Help Please - ROTH Conversion Advice

[VVenti7401]

Hello Everyone,

I am hoping the brain trust here can assist me on deciding what to do in my current situation. My wife and I just recently have been gifted $26,000 and I am thinking about utilizing all of it to do a ROTH Conversion but want to make sure its actually the best thing to do with the money and that I'm not doing something thats not best use of the money. I am looking at converting an IRA account currently valued at about $76,000. I imagine you would need as much information about my finances as possible to answer the question, so hopefully the information below is enough:

Filing Status: Married Filing Joint (My Age is 40 / My wife 37)
Residence: NYC
Employment: My wife and I are both Federal Employees and will recieve a pension upon retirement
Dependent: 1 (Age 4)
Total Annual Wages: $264,000 (My Salary $193,500 / Wife 70,500 - this salary will increase to 101,00 over the next 3 years)
Primary Residence: Valued at 1.35 million / Mortgage balance of $378k @ 2.5% with 15 years remaining)

Cash Savings Emergency Fund: $95,000 in a high yield savings earning 4.75% (We are able to save about $1,300 a month after bills)
529 Account: $94,000 (We are currently contributing $550 per month)
401k Combined Balance: $388,000 (My wife and I both get a 5% match - I contribute $23,000 per year and my wife does 12% of salary)
ROTH Account: $28,000
Traditional IRA Accounts: Total $237,000 (Account 1 = 125k / Account 2 = 76k / Account 3 = 36k)

2023 Tax Information:

AGI: 180K
Taxable Income: 152k
Effective Federal Tax Rate shown on Turbo Tax: 11.94%

My salary went up by about $11k this year compared 2023 and my wife's increased about 8k.


It seems to convert the entire IRA Account valued at 76k will run me about $23,000? I'm figuring sending a check to the IRS of $15,200 (20%) and to NYC of $7,600 (10%). Hoping to get some advice if this seems right and if its a smart thing to do all things considered with my situation. Thank you all in advance!

[Watty]

Total Annual Wages: $264,000....
.....
2023 Tax Information:

AGI: 180K
Taxable Income: 152k
Effective Federal Tax Rate shown on Turbo Tax: 11.94%

You need to focus on your marginal tax bracket and what your final tax bill will be for doing the Roth conversion. I did not follow your numbers but I suspect that you may be in the 22% federal tax bracket and as I recall NY state and NYC taxes are pretty high.

The best way to do that is to do a dummy tax return to get a firm number. It will not be exact but you can use last years tax software or wait until December when the preliminary versions of the 2025 tax software comes out. That would also include state and NYC income taxes. When you get the dummy tax return created you can try increasing or decreasing your income by $100 to see the combined marginal tax rate. This will also pick up other things like NIIT or income based tax credit phase outs.

The 22 and 24 percent federal tax brackets are scheduled to revert to 25 and 28% in 2026.

If I was in your situation then to me it looks like the best case scenario is that you do Roth conversion in the 22% federal tax bracket(plus state taxes) now and the in 30+ years you avoid making traditional IRA withdrawals in the 28% federal tax bracket. That is only a 6% saving which to me is not enough incentive to pay taxes decades before you need to.

Under the current tax laws you may be able to do Roth conversions in the 12 or 15 percent federal after you retire which would be a lot more attractive.

I would not do the Roth conversions.

Total Annual Wages: $264,000 (My Salary $193,500 / Wife 70,500 - this salary will increase to 101,00 over the next 3 years)
.......
401k Combined Balance: $388,000 (My wife and I both get a 5% match - I contribute $23,000 per year and my wife does 12% of salary)

Your wife is only contributing $8,400 a year to her 401k now.

I would suggest that you use the money to increases her 401k contributions to also contribute $23K a year too. You cannot do that directly but she could increase her payroll 401k withholding by $1,000 a month and then use about $750 a month from the gift to pay for your living expenses. That assumes that you are in a combined 25% tax bracket which is why the $750 is $250 lower. Those are rough round numbers so you would need to play with them to figure out how to max out the 401k.

You could put a lot more into the 401k before the end of 2024 and then also do more in 2025.

[Dufus]

You listed AGI. Modified AGI is what determines the amount of Roth contribution you can make. Do you also make T-IRA contributions?

https://www.irs.gov/retirement-plans/pl ... e-for-2024

I had some unexpected pension income from an inheritance and along with my conversion it pushed me over the limit to make a Roth contribution. I had to reverse the contribution. OOPS.

I wish I was thinking about Roth conversions at 40...

[plog]

Why? What's prompted you to consider this? What do you think doing this will help accomplish?

Just from a tax/math perspective it doesn't seem like the right thing. Your locking in your tax on this money at a high marginal rate (different and more important to this discussion than total tax rate).

Again, why?

[Katietsu]

Your wife is only contributing $8,400 a year to her 401k now.

I would suggest that you use the money to increases her 401k contributions to also contribute $23K a year too. You cannot do that directly but she could increase her payroll 401k withholding but $1,000 a month and then use about $750 a month from the gift to pay for your living expenses. That assumes that you are in a combined 25% tax bracket which is why the $750 is $250 lower. Those are rough round numbers so you would need to play with them to figure out how to max out the 401k.

You could put a lot more into the 401k before the end of 2024 and then also do more in 2025.

If either have access to a Roth 401k, they could even use that for the additional contributions if they want more Roth money.

[VVenti7401]

Why? What's prompted you to consider this? What do you think doing this will help accomplish?

Just from a tax/math perspective it doesn't seem like the right thing. Your locking in your tax on this money at a high marginal rate (different and more important to this discussion than total tax rate).

Again, why?

The reason I considered doing this now is based on a few things (not saying it’s right that’s why I’m reaching out for input):

1. Converting earlier allows me more time to have the ROTH Conversion grow (and remain) tax free.

2. The tax cuts are expected to expire in 2026, and although anything technically “can” happen, I rather go by what is a known quantity and presently that’s what’s supposed to happen.

3. My wife and I will continue to have our salaries grow, thereby increasing our tax brackets further down the road making this more costly to do.

4. With presently having 628k in 401k / Traditional IRA money vs under 30k in ROTH I’m very lopsided. If this grows to be a sizable pretax nest egg, combined with social security income for both of us, and two pensions I fear my tax bracket may not actually be that “low” in retirement.

[VVenti7401]

You listed AGI. Modified AGI is what determines the amount of Roth contribution you can make. Do you also make T-IRA contributions?

https://www.irs.gov/retirement-plans/pl ... e-for-2024

I had some unexpected pension income from an inheritance and along with my conversion it pushed me over the limit to make a Roth contribution. I had to reverse the contribution. OOPS.

I wish I was thinking about Roth conversions at 40...

Thanks for the advice, I’ll try that! No, presently we don’t make any T-IRA contributions. Within 3 years I should have my wife at or close to contributing the max as I do in her 401k. I figured plowing even more money into pre-tax at this stage may not be as beneficial and utilizing some cash to convert into ROTH.

[VVenti7401]

Your wife is only contributing $8,400 a year to her 401k now.

I would suggest that you use the money to increases her 401k contributions to also contribute $23K a year too. You cannot do that directly but she could increase her payroll 401k withholding but $1,000 a month and then use about $750 a month from the gift to pay for your living expenses. That assumes that you are in a combined 25% tax bracket which is why the $750 is $250 lower. Those are rough round numbers so you would need to play with them to figure out how to max out the 401k.

You could put a lot more into the 401k before the end of 2024 and then also do more in 2025.

If either have access to a Roth 401k, they could even use that for the additional contributions if they want more Roth money.

Yes we both actually do have that as an option. I was thinking about doing that as well. I just figured since that’s always on the table as an option but current tax rates are not (set to roll back in 26) I thought conversion may be the better option.

[Katietsu]

Your wife is only contributing $8,400 a year to her 401k now.

I would suggest that you use the money to increases her 401k contributions to also contribute $23K a year too. You cannot do that directly but she could increase her payroll 401k withholding but $1,000 a month and then use about $750 a month from the gift to pay for your living expenses. That assumes that you are in a combined 25% tax bracket which is why the $750 is $250 lower. Those are rough round numbers so you would need to play with them to figure out how to max out the 401k.

You could put a lot more into the 401k before the end of 2024 and then also do more in 2025.

If either have access to a Roth 401k, they could even use that for the additional contributions if they want more Roth money.

Yes we both actually do have that as an option. I was thinking about doing that as well. I just figured since that’s always on the table as an option but current tax rates are not (set to roll back in 26) I thought conversion may be the better option.

I would find the change in tax rates, potentially, in 2026 to be relevant if you were older. But, you have decades before this money is going to be spent. The tax code is going to change many times between now and then that this is all guesswork. I am with Watty. My “guess” would be to not convert but to get more into the tax advantaged accounts. Using the Roth 401k for the additional contribution since you expect pension income and already have a solid traditional account would a reasonable way to diversify a bit.

[Rocky Mtn Man]

Cash Savings Emergency Fund: $95,000 in a high yield savings earning 4.75% (We are able to save about $1,300 a month after bills)

Have you thought about using a treasury money market, or a rolling T-bill ladder for your emergency fund? It would save on state and local taxes. I know, not relevant to your original question.

[Watty]

There is a wiki on choosing between a Roth and Traditional retirement account.

https://www.bogleheads.org/wiki/Traditional_versus_Roth

I did not add it up but just eyeballing the numbers it looks like excluding home equity and the 529 that the OP has somewhere around $750K in investments. That is great but the OP is a long way from being in high retirement tax brackets. At 37 and 40 they are also a long way from collecting a large pension and the may not ever collect what they are hoping for.

I was lucky but when I was going through my 50s I saw more people than I would have expected run into things like layoffs, other career setbacks, job burnout, divorce, health problems, the death of a spouse, retiring at a bad time like during the dot com bust or 2008 financial crisis, and other things which caused them to have less in retirement and to be in a lower tax bracket than hoped for.

If you get into retirement and lots of money and tax worries part of the reason was that you were lucky to not have run into some setback.

You also need to be careful about overestimating your retirement income needs at different. Under current tax laws a couple can have over $100K in taxable income and still be in the 12 percent federal tax bracket. If you have a paid off house, kids that are launched, no more retirement savings, no more FICA taxes, etc. There will be other new expenses in retirement but $100K may be enough for a pretty high end lifestyle. Even in NYC if you have a paid off home $100K a year may be enough for a comfortable retirement.

Your income needs will also be different at different phases of retirement. I have seen relatives get to be in about their mid 70s and naturally slow down even though they were in relatively good health for their age. At that point they did not want to travel much and even an evening out was a rare event. During that phase their spending went way down and there were some months when they did not even spend their entire Social Security checks.

Later in retirement if long term care is ever needed they you may have large medical deductions which will help keep you in a low tax bracket.

Doing Roth conversions in a high tax bracket requires a compelling case and I do not see one.

[celia]

I agree with VVenti's original thinking but would adjust it a bit.

He and his wife are moving up the income scale, contributing more to tax-deferred each year until she maxes out her 401K, and they already have $725K in tax-deferred but only $28K in Roth. They are in the 22% tax bracket even after taking into account their $19K increase in wages this year (with a lot more expected within 3 years). Eventually, they will need to change to the Backdoor Roth, but should clear out their traditional IRAs before then. (Yes, I know they can probably move them to the 401Ks, which OP should confirm now.)

When they retire, they will appreciate a little more balance between tax-deferred and Roth as some people I was helping earlier would have appreciated:
Roth conversions to 32%, 35% tax bracket?

It's a shame the OP in that thread did all the tax-deferring while working in the 12% tax bracket and has more in tax-deferred now than he/she can ever convert.

Here's my adjustments to OP's numbers (all being estimates):

$152K (2023 AGI)
$19K (2024 wage increase)
--------
$171K ($30K below the top of the 22% tax bracket for MFJ)
+$76K (Roth conversion)
--------
$247K (solidly in the 24% tax bracket for MFJ)

It seems to convert the entire IRA Account valued at 76k will run me about $23,000? I'm figuring sending a check to the IRS of $15,200 (20%) and to NYC of $7,600 (10%).

Some of this conversion will be taxed in the 22% bracket but more than half in the 24% bracket. I would send the IRS $18K. (Not familiar with NYC or State.)

I think VVenti should go for the Roth conversion and be sure everything in Roth is in stock funds. The $76K is going to compound wherever it is. So I would want to look forward to many years of compounding in a Roth.

[VanGar+Goyle]

Filing Status: Married Filing Joint (My Age is 40 / My wife 37)
Residence: NYC
Employment: My wife and I are both Federal Employees and will receive a pension upon retirement
Total Annual Wages: $264,000 (My Salary $193,500 / Wife 70,500 - this salary will increase to 101,00 over the next 3 years)

401k Combined Balance: $388,000 (My wife and I both get a 5% match - I contribute $23,000 per year and my wife does 12% of salary)
Traditional IRA Accounts: Total $237,000

AGI: 180K
Taxable Income: 152k

It seems to convert the entire IRA Account valued at 76k will run me about $23,000? I'm figuring sending a check to the IRS of $15,200 (20%) and to NYC of $7,600 (10%). Hoping to get some advice if this seems right and if its a smart thing to do all things considered with my situation. Thank you all in advance!

With about 45 years to live, and perhaps 25 more years of earnings, it is a guess, but
if you are now in the 22% Federal Marginal income tax bracket, only 2 years saved so far in tax-deferred, growing income and a pension,
it could go either way. The NYC and NY income tax are additional variables. But if you believe that you will be in the 25% and 28% brackets going forward, then your plan seems reasonable, if you can fill the 22% bracket next year. If you plan to work to age 75, then fully converting your current traditional IRAs this year and next year looks promising. If you plan to retire early and not get a full pension, then prepaying income taxes at your highest rate is a poor choice.

[Exchme]

Since you are fairly young, your salaries and tax brackets are likely to grow, so conversion now absolutely makes sense.

I would target getting the traditional IRAs of one of you and get those zeroed out. Then in the future, that person can make backdoor Roth contributions.

[VVenti7401]

Total Annual Wages: $264,000....
.....
2023 Tax Information:

AGI: 180K
Taxable Income: 152k
Effective Federal Tax Rate shown on Turbo Tax: 11.94%

You need to focus on your marginal tax bracket and what your final tax bill will be for doing the Roth conversion. I did not follow your numbers but I suspect that you may be in the 22% federal tax bracket and as I recall NY state and NYC taxes are pretty high.

The best way to do that is to do a dummy tax return to get a firm number. It will not be exact but you can use last years tax software or wait until December when the preliminary versions of the 2025 tax software comes out. That would also include state and NYC income taxes. When you get the dummy tax return created you can try increasing or decreasing your income by $100 to see the combined marginal tax rate. This will also pick up other things like NIIT or income based tax credit phase outs.

The 22 and 24 percent federal tax brackets are scheduled to revert to 25 and 28% in 2026.

If I was in your situation then to me it looks like the best case scenario is that you do Roth conversion in the 22% federal tax bracket(plus state taxes) now and the in 30+ years you avoid making traditional IRA withdrawals in the 28% federal tax bracket. That is only a 6% saving which to me is not enough incentive to pay taxes decades before you need to.

Under the current tax laws you may be able to do Roth conversions in the 12 or 15 percent federal after you retire which would be a lot more attractive.

I would not do the Roth conversions.

Total Annual Wages: $264,000 (My Salary $193,500 / Wife 70,500 - this salary will increase to 101,00 over the next 3 years)
.......
401k Combined Balance: $388,000 (My wife and I both get a 5% match - I contribute $23,000 per year and my wife does 12% of salary)

Your wife is only contributing $8,400 a year to her 401k now.

I would suggest that you use the money to increases her 401k contributions to also contribute $23K a year too. You cannot do that directly but she could increase her payroll 401k withholding by $1,000 a month and then use about $750 a month from the gift to pay for your living expenses. That assumes that you are in a combined 25% tax bracket which is why the $750 is $250 lower. Those are rough round numbers so you would need to play with them to figure out how to max out the 401k.

You could put a lot more into the 401k before the end of 2024 and then also do more in 2025.

Thanks for the input Watty, you gave a lot for me to think about as another option and I appreciate you laying it out the way you did.

[VVenti7401]

Filing Status: Married Filing Joint (My Age is 40 / My wife 37)
Residence: NYC
Employment: My wife and I are both Federal Employees and will receive a pension upon retirement
Total Annual Wages: $264,000 (My Salary $193,500 / Wife 70,500 - this salary will increase to 101,00 over the next 3 years)

401k Combined Balance: $388,000 (My wife and I both get a 5% match - I contribute $23,000 per year and my wife does 12% of salary)
Traditional IRA Accounts: Total $237,000

AGI: 180K
Taxable Income: 152k

It seems to convert the entire IRA Account valued at 76k will run me about $23,000? I'm figuring sending a check to the IRS of $15,200 (20%) and to NYC of $7,600 (10%). Hoping to get some advice if this seems right and if its a smart thing to do all things considered with my situation. Thank you all in advance!

With about 45 years to live, and perhaps 25 more years of earnings, it is a guess, but
if you are now in the 22% Federal Marginal income tax bracket, only 2 years saved so far in tax-deferred, growing income and a pension,
it could go either way. The NYC and NY income tax are additional variables. But if you believe that you will be in the 25% and 28% brackets going forward, then your plan seems reasonable, if you can fill the 22% bracket next year. If you plan to work to age 75, then fully converting your current traditional IRAs this year and next year looks promising. If you plan to retire early and not get a full pension, then prepaying income taxes at your highest rate is a poor choice.

Thanks for your insight. I do believe I will be 25% and 28% bracket going forward. My wife’s expected salary increases are just what her current position entitles her too. I have no reason to doubt she will continue to progress in her federal career as I did and continue to even higher earnings over the approximately 100k she will reach over the next couple of years.

I also don’t anticipate retiring early. I’m fortunate where my position / type of work allows for full time work at home. I’m healthy and both my wife and I do our best to maintain a healthy lifestyle. I could get hit by a bus tomorrow of course so nobody ever knows for sure but I would say yes I plan to have a long career ahead of me if the choice is mine.

[VVenti7401]

I agree with VVenti's original thinking but would adjust it a bit.

He and his wife are moving up the income scale, contributing more to tax-deferred each year until she maxes out her 401K, and they already have $725K in tax-deferred but only $28K in Roth. They are in the 22% tax bracket even after taking into account their $19K increase in wages this year (with a lot more expected within 3 years). Eventually, they will need to change to the Backdoor Roth, but should clear out their traditional IRAs before then. (Yes, I know they can probably move them to the 401Ks, which OP should confirm now.)

When they retire, they will appreciate a little more balance between tax-deferred and Roth as some people I was helping earlier would have appreciated:
Roth conversions to 32%, 35% tax bracket?

It's a shame the OP in that thread did all the tax-deferring while working in the 12% tax bracket and has more in tax-deferred now than he/she can ever convert.

Here's my adjustments to OP's numbers (all being estimates):

$152K (2023 AGI)
$19K (2024 wage increase)
--------
$171K ($30K below the top of the 22% tax bracket for MFJ)
+$76K (Roth conversion)
--------
$247K (solidly in the 24% tax bracket for MFJ)

It seems to convert the entire IRA Account valued at 76k will run me about $23,000? I'm figuring sending a check to the IRS of $15,200 (20%) and to NYC of $7,600 (10%).

Some of this conversion will be taxed in the 22% bracket but more than half in the 24% bracket. I would send the IRS $18K. (Not familiar with NYC or State.)

I think VVenti should go for the Roth conversion and be sure everything in Roth is in stock funds. The $76K is going to compound wherever it is. So I would want to look forward to many years of compounding in a Roth.

Thanks Celia - if I was to do this I would have kept the same investment. Currently the whole IRA I’m looking to convert is in VTI.

[Wiggums]

I would max out 401k. Your tax deferred is not too large at this point.

[Jack FFR1846]

I would say that the only reason NOT to do Roth conversions here would be if you plan to move out of NYC (high city tax) to a non-income tax state like New Hampshire (high NY State tax, zero NH income tax) where Roth conversions become a Federal tax only issue.

Why to do these conversions.

Raising of the Federal tax rates in 2026
Future RMDs become income.
Future Social security becomes income.
Interest is income (those high yield savings accounts generate tax liability every year)
Taxable account dividends are income.
Get high enough in MAGI and Medicare cost goes up for both of you.
When one of you passes, the IRMAA income number goes down and tax rates go up.

With great help from Schwab's RMD calculator tool (google RMD Calculator), I put together my own spread sheet documenting by the year my tIRA balance, and DW's, social security income and predicted RMDs into the far future. In our case, we have about $3M in pre-tax IRAs and when we're both in RMD land, we would have to take about $300k out if we don't Roth convert. We are currently retired (where our working 22% tax rate is now 24%) and Roth converting up to just under the IRMAA limit. With the tax rates about to change, it would even make sense to do more and pay more tax and IRMAA for a couple years, but I've set this as what we're doing. I wish I understood this back in our working days. I would have only done the 401k to the match and continued with Roth and other investments. Even taxable seems better from an overall cost perspective now. Long term cap gains vs Federal and state tax on IRA withdrawals plus possible IRMAA penalties.

[GAAP]

I am hoping the brain trust here can assist me on deciding what to do in my current situation. My wife and I just recently have been gifted $26,000 and I am thinking about utilizing all of it to do a ROTH Conversion but want to make sure its actually the best thing to do with the money and that I'm not doing something thats not best use of the money.

Some here will never do a Roth conversion, while others would always do one. Any interpretation of "best use" is likely to be fairly biased here.

Employment: My wife and I are both Federal Employees and will recieve a pension upon retirement

To include a pension in your planning, you should be both vested and old enough to claim it. Until then, it's a hoped-for future event with no degree of certainty. Don't plan on it, too many things can change in the interim.

You are young enough that the potential value of tax-free compounding may be in your favor -- but that is not a certainty. Start with this thread to get a better understanding: viewtopic.php?t=438720

Desire for charitable contributions upon death can also be a major factor -- do you have your estate plan figured out? With a child, that's essential -- and worth spending money on before you consider Roth conversions.

Full disclosure: we will finish our Roth conversion plans in 2026.

[celia]

I agree with VVenti's original thinking but would adjust it a bit.

He and his wife are moving up the income scale, contributing more to tax-deferred each year until she maxes out her 401K, and they already have $725K in tax-deferred but only $28K in Roth. They are in the 22% tax bracket even after taking into account their $19K increase in wages this year (with a lot more expected within 3 years). Eventually, they will need to change to the Backdoor Roth, but should clear out their traditional IRAs before then. (Yes, I know they can probably move them to the 401Ks, which OP should confirm now.) ...

Thanks Celia - if I was to do this I would have kept the same investment. Currently the whole IRA I’m looking to convert is in VTI.

That's good. VTI is all stocks. But you can change the holdings before or after a Roth conversion. No taxes to do that.

You can also convert $76K from another IRA instead or a combo of his and hers.

[smitcat]

Why? What's prompted you to consider this? What do you think doing this will help accomplish?

Just from a tax/math perspective it doesn't seem like the right thing. Your locking in your tax on this money at a high marginal rate (different and more important to this discussion than total tax rate).

Again, why?

The reason I considered doing this now is based on a few things (not saying it’s right that’s why I’m reaching out for input):

1. Converting earlier allows me more time to have the ROTH Conversion grow (and remain) tax free.

2. The tax cuts are expected to expire in 2026, and although anything technically “can” happen, I rather go by what is a known quantity and presently that’s what’s supposed to happen.

3. My wife and I will continue to have our salaries grow, thereby increasing our tax brackets further down the road making this more costly to do.

4. With presently having 628k in 401k / Traditional IRA money vs under 30k in ROTH I’m very lopsided. If this grows to be a sizable pretax nest egg, combined with social security income for both of us, and two pensions I fear my tax bracket may not actually be that “low” in retirement.

You can model all of your own numbers and goals with one of the more detailed calculators and review the results. Then you can take those basline runs and alter them to see what happens with the things that specifcally interests or concern you to see those results (one spouse early demise, portfolio performance, SS election ages,tax rate changes, etc). These will both work well for that....
RPM - fairly transparent, free, all ouputs needed to review, no auto optimize features, support is on a thread on this site
https://www.bogleheads.org/wiki/Retiree_Portfolio_Model
Pralana - not as transparent, $100 first year, all outputs needed to review, auto optimize fetaures like draw down strategy and Roth conversions, support is a manual , the owners, and a users group online
https://pralanaretirementcalculator.com/
Either one is going to take some time to setup/run/review and understand the first time. Runs after the baseline will come real quick after you get the feel for them. We prefer Pralana for a number of reasons but run both from time to time.
There is no way you will get valuable insight without doing your own runs or paying someone else to do them for you.
Hope this helps

[VVenti7401]

Why? What's prompted you to consider this? What do you think doing this will help accomplish?

Just from a tax/math perspective it doesn't seem like the right thing. Your locking in your tax on this money at a high marginal rate (different and more important to this discussion than total tax rate).

Again, why?

The reason I considered doing this now is based on a few things (not saying it’s right that’s why I’m reaching out for input):

1. Converting earlier allows me more time to have the ROTH Conversion grow (and remain) tax free.

2. The tax cuts are expected to expire in 2026, and although anything technically “can” happen, I rather go by what is a known quantity and presently that’s what’s supposed to happen.

3. My wife and I will continue to have our salaries grow, thereby increasing our tax brackets further down the road making this more costly to do.

4. With presently having 628k in 401k / Traditional IRA money vs under 30k in ROTH I’m very lopsided. If this grows to be a sizable pretax nest egg, combined with social security income for both of us, and two pensions I fear my tax bracket may not actually be that “low” in retirement.

You can model all of your own numbers and goals with one of the more detailed calculators and review the results. Then you can take those basline runs and alter them to see what happens with the things that specifcally interests or concern you to see those results (one spouse early demise, portfolio performance, SS election ages,tax rate changes, etc). These will both work well for that....
RPM - fairly transparent, free, all ouputs needed to review, no auto optimize features, support is on a thread on this site
https://www.bogleheads.org/wiki/Retiree_Portfolio_Model
Pralana - not as transparent, $100 first year, all outputs needed to review, auto optimize fetaures like draw down strategy and Roth conversions, support is a manual , the owners, and a users group online
https://pralanaretirementcalculator.com/
Either one is going to take some time to setup/run/review and understand the first time. Runs after the baseline will come real quick after you get the feel for them. We prefer Pralana for a number of reasons but run both from time to time.
There is no way you will get valuable insight without doing your own runs or paying someone else to do them for you.
Hope this helps

This looks like some great info, I really do appreciate you providing it. Thank you!

[smitcat]

Why? What's prompted you to consider this? What do you think doing this will help accomplish?

Just from a tax/math perspective it doesn't seem like the right thing. Your locking in your tax on this money at a high marginal rate (different and more important to this discussion than total tax rate).

Again, why?

The reason I considered doing this now is based on a few things (not saying it’s right that’s why I’m reaching out for input):

1. Converting earlier allows me more time to have the ROTH Conversion grow (and remain) tax free.

2. The tax cuts are expected to expire in 2026, and although anything technically “can” happen, I rather go by what is a known quantity and presently that’s what’s supposed to happen.

3. My wife and I will continue to have our salaries grow, thereby increasing our tax brackets further down the road making this more costly to do.

4. With presently having 628k in 401k / Traditional IRA money vs under 30k in ROTH I’m very lopsided. If this grows to be a sizable pretax nest egg, combined with social security income for both of us, and two pensions I fear my tax bracket may not actually be that “low” in retirement.

You can model all of your own numbers and goals with one of the more detailed calculators and review the results. Then you can take those basline runs and alter them to see what happens with the things that specifcally interests or concern you to see those results (one spouse early demise, portfolio performance, SS election ages,tax rate changes, etc). These will both work well for that....
RPM - fairly transparent, free, all ouputs needed to review, no auto optimize features, support is on a thread on this site
https://www.bogleheads.org/wiki/Retiree_Portfolio_Model
Pralana - not as transparent, $100 first year, all outputs needed to review, auto optimize fetaures like draw down strategy and Roth conversions, support is a manual , the owners, and a users group online
https://pralanaretirementcalculator.com/
Either one is going to take some time to setup/run/review and understand the first time. Runs after the baseline will come real quick after you get the feel for them. We prefer Pralana for a number of reasons but run both from time to time.
There is no way you will get valuable insight without doing your own runs or paying someone else to do them for you.
Hope this helps

This looks like some great info, I really do appreciate you providing it. Thank you!

It has worked really well for us the past 5-10 years or so.
The first run took us maybe 2 days of 3-4 hours each to setup/run and really understand the results. In comparison last year we wanted to 'test' 16 seperate possibilities and chart the results of all 16 to the baseline on a seperate chart and that took maybe 1-1/2 hours.
We found that when looking at variables the results are not intuitive - very interesting when you see the possible scenarios.

[tibbitts]

Filing Status: Married Filing Joint (My Age is 40 / My wife 37)
...
It seems to convert the entire IRA Account valued at 76k will run me about $23,000? I'm figuring sending a check to the IRS of $15,200 (20%) and to NYC of $7,600 (10%). Hoping to get some advice if this seems right and if its a smart thing to do all things considered with my situation. Thank you all in advance!

You're so young that you can't possibly calculate whether a conversion will benefit you or not, but given the amount you're suggesting, it probably won't have much effect... so you shouldn't worry about whatever you decide to do.