February 28, 2019 at 11:34 pm #2454b1_leeParticipant
My wife and I are near 68, retired and collecting SSA benefits. We have more than 1 MM in traditional IRAs and our AGI exceeds Medicare Part B and D threshold, thus paying much higher premiums because I have been converting IRA to Roth IRA annually while staying within my tax bracket.
I like to take advantage of 2018-2025 lower tax rate by converting as much IRA to Roth IRA annually and still stay within the 24% rate. My goals are pay lowest life time tax, pass big Roth IRA to children, and pay lowest life time Medicare premiums.
My wife wants to pay the least tax now and defer much to the future.
Who is more correct and have we missed something?March 1, 2019 at 1:59 pm #2456kaneoheParticipant
Seems to be a complex problem where gut feeling and intuition must be replaced by lifetime long spreadsheets to prove which is better. 1M in TIRAs would produce initially 40K in RMDs (if both same age, or if owned mostly by one). The 24% bracket is 150K wide so conceivably you would be in the same bracket then if you didn’t convert….at least initially so perhaps you are paying IRMAA for 5 yrs that you didn’t need to.
Are your kids in lower or higher bracket than you?
The general rule is if tax bracket will be lower in retirement (w/RMDs) that favors not converting now. If tax bracket will be higher in retirement (w/RMDs), that favors converting now. If tax bracket will be the same, things are fairly even w/ a slight edge to Roth over time.
So maybe it’s a tie in your case…….w/ the kids brackets a possible tie-breaker……….but again this is just gut feel not a spreadsheet.
March 3, 2019 at 12:39 am #2473b1_leeParticipant
- This reply was modified 2 years, 6 months ago by kaneohe.
My older child could be in my tax bracket in 5-10 years. The young one probably will be 15-20 years. They are 5 years apart.
My other goal is have them stretch on their inherit IRAs. Taking minimum RMDs annually based on their ages and allow further defer of Roth principles. Also, don’t want to contribute increase to their annual AGIs.March 3, 2019 at 1:15 am #2474kaneoheParticipant
Both inherited TIRAs and Roths can be stretched so that would be a secondary factor though Roth seems at a slight advantage over time if conversion tax rate and withdrawal tax rates are the same. I assume you’re paying conversion taxes from taxable funds, not the IRA?
Still, seems like you need to get a quantitative calculation over time that will depend on the assumptions you make re: future tax rates. I’m guessing you’ll end up somewhere in the middle with not enough time to convert everything before RMDs start
You might want to get Alan S.’s take on this. Post in the Retirement forum here at fairmark.com.June 17, 2021 at 2:21 pm #61204groupbuyanytoolsParticipant
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