5, Congress is thinking about increasing to 75 but that has not been put into law yet.
One major gotcha is converting 401k Roth to Roth IRA. You can withdraw the Roth 491k now but when it hits the Roth IRA, the 5 year wait time on account opening kicks in.