Personal Finance (Not Investing) • KF Roth Conversion Plan

It’s a choice not a requirement. OP could convert to the top of the 12%/15% bracket, but is choosing a big 1-year conversion to avoid a potential future problem whose probability is unknown. Using Roth in the past would mean a smaller total balance now and having spent more in taxes in the past.

Probably not after OP makes the conversions at ~30%. OP is fine with paying the extra taxes as they can afford it, but for those wanting to minimize taxes like myself one concern could be a tax-advantage account working against me. For example say one contributes to traditional @ 12-20% and later converts @ 30%, it seems more like a tax-disadvantage account. Could have even been better to go taxable instead.

ThankYouJack,

On the average, my contribution to Traditional is at 20+%. And, I am paying/converting at 24% (Federal). It has not been a loss to me.

KlangFool

That's not bad, yet adds up to about a year of your expenses or more in taxes if you had Roth optimized during low income years / periods of unemployment. I understand playing it very conservative going heavy in traditional until retirement incase you were let go and never able to find work again. But I don't recommend that approach to all who want to minimize taxes.

Yes, get in front of it while you have the big shovel (income). Trying to optimize in retirement is very difficult with all of the variables (which I won't list again here). Forecast for near-term tax brackets are especially hazy; i.e. TCJA may live on

Also, OP needs to structure the AA in his traditional vs. Roth accounts. Whether 30/70 overall is adequate cannot be ascertained, but Roth needs to bear the brunt of the equity allocation.

Statistics: Posted by KlangFool — Sat Aug 24, 2024 2:46 pm — Replies 68 — Views 2900