[jimbomaybe]

Originally Posted by Plinker

Don’t forget, you will not be able to access the converted ROTH money for a period between 4 years plus one day to 5 years, depending on what date you do the conversion. Regardless of the date of your conversion, the IRS starts counting the 5 year wait on January 1st of the year of conversion. So, a conversion on July 1st has a 4 1/2 year wait while a December 31st conversion only waits 4 years plus one day. Consider waiting until mid-December to convert. Each conversion starts a new wait period.

There is a work around for that . From Investopedia
" A note for multiple account owners: The five-year clock starts with your first contribution to any Roth IRA—not necessarily the one from which you’re withdrawing funds. Once you satisfy the five-year requirement for one Roth IRA, you’ve fulfilled it for all of them.
7
Internal Revenue Service. "Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs)," Pages 31-32.


Any subsequent Roth IRA is considered held for five years. Rollovers from one Roth IRA to another don't reset the five-year clock.
8

[PersonOfInterest]

Originally Posted by Laker14

I'm mulling over the idea of making some substantial Roth conversions from my regular IRA account.

Other than a couple of homes, one in TV and one on a lake in NY, all of my money is in IRAs. I'm 71, and with the amount in my IRAs, and my yearly draw, I am in a comfortable position, UNLESS...where my plan gets shaky is if I or my wife live into our mid-90s (we have some history of long life-spans as well as some history of early demise, so it's a crap shoot), and we have all of our money in IRAs, we could get into some very heavy RMD years, with exorbitant tax rates, and serious depletion of our wealth.

So, it seems to me that Roth conversions over the. next 10 years could be a good hedge against that. From my calculations, somewhere in the 4 or 5 year range would be the break-even point. After that it's a clear win.

From what I've researched, the immediate costs would be obviously, more income tax now, and a bump in our Medicare premiums. Factoring those in, we get the tax back later when we withdraw the Roth money tax-free, and at the pace required of our lifestyles, not at a pace dictated by the IRS.

Furthermore, there is a very good chance that only one of us would survive into such an old age, and the survivor would be taxed at the Single rate, which would be even more of a burden.

As long as I am certain (and I'm as certain as I can be) that we won't need to tap the Roth IRA for 10 years, this seems like a no-brainer.

I'm interested in the opinions of others who may have done this, or are considering doing this, and what their thought processes are.

I'm not sure I see your dilemma. If you're 90 and drawing an RMD that has exorbitant tax rates you're sitting on a very large retirement account which should be more than sufficient to sustain you for the few years you'd have left. Also if your RMD is being taxed it means you've got substantial income as well. In either case if you're 90+ and paying exorbitant tax on your income then you've got an Income that is probably well in excess of what you're spending at that age.

[rsmurano]

Why would anybody convert huge sums of money into a Roth to decrease your nest egg so you can earn less money per year until you die and pay high taxes the year of conversion?
The years you should have converted are 2020 and 2022 when the markets were down 30%, you would have paid less capital gains taxes because you were already down. Don’t convert today since the market is high and you will pay more.

Being a senior doesn’t mean you have to play it safe with your money if you need this money to live on. Making 5% during the last couple of years means you were losing money to inflation. I will never buy bonds to do the old fashioned 60/40 split, it’s all 100% equities for me. There are probably 100’s if not a lot more index funds that have very low low risk like a bond that will make you many times more than that 5% over time. I have half a dozen that I have been using for decades.

[Gladys Turnip]

Originally Posted by Laker14

I'm mulling over the idea of making some substantial Roth conversions from my regular IRA account.

Other than a couple of homes, one in TV and one on a lake in NY, all of my money is in IRAs. I'm 71, and with the amount in my IRAs, and my yearly draw, I am in a comfortable position, UNLESS...where my plan gets shaky is if I or my wife live into our mid-90s (we have some history of long life-spans as well as some history of early demise, so it's a crap shoot), and we have all of our money in IRAs, we could get into some very heavy RMD years, with exorbitant tax rates, and serious depletion of our wealth.

So, it seems to me that Roth conversions over the. next 10 years could be a good hedge against that. From my calculations, somewhere in the 4 or 5 year range would be the break-even point. After that it's a clear win.

From what I've researched, the immediate costs would be obviously, more income tax now, and a bump in our Medicare premiums. Factoring those in, we get the tax back later when we withdraw the Roth money tax-free, and at the pace required of our lifestyles, not at a pace dictated by the IRS.

Furthermore, there is a very good chance that only one of us would survive into such an old age, and the survivor would be taxed at the Single rate, which would be even more of a burden.

As long as I am certain (and I'm as certain as I can be) that we won't need to tap the Roth IRA for 10 years, this seems like a no-brainer.

I'm interested in the opinions of others who may have done this, or are considering doing this, and what their thought processes are.

&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&

Yes, there are many pros and cons to converting (or not converting) Traditional IRA money to Roth. But one factor I have not seen mentioned yet in this thread is simplification. That is, while the decision whether to convert is usually a very close question from a purely financial standpoint, the simplification benefits of converting to Roth are often a game changer. More specifically, after conversion you no longer have to worry about RMDs or IRMAA or income taxes of any sort. This makes life much easier for you, a surviving spouse, heirs, etc. Life becomes simpler. 🙂

[M2inOR]

It's dependent on the size of your IRA. It depends on your life expectancy. It depends on your taxable accounts.

Check out Craig Wear. He has published several books on the topic of IRA to ROTH-IRA conversions.

I've completed 4 years worth of conversions and am at the point of whether to do a 5th year.

Before starting several years ago, I realized that my anticipated RMDs would deliver more income than we needed. I learned about the possibility of converting. I did the math myself, and wanted a 2nd opinion.

I contacted Craig Wear, Paid the fee, and got a detailed plan that worked for us.

The only surprise was IRMAA, but fortunately, we had a tax-free fund from my wife's retirement plan that took care of paying the very high IRMAA. We also had enough savings in our taxable account so that we did not need to use and of the IRA conversion to pay the taxes. One year we reached the 37% bracket, the other years we stayed in the 22% bracket.

We both delayed taking SS benefits until we reached age 70.

We are quite happy with our conversion guidance and the process.

Note well: every situation is different. The books Wear has published will help you decide whether a conversion is worthwhile. For US, it has worked out very well, and we won't need to convert all our IRA funds.

[Cbriggi]

We were on the phone yesterday with our financial advisor and CPA discussing this exact situation. There are many factors to consider - including beneficiaries.

First - talk with a financial advisor! There are pros and cons you have to calculate. A decent firm will have a CPA available (don’t trust just a FA to tax laws). Most will do it gratis as they want you for a client.

Second - Timing. If conversions are advised based on your situation, it is best to wait for a downturn in the market. Sell low from traditional IRA and invest low in ROTH. Think paying tax on a value of 75% vs. 100%

Third - Realize the future is uncertain around any changes to tax laws (oh well they definitely will change but not in our favor.)

Again pros and cons to this but having assets post tax that grow tax free is awesome!

YMMV

[Windguy]

I was under the impression that you can’t move money into a Roth unless you are making wages (have a job). I tried to move some of my IRA into my Roth after I retired, but I was not allowed to do so.

[retiredguy123]

Originally Posted by Cbriggi

We were on the phone yesterday with our financial advisor and CPA discussing this exact situation. There are many factors to consider - including beneficiaries.

First - talk with a financial advisor! There are pros and cons you have to calculate. A decent firm will have a CPA available (don’t trust just a FA to tax laws). Most will do it gratis as they want you for a client.

Second - Timing. If conversions are advised based on your situation, it is best to wait for a downturn in the market. Sell low from traditional IRA and invest low in ROTH. Think paying tax on a value of 75% vs. 100%

Third - Realize the future is uncertain around any changes to tax laws (oh well they definitely will change but not in our favor.)

Again pros and cons to this but having assets post tax that grow tax free is awesome!

YMMV

I would only take issue with your No. 2. If a CPA or a financial advisor claims that they can "time" the stock market, I would not have much confidence in their advice.

[Bridget Staunton]

Blue blaze: first: thank you for your post. But in my case the gov’t tell me the amount I have to withdraw. As far as I know there is no way around it because they want their taxes

[SaucyJim]

Originally Posted by Plinker

Don’t forget, you will not be able to access the converted ROTH money for a period between 4 years plus one day to 5 years, depending on what date you do the conversion. Regardless of the date of your conversion, the IRS starts counting the 5 year wait on January 1st of the year of conversion. So, a conversion on July 1st has a 4 1/2 year wait while a December 31st conversion only waits 4 years plus one day. Consider waiting until mid-December to convert. Each conversion starts a new wait period.

Interesting. I was of the understanding that the five year period was only for five years the specific account was established. I rolled my Roth 401(k) into a newly-established Roth IRA (better self-directed options) a short time ago. I was told the original contributions were still accessible and that only earnings could not be accessed.

[RICH1]

Estate Planning Attorney will be a small fee to pay for Answers ...decrease your financial worth ... Ted Tishman out of TPA is a good one if he's taking Clients.. now is the time to ease your worry's

[M2inOR]

Originally Posted by Windguy

I was under the impression that you can’t move money into a Roth unless you are making wages (have a job). I tried to move some of my IRA into my Roth after I retired, but I was not allowed to do so.

Wrong impression.

It's called a back-door conversion.

Yes there are rules, and age limitations.

Best to read up.

Check with any of the books on the subject, including a few from Craig Wear.

[retiredguy123]

Originally Posted by Bridget Staunton

Blue blaze: first: thank you for your post. But in my case the gov’t tell me the amount I have to withdraw. As far as I know there is no way around it because they want their taxes

As I understand it, the only way to avoid taxes on RMD money is to transfer it directly to a charity.

[Bridget Staunton]

We all pay taxes on SS. It’s national

[SaucyJim]

Originally Posted by Cbriggi

First - talk with a financial advisor! There are pros and cons you have to calculate. A decent firm will have a CPA available (don’t trust just a FA to tax laws). Most will do it gratis as they want you for a client

Good advice, but I would add that the advisor should be fee-based - not commission-based. There is no way I’m giving a percentage of my nest egg to anyone on an ongoing basis. Get the advice and implement it yourself.

Now, if my mental faculties should start to fail, that’s a separate consideration. If that happens, I’d probably run for public office. 😎