How much money should you convert to a Roth IRA and when should you convert? Today we look at a customer that was trying to figure out how much to convert with the standard deduction so they could fill up the 12% tax bracket and retire next year.
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Thank you for your work
Im 35 years old with a SIMPLE IRA. I invest 13% and my employer invests 3%… i have been converting into a Roth because I feel over time taxes will be higher and also I like that I can take early distributions in a worse case scenario… 😬
Also i have a vanguard Roth IRA where i auto invest $50.00 bi weekly into VTSAX
I agree with that. Plus all your gains will belong to you no tax . And you can get your contributions if you need them…. I’m in the same boat at42. Im hoping to convert all mine to roth as advantageous tax allows
@John Brewer thats awesome! I pay attention to our monitary policy and considering the current global monitary situation I believe inflation and taxes will go up in my lifetime.
I am starting Roth conversions this year as well. Playing with last years tax software to get some rough estimates of the damage. I have a couple years coming up in 2026-2027 which are going to create some IRMAA issues when older EE bonds reach maturity. Trying to reduce the RMD amounts that will hit about that same time! First world problems. . . . .
Great information, thank you. Merry Christmas
Great video!!! Keep them coming .
Thanks Dustin it is always easier to understand with the charts.
It’s all good . You have taught us well and we are good on own.
Love the videos can you guys work with retirement funds held in another country that needs bringing to the states
Could you tell me if ‘ 401K rollover to IRA convert to Roth IRA’ is considered a 401K distribution? Or is it an IRA distribution? If it’s an IRA distribution, then for someone who is older than 70.5 years old, will he or she have to take a separate 401K distribution in addition to the 401K – IRA – Roth?
I am starting Roth conversions this year in 2021. Doing the same…trying to keep it in the 12% tax bracket.
Nice exercise! As this scenario involved someone who was probably on Medicare, I feel that this presentation should have also discussed potential Medicare surcharges (Income Related-Monthly Adjustment Amount, or IRMMA) because that can be significant. If you go into the next tax bracket you only pay tax on each additional dollar but with IRMAA if you go even $1 dollar into the next IRMMA bracket you go into a whole new category of Medicare premiums. Check it out, folks. Also, note that Medicare premiums are based upon a two year lookback at your tax forms, so you need to think about this two years before you hit Medicare.
If you convert too much from Traditional —> Roth IRA and make your AGI go over the limit in that year for contributing to Roth IRA ($140k single / $208k married), would your Roth IRA contributions be voided for that year, or how does that work?
Thank for the imagine video. I am over 60. Does The amount $ converting from 401K or traditional IRA to Roth IRA has to be the same for every year? Or this amount can be varied?
Thank
Thanks, very useful. I want to stay within the 12% and I should soon know how much other taxable income I’ll have this year, so I’ll know how much to move. But, when is it advisable to move into the 22% rate, if you doubt you’ll earn more than the top for that rate ($171,050, married) in retirement, even with rmd?
Good question, and good content, but maybe the explanation was a little long ?
Would the following equation be true ?
(__% tax bracket maximum amount) – (estimated taxable income on line 10) = maximum rollover amount
please advise, comments, etc, Thanks
I am “gearing up” to do some “chunking” over a 4 year period. Question: If my adjusted gross comes in a little higher then anticipated (hard to estimate returns on mutual funds), do I owe the higher tax rate on ALL of my income for that year, or only the portion over the bracket amount?
You only owe taxes on the amount over the bracket. But be very careful if you are on Medicare not to go over the amount for IRMAA which is a huge premium increase on Medicare.
@Joyce W. Thank you!
jazzMAN – I am started Roth conversions 3 years ago. And you were right nobody’s talking about the withdrawal strategies. And withdrawal strategies are probably as important as the saving strategy. Ok that said, because I am 100% nervous about the future of taxing Roth by the government (it is not IF but is WHEN). When they start taxing I am making a relative low risk assessment that all current Roth plans will be grandfathered in. So, I’m trying to accelerate my conversions in down-markets knowing that I will pay higher taxes as the ‘cost of conversion’. My goal, and maybe it’s not feasible, is to be ±75% converted in the next 5 to 10 years. Now from my question: can your software help me track all my portfolio and items? e.g., actual performance, and a forecasted performance perspective. It looks like it might but I’m not 100% sure. I will be tracking income, traditional IRA, Roth IRA, taxable brokerage account, add real estate values. Does your software handle all that? If yes where can I get it?
I like how you used a real world example. Take away for everyone is you have to make a specific calculation to your own situation. My opinion-Roth conversions should be a strategy for many unless you believe the rate the government taxes us will go down. Also, your own taxable income may not go down to a lower tax bracket in retirement when RMDs are factored in and/or you have a pension like civilian or military retirees.
What was the name of the software package you use to run the scenario. I believe you said Nest Egg. Can you provide a link for this?
Nice job 👌👍