It really is, predicting future growth Rates on balances and future tax rates is tough. The best we can do is estimate. It seems you have reasonable approach with your conversions avoiding 32% and you have no state tax due. That’s big plusthor111 wrote: ↑Fri Nov 26, 2021 2:18 pmOkay....may not be ridiculous, but doesn't it depend again on your expected tax bracket later in life? 32% seems like a high mark. In any case, it's not quite as simple as converting in the lower brackets. Since we can't predict future tax laws.....it's very tough.tibbitts wrote: ↑Fri Nov 26, 2021 2:08 pmIt's only ridiculous if your assumptions predict you can break the cycle of growing deferred balances by converting lower amounts at more reasonable rates.
Roth Conversion Poll
Re: Roth Conversion Poll
- WoodSpinner
- Posts: 3499
- Joined: Mon Feb 27, 2017 12:15 pm
Re: Roth Conversion Poll
Dollars are equivalent (at a high level) since you need to pay taxes to get it from the IRA. The key is it requires a lot less planning to spend from Roth vs. IRA.marcopolo wrote: ↑Fri Nov 26, 2021 11:44 amIf you have less dollars (net taxes) when you really need the money, how is that more resilient?WoodSpinner wrote: ↑Fri Nov 26, 2021 11:36 amHaving assets in a Roth to use for spending is more resilient than having them in an IRA—might still work but the tax planning is more challenging.marcopolo wrote: ↑Fri Nov 26, 2021 11:32 amI am not sure what you define as more resilient, but I always considered it the opposite. Roth conversions pay off when the portfolio performs well. Roth conversions are detrimental when portfolio is under pressure. To me that makes my financial state less resilient when doing Roth Conversions, I have less money in the scenario when I most need that money.WoodSpinner wrote: ↑Fri Nov 26, 2021 11:22 amActually, it’s a bit mor nuanced than what was presented.thor111 wrote: ↑Fri Nov 26, 2021 9:04 am
Humblecoder:
I humbly and embarrassingly accept that I was wrong. Your simple comparison makes it very clear. On the bright side, it makes me happy I posted. With only two years of conversion complete, I think I will just continue to fill out the 22% bracket, and try to stay under the IRMA penalty zone. Future taxation is always unknowable, but I think it's more likely to get worse than better. Thanks again.
1. Tax brackets may increase
2. Assets in a ROTH provide a more resilient retirement — much easier to understand tax implications and planning.
3. If Taxable assets used to pay the taxes then you are effectively moving money from Taxable to Roth.
4. If you are planning to leave Roth to your heirs then their tax bracket must be considered.
WoodSpinner
It might be a little less complicated, but I am having a hard time seeing how it is more resilient
Again, the way I view resilience is being able to better withstand bad events. Maybe you are using a different definition.
For that definition, Roth Conversions can often make your portfolio less resilient.
WoodSpinner
WoodSpinner
Re: Roth Conversion Poll
The after tax dollars are not necessarily the same for the case where you need the money the most.WoodSpinner wrote: ↑Fri Nov 26, 2021 2:44 pmDollars are equivalent (at a high level) since you need to pay taxes to get it from the IRA. The key is it requires a lot less planning to spend from Roth vs. IRA.marcopolo wrote: ↑Fri Nov 26, 2021 11:44 amIf you have less dollars (net taxes) when you really need the money, how is that more resilient?WoodSpinner wrote: ↑Fri Nov 26, 2021 11:36 amHaving assets in a Roth to use for spending is more resilient than having them in an IRA—might still work but the tax planning is more challenging.marcopolo wrote: ↑Fri Nov 26, 2021 11:32 amI am not sure what you define as more resilient, but I always considered it the opposite. Roth conversions pay off when the portfolio performs well. Roth conversions are detrimental when portfolio is under pressure. To me that makes my financial state less resilient when doing Roth Conversions, I have less money in the scenario when I most need that money.WoodSpinner wrote: ↑Fri Nov 26, 2021 11:22 am
Actually, it’s a bit mor nuanced than what was presented.
1. Tax brackets may increase
2. Assets in a ROTH provide a more resilient retirement — much easier to understand tax implications and planning.
3. If Taxable assets used to pay the taxes then you are effectively moving money from Taxable to Roth.
4. If you are planning to leave Roth to your heirs then their tax bracket must be considered.
WoodSpinner
It might be a little less complicated, but I am having a hard time seeing how it is more resilient
Again, the way I view resilience is being able to better withstand bad events. Maybe you are using a different definition.
For that definition, Roth Conversions can often make your portfolio less resilient.
WoodSpinner
Most of the Roth analysis assume somewhere between modest to optimistic growth rate of your funds.
Prof. McQ used 10% in his analysis, others have used the similar growth assumptions to scare people into doing large Roth Conversions
The Roth Conversion usually payoff in this high growth assumption. Of course, in this case the extra tax savings is just gravy and not really needed to maintain one's standard of living.
But, what happens when the opposite occurs. Let's say you convert at 22% because you are worried that the growth of your $1M TDA will grow to several million dollars. But, instead we hit a bear market that cuts the value of your TDA in half so that instead of worrying about the tax rates of your heirs, you are now concerned about how much you need to cut back your spending to not risk running out of money. Now you find yourself in the situation where you could have extracted those dollars to live on from your TDA at a 12% tax rate, but alas, you had pre-paid your taxes at a 22% percent rate. You now have even less after-tax dollars to spend than if you had not done what seemed like a good idea at the time.
In the first scenario, there is no resilience needed, its all sunshine and unicorns. In the second scenario is when you need resilience in your portfolio. This is exactly when those Roth Conversions prove to be less resilient, not more.
Once in a while you get shown the light, in the strangest of places if you look at it right.
Re: Roth Conversion Poll
This is great insight, with deferred you transfer the downside partially to government. With Roth it’s all on you as tax is already paid.marcopolo wrote: ↑Fri Nov 26, 2021 3:23 pmThe after tax dollars are not necessarily the same for the case where you need the money the most.WoodSpinner wrote: ↑Fri Nov 26, 2021 2:44 pmDollars are equivalent (at a high level) since you need to pay taxes to get it from the IRA. The key is it requires a lot less planning to spend from Roth vs. IRA.marcopolo wrote: ↑Fri Nov 26, 2021 11:44 amIf you have less dollars (net taxes) when you really need the money, how is that more resilient?WoodSpinner wrote: ↑Fri Nov 26, 2021 11:36 amHaving assets in a Roth to use for spending is more resilient than having them in an IRA—might still work but the tax planning is more challenging.marcopolo wrote: ↑Fri Nov 26, 2021 11:32 am
I am not sure what you define as more resilient, but I always considered it the opposite. Roth conversions pay off when the portfolio performs well. Roth conversions are detrimental when portfolio is under pressure. To me that makes my financial state less resilient when doing Roth Conversions, I have less money in the scenario when I most need that money.
It might be a little less complicated, but I am having a hard time seeing how it is more resilient
Again, the way I view resilience is being able to better withstand bad events. Maybe you are using a different definition.
For that definition, Roth Conversions can often make your portfolio less resilient.
WoodSpinner
Most of the Roth analysis assume somewhere between modest to optimistic growth rate of your funds.
Prof. McQ used 10% in his analysis, others have used the similar growth assumptions to scare people into doing large Roth Conversions
The Roth Conversion usually payoff in this high growth assumption. Of course, in this case the extra tax savings is just gravy and not really needed to maintain one's standard of living.
But, what happens when the opposite occurs. Let's say you convert at 22% because you are worried that the growth of your $1M TDA will grow to several million dollars. But, instead we hit a bear market that cuts the value of your TDA in half so that instead of worrying about the tax rates of your heirs, you are now concerned about how much you need to cut back your spending to not risk running out of money. Now you find yourself in the situation where you could have extracted those dollars to live on from your TDA at a 12% tax rate, but alas, you had pre-paid your taxes at a 22% percent rate. You now have even less after-tax dollars to spend than if you had not done what seemed like a good idea at the time.
In the first scenario, there is no resilience needed, its all sunshine and unicorns. In the second scenario is when you need resilience in your portfolio. This is exactly when those Roth Conversions prove to be less resilient, not more.
Re: Roth Conversion Poll
It's a gamble without a crystal ball, because all of the calculations are based on an estimate/guess.
Three years ago, I was 59 years old, I had just joined the 7-figure club, and I was debating whether to start doing some Roth conversions. As a single, my tax brackets are challenging, and I live in a high-tax state.
The best advice I received on this forum was to aim for diversity in the type of retirement accounts--to hold taxable, tax-deferred, and Roth. So I began doing some large conversions, but my conversions have not even kept up with the growth in my tax-deferred account.
You already have diversity in the type of retirement accounts you hold. And, you are in the married tax bracket. I think you could do more conversions, pay IRMAA for a year, and then drop your income down low enough not to pay IRMAA. Either way, you're sitting in the catbird seat.
Three years ago, I was 59 years old, I had just joined the 7-figure club, and I was debating whether to start doing some Roth conversions. As a single, my tax brackets are challenging, and I live in a high-tax state.
The best advice I received on this forum was to aim for diversity in the type of retirement accounts--to hold taxable, tax-deferred, and Roth. So I began doing some large conversions, but my conversions have not even kept up with the growth in my tax-deferred account.
You already have diversity in the type of retirement accounts you hold. And, you are in the married tax bracket. I think you could do more conversions, pay IRMAA for a year, and then drop your income down low enough not to pay IRMAA. Either way, you're sitting in the catbird seat.
Re: Roth Conversion Poll
Roth conversions (in higher tax brackets) could still make sense for select few with double maxed out guaranteed pensions and double maxed out SSes, and/or large brokerage accounts., if the TDA/Roth monies are never needed for their own living, with some potential inheritance monies coming in future, for those - Roth monies strictly meant for passing as inheritance to their highly-successful kids who are already in their highest tax brackets.ball241 wrote: ↑Fri Nov 26, 2021 3:27 pmThis is great insight, with deferred you transfer the downside partially to government. With Roth it’s all on you as tax is already paid.marcopolo wrote: ↑Fri Nov 26, 2021 3:23 pmThe after tax dollars are not necessarily the same for the case where you need the money the most.WoodSpinner wrote: ↑Fri Nov 26, 2021 2:44 pmDollars are equivalent (at a high level) since you need to pay taxes to get it from the IRA. The key is it requires a lot less planning to spend from Roth vs. IRA.marcopolo wrote: ↑Fri Nov 26, 2021 11:44 amIf you have less dollars (net taxes) when you really need the money, how is that more resilient?WoodSpinner wrote: ↑Fri Nov 26, 2021 11:36 am
Having assets in a Roth to use for spending is more resilient than having them in an IRA—might still work but the tax planning is more challenging.
It might be a little less complicated, but I am having a hard time seeing how it is more resilient
Again, the way I view resilience is being able to better withstand bad events. Maybe you are using a different definition.
For that definition, Roth Conversions can often make your portfolio less resilient.
WoodSpinner
Most of the Roth analysis assume somewhere between modest to optimistic growth rate of your funds.
Prof. McQ used 10% in his analysis, others have used the similar growth assumptions to scare people into doing large Roth Conversions
The Roth Conversion usually payoff in this high growth assumption. Of course, in this case the extra tax savings is just gravy and not really needed to maintain one's standard of living.
But, what happens when the opposite occurs. Let's say you convert at 22% because you are worried that the growth of your $1M TDA will grow to several million dollars. But, instead we hit a bear market that cuts the value of your TDA in half so that instead of worrying about the tax rates of your heirs, you are now concerned about how much you need to cut back your spending to not risk running out of money. Now you find yourself in the situation where you could have extracted those dollars to live on from your TDA at a 12% tax rate, but alas, you had pre-paid your taxes at a 22% percent rate. You now have even less after-tax dollars to spend than if you had not done what seemed like a good idea at the time.
In the first scenario, there is no resilience needed, its all sunshine and unicorns. In the second scenario is when you need resilience in your portfolio. This is exactly when those Roth Conversions prove to be less resilient, not more.
As pensions are becoming a dinosaurs in private/public sector - and SS amounts/trust-funds not exactly in growing shape — many current/soon-to-retire folks may infact need some monies withdrawn from TDAs to live-on. For such and many a folks - a larger TDA portfolio provides longevity assurance, larger TDA also provides large cushion against market gyrations, and could prove to be their ultimate savior when tougher times hit.
Re: Roth Conversion Poll
Thanks Lily...LilyFleur wrote: ↑Fri Nov 26, 2021 3:49 pm It's a gamble without a crystal ball, because all of the calculations are based on an estimate/guess.
Three years ago, I was 59 years old, I had just joined the 7-figure club, and I was debating whether to start doing some Roth conversions. As a single, my tax brackets are challenging, and I live in a high-tax state.
The best advice I received on this forum was to aim for diversity in the type of retirement accounts--to hold taxable, tax-deferred, and Roth. So I began doing some large conversions, but my conversions have not even kept up with the growth in my tax-deferred account.
You already have diversity in the type of retirement accounts you hold. And, you are in the married tax bracket. I think you could do more conversions, pay IRMAA for a year, and then drop your income down low enough not to pay IRMAA. Either way, you're sitting in the catbird seat.
I plan to stay in the Tier 1 IRMAA region, and just do conversions around that. That will even out my tax liability over the next many many years, and appears to be the best route. I'll stick to the plan until the government changes the rules (again). This site is awesome for the overwhelming support and huge knowledge base. Good luck in your retirement.
Re: Roth Conversion Poll
It's a fairly high mark for MFJ, but not necessarily for filing single with $3M in deferred, and lifespan is another factor difficult to predict. Certainly converting in lower brackets is an easier decision. I agree that if I assumed MFJ indefinitely I probably wouldn't convert today at 32% all else being equal.thor111 wrote: ↑Fri Nov 26, 2021 2:18 pmOkay....may not be ridiculous, but doesn't it depend again on your expected tax bracket later in life? 32% seems like a high mark. In any case, it's not quite as simple as converting in the lower brackets. Since we can't predict future tax laws.....it's very tough.tibbitts wrote: ↑Fri Nov 26, 2021 2:08 pmIt's only ridiculous if your assumptions predict you can break the cycle of growing deferred balances by converting lower amounts at more reasonable rates.
Re: Roth Conversion Poll
tibbitts wrote: ↑Fri Nov 26, 2021 4:00 pmIt's a fairly high mark for MFJ, but not necessarily for filing single with $3M in deferred, and lifespan is another factor difficult to predict. Certainly converting in lower brackets is an easier decision. I agree that if I assumed MFJ indefinitely I probably wouldn't convert today at 32% all else being equal.thor111 wrote: ↑Fri Nov 26, 2021 2:18 pmOkay....may not be ridiculous, but doesn't it depend again on your expected tax bracket later in life? 32% seems like a high mark. In any case, it's not quite as simple as converting in the lower brackets. Since we can't predict future tax laws.....it's very tough.tibbitts wrote: ↑Fri Nov 26, 2021 2:08 pmIt's only ridiculous if your assumptions predict you can break the cycle of growing deferred balances by converting lower amounts at more reasonable rates.
"It's a fairly high mark for MFJ, but not necessarily for filing single with $3M in deferred,"
Excellent observation - many people do not consider, review, or model the single filer future.
Re: Roth Conversion Poll
Very true, a reason to convert as hedge against this scenariosmitcat wrote: ↑Fri Nov 26, 2021 6:26 pmtibbitts wrote: ↑Fri Nov 26, 2021 4:00 pmIt's a fairly high mark for MFJ, but not necessarily for filing single with $3M in deferred, and lifespan is another factor difficult to predict. Certainly converting in lower brackets is an easier decision. I agree that if I assumed MFJ indefinitely I probably wouldn't convert today at 32% all else being equal.thor111 wrote: ↑Fri Nov 26, 2021 2:18 pmOkay....may not be ridiculous, but doesn't it depend again on your expected tax bracket later in life? 32% seems like a high mark. In any case, it's not quite as simple as converting in the lower brackets. Since we can't predict future tax laws.....it's very tough.
"It's a fairly high mark for MFJ, but not necessarily for filing single with $3M in deferred,"
Excellent observation - many people do not consider, review, or model the single filer future.
- WoodSpinner
- Posts: 3499
- Joined: Mon Feb 27, 2017 12:15 pm
Re: Roth Conversion Poll
Marcopolo,marcopolo wrote: ↑Fri Nov 26, 2021 3:23 pmThe after tax dollars are not necessarily the same for the case where you need the money the most.WoodSpinner wrote: ↑Fri Nov 26, 2021 2:44 pmDollars are equivalent (at a high level) since you need to pay taxes to get it from the IRA. The key is it requires a lot less planning to spend from Roth vs. IRA.marcopolo wrote: ↑Fri Nov 26, 2021 11:44 amIf you have less dollars (net taxes) when you really need the money, how is that more resilient?WoodSpinner wrote: ↑Fri Nov 26, 2021 11:36 amHaving assets in a Roth to use for spending is more resilient than having them in an IRA—might still work but the tax planning is more challenging.marcopolo wrote: ↑Fri Nov 26, 2021 11:32 am
I am not sure what you define as more resilient, but I always considered it the opposite. Roth conversions pay off when the portfolio performs well. Roth conversions are detrimental when portfolio is under pressure. To me that makes my financial state less resilient when doing Roth Conversions, I have less money in the scenario when I most need that money.
It might be a little less complicated, but I am having a hard time seeing how it is more resilient
Again, the way I view resilience is being able to better withstand bad events. Maybe you are using a different definition.
For that definition, Roth Conversions can often make your portfolio less resilient.
WoodSpinner
Most of the Roth analysis assume somewhere between modest to optimistic growth rate of your funds.
Prof. McQ used 10% in his analysis, others have used the similar growth assumptions to scare people into doing large Roth Conversions
The Roth Conversion usually payoff in this high growth assumption. Of course, in this case the extra tax savings is just gravy and not really needed to maintain one's standard of living.
But, what happens when the opposite occurs. Let's say you convert at 22% because you are worried that the growth of your $1M TDA will grow to several million dollars. But, instead we hit a bear market that cuts the value of your TDA in half so that instead of worrying about the tax rates of your heirs, you are now concerned about how much you need to cut back your spending to not risk running out of money. Now you find yourself in the situation where you could have extracted those dollars to live on from your TDA at a 12% tax rate, but alas, you had pre-paid your taxes at a 22% percent rate. You now have even less after-tax dollars to spend than if you had not done what seemed like a good idea at the time.
In the first scenario, there is no resilience needed, its all sunshine and unicorns. In the second scenario is when you need resilience in your portfolio. This is exactly when those Roth Conversions prove to be less resilient, not more.
You do highlight a real risk—prolonged bear market after paying for a conversion. I am fine taking this risk given my current finances—it’s highly unlikely that my spending would be seriously impacted.
That said, I started Retirement with 90%+ in my IRA and believe that becoming more tax diversified will lead to more resilience.
Modeling my finances has convinced me that Roth Conversions are worthwhile—I have posted a very detailed thread on this topic above.
WoodSpinner
WoodSpinner
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Re: Roth Conversion Poll
None of us have accurate crystal balls, so I feel that hedging both returns and future tax code changes is a wise choice. Your Roth has the smallest balance of your three asset locations, so it makes sense to increase its balance. I would only go to the top of the 24% bracket however at most while employed and even lower when retired, either to the NIIT threshold or possibly to the next IRMAA threshold which is slightly higher for most of us. (It's complicated because NIIT and IRMAA depend on different line income item.)
Also one note, from your ages it would appear that IRMAA for this year affects only one of you, while next year it affects both of you. So IRMAA is less critical for your case in TY2021 so you might want to be a tad more aggressive now.
Also one note, from your ages it would appear that IRMAA for this year affects only one of you, while next year it affects both of you. So IRMAA is less critical for your case in TY2021 so you might want to be a tad more aggressive now.
Re: Roth Conversion Poll
This is great point, a balance does make sense in such matters that are not clear.SpideyIndexer wrote: ↑Fri Nov 26, 2021 9:05 pm None of us have accurate crystal balls, so I feel that hedging both returns and future tax code changes is a wise choice. Your Roth has the smallest balance of your three asset locations, so it makes sense to increase its balance. I would only go to the top of the 24% bracket however at most while employed and even lower when retired, either to the NIIT threshold or possibly to the next IRMAA threshold which is slightly higher for most of us. (It's complicated because NIIT and IRMAA depend on different line income item.)
Also one note, from your ages it would appear that IRMAA for this year affects only one of you, while next year it affects both of you. So IRMAA is less critical for your case in TY2021 so you might want to be a tad more aggressive now.
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Re: Roth Conversion Poll
Maybe this is extra credit. Your foreign (or international) equity allocation is pretty light. Perhaps this a personal preference. But usually one can reallocate holdings in tax-deferred and/or Roth accounts without tax consequences. Something to think about.
Getting back to Roth Conversions, I suspect you'll have a few low-income years soon, which would help you convert more of your TD balance to the Roth.
Getting back to Roth Conversions, I suspect you'll have a few low-income years soon, which would help you convert more of your TD balance to the Roth.
Re: Roth Conversion Poll
I have found the Pralana Gold tool for $99 to be somewhat helpful. It gives you quite a bit of flexibility in your inputs including modeling various income sources and expenses. Pralana Gold gave me a slightly better understanding of my situation than RPM did. Nothing big as a result of using it, but it made me feel better about my plan and I may want to tweak it in the future depending on what happens. You can download the manual for free to get an understanding of the tool to see if it fits your needs.thor111 wrote: ↑Thu Nov 25, 2021 5:56 pmI downloaded the spreadsheet, and started to follow the examples, but a lot of it doesn't apply to me (at least just yet). I'm still employed, and not using ACA for medical premiums. I understand the premise of the graph: when IRMA kicks in, there are huge spikes in tax implications, but the chart doesn't format well for my current situation. I really do appreciate the effort, but either I'm slow on the uptake, or this walk-through doesn't apply to me.cas wrote: ↑Thu Nov 25, 2021 5:21 pm
If you are using RPM, does that mean you have access to Excel?
If so, I highly recommend producing personalized marginal rate graphs similar to those in the wiki using the Personal Finance Toolbox excel spreadsheet. (See tutorial on how to produce the graphs here. (Tutorial is for how ACA Premium Tax Credit affects marginal rates on Roth conversions, so slightly different application, but the tutorial on how to produce the graphs should still help.)
You'll want to produce the graphs for both now and after RMDs/SS start so that you can compare marginal rate(s) now vs marginal rate(s) later. With your mix of income types, plus age-related considerations like IRMAA, nominal "tax bracket" percentages can be misleading.
Thanks cas!
https://pralanaretirementcalculator.com/
Re: Roth Conversion Poll
The ACA-specific walk-through may not apply, but the tool probably ought to work for your situation unless it's highly unusual. Some other screenshot instructions/examples are in the Using a spreadsheet section of the Roth IRA conversion wiki.thor111 wrote: ↑Thu Nov 25, 2021 5:56 pmI downloaded the spreadsheet, and started to follow the examples, but a lot of it doesn't apply to me (at least just yet). I'm still employed, and not using ACA for medical premiums. I understand the premise of the graph: when IRMA kicks in, there are huge spikes in tax implications, but the chart doesn't format well for my current situation. I really do appreciate the effort, but either I'm slow on the uptake, or this walk-through doesn't apply to me.cas wrote: ↑Thu Nov 25, 2021 5:21 pm
If you are using RPM, does that mean you have access to Excel?
If so, I highly recommend producing personalized marginal rate graphs similar to those in the wiki using the Personal Finance Toolbox excel spreadsheet. (See tutorial on how to produce the graphs here. (Tutorial is for how ACA Premium Tax Credit affects marginal rates on Roth conversions, so slightly different application, but the tutorial on how to produce the graphs should still help.)
You'll want to produce the graphs for both now and after RMDs/SS start so that you can compare marginal rate(s) now vs marginal rate(s) later. With your mix of income types, plus age-related considerations like IRMAA, nominal "tax bracket" percentages can be misleading.
Thanks cas!
E.g., assuming $130K W-2 income, $5K interest, and $15K qualified dividends (to match the $150K total in the OP - and ages as stated there), and Illinois state taxes:
The y-axis max/min were changed from the defaults, but otherwise the entries of the incomes, filing status, and ages were sufficient to generate that chart. The addition of IL for state taxes didn't change anything due to IL not taxing IRA withdrawals.
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Re: Roth Conversion Poll
Ignoring the 4.95% state tax, your MFJ tax brackets seem to include
22% $81,051 to $172,750
24% $172,751 to $329,850
25% TCJA 2026- $81,051 to $172,750 inflation adjusted
28% TCJA 2026- $172,751 to $329,850 inflation adjusted
3.8% NII additional above $250,000, so 27.8% or 31.8% or 35.8%
32%-35.8% $329,851 to $418,850
IRMAA various amounts at undefined incomes 2 years ago.
Your RMDs would seem to keep you in at least 22% or 25% tax brackets, so filling 22% or even 24% up to $250,000 seem reasonable from a simple view, and may help keep you out of the 31.8% or 35.8% tax brackets.
Re: Roth Conversion Poll
Good point on the IRMAA charges. My thoughts are that I would probably defer part B premiums (and thus IRMAA) when DF turns 65, and I'm still working. I'm guessing it would be cheaper to just keep her on my work sponsored health plan. Ty2021 conversions are done (last march), and it puts me in the 24% range. I plan to stay under the IRMAA Tier 1 for the near future. Do you have reasons to go higher?SpideyIndexer wrote: ↑Fri Nov 26, 2021 9:05 pm
Also one note, from your ages it would appear that IRMAA for this year affects only one of you, while next year it affects both of you. So IRMAA is less critical for your case in TY2021 so you might want to be a tad more aggressive now.
Re: Roth Conversion Poll
Thanks FiveK! I'll take another crack at it.FiveK wrote: ↑Sat Nov 27, 2021 1:12 am The ACA-specific walk-through may not apply, but the tool probably ought to work for your situation unless it's highly unusual. Some other screenshot instructions/examples are in the Using a spreadsheet section of the Roth IRA conversion wiki.
E.g., assuming $130K W-2 income, $5K interest, and $15K qualified dividends (to match the $150K total in the OP - and ages as stated there), and Illinois state taxes:
The y-axis max/min were changed from the defaults, but otherwise the entries of the incomes, filing status, and ages were sufficient to generate that chart. The addition of IL for state taxes didn't change anything due to IL not taxing IRA withdrawals.
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Re: Roth Conversion Poll
Lol I like the way you think. What did you end up doing?tibbitts wrote: ↑Thu Nov 25, 2021 3:05 pmLast year my income outside of conversions was going to be about $40k. So first I was thinking 22%, but 24% was only two percent more. Well it was my last year before IRMAA, so maybe 32%... but 32% is a tiny bracket, and 35% is just 3% more than that. And then 37% is just two percent more than that. It's a slippery slope, and honestly I don't think it will matter much in a predictable way (meaning it might matter a lot, but you don't have any way of knowing that for sure now), unless maybe you do something extreme like convert your entire deferred balance in one year, or never convert anything at all.thor111 wrote: ↑Thu Nov 25, 2021 2:43 pm I realize this has probably been asked a million times, but just selfishly wondering my particular case, should I:
- Roth convert to top of 24% bracket each year
- Roth convert to top of 32% bracket each year
My OCD wants me to convert sooner than later, but that's probably not most tax efficient. Goal is to minimize taxes paid to Government.
- none of the above
In an attempt to follow the rules of requesting recommendations:
Emergency funds: are OK, Debt: none, Tax Filing Status: MFJ, Tax-rate: (top of 24% due to Roth Conversions, but only about 150k (wages, interest, dividends) , 4.95% Illinois)
Age: 62/63 - hoping to retire in 3 years.
Portfolio (1M, 3M, .8M in taxable, deferred, Roth)
AA (71% domestic, 12% foreign, 15% bond) for taxable
AA (79% domestic, 11% foreign, 9% bond) for deferred (mostly rollover, small portion 401k)
AA (93% domestic, 6% foreign, 1% bond) for Roth
Mostly low er index funds.....some mutual funds. There are too many to list, and I am working towards consolidation. I can edit this to post if anyone thinks that would make a huge difference.
Contributions are about 45k (split between Roth and After Tax). After-tax rolled over to Roth on Freq basis.
Almost all is with Fidelity
Any guidance is appreciated.
Re: Roth Conversion Poll
So.....back to contemplating filling the 22% or 24% (but no higher). Good info. Thanks for sharing.VanGar+Goyle wrote: ↑Sat Nov 27, 2021 11:36 amIgnoring the 4.95% state tax, your MFJ tax brackets seem to include
22% $81,051 to $172,750
24% $172,751 to $329,850
25% TCJA 2026- $81,051 to $172,750 inflation adjusted
28% TCJA 2026- $172,751 to $329,850 inflation adjusted
3.8% NII additional above $250,000, so 27.8% or 31.8% or 35.8%
32%-35.8% $329,851 to $418,850
IRMAA various amounts at undefined incomes 2 years ago.
Your RMDs would seem to keep you in at least 22% or 25% tax brackets, so filling 22% or even 24% up to $250,000 seem reasonable from a simple view, and may help keep you out of the 31.8% or 35.8% tax brackets.
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Re: Roth Conversion Poll
I don't think this has come up yet in this thread: if one spouse predeceases the other, the survivor is suddenly a single taxpayer, making a Roth much more attractive wrt taxation on the RMDs from a TD account.
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Re: Roth Conversion Poll
I think I may have been too conservative. It all depends on what your default (no Roth conversion ) tax bracketsthor111 wrote: ↑Sat Nov 27, 2021 11:59 amSo.....back to contemplating filling the 22% or 24% (but no higher). Good info. Thanks for sharing.VanGar+Goyle wrote: ↑Sat Nov 27, 2021 11:36 amIgnoring the 4.95% state tax, your MFJ tax brackets seem to include
22% $81,051 to $172,750
24% $172,751 to $329,850
25% TCJA 2026- $81,051 to $172,750 inflation adjusted
28% TCJA 2026- $172,751 to $329,850 inflation adjusted
3.8% NII additional above $250,000, so 27.8% or 31.8% or 35.8%
32%-35.8% $329,851 to $418,850
IRMAA various amounts at undefined incomes 2 years ago.
Your RMDs would seem to keep you in at least 22% or 25% tax brackets, so filling 22% or even 24% up to $250,000 seem reasonable from a simple view, and may help keep you out of the 31.8% or 35.8% tax brackets.
will be, and if you are willing to spend your $1M taxable on the income taxes for the $3M Roth conversions.
What is the worst it could be? 4.95 + 3.8 + 39 = 47.75%?
Re: Roth Conversion Poll
If you plug in the current $3mil into the current RMD form which gives an age 72 divisor of 25.6 you get 109,500, if I did my table correctly. Add to that your combined Social Security and Pensions which will give you a ballpark figure of combined expected "income". We only started with 2 mil in deferred and have been increasingly aggressive about converting to Roth to raise our income to just under the IRMAA surcharge level. We have two reasons: 1) We suspect tax rates to go up when the personal tax cuts expire in 2026 and 2) In the back of my mind, is that if I pass first, her combined income and social security and RMD will put her into the IRMAA surcharge range, but if we could get a majority of the deferred converted, she can live comfortably on her income without being over the IRMAA limit. So our goal hasn't been tax brackets as much as avoiding the IRMAA cliff. (If they offered an IRMAA holiday, I'd probably bump our conversions significantly to be done with it.)thor111 wrote: ↑Thu Nov 25, 2021 2:43 pm I realize this has probably been asked a million times, but just selfishly wondering my particular case, should I:
- Roth convert to top of 24% bracket each year
- Roth convert to top of 32% bracket each year
My OCD wants me to convert sooner than later, but that's probably not most tax efficient. Goal is to minimize taxes paid to Government.
- none of the above
In an attempt to follow the rules of requesting recommendations:
Emergency funds: are OK, Debt: none, Tax Filing Status: MFJ, Tax-rate: (top of 24% due to Roth Conversions, but only about 150k (wages, interest, dividends) , 4.95% Illinois)
Age: 62/63 - hoping to retire in 3 years.
Portfolio (1M, 3M, .8M in taxable, deferred, Roth)
AA (71% domestic, 12% foreign, 15% bond) for taxable
AA (79% domestic, 11% foreign, 9% bond) for deferred (mostly rollover, small portion 401k)
AA (93% domestic, 6% foreign, 1% bond) for Roth
Mostly low er index funds.....some mutual funds. There are too many to list, and I am working towards consolidation. I can edit this to post if anyone thinks that would make a huge difference.
Contributions are about 45k (split between Roth and After Tax). After-tax rolled over to Roth on Freq basis.
Almost all is with Fidelity
Any guidance is appreciated.
Re: Roth Conversion Poll
OP, I’ll offer you the same advice I gave Woodspinner in his thread: the ceiling for conservative/resilient/robust Roth conversions is the first IRMAA floor, $176,000 in 2021.
Resilient means “high likelihood of pay off early and in substantial amounts.”
If neither IRMAA nor NIIT was a factor, then you could convert to the top of the 24% bracket, AGI about $350,000 in 2021 MFJ. Income tax at 24%, 22%, it hardly matters, given your affluent trajectory.
But for NIIT not to be a factor your taxable investment income must be de minimis, a couple of hundred dollars or less. Else, NIIT will argue against going above $250,000 on your conversion.
Why conversions above the IRMAA #1 floor are not resilient.
Per the chart Fivek showed, if you convert to $176,001 then you have to convert to $221,999 or as close as you dare, to keep the marginal rate under control (2021 IRMAA # 1, MFJ, Medicare B & D, is about $1721). IRMAA marginal tax rate on the first dollar over $176,000 = 172,100%.
At MAGI $221,999, your income tax is 23% (sprawled across the 22%/24% boundary), and your IRMAA expressed as a rate is about 4%, putting you at a 27% conversion total rate. That will work out okay if you are in the post-TCJA 28% bracket; not so well, if you are in an unchanged 22% bracket.
Okay, might as well be hung for a sheep as a lamb; suppose you decide to convert up to the ceiling of IRMAA #2, $275,999. So that’s 24% income tax plus 4.5% IRMAA (#2,3,4 ~ $2606), the total rate now 28.5%.
Except perhaps you had a couple tens of thousands of investment income, $26,000 as it happens. The conversion pushes that income into NIIT @3.8%, call it $950 more in tax. So now the marginal rate for moving through IRMAA #2 and broaching the NIIT floor is 30%+. And that’s not a resilient conversion.
Almost any conversion will pay off given enough time. But conversions that don’t pay until well into the 90s—and only if every assumption is spot on--aren’t resilient.
As Celia pointed out, as long as your unconverted TDA funds are invested in anything decent—say a conservative balanced fund with an expected return of 5.5%--that TDA balance is going to grow into your 80s, throwing off more and more RMD income. Conversions now can trim but not prevent significant amounts of taxable RMD income, given the size of your TDA balance today.
For someone affluent like you with an ample TDA, conversions can only take place at the margin; you can’t really do a material amount without driving your income tax + IRMAA + NIIT to a rickety and probably unprofitable level.
Best to keep them resilient. Even a few hundred thousand dollars in conversions over the next ten years is going to be wealth-enhancing, if the IRMAA floor is respected, and if the funds are truly surplus, so that they can be left undisturbed for a long, long time.
Resilient means “high likelihood of pay off early and in substantial amounts.”
If neither IRMAA nor NIIT was a factor, then you could convert to the top of the 24% bracket, AGI about $350,000 in 2021 MFJ. Income tax at 24%, 22%, it hardly matters, given your affluent trajectory.
But for NIIT not to be a factor your taxable investment income must be de minimis, a couple of hundred dollars or less. Else, NIIT will argue against going above $250,000 on your conversion.
Why conversions above the IRMAA #1 floor are not resilient.
Per the chart Fivek showed, if you convert to $176,001 then you have to convert to $221,999 or as close as you dare, to keep the marginal rate under control (2021 IRMAA # 1, MFJ, Medicare B & D, is about $1721). IRMAA marginal tax rate on the first dollar over $176,000 = 172,100%.
At MAGI $221,999, your income tax is 23% (sprawled across the 22%/24% boundary), and your IRMAA expressed as a rate is about 4%, putting you at a 27% conversion total rate. That will work out okay if you are in the post-TCJA 28% bracket; not so well, if you are in an unchanged 22% bracket.
Okay, might as well be hung for a sheep as a lamb; suppose you decide to convert up to the ceiling of IRMAA #2, $275,999. So that’s 24% income tax plus 4.5% IRMAA (#2,3,4 ~ $2606), the total rate now 28.5%.
Except perhaps you had a couple tens of thousands of investment income, $26,000 as it happens. The conversion pushes that income into NIIT @3.8%, call it $950 more in tax. So now the marginal rate for moving through IRMAA #2 and broaching the NIIT floor is 30%+. And that’s not a resilient conversion.
Almost any conversion will pay off given enough time. But conversions that don’t pay until well into the 90s—and only if every assumption is spot on--aren’t resilient.
As Celia pointed out, as long as your unconverted TDA funds are invested in anything decent—say a conservative balanced fund with an expected return of 5.5%--that TDA balance is going to grow into your 80s, throwing off more and more RMD income. Conversions now can trim but not prevent significant amounts of taxable RMD income, given the size of your TDA balance today.
For someone affluent like you with an ample TDA, conversions can only take place at the margin; you can’t really do a material amount without driving your income tax + IRMAA + NIIT to a rickety and probably unprofitable level.
Best to keep them resilient. Even a few hundred thousand dollars in conversions over the next ten years is going to be wealth-enhancing, if the IRMAA floor is respected, and if the funds are truly surplus, so that they can be left undisturbed for a long, long time.
You can take the academic out of the classroom by retirement, but you can't ever take the classroom out of his tone, style, and manner of approach.
Re: Roth Conversion Poll
Thank you Mr. McQ...point taken. Last year my NIIT obligation was $407, although it could be much larger this year. There are sooooo many things to watch. Whatever happened to the idea of doing taxes on a postcard? Just running some rough numbers...at the Tier 1 rate (which is obviously subject to change), I'll probably exceed that cap (without any conversion in 20 years). As you pointed out, doing some conversions are better than not doing any.McQ wrote: ↑Sun Nov 28, 2021 4:39 pm OP, I’ll offer you the same advice I gave Woodspinner in his thread: the ceiling for conservative/resilient/robust Roth conversions is the first IRMAA floor, $176,000 in 2021.
Resilient means “high likelihood of pay off early and in substantial amounts.”
If neither IRMAA nor NIIT was a factor, then you could convert to the top of the 24% bracket, AGI about $350,000 in 2021 MFJ. Income tax at 24%, 22%, it hardly matters, given your affluent trajectory.
But for NIIT not to be a factor your taxable investment income must be de minimis, a couple of hundred dollars or less. Else, NIIT will argue against going above $250,000 on your conversion.
Why conversions above the IRMAA #1 floor are not resilient.
Per the chart Fivek showed, if you convert to $176,001 then you have to convert to $221,999 or as close as you dare, to keep the marginal rate under control (2021 IRMAA # 1, MFJ, Medicare B & D, is about $1721). IRMAA marginal tax rate on the first dollar over $176,000 = 172,100%.
At MAGI $221,999, your income tax is 23% (sprawled across the 22%/24% boundary), and your IRMAA expressed as a rate is about 4%, putting you at a 27% conversion total rate. That will work out okay if you are in the post-TCJA 28% bracket; not so well, if you are in an unchanged 22% bracket.
Okay, might as well be hung for a sheep as a lamb; suppose you decide to convert up to the ceiling of IRMAA #2, $275,999. So that’s 24% income tax plus 4.5% IRMAA (#2,3,4 ~ $2606), the total rate now 28.5%.
Except perhaps you had a couple tens of thousands of investment income, $26,000 as it happens. The conversion pushes that income into NIIT @3.8%, call it $950 more in tax. So now the marginal rate for moving through IRMAA #2 and broaching the NIIT floor is 30%+. And that’s not a resilient conversion.
Almost any conversion will pay off given enough time. But conversions that don’t pay until well into the 90s—and only if every assumption is spot on--aren’t resilient.
As Celia pointed out, as long as your unconverted TDA funds are invested in anything decent—say a conservative balanced fund with an expected return of 5.5%--that TDA balance is going to grow into your 80s, throwing off more and more RMD income. Conversions now can trim but not prevent significant amounts of taxable RMD income, given the size of your TDA balance today.
For someone affluent like you with an ample TDA, conversions can only take place at the margin; you can’t really do a material amount without driving your income tax + IRMAA + NIIT to a rickety and probably unprofitable level.
Best to keep them resilient. Even a few hundred thousand dollars in conversions over the next ten years is going to be wealth-enhancing, if the IRMAA floor is respected, and if the funds are truly surplus, so that they can be left undisturbed for a long, long time.
I truly appreciate the time taken to post your response.
Re: Roth Conversion Poll
As if you are wishing for one spouse to pre-decease the other, sooner!SpideyIndexer wrote: ↑Sat Nov 27, 2021 12:26 pm I don't think this has come up yet in this thread: if one spouse predeceases the other, the survivor is suddenly a single taxpayer, making a Roth much more attractive wrt taxation on the RMDs from a TD account.
That is when limited amounts of "extra" income could help. Say, possibly "stepped-up" SS to the highest SS-of-the-two.
Stepped-up cost basis of "Brokerage" amounts, and any home-appreciation, and/or business assets you may hold (ie., ZERO to minimal tax). You now have reset your cost basis, evaporated all LTCG and taxes-owned, and near-zero worries about NIIT on LTCG sales for some years
May be, you guys planned to have Pension survivor benefits !?
Limited amount of insurance payout (ZERO tax, mostly)
Your asset levels, and/or income-levels haven't exactly halved., if you consider all of the above (including the fact that you considered some/any of those above possibilities)
Have you "ever" consider Geo-arbitrage to no income-tax state, or lesser taxed-state closer to kin may be, or ever remarried for MFJ status (however gross you may think it is., this occurs more often than you may think!) or adopt
QCDs, and/or large-legacy charity come to mind ?
Yes - your tax burden on single filing-status now may have increased; but how do you account for all the "freebee no-tax" amounts you possibly saved on larger buckets mentioned earlier? Do you account for those - or, just consider those as Gimmes, and continue to complain your now/future Single-filing-status now has increased taxes ?
Now that you have lesser expenses, also, may be you have lesser IRMAA total $tax amounts to pay (1 Vs. 2) ? (someone correct me -- not entirely deciphered those -- long ways from there ..)
Last edited by sc9182 on Sun Nov 28, 2021 8:26 pm, edited 4 times in total.
Re: Roth Conversion Poll
First, I used https://i-orp.com/Plans/extended.html to give me ideas on how much I should convert.
I then used RPM and the Personal finance toolbox spreadsheet to verify and fine tune the amounts.
I then used RPM and the Personal finance toolbox spreadsheet to verify and fine tune the amounts.
Re: Roth Conversion Poll
We converted all of our deferred accounts to Roth accounts over a period of about 6 years when in partial and full retirement and prior to taking SS at 70. We paid all of the taxes out of our taxable account. Paying taxes out of the tax deferred accounts makes conversions less optimal. We may not have converted if we had to pay taxes out of the tax deferred accounts. Our Roth accounts have more than tripled in value since being converted.
We also are in a high tax bracket in retirement due to rental, pension and annuity income. I am happy we don't have to take out unneeded RMDs to add to our income tax payments.
The recent changes in the laws concerning inheriting retirement accounts is another reason I am glad we converted.
I did want to leave some money in tax deferred accounts for donations. At the time DW who retired from professorship felt that donated money was often wasted by the university. So we left nothing in tax deferred accounts. We have since found some charities that we want to support and have set up a charitable account with some individual stocks with large capital gains.
I delayed SS until 70 as I was the higher earner and that is a different topic all together.
We also are in a high tax bracket in retirement due to rental, pension and annuity income. I am happy we don't have to take out unneeded RMDs to add to our income tax payments.
The recent changes in the laws concerning inheriting retirement accounts is another reason I am glad we converted.
I did want to leave some money in tax deferred accounts for donations. At the time DW who retired from professorship felt that donated money was often wasted by the university. So we left nothing in tax deferred accounts. We have since found some charities that we want to support and have set up a charitable account with some individual stocks with large capital gains.
I delayed SS until 70 as I was the higher earner and that is a different topic all together.
- WoodSpinner
- Posts: 3499
- Joined: Mon Feb 27, 2017 12:15 pm
Re: Roth Conversion Poll
OP,
I am facing a similar problem, size-able TDA, Retirement income etc. The approach I am using is laid out in this thread, viewtopic.php?t=354318.
Of particular interest was the goal of establishing a Tax Equilibrium (as best as it can be modeled) which ended up being to the top of IRMAA Tier-0 (e.g. no IRMAA, $182,000) or Tier-1 ($228,000). My plan is to remodel my Roth Conversion targets yearly (early January) and incorporate as much new information as possible on expected returns, tax laws, and portfolio values.
Hope this is somewhat helpful.
WoodSpinner
I am facing a similar problem, size-able TDA, Retirement income etc. The approach I am using is laid out in this thread, viewtopic.php?t=354318.
As others have mentioned up-thread, having a prioritized and well defined set of goals for your Conversion strategy is key. Typically minimizing taxes is not the best goal (although it may work for some situations). Of equal importance is maintaining a bit of humility when modeling, there are so many unknowns and moving parts—it’s definitely an Optimization Strategy and the best you can hope for is to be generally right.
Key Learnings:
- Start with a well defined understanding of your Roth Conversion Goals
- A robust tool or model is essential for understanding the nuances of your Income, Expenses, Cash-Flow, Taxes, Asset Growth, Asset Location etc. there are a lot of moving parts that need to be considered.
- Conversion planning needs to be an iterative process. Taxes, Asset Growth, Unexpected Death, Inflation, Health issues etc. can all change your plan. Suggest reviewing the plan at least annually to fine tune and align.
- A simple line plot of the Cumulative Taxes Paid serves as a great way to compare various scenarios and to determine how closely Tax Equilibrium is achieved.
- The Widow(er) Tax Penalty is real and you need to understand what if any impact this will have on your Retirement Plans.
- When in doubt follow McQuarrie's Rule of Thumb for conservative Roth Conversions
In our case the models were very clear, that doing some Roth Conversions were much better than doing none. They were also clear that there wasn’t a huge difference in Tax-Adjusted Portfolio Values between many of the scenarios considered (e.g. various IRMA tiers or Marginal Brackets).Metrics Considered:
- Marginal Tax Rates vs. Future Marginal Rates (Fed + CA State)
This is a general useful metric -- it rarely makes sense to pay Higher Taxes now when you can pay Lower Taxes later. This is especially true if you will be leaving the IRA to beneficiaries in a lower Tax Bracket or to Charities.- Tax Equilibrium across Retirement (see Kitces Blog
This is a very useful metric to consider. My approach to using this metric is to plot the graphs of Total Cumulative Taxes paid over time (Fed, IRMAA, NIT, State etc.) and look at the slopes of the lines and any obvious bend points. This will highlight Conversion scenarios that are wasting lower marginal tax space or paying more in taxes than future income years.- Total Tax Adjusted Portfolio Value
This is a very useful metric with some caveats. You need to know the Marginal Tax Rate for each scenario on a Year-by-Year basis for useful results. This makes adjusting the values of an IRA fairly easy. However adjusting the value of the Taxable accounts is difficult to model -- this was not implemented in my Retirement Model.- Value of IRA over time
This can be a useful metric depending on your Retirement goals (e.g. you may want to leave Assets in the IRA):
- Self Funding Long Term Care from your IRA
- Charitable bequests from your IRA
- Inheritance by beneficiaries in a lower marginal bracket than you are
Of particular interest was the goal of establishing a Tax Equilibrium (as best as it can be modeled) which ended up being to the top of IRMAA Tier-0 (e.g. no IRMAA, $182,000) or Tier-1 ($228,000). My plan is to remodel my Roth Conversion targets yearly (early January) and incorporate as much new information as possible on expected returns, tax laws, and portfolio values.
Hope this is somewhat helpful.
WoodSpinner
WoodSpinner
Re: Roth Conversion Poll
I totally understand how leaving a balance in your tIRA could be used to reduce your income taxes if you are paying for long term care. But that higher balance leading to IRMAA surcharge would still be an issue, especially if there was only a surviving spouse, ie paying single tax rate. Keeping our tax rate even over the years is main goal, followed by consideration of possible single filing bracket for surviving spouse. In addition, putting heirs into substantially higher tax bracket (meaning more of the inheritance would go to taxes as a percentage as well as substantially more of their earned income would go to taxes because of their inherited IRA RMD, especially at the end of the 10 years).Exchme wrote: ↑Fri Nov 26, 2021 8:34 am From your income, annual savings and account values, it seems clear you could retire now if you so desired, so the first thing to ask yourself is what your goal is for continuing to work. It's also clear that you have far more equity exposure than most near-retirees, so you might want to think about your need to continue to take risk.
Roth Conversions don't make a lot of sense if you wish to do QCDs. If your goal is to optimize the value of the inheritance for your heirs, then their possible future finances and tax rates are part of the puzzle. If you intend to live comfortably but not worry about gifts or optimizing heir inheritance, Roth Conversions can still make sense for the eventuality that one of you outlives the other by a lot of years or that at least one of you lives a long time.
Some people leave a considerable balance in tax deferred for the possibility of needing long term care. The withdrawals would be tax deductible in that case, so pre-paying taxes for conversions would not make sense.
Also, you have to think about your forecasts for the unknowables - if you believe tax laws are likely to revert to pre-TCJA rates on schedule or otherwise become more hostile to high earners, then more conversions now might be better. Your forecast of market returns is obviously key as well.
So give your goals, forecasts and planning considerations some thought before working through models.