## Roth Conversion - Break Even Calculation - How do you do it?

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Topic Author
Ditchwitch
Posts: 139
Joined: Wed Nov 29, 2017 2:18 pm
Location: California

### Roth Conversion - Break Even Calculation - How do you do it?

This article suggests using a formula to estimate whether a Roth conversion makes sense:

https://www.forbes.com/sites/baldwin/20 ... 5dde70a2f8

[Expected Return, e.g. = 7%] x [Capitals Gains Tax, 20%] x [Number of Years to Retirement, e.g. = 18] = 7% x 20% x 18 = 25% (for the example used)

So in the above example if the effective tax rate dropped by more than 25% upon entry into retirement a Roth conversion would be a losing proposition. In essence, the longer an investment has to compound (years) and the higher the expected return the more a conversion might makes sense relative to the drop in the effective tax rate (if any at all).

Is this a good starting point for an estimate? What other factors do folks use to evaluate that proposition?

By the time we reach retirement (12 years) our mortage will be paid off so we could probably live fine of the RMDs (~50K) plus social security (~30K) minus federal & state taxes. Taxes will likely be quite a bit lower than currently but I need to do more calculations on that side to get better projections.
“Anyone who has never made a mistake has never tried anything new.” | ― Albert Einstein

livesoft
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### Re: Roth Conversion - Break Even Calculation - How do you do it?

I don't think that formula is a good one. I think you should come up with your own formula because that is probably the only way you will really understand what is going on. There is a complicated Roth conversion decision spreadsheet somewhere posted at bogleheads.org, too.
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patrick013
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### Re: Roth Conversion - Break Even Calculation - How do you do it?

Ditchwitch wrote:
Sat Dec 30, 2017 11:22 am
Is this a good starting point for an estimate? What other factors do folks use to evaluate that proposition?

By the time we reach retirement (12 years) our mortage will be paid off so we could probably live fine of the RMDs (~50K) plus social security (~30K) minus federal & state taxes. Taxes will likely be quite a bit lower than currently but I need to do more calculations on that side to get better projections.
The article states :

"The usual advice on Rothifying goes like this: If your tax bracket at retirement will be the same or higher, go ahead and convert, but if your tax bracket is likely to be lower, don't do it."

I would think your highest retirement tax rate would be at age 70 for example
when all RMD's, SS, pension, annuities, and investment income would be at their
highest level and at their highest level taxwise. Your tax bracket then is expected
to be lower so your accuracy in estimating that is very important.

randomguy
Posts: 6910
Joined: Wed Sep 17, 2014 9:00 am

### Re: Roth Conversion - Break Even Calculation - How do you do it?

patrick013 wrote:
Sat Dec 30, 2017 3:35 pm
Ditchwitch wrote:
Sat Dec 30, 2017 11:22 am
Is this a good starting point for an estimate? What other factors do folks use to evaluate that proposition?

By the time we reach retirement (12 years) our mortage will be paid off so we could probably live fine of the RMDs (~50K) plus social security (~30K) minus federal & state taxes. Taxes will likely be quite a bit lower than currently but I need to do more calculations on that side to get better projections.
The article states :

"The usual advice on Rothifying goes like this: If your tax bracket at retirement will be the same or higher, go ahead and convert, but if your tax bracket is likely to be lower, don't do it."

I would think your highest retirement tax rate would be at age 70 for example
when all RMD's, SS, pension, annuities, and investment income would be at their
highest level and at their highest level taxwise. Your tax bracket then is expected
to be lower so your accuracy in estimated that is very important.

Spouse death and RMDs peakinging in the mid 80s is likely to be the peak tax rate.

The advantage of doing ROTH conversions in the example is because of the reduction of tax drag. Given that number never shows up, I have to imagine that there is a lot of luck in this giving the right return. And you should understand the "marginal vs effective" versus the "marginal vs marginal" discussion

grabiner
Posts: 23380
Joined: Tue Feb 20, 2007 11:58 pm
Location: Columbia, MD

### Re: Roth Conversion - Break Even Calculation - How do you do it?

The computation is simple if you converting a traditional to a Roth IRA and paying tax from the traditional IRA (or from money that would otherwise be invested in a 401(k) or IRA). In this case, the conversion is a good idea if you have a lower marginal tax rate now than you will at withdrawal, and is break-even if you will withdraw at the same tax rate.

For example, if the current tax law has put you in a 22% tax bracket, and you expect to be in the 25% bracket when the rates go back up in 2026, you will come ahead if you convert. If you convert \$10,000 in a traditional IRA to \$7800 in a Roth IRA but keep the same investments, you will come out ahead; the \$10,000 in the traditional IRA would be equivalent to \$7500 tax-free. If the 22% tax bracket becomes permanent, you break even with the conversion.

It gets more complicated if you are converting and paying the tax from a taxable account, or if you are considering switching from a traditional to a Roth 401(k). It is still clear to convert if you will retire at the same marginal tax rate, but it might be right to convert if you will retire in a slightly lower bracket.

Here is a calculation I made a few years ag: Roth 401(k) in a 28% bracket thoughts If you are in a 28% bracket now (which existed at the time of the post) and expect to retire in a 25% bracket, and bonds yield 3%, it's better to use the traditional 401(k) within 15 years of retirement, with the intention of converting at 25% after you retire.
David Grabiner

David Jay
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Location: Michigan

### Re: Roth Conversion - Break Even Calculation - How do you do it?

randomguy wrote:
Sat Dec 30, 2017 3:52 pm
Spouse death and RMDs peakinging in the mid 80s is likely to be the peak tax rate.
^^^ this.

Remember, your RMD percentage is going up every year (it is based on average remaining life expectancy, the IRS wants you to pay taxes on ALL of it but they don't know your individual expiration date). It starts at just 3.6% at 70.5 but doubles in 15 years and keeps climbing (I.e. 10% at age 92).
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

patrick013
Posts: 2453
Joined: Mon Jul 13, 2015 7:49 pm

### Re: Roth Conversion - Break Even Calculation - How do you do it?

randomguy wrote:
Sat Dec 30, 2017 3:52 pm
patrick013 wrote:
Sat Dec 30, 2017 3:35 pm
Ditchwitch wrote:
Sat Dec 30, 2017 11:22 am
Is this a good starting point for an estimate? What other factors do folks use to evaluate that proposition?

By the time we reach retirement (12 years) our mortage will be paid off so we could probably live fine of the RMDs (~50K) plus social security (~30K) minus federal & state taxes. Taxes will likely be quite a bit lower than currently but I need to do more calculations on that side to get better projections.
The article states :

"The usual advice on Rothifying goes like this: If your tax bracket at retirement will be the same or higher, go ahead and convert, but if your tax bracket is likely to be lower, don't do it."

I would think your highest retirement tax rate would be at age 70 for example
when all RMD's, SS, pension, annuities, and investment income would be at their
highest level and at their highest level taxwise. Your tax bracket then is expected
to be lower so your accuracy in estimating that is very important.

Spouse death and RMDs peakinging in the mid 80s is likely to be the peak tax rate.

The advantage of doing ROTH conversions in the example is because of the reduction of tax drag. Given that number never shows up, I have to imagine that there is a lot of luck in this giving the right return. And you should understand the "marginal vs effective" versus the "marginal vs marginal" discussion
With the info available I see nothing wrong with the article's advice
in blue above, tho it should specify marginal. It will give a higher return.

smitcat
Posts: 2272
Joined: Mon Nov 07, 2016 10:51 am

### Re: Roth Conversion - Break Even Calculation - How do you do it?

Ditchwitch wrote:
Sat Dec 30, 2017 11:22 am
This article suggests using a formula to estimate whether a Roth conversion makes sense:

https://www.forbes.com/sites/baldwin/20 ... 5dde70a2f8

[Expected Return, e.g. = 7%] x [Capitals Gains Tax, 20%] x [Number of Years to Retirement, e.g. = 18] = 7% x 20% x 18 = 25% (for the example used)

So in the above example if the effective tax rate dropped by more than 25% upon entry into retirement a Roth conversion would be a losing proposition. In essence, the longer an investment has to compound (years) and the higher the expected return the more a conversion might makes sense relative to the drop in the effective tax rate (if any at all).

Is this a good starting point for an estimate? What other factors do folks use to evaluate that proposition?

By the time we reach retirement (12 years) our mortage will be paid off so we could probably live fine of the RMDs (~50K) plus social security (~30K) minus federal & state taxes. Taxes will likely be quite a bit lower than currently but I need to do more calculations on that side to get better projections.
We have had great results and feedback by utilizing the RPM spreadsheet/calculator. It will be updated shortly for the newer tax rates so maybe waiting a week is worth the time. It will supply a direct comparison between conversion and no conversions which can be tuned. saved, printed and compared.

FiveK
Posts: 5989
Joined: Sun Mar 16, 2014 2:43 pm

### Re: Roth Conversion - Break Even Calculation - How do you do it?

Ditchwitch wrote:
Sat Dec 30, 2017 11:22 am
Is this a good starting point for an estimate? What other factors do folks use to evaluate that proposition?

In the Forbes article,
This RTN shortcut overstates the case for Rothifying a bit, so give yourself a margin of safety. Convert only if your bracket is likely to fall by a lot less than that RTN fraction, and convert only a portion of your account. If you're 52 and can stay invested for 18 years, and if your bracket is likely to fall only a little (say, from 40% to 35%), snatch the Roth bait.
Putting assumptions from the Forbes article in the 'Misc. calcs' tab of the personal finance toolbox spreadsheet, one gets

This is consistent with the article's suggestion to convert if the rate drops from 40% to 35%.
Last edited by FiveK on Sun Jul 22, 2018 12:13 pm, edited 1 time in total.

BigJohn
Posts: 1628
Joined: Wed Apr 02, 2014 11:27 pm

### Re: Roth Conversion - Break Even Calculation - How do you do it?

Here is a post on my attempt to look at break even analysis on Roth conversion. I agree with comment above about looking at your specific situation, especially with respect to marginal tax rates that can be different than you expect based on tax code complexities. Recognize that there are a lot of assumptions that can change the result significantly so I don’t think you’ll find certainty. However, you should be able to say “I win if....” and “I lose if ....” once your done.

viewtopic.php?p=3090034#p3090034

dharrythomas
Posts: 917
Joined: Tue Jun 19, 2007 4:46 pm

### Re: Roth Conversion - Break Even Calculation -

I don't think there is one simple formula. Most assume that you"'ll withdraw from the Roth on a similar basis as the traditional account.

Is it big enough to change the tax status of SS?

Will you need RMDs or will this be passed to heirs? If you can defer RMDs and plan to pass the account to heirs, deferring RMDs my make a conversion worthwhile because of extended tax-free growth even if the formulas tell you not to convert.

patrick013
Posts: 2453
Joined: Mon Jul 13, 2015 7:49 pm

### Re: Roth Conversion - Break Even Calculation - How do you do it?

When looking at pre and post retirement tax rates the decision
is fairly easy. On that basis the problems arise that are related to
actually estimating the tax rate, the 5 year rule, and whether the
tax on conversion is paid from the tIRA, the Roth, or from a taxable
MMF. The general concept is still very solid for incremental conversions.

Topic Author
Ditchwitch
Posts: 139
Joined: Wed Nov 29, 2017 2:18 pm
Location: California

### Re: Roth Conversion - Break Even Calculation - How do you do it?

with so many moving parts and not clear how much a future marginal tax rate might differ from the current (no clear tax benefit) it seems to me more prudent maybe to take a more hands off approach. Maybe better to wait another year and do some more tax research than trying to micromanage??
“Anyone who has never made a mistake has never tried anything new.” | ― Albert Einstein

BigJohn
Posts: 1628
Joined: Wed Apr 02, 2014 11:27 pm

### Re: Roth Conversion - Break Even Calculation - How do you do it?

Ditchwitch wrote:
Sun Dec 31, 2017 12:14 am
with so many moving parts and not clear how much a future marginal tax rate might differ from the current (no clear tax benefit) it seems to me more prudent maybe to take a more hands off approach. Maybe better to wait another year and do some more tax research than trying to micromanage??
My two cents.... moving parts are not less next year and future tax rates are always uncertain (who saw this change coming two years ago?). In addition, you have a limited window to do this before RMDs and SS kick in. This doesn't mean you should do a conversion, just that waiting a year won't bring more clarity.

Longdog
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### Re: Roth Conversion - Break Even Calculation -

dharrythomas wrote:
Sat Dec 30, 2017 9:13 pm
I don't think there is one simple formula. Most assume that you"'ll withdraw from the Roth on a similar basis as the traditional account.

Is it big enough to change the tax status of SS?

Will you need RMDs or will this be passed to heirs? If you can defer RMDs and plan to pass the account to heirs, deferring RMDs my make a conversion worthwhile because of extended tax-free growth even if the formulas tell you not to convert.
RMDs are not optional in a traditional IRA and cannot be deferred. Conversions are optional, but not RMDs.
Steve

Topic Author
Ditchwitch
Posts: 139
Joined: Wed Nov 29, 2017 2:18 pm
Location: California

### Re: Roth Conversion - Break Even Calculation -

Longdog wrote:
Sun Dec 31, 2017 7:30 am
dharrythomas wrote:
Sat Dec 30, 2017 9:13 pm
I don't think there is one simple formula. Most assume that you"'ll withdraw from the Roth on a similar basis as the traditional account.

Is it big enough to change the tax status of SS?

Will you need RMDs or will this be passed to heirs? If you can defer RMDs and plan to pass the account to heirs, deferring RMDs my make a conversion worthwhile because of extended tax-free growth even if the formulas tell you not to convert.
RMDs are not optional in a traditional IRA and cannot be deferred. Conversions are optional, but not RMDs.
Roth IRAs don't have RMDs until they are passed along to heirs, so that could potentially be a benefit.

My effective tax has been ~11-15% the last few years with a trend to increase since deductions decreasing and exemptions/tax credits are decreasing. I currently have little good idea what our taxes might look like in 10-12 years though. Using firecalc ballpark estimates it seems we should be able to live fine on RMDs (4%) and SS and that income should be a little more than half of my income now. That would probably put me in a lower marginal tax bracket although I am not really sure how to calculate this with some degree of certainty.
“Anyone who has never made a mistake has never tried anything new.” | ― Albert Einstein

BigJohn
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### Re: Roth Conversion - Break Even Calculation - How do you do it?

Ditchwitch wrote:
Sun Dec 31, 2017 10:17 am
Using firecalc ballpark estimates it seems we should be able to live fine on RMDs (4%) and SS and that income should be a little more than half of my income now. That would probably put me in a lower marginal tax bracket although I am not really sure how to calculate this with some degree of certainty.
If your taxable income is really going to be half of what it is right now then Roth conversions may not make sense. Two things though to make sure you understand what your taxable income might be. First, your "RMDs (4%)" comment implies you have control over the RMD amount based on what you need to spend. This is not the case. The law requires an increasing RMD each year based on remaining life expectancy. So at 70 you must withdraw at last 3.6% but by the time you are 90 that's up to almost 10%. Second, depending on your AGI, up to 85% of your SS benefits can be taxable income.

grabiner
Posts: 23380
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Location: Columbia, MD

### Re: Roth Conversion - Break Even Calculation - How do you do it?

BigJohn wrote:
Sun Dec 31, 2017 10:57 am
Ditchwitch wrote:
Sun Dec 31, 2017 10:17 am
Using firecalc ballpark estimates it seems we should be able to live fine on RMDs (4%) and SS and that income should be a little more than half of my income now. That would probably put me in a lower marginal tax bracket although I am not really sure how to calculate this with some degree of certainty.
If your taxable income is really going to be half of what it is right now then Roth conversions may not make sense. Two things though to make sure you understand what your taxable income might be. First, your "RMDs (4%)" comment implies you have control over the RMD amount based on what you need to spend. This is not the case. The law requires an increasing RMD each year based on remaining life expectancy. So at 70 you must withdraw at last 3.6% but by the time you are 90 that's up to almost 10%. Second, depending on your AGI, up to 85% of your SS benefits can be taxable income.
That second consideration needs an additional clarification; see Taxation of Social Security benefits on the wiki. If you are in the phase-in for Social Security taxation, every additional \$1 of income makes 85 cents of Social Security taxable, until the maximum 85% is taxable. Thus, you may retire in a 15% tax bracket, but have a 27.75% marginal tax rate. If this applies to you, then converting even at 24% may be a good deal. If you are over the limit, your marginal tax rate goes back to the usual 15% or 25%.
David Grabiner

Topic Author
Ditchwitch
Posts: 139
Joined: Wed Nov 29, 2017 2:18 pm
Location: California

### Re: Roth Conversion - Break Even Calculation - How do you do it?

BigJohn wrote:
Sun Dec 31, 2017 10:57 am
Ditchwitch wrote:
Sun Dec 31, 2017 10:17 am
Using firecalc ballpark estimates it seems we should be able to live fine on RMDs (4%) and SS and that income should be a little more than half of my income now. That would probably put me in a lower marginal tax bracket although I am not really sure how to calculate this with some degree of certainty.
If your taxable income is really going to be half of what it is right now then Roth conversions may not make sense. Two things though to make sure you understand what your taxable income might be. First, your "RMDs (4%)" comment implies you have control over the RMD amount based on what you need to spend. This is not the case. The law requires an increasing RMD each year based on remaining life expectancy. So at 70 you must withdraw at last 3.6% but by the time you are 90 that's up to almost 10%. Second, depending on your AGI, up to 85% of your SS benefits can be taxable income.
Yes, I have seen that RMDs work their way up progressively...

I plugged in some numbers into this retirement calculator:

https://www.i-orp.com/GOPtax/index.html

It's output implied (not very dissimilar to firecalc) that gross withdrawals including RMDs minus taxes would amount to about half my current gross and that would last until about 92.
“Anyone who has never made a mistake has never tried anything new.” | ― Albert Einstein

Topic Author
Ditchwitch
Posts: 139
Joined: Wed Nov 29, 2017 2:18 pm
Location: California

### Re: Roth Conversion - Break Even Calculation - How do you do it?

grabiner wrote:
Sun Dec 31, 2017 11:49 am
BigJohn wrote:
Sun Dec 31, 2017 10:57 am
Ditchwitch wrote:
Sun Dec 31, 2017 10:17 am
Using firecalc ballpark estimates it seems we should be able to live fine on RMDs (4%) and SS and that income should be a little more than half of my income now. That would probably put me in a lower marginal tax bracket although I am not really sure how to calculate this with some degree of certainty.
If your taxable income is really going to be half of what it is right now then Roth conversions may not make sense. Two things though to make sure you understand what your taxable income might be. First, your "RMDs (4%)" comment implies you have control over the RMD amount based on what you need to spend. This is not the case. The law requires an increasing RMD each year based on remaining life expectancy. So at 70 you must withdraw at last 3.6% but by the time you are 90 that's up to almost 10%. Second, depending on your AGI, up to 85% of your SS benefits can be taxable income.
That second consideration needs an additional clarification; see Taxation of Social Security benefits on the wiki. If you are in the phase-in for Social Security taxation, every additional \$1 of income makes 85 cents of Social Security taxable, until the maximum 85% is taxable. Thus, you may retire in a 15% tax bracket, but have a 27.75% marginal tax rate. If this applies to you, then converting even at 24% may be a good deal. If you are over the limit, your marginal tax rate goes back to the usual 15% or 25%.
OK, this definitely looks like it would be quite complicated and I would need to analyze retirement taxes more carefully....maybe something to do in 2018 and then revisit the conversion issue some time...the good news is there's still several years to go and with my marginal tax rate probably climbing the next few years it may be more beneficial to convert regularly in the years from now until retirement...
“Anyone who has never made a mistake has never tried anything new.” | ― Albert Einstein

munemaker
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Joined: Sat Jan 18, 2014 6:14 pm

### Re: Roth Conversion - Break Even Calculation - How do you do it?

First I started with i-ORP to get in the ballpark. '

Then I used Bigfoot's RPM spreadsheet to fine tune it.

Updated i-ORP is already available and, last I read, the updated RPM spreadsheet is scheduled for 1/1/2018 release.

FiveK
Posts: 5989
Joined: Sun Mar 16, 2014 2:43 pm

### Re: Roth Conversion - Break Even Calculation - How do you do it?

munemaker wrote:
Sun Dec 31, 2017 12:15 pm
First I started with i-ORP to get in the ballpark. '

Then I used Bigfoot's RPM spreadsheet to fine tune it.

Updated i-ORP is already available and, last I read, the updated RPM spreadsheet is scheduled for 1/1/2018 release.
+1

The federal tax calculations in the personal finance toolbox spreadsheet have also been updated to the 2018 law.

BigFoot48
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Location: Arizona

### Re: Roth Conversion - Break Even Calculation - How do you do it?

munemaker wrote:
Sun Dec 31, 2017 12:15 pm
... last I read, the updated RPM spreadsheet is scheduled for 1/1/2018 release.
First thing tomorrow morning - doing final review now. viewtopic.php?f=1&t=97352&p=1405885#p1405885
Retired | Two-time in top-10 in Bogleheads S&P500 contest; 13-time loser

patrick013
Posts: 2453
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### Re: Roth Conversion - Break Even Calculation - How do you do it?

BigJohn wrote:
Sun Dec 31, 2017 7:13 am
Ditchwitch wrote:
Sun Dec 31, 2017 12:14 am
with so many moving parts and not clear how much a future marginal tax rate might differ from the current (no clear tax benefit) it seems to me more prudent maybe to take a more hands off approach. Maybe better to wait another year and do some more tax research than trying to micromanage??
My two cents.... moving parts are not less next year and future tax rates are always uncertain (who saw this change coming two years ago?). In addition, you have a limited window to do this before RMDs and SS kick in. This doesn't mean you should do a conversion, just that waiting a year won't bring more clarity.
I think the new 2018 tax estimators will be out soon enough (HRBlock, TurboTax, etc,)
so doing that should be easier. I as most people always knew my income would be
less in retirement just have to double check the new marginal tax rate. Not many
variables to change so the big programs like i-ORP may not really optimize anything.
Give one a try when they get fully updated too. Most things I do with a tax minimization
mindset. Programs like i-ORP should solve the taxable account vs. IRA account
withdrawal question if balances there are needed for living expenses. Most tax
advisors like to keep Roth's in reserve as long as possible as a general rule.

munemaker
Posts: 3755
Joined: Sat Jan 18, 2014 6:14 pm

### Re: Roth Conversion - Break Even Calculation - How do you do it?

FiveK wrote:
Sun Dec 31, 2017 12:23 pm

The federal tax calculations in the personal finance toolbox spreadsheet have also been updated to the 2018 law.
Does the Personal Finance Toolbox spreadsheet include Roth conversions? I gave it a quick look and didn't see anything on Roth conversions.

FiveK
Posts: 5989
Joined: Sun Mar 16, 2014 2:43 pm

### Re: Roth Conversion - Break Even Calculation - How do you do it?

munemaker wrote:
Sun Dec 31, 2017 4:34 pm
FiveK wrote:
Sun Dec 31, 2017 12:23 pm

The federal tax calculations in the personal finance toolbox spreadsheet have also been updated to the 2018 law.
Does the Personal Finance Toolbox spreadsheet include Roth conversions? I gave it a quick look and didn't see anything on Roth conversions.
Yes, it would be under "tIRA distribution" - cell D31 on the 'Calculations' tab.

One can change the x-axis variable for marginal rates from the default "401k contribution" to "tIRA distribution" (or pretty much anything else) using the procedure described in rows 19-36 of the 'Instructions' tab.

munemaker
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Joined: Sat Jan 18, 2014 6:14 pm

### Re: Roth Conversion - Break Even Calculation - How do you do it?

FiveK wrote:
Sun Dec 31, 2017 5:06 pm
munemaker wrote:
Sun Dec 31, 2017 4:34 pm
FiveK wrote:
Sun Dec 31, 2017 12:23 pm

The federal tax calculations in the personal finance toolbox spreadsheet have also been updated to the 2018 law.
Does the Personal Finance Toolbox spreadsheet include Roth conversions? I gave it a quick look and didn't see anything on Roth conversions.
Yes, it would be under "tIRA distribution" - cell D31 on the 'Calculations' tab.

One can change the x-axis variable for marginal rates from the default "401k contribution" to "tIRA distribution" (or pretty much anything else) using the procedure described in rows 19-36 of the 'Instructions' tab.
Thanks! I will check it out.

GAAP
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### Re: Roth Conversion - Break Even Calculation - How do you do it?

Generally speaking, I don't "calculate" anything dependent on taxes that requires me to guess what will happen in 2+ years -- certainly, the last few months can show why...

If you live somewhere with a state estate tax, particularly one not tied to federal levels, Roth conversions have potentially major implications for your heirs -- possibly including the surviving spouse.

A Roth conversion of your annual withdrawal amount at the start of a year can allow for some tax-free growth during the rest of the year, while maintaining exactly the same tax cost -- with a reduction in ongoing tax exposure (granted, a small one).

Roth conversions don't have to be an all-or-nothing proposition. In a year with no expected tax changes (probably most years), you may be able to afford the extra tax hit to convert beyond your annual needs while maintaining the the tax bracket that you're already in. This will reduce future RMDs, and their potential tax effects.

While I have a strategy that includes Roth conversions, my actual tactical choices will be evaluated each year -- I don't see this as a set-and-forget proposition.