Extra year-end cash from RMD
Extra year-end cash from RMD
I think I will have around $5,000 in cash after taking my RMD for this year. I see two options: (1) put the $5,000 in a taxable account, maybe Total Stock Market; (2) convert $20,000 from my traditional IRA to my Roth IRA and use the $5,000 to pay the tax. My marginal tax rate is 25%. Which of the two options would you recommend? Or do you have a third option for me to consider? Thanks.
Re: Extra year-end cash from RMD
Will converting subject more of your social security income to taxation?
- cheese_breath
- Posts: 11786
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Re: Extra year-end cash from RMD
Unless there's something I don't know, if he's in the 25% bracket he is already paying taxes on 85% of his SS.furwut wrote:Will converting subject more of your social security income to taxation?
But another question might be, would converting $20,000 to a Roth IRA move him up into the next bracket?
The surest way to know the future is when it becomes the past.
Re: Extra year-end cash from RMD
What is your taxable income subtracting out QDIV/LTCG?........single/MFJ? Trying to determine if you are really in the 25% bracket for ordinary income. If you are in the 25% bracket including QDIV/LTCG but not w/o them, then an increase in ordinary income could have a marginal tax rate of 30% to the extent of the QDIV/LTCG in the 15% bracket.
Will the addition of the 20K to income subject you to IRMAA......the increase in Medicare B/D premiums?
If no side effects occur, it would seem to be the usual Roth conversion question where, if tax rates for conversion or TIRA withdrawal are the same, the Roth wins by the amount of taxation on the taxable account.
Will the addition of the 20K to income subject you to IRMAA......the increase in Medicare B/D premiums?
If no side effects occur, it would seem to be the usual Roth conversion question where, if tax rates for conversion or TIRA withdrawal are the same, the Roth wins by the amount of taxation on the taxable account.
- Epsilon Delta
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Re: Extra year-end cash from RMD
You don't have to decide now. You can convert the $20k to a Roth. Then you have until Oct 15 2014 to figure out what all the side effects on your taxes are. If you don't like them you can recharacterize and invest the $5000 in a taxable account. You can even partially recharacterize if you find that you can convert $10k before you move up a bracket.
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Re: Extra year-end cash from RMD
Go offroad racing in Mexico.
Re: Extra year-end cash from RMD
If Congress renews the QCD (Qualified Charitable Distribution) you could give some/all of your RMD to charities (check made out to Charity, sent to you to distribute). You could do that this year (up to $100,000) if you choose, but it sounds like your problem is too much cash laying around. There is no harm in putting your cash in taxable stock indexes or I-Bonds, munis, CDs, etc.
I would hesitate to put it into Roth unless it is for heirs or the surviving spouse anticipates a higher tax bracket.
I would hesitate to put it into Roth unless it is for heirs or the surviving spouse anticipates a higher tax bracket.