My Plan for Roth Conversion in December - Does This Make Sense?
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My Plan for Roth Conversion in December - Does This Make Sense?
I'm going to do a Roth IRA conversion in December, but I don't want to go to the time/expense of doing a tax analysis in advance to hit a specific bracket - too complicated. Rather, I'll convert a "safe" amount that I know is more than I will ultimately end up doing. Then, when I prepare my return and see my taxes in February or March I'll recharacterize back to an amount that keeps me within the bracket I've targeted. I'll do the Roth conversion into a new rIRA account, as recommended by Celia and other Roth IRA mavens here.
I want to do a subsequent Roth conversion next year, but my understanding is that as long as I wait 30 days next year, I'll be able to do this with money I've recharacterized.
I don't want to/intend to file an extension next year - I'll just wrap this up completely by April 15, 2018.
I'm basing this on my understanding of the IRA Recharacterization wiki and the James Lange timeline described there.
https://www.bogleheads.org/wiki/IRA_recharacterization
This all seems pretty simple and straightforward. Am I missing anything?
I want to do a subsequent Roth conversion next year, but my understanding is that as long as I wait 30 days next year, I'll be able to do this with money I've recharacterized.
I don't want to/intend to file an extension next year - I'll just wrap this up completely by April 15, 2018.
I'm basing this on my understanding of the IRA Recharacterization wiki and the James Lange timeline described there.
https://www.bogleheads.org/wiki/IRA_recharacterization
This all seems pretty simple and straightforward. Am I missing anything?
72 yrs. mostly-retired lawyer. Boglehead since day 1 (and M* Diehard long before that) under various names
- JDCarpenter
- Posts: 1800
- Joined: Tue Sep 09, 2014 2:42 pm
Re: My Plan for Roth Conversion in December - Does This Make Sense?
Be careful on the 30 day rule. It is the LATER of 30 days or the next calendar year:Small Law Survivor wrote: ↑Tue Nov 28, 2017 9:42 am I'm going to do a Roth IRA conversion in December, but I don't want to go to the time/expense of doing a tax analysis in advance to hit a specific bracket - too complicated. Rather, I'll convert a "safe" amount that I know is more than I will ultimately end up doing. Then, when I prepare my return and see my taxes in February or March I'll recharacterize back to an amount that keeps me within the bracket I've targeted. I'll do the Roth conversion into a new rIRA account, as recommended by Celia and other Roth IRA mavens here.
I want to do a subsequent Roth conversion next year, but my understanding is that as long as I wait 30 days next year, I'll be able to do this with money I've recharacterized.
I don't want to/intend to file an extension next year - I'll just wrap this up completely by April 15, 2018.
I'm basing this on my understanding of the IRA Recharacterization wiki and the James Lange timeline described there.
https://www.bogleheads.org/wiki/IRA_recharacterization
This all seems pretty simple and straightforward. Am I missing anything?
https://www.irs.gov/retirement-plans/re ... onversions (4th FAQ)if you recharacterize all or part of a rollover or conversion to a Roth IRA, you cannot reconvert the amount recharacterized to the same or another Roth IRA until the later of:The waiting period to convert applies only to amounts you recharacterized. For example, you can convert amounts from a different traditional IRA to a Roth IRA immediately.30 days after the recharacterization, or
the year following the year of the rollover or conversion.
We are going to take the same approach. Just converted 2017 after getting ballpark, but will convert 2018 in Jan--before recharacterizing part of 2017.
Our personal blog (no ads) of why we saved/invested: https://www.lisajtravels.com/
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Re: My Plan for Roth Conversion in December - Does This Make Sense?
Yes, will be careful re 30 day rule ("later of ...")
You said that "We are going to take the same approach. Just converted 2017 after getting ballpark, but will convert 2018 in Jan--before recharacterizing part of 2017."
What is your thinking behind this order of events. Does converting before you recharacterize lift any restrictions on that money?
You said that "We are going to take the same approach. Just converted 2017 after getting ballpark, but will convert 2018 in Jan--before recharacterizing part of 2017."
What is your thinking behind this order of events. Does converting before you recharacterize lift any restrictions on that money?
72 yrs. mostly-retired lawyer. Boglehead since day 1 (and M* Diehard long before that) under various names
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Re: My Plan for Roth Conversion in December - Does This Make Sense?
It's not complicated to run tax scenarios on a tax software. Just import last year return and make changes to specific line items. This could be simpler than recharacterization of a Roth
TravelforFun
TravelforFun
Re: My Plan for Roth Conversion in December - Does This Make Sense?
Unless you're converting large amounts (like more than 50% of your TIRAs), my understanding is the 30 day rule, etc is not applicable.
- JDCarpenter
- Posts: 1800
- Joined: Tue Sep 09, 2014 2:42 pm
Re: My Plan for Roth Conversion in December - Does This Make Sense?
If markets I'm invested in go up, more appreciation is inside the roth if convert early. If markets go down, I can (under current tax law) put the same dollar amount in later and recharacterize the losing "bet." See "leapfrog" discussions on this forum (A subset of the "horse race" discussions.)Small Law Survivor wrote: ↑Tue Nov 28, 2017 10:38 am Yes, will be careful re 30 day rule ("later of ...")
You said that "We are going to take the same approach. Just converted 2017 after getting ballpark, but will convert 2018 in Jan--before recharacterizing part of 2017."
What is your thinking behind this order of events. Does converting before you recharacterize lift any restrictions on that money?
Our personal blog (no ads) of why we saved/invested: https://www.lisajtravels.com/
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Re: My Plan for Roth Conversion in December - Does This Make Sense?
I'm really not interested in doing all the "leapfrog" stuff - too complicated. I want to keep it simple.
I think recharacterizing an over-conversion before 4/15/18 is pretty simple. I did a recharacterization a few yrs. ago and it wasn't a problem. I really can't "model" last year's taxes to determine this year - too much changed year-to-year. Last year I had partnership K1 income, for example. This year I won't - will be simple W2 income.
I think recharacterizing an over-conversion before 4/15/18 is pretty simple. I did a recharacterization a few yrs. ago and it wasn't a problem. I really can't "model" last year's taxes to determine this year - too much changed year-to-year. Last year I had partnership K1 income, for example. This year I won't - will be simple W2 income.
72 yrs. mostly-retired lawyer. Boglehead since day 1 (and M* Diehard long before that) under various names
Re: My Plan for Roth Conversion in December - Does This Make Sense?
Actually, the change to use as an example (lack of last year's K1) should make it much easier to model TY2017.Small Law Survivor wrote: ↑Tue Nov 28, 2017 11:36 am I'm really not interested in doing all the "leapfrog" stuff - too complicated. I want to keep it simple.
I think recharacterizing an over-conversion before 4/15/18 is pretty simple. I did a recharacterization a few yrs. ago and it wasn't a problem. I really can't "model" last year's taxes to determine this year - too much changed year-to-year. Last year I had partnership K1 income, for example. This year I won't - will be simple W2 income.
Re: My Plan for Roth Conversion in December - Does This Make Sense?
Google "Roth recharacterization" "tax bill" and read and be warned there .... As I understand it, no discussion of the new tax bill is allowed currently on the board. I sent a PM to one of the moderators asking that this rule be relaxed given the current timelines ....
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Re: My Plan for Roth Conversion in December - Does This Make Sense?
Agee that this seems quite important to people that may be planning to rechar in 2018. Under this bill they will be unable to do that - they must rechar by end of 2017.
72 yrs. mostly-retired lawyer. Boglehead since day 1 (and M* Diehard long before that) under various names