patrick.net
An Antidote to Corporate Media
1,194,145 comments by 13,886 users - 6DOF, AmericanKulak, Blue, Patrick, richwicks online now
invite responseComments 1 - 5 of 5 Search these comments
1
clambo
2024 Apr 18, 9:13am
Addendum:
Conversion to a Roth IRA is probably not really worth it if you will spend the money in 5-10 years.
Conversion to a Roth IRA is probably not really worth it if you will spend the money in 5-10 years.
2
zzyzzx
2024 Apr 18, 9:18am
zzyzzx
2024 Apr 18, 9:18am
The 5 year rule might be a deal breaker for some people. What is confusing is if you ask the internet it's unclear exactly how the 5 year rule works. I have an old Roth IRA, as in probably 20 years old or more. I don't have a lot of money in it, but if I were to do a Roth IRA conversion, I would assume that the money that's been in the account for more than 5 years would be accessible in less than 5 years if I wanted it, but that scenario is never mentioned. Every scenario assumes that your Roth IRA is completely new.
If you convert the whole thing at once, expect a huge tax bill, but you will potentially avoid IRMMA in the future.
If you are planning on relocating to a state with no state income tax, I would not do a conversion until after the move.
If you are already old, converting to a Roth is probably also questionable.
Converting everything is also potentially questionable because it reduces your flexibility.
People often do mega conversions when the market is low.
If you don't have heirs, then doing the conversion also might be pointless.
If you convert the whole thing at once, expect a huge tax bill, but you will potentially avoid IRMMA in the future.
If you are planning on relocating to a state with no state income tax, I would not do a conversion until after the move.
If you are already old, converting to a Roth is probably also questionable.
Converting everything is also potentially questionable because it reduces your flexibility.
People often do mega conversions when the market is low.
If you don't have heirs, then doing the conversion also might be pointless.
3
zzyzzx
2024 Apr 18, 9:19am
zzyzzx
2024 Apr 18, 9:19am
clambo says
Hence my if you are old comment.
Conversion to a Roth IRA is probably not really worth it if you will spend the money in 5-10 years.
Hence my if you are old comment.
4
HeadSet
2024 Apr 18, 9:47am
HeadSet
2024 Apr 18, 9:47am
clambo says
Will your RMD on the Traditional IRAs put you in this category? Traditional IRAs still grow tax free.
I'm checking tax rates or "tax brackets" and will judiciously avoid getting into the 32% bracket (above $191,950 filing as single).
For married, the number is $383,900.
Will your RMD on the Traditional IRAs put you in this category? Traditional IRAs still grow tax free.
5
clambo
2024 Apr 18, 11:10am
A traditional IRA grows "tax-deferred", not tax free; you are taxed on your distributions someday.
Someone said it's a joint account with Uncle Sam; he also decides how big a cut he'll take from it.
My RMDs will probably not put me up to $191,950.
My RMDs are 4 or 5 years away.
I'm going to convert probably $10,000 or so each year for the next few years.
The conversion is most useful if you're able to let it ride for 10 years or so; that way compounding has had time to work.
Should I convert at age 80? Probably not, unless I want to never spend it for some reason.
I'm gambling that I live as long as my father (96).
Someone said it's a joint account with Uncle Sam; he also decides how big a cut he'll take from it.
My RMDs will probably not put me up to $191,950.
My RMDs are 4 or 5 years away.
I'm going to convert probably $10,000 or so each year for the next few years.
The conversion is most useful if you're able to let it ride for 10 years or so; that way compounding has had time to work.
Should I convert at age 80? Probably not, unless I want to never spend it for some reason.
I'm gambling that I live as long as my father (96).
Roth IRAs have not been around as long as traditional IRAs nor 401ks.
So, I like others have significant traditional IRA balances.
I'm presently wrestling with the idea of how much of my IRA to convert to a Roth IRA.
Two features of Roth are attractive; it's growing tax free, and you have no Required Minimum Distribution (age 73) as with a traditional IRA.
A Roth conversion is a "taxable event"; the amount you convert from your IRA is reported on a 1099 and taxed as income.
I'm checking tax rates or "tax brackets" and will judiciously avoid getting into the 32% bracket (above $191,950 filing as single).
For married, the number is $383,900.
The only investment about as good as the Roth IRA is the Health Savings Account, because it's deductible and tax free if you use it for medical, dental, vision, etc.
Taxes, not the stock market fluctuations, are the greatest danger to your retirement finances. Avoid taxes as much as you can.