I’ll never convert a penny to a Roth unless we get hit with another 2007/2008 recession, or the v shape downturn in 2020 because of Covid. Why would anybody convert when the market is high? You will pay more taxes. If I would have converted when the market was at its lowest point in 2020, when we all knew the market will have a v shape recovery, I would have been able to convert 35% more and pay the same taxes if converted at the markets high point, and knowing when the market recovers, I will have the same amount of money as I had before - taxes paid. If you convert when the market is high, and actually falling, it will be very hard for you to recover your money. At the markets high, you have an equal chance of the market going down more than going up, and if the market goes down after your conversion, it’s going to take you a long time to get back to where you were.
As for calculations, you have to add all your gains, short/long for the year, SS income, dividends, etc. to your calculations, and I a lot of cases, every penny you convert is going to add to your tax base, future Medicare payments, etc..
For me, when I’m fully invested, I make 30% and much more on my investments, so I would rather have all my money making this money instead of a smaller base after a conversion and paying taxes. When I’m 73 or so when I have to take an rmd, I’m making much more money per year to pay the rmd taxes.
For me, you don’t know what the older people will be paying in taxes on their non-taxable income. For example, I hear rumblings the new WH wants to do away with the income tax and make it so the government makes their money by tariffs. If this happens, I’m doing 1 big sell the 1st day in case later on they go back to an income tax. Or, maybe they will extend the age to take rmd’s like they did during COVID. Or, the tax rates will be lower in the future. All these cases are a win/win for me for not doing a conversion. Worst case, I’m making good money on my larger base that paying taxes on my rmd’s are trivial.
|