Benefits (or not) of rolling funds from Trad IRA to aRoth

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Benefits (or not) of rolling funds from Trad IRA to aRoth

Postby singletond » Fri Feb 01, 2013 4:48 pm

We are obliged to take MRDs and these grow to a large % in later years. If one stays in the same tax bracket for a long time, is it worth rolling funds from trad. IRA to a Roth and pay the income tax now, rather than wait and pay the higher income tax on very large MDRs later?

I assume that rolling only sufficient funds to bring taxable income up to the top of one's tax band would be beneficial. Does anyone know of authoritive articles on this topic?

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Re: Benefits (or not) of rolling funds from Trad IRA to aRot

Postby MN Finance » Fri Feb 01, 2013 5:13 pm

If you're already at RMD age then converting is of a nominal benefit since the assumption is that you can't convert much above the RMD and stay in current brackets. There's a lot more that goes into the answer so it's hard to tell from the data you provided.
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Re: Benefits (or not) of rolling funds from Trad IRA to aRot

Postby BL » Fri Feb 01, 2013 5:22 pm

I don't think "rolling" is the correct term. Maybe it is converting.

We do this, I am not positive it is going to pay off but it may very well pay off. Also, it should benefit our heirs.

Also, I have decided to use the QCD (Qualified Charitable Distribution) this year for most non-minor charitable contributions( since we don't itemize) rather than limit it to RMD amount. Again, not positive it will help, but I think it will, since we will then contribute that much to our taxable account rather than "blow" it. I used the QCD last year for my RMD amount so it will not be taxed.

Not only do the %s increase with age, there is a likelihood of one survivor of a married couple being in a higher tax bracket if income is not cut exactly in half.

Keeping more/most of fixed income in the IRA rather than elsewhere may keep it from growing as fast as the other accounts. That seems to be recommended in the Wiki.
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Re: Benefits (or not) of rolling funds from Trad IRA to aRot

Postby kaneohe » Fri Feb 01, 2013 8:14 pm

If you're already taking RMDs, remember that you have to take the RMD before doing any conversions........and since all of your TIRAs are considered to be 1 big TIRA, you need to fulfill that RMD for all TIRAs before doing any conversions.
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