Tax gain harvesting or IRA to Roth conversion ?

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Tax gain harvesting or IRA to Roth conversion ?

Post by Blister » Mon Jan 22, 2018 3:48 pm

Having retired last year, I am delaying taking SS until 70. No earned income in 2018 though we have adequate moneys in taxable accounts until age 70. My thoughts were to use to the next couple of years to convert IRA money to Roth while in low tax bracket. But now Im also considering selling some equities with long term gains to get the 0 tax rate. Anything I am missing? The idea with the conversions was to keep me out of the 25% or 28% bracket once RMD kicks in.
Everthing works out in the end. If it doesn't then its not the end.

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Re: Tax gain harvesting or IRA to Roth conversion ?

Post by krow36 » Mon Jan 22, 2018 5:19 pm

What is your expected taxable income? Are you filing single or joint? Do you have a pension as well as large tax-deferred accounts and SS and so are worried about large RMDs and therefore a high bracket after age 70? If you are planning to spend in retirement first from your taxable account rather from your tax deferred or Roth accounts, I think I'd favor TGH over conversion to Roth.

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Re: Tax gain harvesting or IRA to Roth conversion ?

Post by retiredjg » Mon Jan 22, 2018 5:32 pm

Not enough information, but I would probably favor the Roth conversions if you have a very large tax-deferred account.

Long term capital gains have a VERY long and near uninterrupted history of being taxed at a lower rate than ordinary income. That benefit (including the 0% tax rate up to a certain point) is likely to be around awhile. Get Roth conversions out of the way to get your RMDs reduced (if that is likely to be an issue) and benefit from the favorable capital gains tax rate later.

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