Quote:
Originally Posted by Tom52
Can anyone recommend someone like a tax pro who would help me determine the tax consequences of, and recommended amount to convert from a conventional IRA to a Roth IRA?
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I started a thread a week or so ago asking for opinions as to the wisdom of Roth conversions. Of course, responses were all over the lot. I came to the conclusion that the only way to figure it out was to look at my particular scenario, and what my concerns were. Here's what I came up with:
My situation is that nearly ALL of the money we (wife and I) have, that we are counting on to last until we die, is in regular IRAs. From all of the calculators I've run, plugging in various unknowns like rate of return, inflation, expenses, etc. it should suffice nicely at a very conservative 4% rate of withdrawal, and even survive the RMDs. BTW, I am 71, and my wife is 66.
If we die in our 80s, no problem either way. I can convert, or not. Where it could get dicey is if we live well into our 90s...or even more dicey, and more likely, is if ONE of us lives into our 90s (we both have relatives who have died young, and some who have lived well into their 90s, even to 100). So the conclusion I have reached is that for us, it's worth doing.
As a wise old relative once said to me, "don't worry about dying. Dying will take care of itself. Living is what you have to worry about". So in that vein, if one of us survives the other for a long time, without converting to Roth, RMDs would push the survivor's income beyond what would be needed, and while I don't have a crystal ball to tell me exactly what the tax rates will be 20 years from now, I feel confident that a single person, filing singly, will be in a higher rate then, than a married couple, filing jointly, will be in now.
I created a bunch of spreadsheets trying to figure out what would happen to the IRAs with no conversions, and what would happen to the combination of regular IRAs and Roth IRAs if I converted various amounts.
For me, for us, DW and I have decided we will convert some. I made a list of some "threshold" numbers, particularly where the marginal tax rates (Married Filing Jointly) change, and also where the IRRMA thresholds are. I used those thresholds to help me decide at what levels I wanted to be at with our taxable income and our MAGI (IRRMAs are figured based on MAGI, not taxable income, be sure you know the difference).
I am currently in the boat of having decided for myself what I want to do, and will be looking for a tax advisor to make sure I pay my estimated taxes correctly, and use the proper tax forms to avoid a tax penalty. I am not going to ask a CPA or CFP if I should convert. I did that homework myself, based upon sacrifices I am willing to make now, in order to avoid a scenario I am concerned about that I may never even live to see the benefit of. That's OK with me. I've made my own decision on what I want to do, I need to make sure I do it properly so I don't incur more expense than I'd calculated, by doing it improperly.