Author Topic: start converting trad IRA to Roth now  (Read 851 times)

FireAnt

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start converting trad IRA to Roth now
« on: February 15, 2020, 08:38:03 PM »
Just finished my taxes (without filing) and see that we are well within the 12% tax bracket- Our AGI is just under 70k. I have money in a traditional IRA and wondering if it would be smart to start converting these funds to a Roth but staying under the $78,950 threshold now. We have 8-9 years before we are able to fully RE. I was thinking of converting maybe $5k or 6k. 

terran

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Re: start converting trad IRA to Roth now
« Reply #1 on: February 15, 2020, 09:09:25 PM »
Maybe. What tax bracket do you expect to be in when you retire, which is to say, how much of your planned spending will come from traditional IRAs and what bracket will that put you in? How does your current state tax bracket compare to what it will be when you retire, especially if you'll move to a different state with higher/lower/no taxes?

It's too late to convert traditional to Roth and have it count for 2019, although if you made traditional contributions you could recharacterize those to Roth, which makes it as if you contributed to Roth in the first place.

FireAnt

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Re: start converting trad IRA to Roth now
« Reply #2 on: February 16, 2020, 06:43:06 AM »
Maybe. What tax bracket do you expect to be in when you retire, which is to say, how much of your planned spending will come from traditional IRAs and what bracket will that put you in? How does your current state tax bracket compare to what it will be when you retire, especially if you'll move to a different state with higher/lower/no taxes?

It's too late to convert traditional to Roth and have it count for 2019, although if you made traditional contributions you could recharacterize those to Roth, which makes it as if you contributed to Roth in the first place.

Shoot, I thought I had until April 15 to decide. I don't have traditional contributions from this year. I know what our yearly expenses will likely be, but not the specifics into what state we'd retire in and what buckets our spending will be coming from. Good points- thanks.

TomTX

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Re: start converting trad IRA to Roth now
« Reply #3 on: February 16, 2020, 07:38:49 AM »
Maybe. What tax bracket do you expect to be in when you retire, which is to say, how much of your planned spending will come from traditional IRAs and what bracket will that put you in? How does your current state tax bracket compare to what it will be when you retire, especially if you'll move to a different state with higher/lower/no taxes?

It's too late to convert traditional to Roth and have it count for 2019, although if you made traditional contributions you could recharacterize those to Roth, which makes it as if you contributed to Roth in the first place.

Shoot, I thought I had until April 15 to decide. I don't have traditional contributions from this year. I know what our yearly expenses will likely be, but not the specifics into what state we'd retire in and what buckets our spending will be coming from. Good points- thanks.

Presuming by "this year" you mean 2020 - that wouldn't help either.

If you have Traditional IRA contributions for 2019, you can still recharacterize those to Roth and have it affect your 2019 taxes.

FireAnt

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Re: start converting trad IRA to Roth now
« Reply #4 on: February 16, 2020, 06:10:32 PM »
Maybe. What tax bracket do you expect to be in when you retire, which is to say, how much of your planned spending will come from traditional IRAs and what bracket will that put you in? How does your current state tax bracket compare to what it will be when you retire, especially if you'll move to a different state with higher/lower/no taxes?

It's too late to convert traditional to Roth and have it count for 2019, although if you made traditional contributions you could recharacterize those to Roth, which makes it as if you contributed to Roth in the first place.

You're right, I wasn't clear. I don't have any traditional IRA contributions from 2019 or 2020. It's a rollover from 3+ years ago from a previous employer.

Shoot, I thought I had until April 15 to decide. I don't have traditional contributions from this year. I know what our yearly expenses will likely be, but not the specifics into what state we'd retire in and what buckets our spending will be coming from. Good points- thanks.

Presuming by "this year" you mean 2020 - that wouldn't help either.

If you have Traditional IRA contributions for 2019, you can still recharacterize those to Roth and have it affect your 2019 taxes.

TomTX

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Re: start converting trad IRA to Roth now
« Reply #5 on: February 16, 2020, 06:33:43 PM »
If you don't yet have IRA contributions for 2019, you can still make them until tax day in April.

FireAnt

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Re: start converting trad IRA to Roth now
« Reply #6 on: February 17, 2020, 06:59:07 AM »
If you don't yet have IRA contributions for 2019, you can still make them until tax day in April.

Yep. I am waiting on a situation to resolve so I can hopefully contribute to a Roth IRA. I've been limited in contributing because we've filed MFS, but hopefully can do MFJ in this year. :)