[M2inOR]

I'm about to do my 3rd year of Roth conversion. Each year we did it, we ended up in the top tax bracket as expected. Unexpected was IRMAA. Fortunately, my wife's employer had a medical premium account for retirees to pay the IRMAA fees for both of us.

Conversion isn't for everyone, but has worked well for us.

The other advantage of the Roth is for beneficiaries of our estate. Traditional IRAs when inherited must be spent within 10 years. Roths don't.

Conversion isn't for everyone. Seek an advisor who specializes with conversions, and understand the advantages and disadvantages. Fortunately for us, it makes good sense.

Our trigger was that we looked into the future when RMDs would be required. Ours would have thrown off income placing us in the upper tax bracket as we would have income that exceeded what we made during our working years. Yes, we saved a lot, and our investments did very well.

We expect future tax increases will occur regardless of who's in the White House. With a Roth, I don't expect the government to renege and start taxing them.

[mbalsama]

Originally Posted by petsetc

Just a friendly reminder that it's the 4th qtr and time to consider Roth conversions, particularly if you have not yet taken your Social Security. Also, since the market is down, you'll get more bang for your buck.

Here are some Roth IRA Conversion Considerations

Pro’s

1. Income is tax free for life
2. Assets grow tax free for life
3. No Required Minimum Distributions at age 72
4. No RMD’s for spousal beneficiaries
5. Although RMD’s are required for non spousal beneficiaries, income and growth is still tax free
6. Possible No state or local Income taxes due on conversions, only Federal taxes - depends where you live
7. Federal tax rate is at the lowest now for conversions - 37%
8. A conversion now can protect against future tax law changes
9. Use conversion to take advantage of market conditions:
1. If the market is low, take advantage of stock market declines - pay lower taxes on conversion amount and benefit when assets rebound
2. If the market is high, convert assets to cash and buy back when it is lower
10. Future earnings does not count towards IRRMA - Medicare premium surcharge

Con’s

1. Income tax is due in the year of conversion
2. Subject to Five-Year-Rule - cannot withdraw any earnings for 5 years (withdraw of contributions OK)
3. Each conversion is subject to a separate Five-Year-Rule
4. Trigger IRMMA and pay higher Medicare Part B & Part D premiums for one year

[petsetc]

Two comments - the 5 year period applies to YEAR ROTH is initial opened ( Jan 1 is the same as DEC 31) and an inherited ROTH also has a 10 year draw down window.

[M2inOR]

Sorry I was not clear when I commented on the 10 year rule for beneficiaries. Yes, must empty the account, but no taxes due. Time limit varies depending on relationships.

If it were conventional IRA, there are RMDs and taxes for beneficiaries.

If all this seems complex, read the many publications available or seek an advisor who is familiar and knowledgeable about conversions and taxes

[HJBeck]

You mentioned that you started taking your RMD at age 74. I thought the new law said one must start at 73. The exception was that one could wit till April 15th of the following year one turns 73. Am I misunderstanding this? The draw back in waiting till April 15th of the following year is that you must take an additional withdrawal for that year. Thus additional tax burden. Am I seeing this incorrectly

[ElDiabloJoe]

FWIW, I'm only 54 and I opened my Roth in 2019. I have a good amount in an IRA (was combined from various 457(b) plans). My CPA / Fee-only advisor has us on a program that converts from the IRA to the Roth annually in such an amount as to not move us up a tax bracket. I have a long horizon in order to accomplish this, so I am not in any rush.

[MidWestIA]

Roth IRA five-year rule says you cannot withdraw earnings tax-free until it's been at least five years since you first contributed to a Roth IRA account.

The IRMA withdraw effect when it jumps and part D increases too plus getting in a higher tax bracket

Part B costs for those with higher incomes - Medicare Interactive

[mrf0151]

If you don't need the money for 5 years, then it is really to your advantage to roll IRA to Roth. We have done this incrementally for several years now before age 73 hits. If the Feds stay away in the future, then it will be a winner.