recently retired -- should I move $7K from brokerage to a Roth IRA?

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miket29
Posts: 227
Joined: Tue Jun 20, 2017 9:07 pm

recently retired -- should I move $7K from brokerage to a Roth IRA?

Post by miket29 »

I have both tax-deferred and regular brokerage accounts. In past years I couldn't contribute to a Roth IRA due to exceeding the MAGI limit but this year I am eligible since I retired in March and my income is under the limit. I have enough earned income this year to make a full Roth IRA contribution of $7K.

What I'm thinking of doing is selling $7K from my regular brokerage account, choosing something like a bond fund with very low unrealized gain, and then putting the money into a Roth IRA account as a 2021 contribution. It makes sense to me, but thought it would be a good idea to check if there are any downsides I haven't considered.
Silk McCue
Posts: 5223
Joined: Thu Feb 25, 2016 7:11 pm

Re: recently retired -- should I move $7K from brokerage to a Roth IRA?

Post by Silk McCue »

That is a reasonable thing to do. However, since your income is lower you MAY be better off performing a Roth conversion and paying the taxes with the funds from your taxable account. It all depends on your financial plan and income details.

Cheers
SuzBanyan
Posts: 485
Joined: Thu Jun 02, 2016 11:20 am

Re: recently retired -- should I move $7K from brokerage to a Roth IRA?

Post by SuzBanyan »

Silk McCue wrote: Wed Apr 07, 2021 11:42 am That is a reasonable thing to do. However, since your income is lower you MAY be better off performing a Roth conversion and paying the taxes with the funds from your taxable account. It all depends on your financial plan and income details.

Cheers
No reason not to make the Roth contribution and look into doing Roth conversions as well. Roth conversion income does not count toward the income limit for Roth contributions.
Silk McCue
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Joined: Thu Feb 25, 2016 7:11 pm

Re: recently retired -- should I move $7K from brokerage to a Roth IRA?

Post by Silk McCue »

SuzBanyan wrote: Wed Apr 07, 2021 11:53 am No reason not to make the Roth contribution and look into doing Roth conversions as well. ...
That isn't necessarily true. As I stated "It all depends on your financial plan and income details." We do not know the OP's specific details.

If choosing to contribute $7k to a Roth and paying the taxes out of their taxable brokerage account to perform an "optimal conversion", based upon their particular details, left them with a lower balance in their taxable account than they felt comfortable with then maybe they shouldn't. If they have a large taxable account and performing an "optimal conversion" and contributing $7k to a Roth is of no concern for the remaining balance then they could do both.

If the OP wanted to share their details in the format used for portfolio review and recommendations then other well respected contributors on this forum could provide them with more targeted feedback and recommendations.

Cheers
suemarkp
Posts: 495
Joined: Sun Nov 12, 2017 8:18 pm
Location: Somewhere in WA State

Re: recently retired -- should I move $7K from brokerage to a Roth IRA?

Post by suemarkp »

To me a taxable to roth movement (contribution) is a no brainer. If your income is low enough this year that the capital gains would be zero, do it. Even if you are paying 15% on the gains it is worth it because you will be paying that capital gain tax at some point.

Even if you end up needing the money later and regret the contribution, you can withdraw the contribution with no penalty.
Mark | Somewhere in WA State
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