Roth Conversions
 

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?

Have you used anyone in the past???
It's not easy to ramp someone up quickly, without offering generic suggestions.
TOOOOOO many CPA's, Tax Advisors, Financial Peeps, give you the latest text book suggestions.
TOOOOOO many said, conversion.

Conversions ain't that good.
IF good, marginally good.
IS it really worth it...............will never know until U R dead.

Good Luck.

Hopefully your financial advisor has a tax professional associate. There are many things to consider aside from just the tax issues. for example there may be a 5 year waiting period before you can withdrawal the ROTH funds. I had looked into this years ago, but I missed the optimal time to do the conversion, so I just live with RMDs.

OP, the problem with Roth conversions is that you need someone with a crystal ball to tell you future tax rates for you and your heirs, future retirement laws, and how long you will live. Good luck finding a tax pro who can do this.

Single or Married makes a huge difference.
Max Social Security AND pension?
How big is your NON qualified, taxable investment account?

Basically, there is a balance between three Investment account buckets:
IRA/401K
Taxable Investments
Roth IRA

There is a balance between three income sources
Social Security
IRA RMDS
Pensions

and the the more controllable bucket but also can be very lumpy and very hard to predict, is your total living expenses combined with your age and health conditions, now and in the future.

Also, delaying Social Security will help with the conversion and can even be used while delaying social security. The question is: will you be using the Roth to NOT WITHDRAW from your taxable account? or to use if you don't have a significant taxable investment account to withdraw when SS and Pensions/interst and dividends are not enough? if uncertain, please review the size of your three investment account balances above.

for most people, you do not need more than 200K in a Roth right now, age late 60s when the optimal time is to convert when not working. Converting $200K all at once is a very big tax check, so equal amounts over the pre IRA RMD years will be the best, depending upon circumstances.

And as an anon poster, I have 30 + years in corporate finance building forecast models for all kinds of financial scenarios, and if you want to discuss further, please send me a private email, and I can get you started in the concepts so that you can discuss a plan with any CFP and CPA.

Finally, a CPA focuses on tax reduction strategies, and a CFP focuses on wealth management, investment increases which are two opposite points of view, complementary, but be sure that you understand where each strength lies and what to expect their contribution would be.

We have had historic low tax rates for a long time. What are the chances that they will stay low for a long time? Whenever you have a taxable account remember you have an uncle waiting for his share. There are many MANY questions to be answered. Married, kids, charities, health, age? A good resource is Ed Slott, he is a tax/Roth expert.
In my situation, we are doing Roth conversion while tax rates are still low (until 2026).

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.

I have both a Roth IRA and a non-Roth 401K. I am not planning to covert my 401K since I like the national ERISA protections.

It is not complicated. The amount you move into the Roth IRA is added to your annual taxable income. You alone can determine what tax burden you can tolerate.

Managing the estimated tax due is a bit complicated. I feel it's to my advantage to make the conversion in December, so I can keep the money I will use to pay the taxes in my possession as long as possible. There are some forms you have to fill out, and fill out correctly, in order to avoid the penalty consequences of not having made the estimated tax payments quarterly, as you would if your income was steady throughout the year.

From what I can glean reading the IRS instructions, you can pay your estimated taxes as you receive the income, but you have to report it a certain way. I think I understand it, but I'm not sure I understand it. Especially for the first year doing this, I think having a tax pro guide me through it might be money well spent.

Also, it's not just about how it affects your taxable income, you have to be aware of how it affects your IRRMA thresholds.

I use the prior year tax rule to pay an equal amount of estimated tax every quarter. It makes no difference when I receive income during the year. There is no penalty due. And, the income tax due on any IRA withdrawals or conversions are always due on April 15 of the next year, regardless of when you received the income. So, you can receive the income in January or December of the prior year, but the same tax amount is due on April 15 of the next year.

Yes, if you don't use the prior year tax rule, you could owe a small penalty if you don't adjust the estimated quarterly payments.

I appreciate that information. I would love to be able to find it on the IRA.gov site. If you happen to have a link to the publication that explains that, I'd appreciate it. I'll keep searching.
Thanks.

I don't have a specific link, but I always pay my annual income tax on April 15 for the prior year. I never have any money withheld during the year for my pension, dividends, or RMDs. All of my taxes are paid quarterly as estimated payments. As I understand it, as long as you follow the prior tax year rule, which is usually based on 25 percent per quarter of the total tax paid in the prior year, you will never owe a penalty, even if your income greatly exceeds the prior year income. Recently, I took my RMD and paid no withholding tax on it. There are some sources of income that may require a tax withholding, such as a gambling or lottery winning, but money withdrawn from a tax deferred account for an RMD, pension income, or SS income are not subject to mandatory withholding. So, compliance with the IRS estimated tax rule will avoid a penalty, and allow you to pay any additional taxes due on April 15. I use TurboTax and they calculate my estimated payments for the next year as well as my taxes due for the current year. These estimated payments are due on April 15, June 15, September 15, and January 15, and they must be paid on time. I don't know if there is a special rule for a Roth conversion, but I doubt it.

Note that I did some Googling, and it looks like a Roth conversion just adds ordinary income to the current year's taxable income, with no requirement to pay the tax earlier than the normal April 15 tax date. Fidelity says:

Time of year
Converting earlier in the year gives you more time to pay taxes, but converting later in the year allows you to start the 5-year rule as of the beginning of the year.

OK, I was misunderstanding what you said.
thanks.

While I agree with all the above (and it took me a while to get to that place) I'm not yet sure whether you need to pay estimated taxes based on 100% of your payment for last year or if you need to base it on 110% when your AGI is above a certain level. I use 110% just to be safe but that *might* not be necessary.