Everytime I have ran the numbers on RMD conversions it came out even if the tax rate was the same.
That will happen if you pay the conversion tax from the traditional account, or if you pay the conversion tax from taxable funds but pay no tax on returns in the taxable account.
If you pay the conversion tax from a taxable account that incurs taxes on the interest/dividends/capital gains in that account, you come out ahead by doing a conversion even with equal tax rate now vs. later.
Wow, I never considered running it that way, good to know.
And then add in the fact that Roth income creates several other advantages.
1- Better for your heirs to inherit.
Depends on your heirs' marginal rates vs. yours.
But, I would only do a Roth Conversion when I'm in a low tax bracket.
2-The RMD income doesn't push you out of some income based benefits.
Huh? Which do you have in mind?
The ACA, Roth income is not included in MAGI for ACA qualification.
Savers Credit- IRA income could push you out, whereas Roth income wouldn't.
Anyone think of others?
Please add other advantages, I had a list of 5 but my mind is not recalling them.
Edit, found my list,
Since the spendable dollars are the same, there are other advantages to a Roth Conversion.
1. You think tax rates will increase for your bracket at withdrawal time. Yes.
2. A Roth has advantages for your heirs to inherit. Depends on your heirs' marginal rates vs. yours.
Again, I would only do a Roth Conversion when I'm in a low tax bracket.
3. The extra income from RMDs of a traditional IRA will push you into higher tax Brackets. It might. If it does, it's a good reason to convert now.
4. If one spouse dies, traditional IRA RMDs would push the remaining spouse to a higher bracket. Yes.
5. Phaseouts and benefits based on AGI and MAGI could push you into a higher bracket with a Traditional IRA. Have to consider this both now and the expected future.
I probably wouldn't do a Roth Conversion now if, it pushed my into a phaseout.
6. More money in a Roth lowers your AGI which may make less of your social security taxable. It could.
I appreciate your input, thanks.