Proposed update to Roth Conversion wiki page

[fyre4ce]

I'm proposing an update to the Roth Conversion wiki page:

Current: https://www.bogleheads.org/wiki/Roth_IRA_conversion

Proposed: https://www.bogleheads.org/wiki/User:Fy ... conversion

My goals were to improve the organization and readability of the page, and add some detail and explanations on a few points. There are no major content changes. Change summary:

1. Renamed the page "Roth Conversion" instead of "Roth IRA conversion". Rollovers into employer plan Roth sub-accounts are common enough that they should be included in the discussion too. If published, I'll add a redirect link from "Roth IRA conversion" to the new page.
2. Reorganized the page. "How to convert" moved down the page; readers should not spend time learning how to convert before they check to see whether they should convert. Conversion priorities put into a table form for emphasis and readability. References to tools that help to decide whether to convert are now organized by their purpose (plotting current marginal rates, etc.). Made Cautions its own section. Created section for specific situations and put all the special cases the page discusses in there.
3. Rewrote the header. The current first sentence is "Roth IRA conversions are permitted by US tax regulations", but this is not nearly as good as a concise description of what a Roth conversion is. Added a sentence to emphasize that Roth conversions are a tax planning decision, and clarified that they are also used in the two "backdoor" processes.
4. Added Details section at the top, which contains (I think) useful information readers should know before they consider conversion. Some of this information is pulled from other parts of the existing page, some of it is new content I added.
5. Renamed the main section "Whether, when, and how much to convert" because it addresses all three of these questions. Rewrote parts of it to make it more accurate and easier to read, while relocating discussion of special cases further down the page.
6. The current page says, "If you expect to be in a lower tax bracket in future years, wait until then to convert." - but I don't think this is entirely accurate. If converting a small percentage of a large pre-tax balance, it's best to convert in the current year and in future years; I added this caveat.
7. Added a link to my Traditional versus Roth future tax rate estimation spreadsheet, which has been reviewed by the forum and successfully used to help forum readers with real decisions.
8. Added a couple cautions about liquidity and irreversibility.
9. Cleaned up the discussion about Social Security. For example, phase-in of SS taxation is not an issue when conversions are done before someone starts collecting SS. So I changed the focus to predicting where one will be relative to the taxation spike in the future, and converting enough to come in under the spike then.
10. Expanded the discussion about conversions in a down market, specifically about why it's hard to do this in practice.
11. Added a section on paying capital gains taxes to convert, with an example.

Please provide feedback on the proposed update!

[FiveK]

Seems the current page "ain't broke" so we should be leery of "fixing it" on a wholesale basis. Others' perspectives would be useful. Some specific comments:

1. Page name: I don't care, although it's always seemed odd to use Roth as the adjective when it is a traditional account that is being converted. At a minimum, all the forum references that have been made to the existing page name should continue to work.
2. Details belong at the end, not at the beginning. Keep the initial sections short and of a summary, not detailed, nature. At the time the "Starting in 2018..." notice was added, that was a significant change and worth highlighting. Might or might not be such a big deal now.
3. No problem having something other than "Roth IRA conversions are permitted by US tax regulations" as the first sentence. From a practical perspective, the necessary condition for making conversions directly from an employer plan is that plan allowing partial distributions. The current "marginal tax rate in future years" should be retained instead of "marginal tax rate in retirement".
4. Haven't parsed the "Whether, when, and how much to convert" in detail yet.
5. What do you consider inaccurate about "If you expect to be in a lower tax bracket in future years, wait until then to convert"? E.g., for someone currently subject to a >40% marginal rate but expecting 24% in future years?
6. No strong objection to adding a link to your spreadsheet, although it seems preferable to have had a larger number of successful forum uses (at least double digits?) before putting it in the wiki. Or maybe not - I don't know, for example, how the RPM spreadsheet started and was publicized.
   In any case, keeping the current "Using a spreadsheet" section title instead of "Calculations" will maintain all the forum links that point to that section.
7. Regarding conversions in a down market, the current wording "Being able to convert a larger fraction of one's traditional account in a down market when the marginal tax rate for the conversion is favorable is a good thing, but a down market does not make incurring a higher marginal tax rate favorable" should be retained, because that summarizes discussions in various forum topics.
8. Regarding paying capital gains taxes to convert, reference could be made to this post in the "Roth 401(k) vs. 401(k) Spreadsheet Attempt - Critique Please" topic. I think those formulas are also in the "toolbox" spreadsheet: see marginal tax rate cost of selling equities)

[JBTX]

Deleted

[fyre4ce]

Page name: I don't care, although it's always seemed odd to use Roth as the adjective when it is a traditional account that is being converted. At a minimum, all the forum references that have been made to the existing page name should continue to work.

I think a simple redirect link should do it, both for forum links and links elsewhere in the wiki. But I do think "Roth conversion" is a better title.

Details belong at the end, not at the beginning. Keep the initial sections short and of a summary, not detailed, nature. At the time the "Starting in 2018..." notice was added, that was a significant change and worth highlighting. Might or might not be such a big deal now.

I think there is sufficient content above the Details section in the draft to warrant its placement - by that point, readers already know what a Roth conversion is, have a rough idea of when to do them, and why. But, I don't think it's crazy to move it down one section, between "Whether, when, and how much to convert" and "Cautions". I'd like to hear what a few other folks think but not a big issue for me.

No problem having something other than "Roth IRA conversions are permitted by US tax regulations" as the first sentence. From a practical perspective, the necessary condition for making conversions directly from an employer plan is that plan allowing partial distributions. The current "marginal tax rate in future years" should be retained instead of "marginal tax rate in retirement".

Why do you favor "in future years" versus "in retirement" or, say, "at later withdrawal"? Maybe we're hinging on a technicality. I think the mathematical value of a conversion today depends on tax rates today, at later withdrawal, and how the taxes would grow in between. It doesn't really depend on any of the tax rates in between. If tax rates are lower in between, it might be BETTER to wait, but the +/- value of converting today wouldn't change based on that. But the sentence says "the gain or benefit", not "the optimal decision", so to me it sounds correct as written. I may be missing your point though, which you're free to elaborate on.

[*]What do you consider inaccurate about "If you expect to be in a lower tax bracket in future years, wait until then to convert"? E.g., for someone currently subject to a >40% marginal rate but expecting 24% in future years?

It's interesting that we have different interpretations of that sentence. I interpreted it as, "If a Roth conversion would otherwise be warranted this year based on tax rates, but you expect to be in a lower tax bracket in future years, wait until then to convert." I'm keying off the word "wait", which implies to me you would otherwise convert now. That makes sense to me as long as the IRA balance is small. Say you expect to be in the 24% bracket at in retirement, and are in the 22% bracket this year. You have a $20,000 IRA and are expecting a large pension, so the table says you should convert the entire balance this year. But, you expect to be in the 12% bracket next year, then higher again forever, so it's best to wait until next year to convert.

The problem with that advice is say you have a $5M IRA and no pension. You should convert this year @ 22% AND next year @ 12% and 22%. You want to make sure you have enough balance left over to convert in future years. That's why I added the caveat and the proposed edit makes it much clearer to me.

It seems you interpret it differently. Say your investor is >40% in peak earnings years and expects to retire in the 24% bracket. Next year they move to a different state and are down to 37%, but still expect to be there right up until they retire. Doesn't that satisfy your interpretation (tax rates are lower in a future year), so they should convert @ 37%? That doesn't seem right. Assuming this person is going to live off all their pre-tax withdrawals in retirement, they probably should not convert at all.

The ambiguity is all the more reason to clarify it. Let me know if you have any issues with the proposed edited text and we can go from there.

No strong objection to adding a link to your spreadsheet, although it seems preferable to have had a larger number of successful forum uses (at least double digits?) before putting it in the wiki. Or maybe not - I don't know, for example, how the RPM spreadsheet started and was publicized.
In any case, keeping the current "Using a spreadsheet" section title instead of "Calculations" will maintain all the forum links that point to that section.

Fair question. My tool has been published for almost two years now, and I've gotten good feedback on it, which has all been incorporated. I asked myself, is the page better with the reference than without it? I think the answer is yes. It's clearly helped some people, and has been tested enough to remove at least most of the bugs, so I think the reference is worth the space. I'm happy to accept feedback from you on it!

No problem changing the section title to "Using a spreadsheet", I'll update.

Regarding conversions in a down market, the current wording "Being able to convert a larger fraction of one's traditional account in a down market when the marginal tax rate for the conversion is favorable is a good thing, but a down market does not make incurring a higher marginal tax rate favorable" should be retained, because that summarizes discussions in various forum topics.

I tried to capture the essence of that statement with the explanation. Let me see if I can wordsmith it more to your taste; might take a few days though.

Regarding paying capital gains taxes to convert, reference could be made to this post in the "Roth 401(k) vs. 401(k) Spreadsheet Attempt - Critique Please" topic. I think those formulas are also in the "toolbox" spreadsheet: see marginal tax rate cost of selling equities) [/list]

I'm fine putting in a spreadsheet reference if there's a tool that does this calculation. I do have some concerns with how the calculation has been done, such as in the post you linked. It's correct to say the tax cost today is [tax needed] / [1 - (CG_rate x gain_fraction)]. But, in the "don't convert" case, it's important to consider the taxable assets carry that lower basis forward, and there will be more capital gains tax due in the future, compared to if the same value were invested in the taxable account starting at t=0. All the formulas I've seen for taxable future value assume 100% basis at t=0 but that's not what's going on here. In the example I included, I had to calculate the basis iteratively with a spreadsheet. This tool looks pretty good, and if it looks to get it right I'll include a link.

[fyre4ce]

Without spending a lot of time pondering “the Roth diversion decision table” at first glance I’m not confident that the advice in it is uniformly correct.

Would you care to elaborate? For what it's worth, the content in that table is very similar to what's on the live page, in paragraph form.

[FiveK]

Why do you favor "in future years" versus "in retirement"

Because "retirement" is not a necessary condition.

[*]What do you consider inaccurate about "If you expect to be in a lower tax bracket in future years, wait until then to convert"? E.g., for someone currently subject to a >40% marginal rate but expecting 24% in future years?

It's interesting that we have different interpretations of that sentence. I interpreted it as, "If a Roth conversion would otherwise be warranted this year based on tax rates, but you expect to be in a lower tax bracket in future years, wait until then to convert."

Given that the sentence is the very first in the "Whether to convert" section, there should be no presumption that a decision to convert has already been made.

No strong objection to adding a link to your spreadsheet, although it seems preferable to have had a larger number of successful forum uses (at least double digits?) before putting it in the wiki. Or maybe not - I don't know, for example, how the RPM spreadsheet started and was publicized.
In any case, keeping the current "Using a spreadsheet" section title instead of "Calculations" will maintain all the forum links that point to that section.

Fair question. My tool has been published for almost two years now, and I've gotten good feedback on it, which has all been incorporated. I asked myself, is the page better with the reference than without it? I think the answer is yes. It's clearly helped some people, and has been tested enough to remove at least most of the bugs, so I think the reference is worth the space. I'm happy to accept feedback from you on it!

Seems overly complex in the sense of striving for precision where accuracy is unlikely.

Regarding conversions in a down market, the current wording "Being able to convert a larger fraction of one's traditional account in a down market when the marginal tax rate for the conversion is favorable is a good thing, but a down market does not make incurring a higher marginal tax rate favorable" should be retained, because that summarizes discussions in various forum topics.

I tried to capture the essence of that statement with the explanation. Let me see if I can wordsmith it more to your taste; might take a few days though.

Leaving it unchanged, with no wordsmithing, would be fine.

Regarding paying capital gains taxes to convert, reference could be made to this post in the "Roth 401(k) vs. 401(k) Spreadsheet Attempt - Critique Please" topic. I think those formulas are also in the "toolbox" spreadsheet: see marginal tax rate cost of selling equities) [/list]

I'm fine putting in a spreadsheet reference if there's a tool that does this calculation.

Doesn't the one provided do that?

I do have some concerns with how the calculation has been done, such as in the post you linked. It's correct to say the tax cost today is [tax needed] / [1 - (CG_rate x gain_fraction)]. But, in the "don't convert" case, it's important to consider the taxable assets carry that lower basis forward, and there will be more capital gains tax due in the future, compared to if the same value were invested in the taxable account starting at t=0.

Unless the situation changes and other funds are available. See prior reference to precision vs. accuracy.

All the formulas I've seen for taxable future value assume 100% basis at t=0 but that's not what's going on here. In the example I included, I had to calculate the basis iteratively with a spreadsheet. This tool looks pretty good, and if it looks to get it right I'll include a link.

Is that one of the "Two more spreadsheets regarding the reinvested RMD situation are in the part (c) discussion of ”Traditional plus taxable” vs. Roth"?

[JBTX]

Deleted

[jakehefty17]

I have never looked at this wiki page... which surprises me. I would agree it could use some refreshing.

The pages I've referenced are for the Backdoor and Mega-Backdoor Roth pages. I actually contributed my personal experience into the Mega-Backdoor page, when there was a post asking for input.

I'd agree that Roth Conversions would be a better title for the page to encompass both 401k and IRA.

Changing the description to a "tax planning decision" is true in some cases (from Traditional to Roth), but less true for the backdoor processes. By that I mean the conversion is almost certainly better than leaving it where it is - specifically for backdoor contributions. Traditional vs Roth is a much more complex decision, particularly due to the uncertainty of future tax rates and policy.

I understand that Roth conversions outside of Backdoor strategies can be beneficial, particularly for early retirement. One that I'm aware of is a Roth IRA conversion ladder, which is actually a phrase/strategy absent from the wiki.

A lot of this is information relative to the Traditional versus Roth, Backdoor and Mega-Backdoor Roth pages. So I'm not sure how much double-dipping is required... you could link each of these pages to certain sections.

Just my 2 cents. Good luck!

[WoodSpinner]

Fry4ce,

Thanks for taking this on…

There are some nuances that I think need to be highlighted….

1. There are many other reasons for doing Roth Conversions than Marginal Tax Rates today vs. the future. I think this is an area that warrants more discussion.

- Resilience — especially if most of your funds are in a TDA and you don’t have good Tax Diversification.
- Estate Planning — especially if you plan to leave funds to a Spendthrift or Special-Needs Trust
- Optimization: Couple, Surviving Spouse, Beneficiaries?
- Trying to achieve a Tax Equilibrium across Retirement
- Using Roth Conversion ladders to support Early Retirement Cashflow

2. I think more emphasis is needed in developing a list of prioritized Roth Conversion goals
- What are you optimizing for: Tax Adjusted Portfolio Values, Resilience, Estate Planning
- Who are you optimizing for: Couple, Surviving Spouse, Beneficiaries
- When are planning for: When do you plan conversions to start and end
- How much money to leave in a TDA: Charitable Giving, LTC Self Funding
- What funds from the IRA am I planning to spend already to meet my Cashflow needs

3. Suggest some discussion on Conversions In-Kind rather than Buy/Sell. Perhaps switch examples to use Fidelity or Schwab since Vanguard has a very poor implementation for Roth Conversions.

4. Include details for expected code in Box 7 of a 1099-R

5. I don’t think enough insight is provided in terms of an Expected Paid Tax Breakeven Point for planning Roth Conversions. This significantly affects the odds of actually saving on Taxes over your Retirement.

6. Not enough insight into the question of how much taxes are paid to improve Tax Adjusted Portfolio values versus the increase in value. There needs to be an RoI analysis done to avoid over Converting.


WoodSpinner

[bsteiner]

...
5. I don’t think enough insight is provided in terms of an Expected Paid Tax Breakeven Point for planning Roth Conversions. This significantly affects the odds of actually saving on Taxes over your Retirement.
...

At a constant tax rate, that's meaningless. It's only relevant to the extent you convert at a higher tax rate than would otherwise apply to the distributions.

[rkhusky]

Any interest in discussing a Roth conversion ladder for early retirees?

Or a technique I was contemplating in order to withdraw from my tIRA before age 59.5: withdraw contributions from Roth IRA and simultaneously do a Roth conversion from the tIRA of the same amount.

[Running Bum]

The page is very good. I have a few suggestions for minor improvement.

Under "Cautions", you say to check for adverse tax impacts before converting. These same adverse tax impacts can happen later when taking RMDs, and can be reduced by conversion.

In the first Cautions bullet, there are two more impacts: Conversion now, or RMDs later, can push (more) QDivs/LTCGs into being taxed. They can also push more SS benefit into being taxed, if one does not already have 85% of SS income taxed.

Somewhere, I think it's worth mentioning that a Roth is a good source of funds for handling large (unexpected?) expenses without incurring a large tax hit due to an income spike you'd have if you had to take it from your tax deferred account. Roth conversions help you build up those funds. (There's probably a better way to say that.)

[fyre4ce]

Because "retirement" is not a necessary condition.

True; I think the term tends to get used as a shorthand for the period of future withdrawals, that is easy for readers to pick up on and understand. My problem with "in future years" is that it's vague. Which future years? All of them? The lowest tax rate years? Years when withdrawals are planned?

Maybe "your expected marginal tax rate when the money will eventually be withdrawn" is clearer? That covers cases of retirement, heirs, conversions along the way, etc.

What do you consider inaccurate about "If you expect to be in a lower tax bracket in future years, wait until then to convert"? E.g., for someone currently subject to a >40% marginal rate but expecting 24% in future years?

It's interesting that we have different interpretations of that sentence. I interpreted it as, "If a Roth conversion would otherwise be warranted this year based on tax rates, but you expect to be in a lower tax bracket in future years, wait until then to convert."

Given that the sentence is the very first in the "Whether to convert" section, there should be no presumption that a decision to convert has already been made.

It sounds like you're interpreting that sentence recursively - ie. "If you expect any future year to have a lower tax rate this year, wait until then and then reevaluate according to this rule." A consequence of that would be that no one should ever convert if they expect to have any future year that's a lower rate than the current year. Is that how you're interpreting this, and do you think that's the advice the page should be giving? (Not a rhetorical question; genuinely want to know.)

Seems overly complex in the sense of striving for precision where accuracy is unlikely.

At risk of side-tracking this discussion, I'll ask - what complexity and precision would you like to see removed?

Leaving it unchanged, with no wordsmithing, would be fine.

My problem with the current page/sentence is that it's not clear what, if anything, can be done with the information that converting in a down market is "a good thing." Readers are presumably most interested in applying the information on the page to optimize their own finances. So they see that cookie and are left wondering if there's a way to get it, and if so, how. That's why I added the context of how it's not practical to take advantage of down markets when converting, and you can only know if you got a good deal in hindsight. Or, if there's a way to capitalize on market crashes with conversions I'm not seeing, by all means let me know.

I do have some concerns with how the calculation has been done, such as in the post you linked. It's correct to say the tax cost today is [tax needed] / [1 - (CG_rate x gain_fraction)]. But, in the "don't convert" case, it's important to consider the taxable assets carry that lower basis forward, and there will be more capital gains tax due in the future, compared to if the same value were invested in the taxable account starting at t=0.

Unless the situation changes and other funds are available. See prior reference to precision vs. accuracy.

I take your point about precision and accuracy. But here's my issue. If you are trying to calculate a result and decide to include a particular factor (here, capital gains tax from the sale), you need to include it everywhere in the calculation. Including it in some places (eg. on the front end) but not others (eg. on the back end) is a big no-no. I agree you may have other funds available in the future, but that doesn't change the fact that with one option you'll be left with low-basis shares that you may have to pay capital gains tax to liquidate. If you want to assume a capital gains rate of 0, maybe if you're expecting to be in the 0% bracket or leave them to heirs, fine, plug 0 into the formula. But if the calculation is worth doing, it's worth doing accurately.

All the formulas I've seen for taxable future value assume 100% basis at t=0 but that's not what's going on here. In the example I included, I had to calculate the basis iteratively with a spreadsheet. This tool looks pretty good, and if it looks to get it right I'll include a link.

Is that one of the "Two more spreadsheets regarding the reinvested RMD situation are in the part (c) discussion of ”Traditional plus taxable” vs. Roth"?

Yes, that's listed as "MDM's spreadsheet". I need to spend some time looking at the formulas in more detail. I will also take a run at deriving a formula that doesn't require iteration by year. If I'm successful I'll add a link to it.

[fyre4ce]

I have never looked at this wiki page... which surprises me. I would agree it could use some refreshing.

The pages I've referenced are for the Backdoor and Mega-Backdoor Roth pages. I actually contributed my personal experience into the Mega-Backdoor page, when there was a post asking for input.

Thanks very much for the review and feedback, which I'll address below.

Changing the description to a "tax planning decision" is true in some cases (from Traditional to Roth), but less true for the backdoor processes. By that I mean the conversion is almost certainly better than leaving it where it is - specifically for backdoor contributions. Traditional vs Roth is a much more complex decision, particularly due to the uncertainty of future tax rates and policy.

I tried to address this very point. Take another look at the second paragraph of the header:

Roth conversions are usually done as part of a long-term tax planning strategy. ... They are also done as the second step in the Backdoor Roth IRA and Mega-backdoor Roth, with the intent of contributing more to Roth accounts than would otherwise be allowed.

Do you think that captures the two main uses?

I understand that Roth conversions outside of Backdoor strategies can be beneficial, particularly for early retirement. One that I'm aware of is a Roth IRA conversion ladder, which is actually a phrase/strategy absent from the wiki.[/url]

Yes, great point and one others have made as well. A Roth conversion ladder definitely deserves discussion in the "Specific situations" section. If it gets too unwieldy, maybe it would be best to get its own page, but let's see how it turns out here first.

A lot of this is information relative to the Traditional versus Roth, Backdoor and Mega-Backdoor Roth pages. So I'm not sure how much double-dipping is required... you could link each of these pages to certain sections.

Agreed, and I tried to strike some balance here, not duplicating too much content but not making it a bunch of links either. Major sections are linked to that page - calculations, current rates, future rates. If you have suggestions for what should be linked, by all means share.

[Flobes]

Please provide feedback on the proposed update!

State taxation is absent in the discussion. Special opportunities there were a principal determinant for my own Roth conversions strategy.

In Colorado, some "pension income" is excluded from state income taxes ($20k 55-64; $24k 65+). The definition of "pension income" includes Roth conversions. So I did partial Roth conversions to make full use of this state-tax-free opportunity. I saw it as a 4.63% (our flat tax rate) bonus earned. Once I turned 70, Social Security filled the "exempt" bucket, and my IRA balance was very whittled down to target. (BTW Colo tax rate has since decreased unpredictably, twice, and is now 4.4% flat.)

Other states also have some unique tax considerations of Roth conversion as well, which I know only from it appearing in various discussions on the Forum.

[Alan S.]

Note that the tax code limits the term "conversion" to IRA to Roth IRA transfers. A 401k to Roth IRA rollover is not a conversion, rather it is a "qualified rollover contribution". Similarly, an IRR (in plan Roth rollover) is also not a conversion.

Since the tax treatment for all the above transactions are analogous, I would suggest that the 3rd sentence of the opening proposed paragraph be changed to the following:

Transactions that are analogous to Roth conversions for tax purposes include "qualified rollover contributions" from qualified employer plans to Roth IRAs, and "in plan Roth rollovers" from the non Roth portion of employer plans to the designated Roth account in the same plan.

[WoodSpinner]

...
5. I don’t think enough insight is provided in terms of an Expected Paid Tax Breakeven Point for planning Roth Conversions. This significantly affects the odds of actually saving on Taxes over your Retirement.
...

At a constant tax rate, that's meaningless. It's only relevant to the extent you convert at a higher tax rate than would otherwise apply to the distributions.

Or converting at a lower tax rate when you will shift to a higher one.

Either way, if one of your primary reasons for Conversions is to save on taxes (this is a frequently sighted reason) then it’s a worthwhile excercise.

Note: I am considering ACA credits, IRMAA and other components of the Effective Marginal Rate as part of the Taxes Paid….

WoodSpinner

[bsteiner]

...
5. I don’t think enough insight is provided in terms of an Expected Paid Tax Breakeven Point for planning Roth Conversions. This significantly affects the odds of actually saving on Taxes over your Retirement.
...

At a constant tax rate, that's meaningless. It's only relevant to the extent you convert at a higher tax rate than would otherwise apply to the distributions.

Or converting at a lower tax rate when you will shift to a higher one.

Either way, if one of your primary reasons for Conversions is to save on taxes (this is a frequently sighted reason) then it’s a worthwhile excercise.

Note: I am considering ACA credits, IRMAA and other components of the Effective Marginal Rate as part of the Taxes Paid….

WoodSpinner

There are many other factors, such as the effect on the taxation of qualified dividends and capital gains, the various deductions and credits that depend on income, and the effect on the taxation of Social Security benefits.

[WoodSpinner]

...
5. I don’t think enough insight is provided in terms of an Expected Paid Tax Breakeven Point for planning Roth Conversions. This significantly affects the odds of actually saving on Taxes over your Retirement.
...

At a constant tax rate, that's meaningless. It's only relevant to the extent you convert at a higher tax rate than would otherwise apply to the distributions.

Or converting at a lower tax rate when you will shift to a higher one.

Either way, if one of your primary reasons for Conversions is to save on taxes (this is a frequently sighted reason) then it’s a worthwhile excercise.

Note: I am considering ACA credits, IRMAA and other components of the Effective Marginal Rate as part of the Taxes Paid….

WoodSpinner

There are many other factors, such as the effect on the taxation of qualified dividends and capital gains, the various deductions and credits that depend on income, and the effect on the taxation of Social Security benefits.

Agreed — my suggested analysis would consider all of them as well …

[FiveK]

Because "retirement" is not a necessary condition.

True; I think the term tends to get used as a shorthand for the period of future withdrawals, that is easy for readers to pick up on and understand. My problem with "in future years" is that it's vague. Which future years? All of them? The lowest tax rate years? Years when withdrawals are planned?

Maybe "your expected marginal tax rate when the money will eventually be withdrawn" is clearer? That covers cases of retirement, heirs, conversions along the way, etc.

Indeed it is vague, consistent with the general observation about the whole traditional vs. Roth issue that most answers should start with "it depends...."

One could quibble about the words "tax bracket" vs. "marginal tax rate" in the current "If you expect to be in a lower tax bracket in future years, wait until then to convert." One could also quibble that "when the money will eventually be withdrawn" could mislead people when the tax rates between "conversion" and "withdrawal" will differ. If there is no perfect phrase, and what is there is "good enough", keeping the status quo avoids never-ending wordcrafting. Of course, "good enough" is subjective....

What do you consider inaccurate about "If you expect to be in a lower tax bracket in future years, wait until then to convert"? E.g., for someone currently subject to a >40% marginal rate but expecting 24% in future years?

It's interesting that we have different interpretations of that sentence. I interpreted it as, "If a Roth conversion would otherwise be warranted this year based on tax rates, but you expect to be in a lower tax bracket in future years, wait until then to convert."

Given that the sentence is the very first in the "Whether to convert" section, there should be no presumption that a decision to convert has already been made.

It sounds like you're interpreting that sentence recursively - ie. "If you expect any future year to have a lower tax rate this year, wait until then and then reevaluate according to this rule." A consequence of that would be that no one should ever convert if they expect to have any future year that's a lower rate than the current year. Is that how you're interpreting this, and do you think that's the advice the page should be giving? (Not a rhetorical question; genuinely want to know.)

The current phrase is "future years", not "any future year". Perhaps the most common application of this advice is to people who are currently working full time: for most of them, converting while working will not be best and they should wait for future years when they have either retired, or gone to part time, etc.

Leaving [Being able to convert a larger fraction of one's traditional account in a down market when the marginal tax rate for the conversion is favorable is a good thing, but a down market does not make incurring a higher marginal tax rate favorable.] unchanged, with no wordsmithing, would be fine.

My problem with the current page/sentence is that it's not clear what, if anything, can be done with the information that converting in a down market is "a good thing."

But that's not what it says. Converting in a down market may or may not be a good thing. If such as conversion would be good, doing it in a down market can make it better.

I do have some concerns with how the calculation has been done, such as in the post you linked. It's correct to say the tax cost today is [tax needed] / [1 - (CG_rate x gain_fraction)]. But, in the "don't convert" case, it's important to consider the taxable assets carry that lower basis forward, and there will be more capital gains tax due in the future, compared to if the same value were invested in the taxable account starting at t=0.

Unless the situation changes and other funds are available. See prior reference to precision vs. accuracy.

I take your point about precision and accuracy. But here's my issue. If you are trying to calculate a result and decide to include a particular factor (here, capital gains tax from the sale), you need to include it everywhere in the calculation. Including it in some places (eg. on the front end) but not others (eg. on the back end) is a big no-no.

No, you don't, and no, it isn't.

I agree you may have other funds available in the future, but that doesn't change the fact that with one option you'll be left with low-basis shares that you may have to pay capital gains tax to liquidate. If you want to assume a capital gains rate of 0, maybe if you're expecting to be in the 0% bracket or leave them to heirs, fine, plug 0 into the formula. But if the calculation is worth doing, it's worth doing accurately.

Again, "accuracy" and "many years in the future" are generally not compatible. Whether a similar adjustment is needed for future conversions/withdrawals will vary from person to person. For example, if SS benefits, RMDs, etc., are expected to be available in the future, no adjustment would be needed as there would be "cash on hand" to pay the tax.

[fyre4ce]

1. There are many other reasons for doing Roth Conversions than Marginal Tax Rates today vs. the future. I think this is an area that warrants more discussion.

- Resilience — especially if most of your funds are in a TDA and you don’t have good Tax Diversification.
- Estate Planning — especially if you plan to leave funds to a Spendthrift or Special-Needs Trust
- Optimization: Couple, Surviving Spouse, Beneficiaries?
- Trying to achieve a Tax Equilibrium across Retirement
- Using Roth Conversion ladders to support Early Retirement Cashflow

Thanks. Agree it would be good to include a reference to tax diversification. It's discussed on the T vs. R page, and I can easily add a reference and link. There is also already a discussion of estate planning, including surviving spouse, beneficiaries, and charitable giving. It doesn't include any discussion about trusts, but I know we have some estate planning experts here, so if someone wants to propose some text, I'll include it happily. Roth conversion ladders are a great topic to include, and I'll add a section. I'm not sure what exactly is meant by "tax equilibrium" - I assume something like staying in the same bracket throughout retirement, perhaps by early Roth conversions to keep future RMDs down. I'll add a sentence to that effect.

2. I think more emphasis is needed in developing a list of prioritized Roth Conversion goals
- What are you optimizing for: Tax Adjusted Portfolio Values, Resilience, Estate Planning
- Who are you optimizing for: Couple, Surviving Spouse, Beneficiaries
- When are planning for: When do you plan conversions to start and end
- How much money to leave in a TDA: Charitable Giving, LTC Self Funding
- What funds from the IRA am I planning to spend already to meet my Cashflow needs

I think my above comments at least partially cover what you're talking about here. I'll add a comment about leaving enough in pre-tax accounts to cover future deductible expenses, like charity and medical/LTC expenses.

3. Suggest some discussion on Conversions In-Kind rather than Buy/Sell. Perhaps switch examples to use Fidelity or Schwab since Vanguard has a very poor implementation for Roth Conversions.

I'm not sure what to say about this, because I've only done a couple Roth conversions myself, and not with Vanguard, Schwab, or Fidelity. Would you volunteer to write some text, or at least highlight the key points you think readers should know?

4. Include details for expected code in Box 7 of a 1099-R

Good suggestion; I'll add some comments to the Details section.

5. I don’t think enough insight is provided in terms of an Expected Paid Tax Breakeven Point for planning Roth Conversions. This significantly affects the odds of actually saving on Taxes over your Retirement.

6. Not enough insight into the question of how much taxes are paid to improve Tax Adjusted Portfolio values versus the increase in value. There needs to be an RoI analysis done to avoid over Converting.

I'm not sure what you mean by either of these. Can you elaborate?

[FiveK]

- Trying to achieve a Tax Equilibrium across Retirement

I'm not sure what exactly is meant by "tax equilibrium"

Perhaps Finding Your Tax Equilibrium Rate When Liquidating Retirement Accounts is the source of that phrase?

[WoodSpinner]

- Trying to achieve a Tax Equilibrium across Retirement

I'm not sure what exactly is meant by "tax equilibrium"

Perhaps Finding Your Tax Equilibrium Rate When Liquidating Retirement Accounts is the source of that phrase?

Correct — it’s often a reasonably good enough target for most …

[fyre4ce]

Any interest in discussing a Roth conversion ladder for early retirees?

Or a technique I was contemplating in order to withdraw from my tIRA before age 59.5: withdraw contributions from Roth IRA and simultaneously do a Roth conversion from the tIRA of the same amount.

Great suggestion; I'll add a section.

[fyre4ce]

- Trying to achieve a Tax Equilibrium across Retirement

I'm not sure what exactly is meant by "tax equilibrium"

Perhaps Finding Your Tax Equilibrium Rate When Liquidating Retirement Accounts is the source of that phrase?

WoodSpinner says yes. I'll include a link to that article.

[WoodSpinner]

1. There are many other reasons for doing Roth Conversions than Marginal Tax Rates today vs. the future. I think this is an area that warrants more discussion.

- Resilience — especially if most of your funds are in a TDA and you don’t have good Tax Diversification.
- Estate Planning — especially if you plan to leave funds to a Spendthrift or Special-Needs Trust
- Optimization: Couple, Surviving Spouse, Beneficiaries?
- Trying to achieve a Tax Equilibrium across Retirement
- Using Roth Conversion ladders to support Early Retirement Cashflow

Thanks. Agree it would be good to include a reference to tax diversification. It's discussed on the T vs. R page, and I can easily add a reference and link. There is also already a discussion of estate planning, including surviving spouse, beneficiaries, and charitable giving. It doesn't include any discussion about trusts, but I know we have some estate planning experts here, so if someone wants to propose some text, I'll include it happily. Roth conversion ladders are a great topic to include, and I'll add a section. I'm not sure what exactly is meant by "tax equilibrium" - I assume something like staying in the same bracket throughout retirement, perhaps by early Roth conversions to keep future RMDs down. I'll add a sentence to that effect.

Trusts
I am not a lawyer but here is my understanding about leaving IRAs to Spendthrift and Disability trusts (I suspect my terminology is not accurate for the Trust types):

- Both of these types of trusts are required to empty an IRA in a prescribed period of time (5 years I believe)
- Trusts are taxed at the highest Marginal Tax Rate after about $13,000 in income (approximately)
- Leaving these types of trusts a Roth IRA can be a smart estate move since funds from an Inherited Roth are not taxed as ordinary income

Optimization
The optimization is a key decision point before planning anybRoth conversions. Typically, optimizing for a couple will result in higher taxes for a surviving spouse and possibly their beneficiaries. It really needs to be emphasized as a decision point.

3. Suggest some discussion on Conversions In-Kind rather than Buy/Sell. Perhaps switch examples to use Fidelity or Schwab since Vanguard has a very poor implementation for Roth Conversions.

I'm not sure what to say about this, because I've only done a couple Roth conversions myself, and not with Vanguard, Schwab, or Fidelity. Would you volunteer to write some text, or at least highlight the key points you think readers should know?

At a minimum discuss the ability to convert In-Kind which simply means you move the existing asset from the TDA to a Roth without buying and selling. This reduces the complexity of the Conversion (single step) and avoids some risk for being out of the market. Conversion $ amounts are usually the end of day price for the asset.

5. I don’t think enough insight is provided in terms of an Expected Paid Tax Breakeven Point for planning Roth Conversions. This significantly affects the odds of actually saving on Taxes over your Retirement.

Many people expect to use Roth Conversions to reduce the overall taxes paid — especially if they are looking at Marginal Tax Brackets as an indicator (e.g. convert at the 12% bracket to avoid the 22%). There may in fact be a tax savings BUT you are paying more taxes in the early years (as compared to no conversions). There is a crossover point where you actually save on overall taxes paid. The earlier the better BUT for some of us this crossover occurs in their late 80’s, which may be past your expected life span.

You may still decide Conversions make sense but at least you are aware of the probabilities. We decided to be a bit less aggressive in conversions since I am not confident we will really live long enough to save on taxes.

It’s not a sure thing!

6. Not enough insight into the question of how much taxes are paid to improve Tax Adjusted Portfolio values versus the increase in value. There needs to be an RoI analysis done to avoid over Converting.

An example was recently posted that involved paying $32,000 in additional taxes to achieve a $2,000 improvement in Tax Adjusted Net Worth. Is this a good deal? Perhaps, or perhaps not. It’s one of downsides of using Tax Adjusted Networth as a metric for judging Conversions.

Hope this helps a bit — again, many thanks for taking on this task! It’s not simple or clear cut but will be very helpful!!

WoodSpinner

[FiveK]

An example was recently posted that involved paying $32,000 in additional taxes to achieve a $2,000 improvement in Tax Adjusted Net Worth. Is this a good deal? Perhaps, or perhaps not. It’s one of downsides of using Tax Adjusted Networth as a metric for judging Conversions.

That is the Not understanding conclusion to Roth comparison - Bogleheads.org topic. It's a decent example of various perceptions, some correct some not, that are out there.

While there will always be "it depends..." conditions on traditional vs. Roth, at the least the wiki should document how the math works, given some usual assumptions. I think the wiki currently does do that, am not terribly concerned that we are heading in a different direction, and trust that's not a controversial position....

[fyre4ce]

Maybe "your expected marginal tax rate when the money will eventually be withdrawn" is clearer? That covers cases of retirement, heirs, conversions along the way, etc.

Indeed it is vague, consistent with the general observation about the whole traditional vs. Roth issue that most answers should start with "it depends...."

One could quibble about the words "tax bracket" vs. "marginal tax rate" in the current "If you expect to be in a lower tax bracket in future years, wait until then to convert." One could also quibble that "when the money will eventually be withdrawn" could mislead people when the tax rates between "conversion" and "withdrawal" will differ. If there is no perfect phrase, and what is there is "good enough", keeping the status quo avoids never-ending wordcrafting. Of course, "good enough" is subjective....

Let's not lose track of the ultimate goal, which is to help as many readers as possible make good decisions about Roth conversions. The major downside of what you're proposing - leaving things intentionally vague to cover all your bases - is that readers are left without a clear understanding of what to do. Case in point: for the sentence we discussed below, I still don't understand what it's trying to say, even after several rounds of dialog with you. Sharpening things up a bit will aid understanding, and it's okay if it doesn't apply to literally every case, as long as it helps substantially more people than it hurts. Details further down the page are meant to cover those special cases.

Pretend for a moment we were writing a wiki page about blackjack strategy. "Always split aces and 8's" is a perfect example of really good advice. Easy to understand, easy to remember, no deep understanding of probability theory required, and accurate nearly all the time. Depending on the expected audience, we could add things like "...except surrender on 8-8 vs. dealer ace if the dealer hits a soft 17", expected value tables, etc. further down. It's our job as writers to do the complex thinking, analysis, computer simulations, etc. and boil that down to advice that will help as many readers as possible, as much as possible, while being as easy to digest as possible, acknowledging that no page will ever be perfect.

It seems you would want to say something like, "The best strategy depends on the cards that will be dealt." Definitely true, but doesn't advance the reader's understanding nearly as much. Similarly, though far from perfect, "The gain or benefit depends on ... your expected marginal tax rate when the money will eventually be withdrawn" seems an improvement over "in future years". Fair point about future withdrawals vs. conversions, but it's mentioned lower on the page that a conversion to be a type of withdrawal, so I don't see a big problem. Actually, the "expected" should probably be removed, because the expected value depends on expected future tax rates, but the [actual] value depends on [actual] future tax rates. We do the estimation today to best predict what to do with our limited information.

snip

The current phrase is "future years", not "any future year". Perhaps the most common application of this advice is to people who are currently working full time: for most of them, converting while working will not be best and they should wait for future years when they have either retired, or gone to part time, etc.

My response is similar to what I just wrote. I still don't understand what's trying to be said even after your explanation. I agree converting while in peak earnings years is probably not a good idea, but that advice is already covered by the table - "if current rates are much greater than predicted future rates, do not Roth-convert". The vagueness of that sentence is hurting more than it's helping. Take a look again at what I replaced it with. The table contains the standard advice for when to convert, and then the caveat is added below of, "if you're converting a big percentage of your balance and rates will be lower in future years, wait until then to convert." That covers all the example cases you and I have proposed, and it's clearer and more accurate than what's on the live page. Perfect? Definitely not. But an improvement? Yes, and that's enough to make the edit worthwhile.

I take your point about precision and accuracy. But here's my issue. If you are trying to calculate a result and decide to include a particular factor (here, capital gains tax from the sale), you need to include it everywhere in the calculation. Including it in some places (eg. on the front end) but not others (eg. on the back end) is a big no-no.

No, you don't, and no, it isn't.

I spent time working as an analyst in industry, and I know how analysis gets done when the results really matter. Choose your assumptions and method to give you the best accuracy and reasonable complexity, clearly state those assumptions, and understand the size and direction of potential error in your result. I'm telling you from years of experience, if you're going to say you're including capital gains tax, include it everywhere it belongs. Even if you think it doesn't matter, maybe someone comes along later with a case where it matters a lot more, and if they don't know you've excluded it somewhere, they could run into problems. Or maybe capital gains rates go up a lot and become more important. Who knows. But people get fired for doing things like that. Now, if it was way more work to include it somewhere, maybe you decide to leave it out and clearly state that. But I went through the formulas for taxable growth and maxing out retirement accounts and it was very easy to modify to include. The basis formula has a 1 in it, and that gets replaced by the basis fraction. I already updated both pages, and updated my spreadsheet tool too, but I haven't yet published the latter. Yes, sometimes the analysis has a lot of uncertainty in the inputs. No, that's not an excuse to intentionally add errors by using less accurate math, especially when it's exactly the same amount of work for the user.

I agree you may have other funds available in the future, but that doesn't change the fact that with one option you'll be left with low-basis shares that you may have to pay capital gains tax to liquidate. If you want to assume a capital gains rate of 0, maybe if you're expecting to be in the 0% bracket or leave them to heirs, fine, plug 0 into the formula. But if the calculation is worth doing, it's worth doing accurately.

Again, "accuracy" and "many years in the future" are generally not compatible. Whether a similar adjustment is needed for future conversions/withdrawals will vary from person to person. For example, if SS benefits, RMDs, etc., are expected to be available in the future, no adjustment would be needed as there would be "cash on hand" to pay the tax.

To make an accurate assessment, you have to track the same set of dollars from now until withdrawal, with no extra money being added or subtracted to either case, or else it will throw your results off. This would be like someone saying, "I always contribute pre-tax no matter what, it saves me taxes now." "But you're in a low bracket now, and you'll have to pay taxes later." "Oh, I'll just pay the taxes with Social Security." Maybe so, but if you go Roth you'll have those dollars available for spending, whereas you don't otherwise, and that needs to be accounted for. In any case, look at the formula here, and unless you find an error, that's what I'll be using going forward because it looks to be the most accurate.

[FiveK]

It seems you would want to say something like....

I spent time working as an analyst in industry, and I know how analysis gets done when the results really matter....
I'm telling you from years of experience....

When someone starts putting words in my mouth, assuming a perhaps unwarranted position of superior knowledge, etc., it's time to disengage for a while.

In a face to face discussion such things might be resolved quickly, but given the limited bandwidth of forum discussions it's often not worth the effort.

[fyre4ce]

Note that the tax code limits the term "conversion" to IRA to Roth IRA transfers. A 401k to Roth IRA rollover is not a conversion, rather it is a "qualified rollover contribution". Similarly, an IRR (in plan Roth rollover) is also not a conversion.

Since the tax treatment for all the above transactions are analogous, I would suggest that the 3rd sentence of the opening proposed paragraph be changed to the following:

Transactions that are analogous to Roth conversions for tax purposes include "qualified rollover contributions" from qualified employer plans to Roth IRAs, and "in plan Roth rollovers" from the non Roth portion of employer plans to the designated Roth account in the same plan.

Thanks, this is really helpful and I'll definitely include it.

Is it accurate to say that an IRA --> Roth IRA conversion is a type of "rollover" (ie. all conversions are rollovers, but not all rollovers are conversions)?

[Alan S.]

Note that the tax code limits the term "conversion" to IRA to Roth IRA transfers. A 401k to Roth IRA rollover is not a conversion, rather it is a "qualified rollover contribution". Similarly, an IRR (in plan Roth rollover) is also not a conversion.

Since the tax treatment for all the above transactions are analogous, I would suggest that the 3rd sentence of the opening proposed paragraph be changed to the following:

Transactions that are analogous to Roth conversions for tax purposes include "qualified rollover contributions" from qualified employer plans to Roth IRAs, and "in plan Roth rollovers" from the non Roth portion of employer plans to the designated Roth account in the same plan.

Thanks, this is really helpful and I'll definitely include it.

Is it accurate to say that an IRA --> Roth IRA conversion is a type of "rollover" (ie. all conversions are rollovers, but not all rollovers are conversions)?

Yes, that's accurate. In fact, a conversion is a two part transaction - a distribution followed by a rollover.

[FiveK]

Note that the tax code limits the term "conversion" to IRA to Roth IRA transfers. A 401k to Roth IRA rollover is not a conversion, rather it is a "qualified rollover contribution". Similarly, an IRR (in plan Roth rollover) is also not a conversion.

Since the tax treatment for all the above transactions are analogous, I would suggest that the 3rd sentence of the opening proposed paragraph be changed to the following:

Transactions that are analogous to Roth conversions for tax purposes include "qualified rollover contributions" from qualified employer plans to Roth IRAs, and "in plan Roth rollovers" from the non Roth portion of employer plans to the designated Roth account in the same plan.

Thanks, this is really helpful and I'll definitely include it.

Is it accurate to say that an IRA --> Roth IRA conversion is a type of "rollover" (ie. all conversions are rollovers, but not all rollovers are conversions)?

Yes, that's accurate. In fact, a conversion is a two part transaction - a distribution followed by a rollover.

Often one hears the word rollover used to mean a "like to like" event: traditional to traditional or Roth to Roth, with no tax implications, while the word conversion is used to mean traditional to Roth, and that of course has tax implications.

It's not uncommon to have to clarify what a new poster is intending when these words are used without enough context. As long as the wiki continues to be clear that going from traditional to Roth, "You pay taxes as if you withdrew the entire amount converted, but without any penalty for early withdrawal" or words to that effect, all should be well.

[fyre4ce]

Okay, I did a top-to-bottom scrub of the page and tried to incorporate all feedback received. I may not mention all of it here, but I want to quote at least once from each reviewer so they see this post and have a chance to review the updates. I also added a "Benefits" section as there were enough benefits that applied to many situations I thought it deserved its own section. It increases the page length and many of the benefits are redundant with ideas elsewhere on the page, but I thought it was worthwhile to readers to have them all summarized in one place.

snip

Moved the Details section down the page. Retitled section "Using a spreadsheet". Retained exact wording of conversions in a down market per request: "Being able to convert a larger fraction..." (I preferred to do some wordsmithing, but you had strong opinions about this and it's a reasonable compromise.) Changed text in first paragraph to "marginal tax rate when the money will eventually be withdrawn", as this captures the idea of the current text while being much more descriptive. Did my own calculations about paying capital gains taxes (and actually updated my tool with this feature), so I edited the capital gains section with a summary and a link to both tools.

I understand that Roth conversions outside of Backdoor strategies can be beneficial, particularly for early retirement. One that I'm aware of is a Roth IRA conversion ladder, which is actually a phrase/strategy absent from the wiki.

Added section on Roth conversion ladders.

snip

Added link to Kitces article about tax equilibrium, and sentence saying try to balance tax rates across one's lifetime. Added text about leaving assets to trust. Added Roth conversion ladder section. Added a caution about leaving enough in pre-tax accounts to fill low brackets and pay for charitable donations/medical/LTC expenses. Added discussion of in-kind vs. cash conversions, and descriptions of how it's done at other brokerages (based on my very limited personal experience; others may want to check to make sure I got it right). Added details of Form 1099-R including distribution codes.

At a constant tax rate, that's meaningless. It's only relevant to the extent you convert at a higher tax rate than would otherwise apply to the distributions.

bsteiner, quoting you here to ask if you'll take a look at the estate planning section and let me know if you have any feedback. I know next to nothing about leaving IRAs to trusts.

Any interest in discussing a Roth conversion ladder for early retirees?

Added section on Roth conversion ladders.

Under "Cautions", you say to check for adverse tax impacts before converting. These same adverse tax impacts can happen later when taking RMDs, and can be reduced by conversion.

In the first Cautions bullet, there are two more impacts: Conversion now, or RMDs later, can push (more) QDivs/LTCGs into being taxed. They can also push more SS benefit into being taxed, if one does not already have 85% of SS income taxed.

Somewhere, I think it's worth mentioning that a Roth is a good source of funds for handling large (unexpected?) expenses without incurring a large tax hit due to an income spike you'd have if you had to take it from your tax deferred account. Roth conversions help you build up those funds. (There's probably a better way to say that.)

Added all of these to the Benefits and Cautions sections.

State taxation is absent in the discussion. Special opportunities there were a principal determinant for my own Roth conversions strategy.

In Colorado, some "pension income" is excluded from state income taxes ($20k 55-64; $24k 65+). The definition of "pension income" includes Roth conversions. So I did partial Roth conversions to make full use of this state-tax-free opportunity. I saw it as a 4.63% (our flat tax rate) bonus earned. Once I turned 70, Social Security filled the "exempt" bucket, and my IRA balance was very whittled down to target. (BTW Colo tax rate has since decreased unpredictably, twice, and is now 4.4% flat.)

Other states also have some unique tax considerations of Roth conversion as well, which I know only from it appearing in various discussions on the Forum.

Added a mention of state taxes to the Benefits section. I hesitated because state taxes are subsumed under one's overall marginal tax rate, but it's just a couple sentences and may help residents of certain states realize they have planning opportunities. Interestingly, the Colorado pension income is NOT mentioned in the wiki's state income tax page; are you a wiki editor and would you be interested in adding it?

Note that the tax code limits the term "conversion" to IRA to Roth IRA transfers. A 401k to Roth IRA rollover is not a conversion, rather it is a "qualified rollover contribution". Similarly, an IRR (in plan Roth rollover) is also not a conversion.

Since the tax treatment for all the above transactions are analogous, I would suggest that the 3rd sentence of the opening proposed paragraph be changed to the following:

Transactions that are analogous to Roth conversions for tax purposes include "qualified rollover contributions" from qualified employer plans to Roth IRAs, and "in plan Roth rollovers" from the non Roth portion of employer plans to the designated Roth account in the same plan.

I added this text, with slight edits, to the page header. I decided not to mention that conversions are also a type of rollover; I'm not sure this would help any readers. If you have any further suggestions, please let me know.

[bsteiner]

...

bsteiner, quoting you here to ask if you'll take a look at the estate planning section and let me know if you have any feedback. I know next to nothing about leaving IRAs to trusts.
...

You wrote:

Trusts are required to liquidate retirement accounts in five years, rather than ten years when left to an individual, and pay taxes according to the trust tax brackets, which are highly compressed (as of 2023, the top 37% rate begins at just $14,450). If you are considering leaving assets into trusts, you definitely need to consult an estate planning attorney in your state, who can advise on the details and on tax strategies.

I would delete the statement that trusts have to take distribution within five years since it's generally incorrect.

I would also delete "in your state" since this is mainly a matter of Federal tax law, and also because multiple states are often involved. You would have to consider the state income taxes in the states where the trustees are and where the beneficiaries are.

Also note that if you leave retirement benefits (or other assets) in trust, the trustees may (unless limited by the terms of the Will or trust instrument) make distributions to carry out income, but if you leave them outright, you can't put them back in. One lawyer, now retired, compares assets in trust to toothpaste in a tube -- you can always take the toothpaste out of the tube (distribute assets from a trust), but you can't put it back in.

[fyre4ce]

...

bsteiner, quoting you here to ask if you'll take a look at the estate planning section and let me know if you have any feedback. I know next to nothing about leaving IRAs to trusts.
...

You wrote:

Trusts are required to liquidate retirement accounts in five years, rather than ten years when left to an individual, and pay taxes according to the trust tax brackets, which are highly compressed (as of 2023, the top 37% rate begins at just $14,450). If you are considering leaving assets into trusts, you definitely need to consult an estate planning attorney in your state, who can advise on the details and on tax strategies.

I would delete the statement that trusts have to take distribution within five years since it's generally incorrect.

I would also delete "in your state" since this is mainly a matter of Federal tax law, and also because multiple states are often involved. You would have to consider the state income taxes in the states where the trustees are and where the beneficiaries are.

Also note that if you leave retirement benefits (or other assets) in trust, the trustees may (unless limited by the terms of the Will or trust instrument) make distributions to carry out income, but if you leave them outright, you can't put them back in. One lawyer, now retired, compares assets in trust to toothpaste in a tube -- you can always take the toothpaste out of the tube (distribute assets from a trust), but you can't put it back in.

Thanks very much. It sounds like if the beneficiaries of the trust are eligible beneficiaries (ie. allowed to distribute assets on a 10-year schedule) and the trust doesn't accumulate assets, the IRA is allowed to distribute assets on the 10-year schedule rather than 5-year; I didn't know this. It also sounds like trusts usually do not pay much if any taxes on IRA withdrawals at the trust level; the trustees usually distribute income to beneficiaries, who pay taxes on their own brackets. I changed the paragraph to:

Roth conversions may be valuable when leaving assets into trust. Trusts are required to pay taxes on undistributed income according to the trust tax brackets, which are highly compressed (as of 2023, the top 37% rate begins at just $14,450). If you are considering leaving assets into trusts, you definitely need to consult an estate planning attorney, who can advise on the details and on tax strategies.

If there's anything else you think it would be good to add or change, kindly let me know. Thanks again!

[bsteiner]

... It also sounds like trusts usually do not pay much if any taxes on IRA withdrawals at the trust level; the trustees usually distribute income to beneficiaries, who pay taxes on their own brackets. I changed the paragraph to:
...

Not necessarily. Making distributions throws the amounts distributed into the beneficiaries' estates for estate tax purposes, and exposes them to the beneficiaries' creditors and spouses. With the stretch generally limited to 10 years, the beneficiaries may not be in low brackets. Also, sometimes beneficiaries are in high income tax states and the trusts don't pay state income taxes (though sometimes the reverse is the case).

[WoodSpinner]

...

bsteiner, quoting you here to ask if you'll take a look at the estate planning section and let me know if you have any feedback. I know next to nothing about leaving IRAs to trusts.
...

You wrote:

Trusts are required to liquidate retirement accounts in five years, rather than ten years when left to an individual, and pay taxes according to the trust tax brackets, which are highly compressed (as of 2023, the top 37% rate begins at just $14,450). If you are considering leaving assets into trusts, you definitely need to consult an estate planning attorney in your state, who can advise on the details and on tax strategies.

I would delete the statement that trusts have to take distribution within five years since it's generally incorrect.

I would also delete "in your state" since this is mainly a matter of Federal tax law, and also because multiple states are often involved. You would have to consider the state income taxes in the states where the trustees are and where the beneficiaries are.

Also note that if you leave retirement benefits (or other assets) in trust, the trustees may (unless limited by the terms of the Will or trust instrument) make distributions to carry out income, but if you leave them outright, you can't put them back in. One lawyer, now retired, compares assets in trust to toothpaste in a tube -- you can always take the toothpaste out of the tube (distribute assets from a trust), but you can't put it back in.

Bruce,

How do you suggest we deal with this topic in the WIKI?

- It’s my understanding that a trust which will inherit an TDA must have specific characteristics to allow a stretch:
https://www.investopedia.com/terms/s/se ... -trust.asp

Otherwise it will default to the 5 year rule for the stretch….

- How should we discuss using an Inherited IRA/Roth when the Trust is designed for Special Needs or Spendthrift situations?

One suggestion is that it is better to leave a Roth for these types of trusts due to the Trust Tax Rates.

Thoughts?


WoodSpinner

[bsteiner]

...
Bruce,

How do you suggest we deal with this topic in the WIKI?

1. - It’s my understanding that a trust which will inherit an TDA must have specific characteristics to allow a stretch:
https://www.investopedia.com/terms/s/se ... -trust.asp

Otherwise it will default to the 5 year rule for the stretch….

2. - How should we discuss using an Inherited IRA/Roth when the Trust is designed for Special Needs or Spendthrift situations?

3. One suggestion is that it is better to leave a Roth for these types of trusts due to the Trust Tax Rates.

1. Yes, but it would be hard to flunk them. In any event, the lawyer should be able to draft it.

2. Spendthrift is no different from non-spendthrift except possibly the degree of control the beneficiary will have over the trust. Special needs is essentially the same as well except that depending on the nature of the special needs, the beneficiary may have a lesser degree of control (or no control) over the trust. If the beneficiary qualifies as disabled or chronically ill, and no distributions be made to anyone not disabled or chronically ill, the trust can stretch the benefits over the beneficiary's life expectancy. Also, in the case of a disabled or chronically ill beneficiary, you can have charity as a remainder beneficiary.

3. That's often the case. The 10-year rule makes Roth conversions beneficial more often than before.

[FiveK]

Adding any sections that would not interfere at all with the existing text would be a reasonable step.

Note that the oldest comment in the page history is "New page, focusing on whether to convert." The more things change, the more they stay the same.

But also note that for 13 years the lead section has been "How to convert". That's actually a question people relatively new to personal finance probably have, and assuming that's more of our target audience than, say, readers of refereed journal articles, leaving it as is and as the lead section would be fine.

[fyre4ce]

...

bsteiner, quoting you here to ask if you'll take a look at the estate planning section and let me know if you have any feedback. I know next to nothing about leaving IRAs to trusts.
...

You wrote:

Trusts are required to liquidate retirement accounts in five years, rather than ten years when left to an individual, and pay taxes according to the trust tax brackets, which are highly compressed (as of 2023, the top 37% rate begins at just $14,450). If you are considering leaving assets into trusts, you definitely need to consult an estate planning attorney in your state, who can advise on the details and on tax strategies.

I would delete the statement that trusts have to take distribution within five years since it's generally incorrect.

I would also delete "in your state" since this is mainly a matter of Federal tax law, and also because multiple states are often involved. You would have to consider the state income taxes in the states where the trustees are and where the beneficiaries are.

Also note that if you leave retirement benefits (or other assets) in trust, the trustees may (unless limited by the terms of the Will or trust instrument) make distributions to carry out income, but if you leave them outright, you can't put them back in. One lawyer, now retired, compares assets in trust to toothpaste in a tube -- you can always take the toothpaste out of the tube (distribute assets from a trust), but you can't put it back in.

Bruce,

How do you suggest we deal with this topic in the WIKI?

- It’s my understanding that a trust which will inherit an TDA must have specific characteristics to allow a stretch:
https://www.investopedia.com/terms/s/se ... -trust.asp

Otherwise it will default to the 5 year rule for the stretch….

- How should we discuss using an Inherited IRA/Roth when the Trust is designed for Special Needs or Spendthrift situations?

One suggestion is that it is better to leave a Roth for these types of trusts due to the Trust Tax Rates.

Thoughts?


WoodSpinner

I suspect that a good fraction of bsteiner's clients are in the top tax bracket and over the federal estate tax exemption, so there's no tax rate disadvantage to paying at trust rates versus personal, and as he mentioned there may be some state income tax savings, plus estate tax savings and asset protection by leaving the assets in trust. It's an instance of very high income and wealth. I think the current, simple, language in the draft page is sufficient; getting into 5-year vs. 10-year periods and situations where trustees should distribute income vs. leave it in trust are too complex to deal with on this page.

[RetiredCSProf]

For those affected, Required Minimum Distributions (RMDs) must be the first withdrawal to leave an account each year. If you Roth-convert before the entire RMD is withdrawn, some or all of the conversion will be considered to have been an RMD improperly reinvested into a Roth account.

Based on a recent BH thread, I suggest rewriting this paragraph to explain that the Roth conversion (in this case) would be considered an excess Roth contribution and subject to a 6% excise tax if not corrected before taxes are due. Also, any earnings on the excess Roth contribution would be considered ordinary income.

[bsteiner]

...
I suspect that a good fraction of bsteiner's clients are in the top tax bracket and over the federal estate tax exemption, so there's no tax rate disadvantage to paying at trust rates versus personal, and as he mentioned there may be some state income tax savings, plus estate tax savings and asset protection by leaving the assets in trust. It's an instance of very high income and wealth. I think the current, simple, language in the draft page is sufficient; getting into 5-year vs. 10-year periods and situations where trustees should distribute income vs. leave it in trust are too complex to deal with on this page.

WIth the current level of the estate tax exclusion amount and portability, many of our clients no longer have taxable estates. However, the estate tax exclusion amount is scheduled to revert to $6,460,000 (indexed from 2023) in 2026. At that point, more clients will have taxable estates. Also, some states have a state estate tax with a lower exclusion amount.

Almost all of our clients provide for their children in trust rather than outright. Trusts reach the top bracket at a much lower level of income.

Singles reach the 32% bracket at $182,100 of taxable income in 2023. That covers most surviving spouses. WIth RMDs, social security, and in some cases such as retired teachers, pensions, many people are in that bracket. The difference between 32% and 37% isn't very much.

In states that have a state estate tax, Roth conversions avoid the problem of the income tax deduction for estate taxes only covering the Federal estate tax, but not the state estate tax.

[fyre4ce]

For those affected, Required Minimum Distributions (RMDs) must be the first withdrawal to leave an account each year. If you Roth-convert before the entire RMD is withdrawn, some or all of the conversion will be considered to have been an RMD improperly reinvested into a Roth account.

Based on a recent BH thread, I suggest rewriting this paragraph to explain that the Roth conversion (in this case) would be considered an excess Roth contribution and subject to a 6% excise tax if not corrected before taxes are due. Also, any earnings on the excess Roth contribution would be considered ordinary income.

Great point, thanks. Edit has been made.

[fyre4ce]

Adding any sections that would not interfere at all with the existing text would be a reasonable step.

Note that the oldest comment in the page history is "New page, focusing on whether to convert." The more things change, the more they stay the same.

But also note that for 13 years the lead section has been "How to convert". That's actually a question people relatively new to personal finance probably have, and assuming that's more of our target audience than, say, readers of refereed journal articles, leaving it as is and as the lead section would be fine.

It's interesting you picked that change to object to, because I would have said that's the perfect example of reorganization the current page needs. It seems very clear to me that readers should read first about whether to convert before they read about how to convert; until they decide to convert for sound reasons, it would potentially be a waste of space to read about how to convert. It's possible someone may already understand what a conversion is, how it works, made an independent well-reasoned opinion to convert, but not know how... and then this person chooses the BH wiki over the other resources that are available (eg. contacting their custodian, googling "how to do a Roth conversion" gives useful results). But I think those folks will be far outnumbered by the average forum reader, who probably knows what a conversion is at a basic level, but is looking for details and more importantly, a procedure for deciding if they should convert. It doesn't matter whether you're writing a peer-reviewed article for Nature, a wiki page, or anything else, the principle is the same - lead the reader from one idea to the next such that new ideas build on earlier ones. That's what I've tried to do here. You mentioned a few times about preserving the page the way it is. I don't think we should give any special favor to page's current form; it seems silly to think it couldn't be improved. Rather, I think each edit should be decided on its own merits; if it makes the page better, the edit should be made. That said, while this edit adds a lot of content to cover details and special situations, the core of the content has stayed nearly the same.

You touched on a point I think is very important not to lose sight of. Of all the resources on the web, what are the greatest strengths of the BH wiki, compared to others? I would say, giving accurate and reasonably detailed/complete information to do-it-yourself investors that will help them manage their own finances. Some of the information in the wiki (this page and others) is easily found on other websites. What sets the BH wiki apart, I think, are sections like "Whether, when, and how much to convert" and "Specific situations", which are not as easy to find other places, and also tying all the information together into well-organized package. This is our niche, and I think as editors we should be focusing on this strength.

[fyre4ce]

...
I suspect that a good fraction of bsteiner's clients are in the top tax bracket and over the federal estate tax exemption, so there's no tax rate disadvantage to paying at trust rates versus personal, and as he mentioned there may be some state income tax savings, plus estate tax savings and asset protection by leaving the assets in trust. It's an instance of very high income and wealth. I think the current, simple, language in the draft page is sufficient; getting into 5-year vs. 10-year periods and situations where trustees should distribute income vs. leave it in trust are too complex to deal with on this page.

WIth the current level of the estate tax exclusion amount and portability, many of our clients no longer have taxable estates. However, the estate tax exclusion amount is scheduled to revert to $6,460,000 (indexed from 2023) in 2026. At that point, more clients will have taxable estates. Also, some states have a state estate tax with a lower exclusion amount.

Almost all of our clients provide for their children in trust rather than outright. Trusts reach the top bracket at a much lower level of income.

Singles reach the 32% bracket at $182,100 of taxable income in 2023. That covers most surviving spouses. WIth RMDs, social security, and in some cases such as retired teachers, pensions, many people are in that bracket. The difference between 32% and 37% isn't very much.

In states that have a state estate tax, Roth conversions avoid the problem of the income tax deduction for estate taxes only covering the Federal estate tax, but not the state estate tax.

Very interesting perspective and it makes a lot of sense, thanks. I learned recently that the deduction for Income in Respect of a Decedent eliminates any federal estate tax advantage for Roth conversions when the owner's and heir's tax rates are equal. But I didn't think about state estate taxes. None of the states that levy estate taxes allow a similar deduction for heirs?

[teen persuasion]

I like the inclusion of the Roth conversion ladder - we are beginning a modified version of this (not converting exactly the amount we want for 5 years from now, but just converting to a target AGI; we also have the "pot" of past Roth IRA contributions to withdraw from before we reach 59.5, and unreimbursed HSA funds).

Under Cautions you mention EFC - just be aware that the term EFC will eventually be replaced with SAI (Student Aid Index) whenever FAFSA Simplification is fully implemented. Which implies that the linked EFC wiki page will also require revamping.

[FiveK]

Adding any sections that would not interfere at all with the existing text would be a reasonable step.

Note that the oldest comment in the page history is "New page, focusing on whether to convert." The more things change, the more they stay the same.

But also note that for 13 years the lead section has been "How to convert". That's actually a question people relatively new to personal finance probably have, and assuming that's more of our target audience than, say, readers of refereed journal articles, leaving it as is and as the lead section would be fine.

It's interesting you picked that change to object to, because I would have said that's the perfect example of reorganization the current page needs.

Just the first objection - see below for why there may be more.

It seems very clear to me that readers should read first about whether to convert before they read about how to convert....

Not an unreasonable position, but not necessarily correct for an important Boglehead target audience: those not really knowing where to start. For those, not knowing "how" can prevent further investigation, or cause them to go to their local EJ or other advisor "because this is too complicated for me." Spend a few years working with VITA, Tax-Aide, etc., and you'll see such a population segment. A very brief "how to" can assuage their concerns about things being too complex.

You mentioned a few times about preserving the page the way it is. I don't think we should give any special favor to page's current form; it seems silly to think it couldn't be improved. Rather, I think each edit should be decided on its own merits; if it makes the page better, the edit should be made.

Yes, and it would also be silly for all wiki editors to tweak things on a continuous basis because they each think their wording is better. So yes, we should give special favor to a page's current form and expect there to be a significantly good reason to make a significant change. In most cases, including this one, the original wiki authors were some pretty knowledgeable folks. Maybe it was a conscious decision to lead with "how" and maybe not, but authors of similar articles such as Roth IRA Conversion: Definition, Methods, and Example also lead with "how".

You touched on a point I think is very important not to lose sight of. Of all the resources on the web, what are the greatest strengths of the BH wiki, compared to others? I would say, giving accurate and reasonably detailed/complete information to do-it-yourself investors that will help them manage their own finances. Some of the information in the wiki (this page and others) is easily found on other websites. What sets the BH wiki apart, I think, are sections like "Whether, when, and how much to convert" and "Specific situations", which are not as easy to find other places, and also tying all the information together into well-organized package. This is our niche, and I think as editors we should be focusing on this strength.

Agree that knowing the audience is important, and that the BH wiki might reasonably be positioned somewhere between clickbait articles and refereed journals where topical articles such as McQ's The Arithmetic of Roth Conversions | Financial Planning Association appear.

Where you and I seem to differ is on the amount of "simple" content. I don't object to the reasonably detailed niche, and ask that you in turn don't fight inclusion/retention of the simpler concepts.

[bsteiner]

...
I suspect that a good fraction of bsteiner's clients are in the top tax bracket and over the federal estate tax exemption, so there's no tax rate disadvantage to paying at trust rates versus personal, and as he mentioned there may be some state income tax savings, plus estate tax savings and asset protection by leaving the assets in trust. It's an instance of very high income and wealth. I think the current, simple, language in the draft page is sufficient; getting into 5-year vs. 10-year periods and situations where trustees should distribute income vs. leave it in trust are too complex to deal with on this page.

WIth the current level of the estate tax exclusion amount and portability, many of our clients no longer have taxable estates. However, the estate tax exclusion amount is scheduled to revert to $6,460,000 (indexed from 2023) in 2026. At that point, more clients will have taxable estates. Also, some states have a state estate tax with a lower exclusion amount.

Almost all of our clients provide for their children in trust rather than outright. Trusts reach the top bracket at a much lower level of income.

Singles reach the 32% bracket at $182,100 of taxable income in 2023. That covers most surviving spouses. WIth RMDs, social security, and in some cases such as retired teachers, pensions, many people are in that bracket. The difference between 32% and 37% isn't very much.

In states that have a state estate tax, Roth conversions avoid the problem of the income tax deduction for estate taxes only covering the Federal estate tax, but not the state estate tax.

Very interesting perspective and it makes a lot of sense, thanks. I learned recently that the deduction for Income in Respect of a Decedent eliminates any federal estate tax advantage for Roth conversions when the owner's and heir's tax rates are equal. But I didn't think about state estate taxes. None of the states that levy estate taxes allow a similar deduction for heirs?

Most do. But that’s not the problem. The problem is that the deduction only covers the Federal estate tax, but not the state estate tax. In a state that still has the old 16% top rate, the estate tax is 33.6% Federal and 16% state, so you only get the deduction for about 2/3 of the estate tax. That’s a major factor favoring Roth conversions in states that have a state estate tax.

[fyre4ce]

I like the inclusion of the Roth conversion ladder - we are beginning a modified version of this (not converting exactly the amount we want for 5 years from now, but just converting to a target AGI; we also have the "pot" of past Roth IRA contributions to withdraw from before we reach 59.5, and unreimbursed HSA funds).

Under Cautions you mention EFC - just be aware that the term EFC will eventually be replaced with SAI (Student Aid Index) whenever FAFSA Simplification is fully implemented. Which implies that the linked EFC wiki page will also require revamping.

Thanks for the feedback. I added a phrase to add Roth contributions as an option for funding the five-year waiting period.

As for EFC, it's not a big deal to update the page once the change is made. EFC can be made a "redirect" link, and in any case it's not hard to change links.

[fyre4ce]

Adding any sections that would not interfere at all with the existing text would be a reasonable step.

Note that the oldest comment in the page history is "New page, focusing on whether to convert." The more things change, the more they stay the same.

But also note that for 13 years the lead section has been "How to convert". That's actually a question people relatively new to personal finance probably have, and assuming that's more of our target audience than, say, readers of refereed journal articles, leaving it as is and as the lead section would be fine.

It's interesting you picked that change to object to, because I would have said that's the perfect example of reorganization the current page needs.

Just the first objection - see below for why there may be more.

It seems very clear to me that readers should read first about whether to convert before they read about how to convert....

Not an unreasonable position, but not necessarily correct for an important Boglehead target audience: those not really knowing where to start. For those, not knowing "how" can prevent further investigation, or cause them to go to their local EJ or other advisor "because this is too complicated for me." Spend a few years working with VITA, Tax-Aide, etc., and you'll see such a population segment. A very brief "how to" can assuage their concerns about things being too complex.

This is a good point and a valuable perspective. I added a sentence in the header that includes a brief description of how to convert, that it's "easy", and a link to the lower section. This will serve the readers you are describing, without spending three paragraphs of premium space at the top of the page on it.

You mentioned a few times about preserving the page the way it is. I don't think we should give any special favor to page's current form; it seems silly to think it couldn't be improved. Rather, I think each edit should be decided on its own merits; if it makes the page better, the edit should be made.

Yes, and it would also be silly for all wiki editors to tweak things on a continuous basis because they each think their wording is better. So yes, we should give special favor to a page's current form and expect there to be a significantly good reason to make a significant change. In most cases, including this one, the original wiki authors were some pretty knowledgeable folks. Maybe it was a conscious decision to lead with "how" and maybe not, but authors of similar articles such as Roth IRA Conversion: Definition, Methods, and Example also lead with "how".

This is just not how a wiki is supposed to work. It's a living document and is supposed to be continuously improved by many editors, by way of big and small changes. Our wiki already changes a lot anyway - annual tax updates, tax law changes every few years, new pages, old pages get rewritten. Getting into an edit war over an Oxford comma would be silly, but improving grammar, making wording more clear, fixing run-on sentences, reorganizing, adding helpful details, adding links... this is exactly what editors are supposed to do and what I've tried to do here. I've been responsive to all feedback provided, including from you, and have implemented most suggested changes. If someone else wants to rewrite it next week or month or year, and they post it for review and the consensus is that it's even better, great. Right now, this is the best we have, and there looks to be a consensus it's an improvement, so I think we should move forward with the change. I'll give more chances for feedback before going live, though.

You touched on a point I think is very important not to lose sight of. Of all the resources on the web, what are the greatest strengths of the BH wiki, compared to others? I would say, giving accurate and reasonably detailed/complete information to do-it-yourself investors that will help them manage their own finances. Some of the information in the wiki (this page and others) is easily found on other websites. What sets the BH wiki apart, I think, are sections like "Whether, when, and how much to convert" and "Specific situations", which are not as easy to find other places, and also tying all the information together into well-organized package. This is our niche, and I think as editors we should be focusing on this strength.

Agree that knowing the audience is important, and that the BH wiki might reasonably be positioned somewhere between clickbait articles and refereed journals where topical articles such as McQ's The Arithmetic of Roth Conversions | Financial Planning Association appear.

Where you and I seem to differ is on the amount of "simple" content. I don't object to the reasonably detailed niche, and ask that you in turn don't fight inclusion/retention of the simpler concepts.

Actually, in this case, I would say this edit is an attempt to make the page more accessible to novice and intermediate readers. It is longer overall, for sure, but that's because of added sections and more explicit detail covering things like the cautions to check, specific cases when conversions might be appropriate, etc. I wouldn't call the added content "complex" (with the one exception of the capital gains math); the added language is meant to be simple and easy to understand. It is trying to cater to more novice readers by assuming they don't already know these finer points, and laying them out in a logical flow. In my opinion, helping readers at the novice end of the spectrum is more important than at the advanced end, and that's the goal here.