Roth Conversion later in life, near retirement

[Anonymous]

Anonymous wrote:Optimizing conversions is no easy task for many. Bogleheads has a number of active threads on this.

From what I have read there, it is usually not worth it if your 401k/IR is $1 million or less. For many, the sweet spot is after retirement and before taking social security. But then, you have to factor in if the conversion subjects you to the net invest tax (NIT) and, if you are taking Medicare, whether it subjects you to IRMAA on Medicare part B. Is it possible that RMDs will go to medical care that puts you over 7.5% of income, qualifying you for a medical deduction for taxes?

What is the source of funds for the conversion? Conversion proceeds makes the benefits less attractive, but if you can use proceeds from sales of holdings in your taxable account it is more attractive as they are taxed at lower long term capital gains tax rates.

I really big consideration, of course, is whether RMDs will catapult you into a higher tax bracket once you are 73. Add in the possibility that in retirement, one spouse may die and the other then will be subject to higher, single tax rates. Consider your views about the possibility of the current lower brackets expiring and not be renewed after 2026.

You also have to factor in what your objectives are for the Roth: Is it something you wish to draw on during retirement, or a pot of money you wish to pass on to your heirs. If the latter, you have to factor in whether a conversion will benefit your heirs from a state (or federal if your estate is large enough) estate tax perspective.

Personally, I am strictly a DIY investor, but taking in all of the above is very tricky, so I am considering getting professional advice. I understand there is financial management software out there that could help (Pralana, New Retirement) but haven't tried it.

[Anonymous]

Thanks for your response. Yes it is super complicated and the more I look into it the more I discover additional “ things to consider “.
One consideration is that if current tax rates go up in 2026, we would be better off taking care of the conversion this year or next year. However we are still 5-6 years away from retirement and our overall balances are not where they need to be so it feels scary to convert and pay a big tax bill. Otoh if tax rates do go up in 2026, it makes the Potential tax bills once RMDs begin quite painful.

[Anonymous]

Anyone try the services of Craig Wear —who bills himself and his team as having a niche expertise in Roth conversions (having it done it exclusively fir past 15 years) to lessen tax liabilities and use money on own teems versus forced RMDs etc. His fee of 10k (or 9900). Seems steep but he offers 100% guarantee of tax savings or money back.

[Anonymous]

Anonymous wrote:Anyone try the services of Craig Wear —who bills himself and his team as having a niche expertise in Roth conversions (having it done it exclusively fir past 15 years) to lessen tax liabilities and use money on own teems versus forced RMDs etc. His fee of 10k (or 9900). Seems steep but he offers 100% guarantee of tax savings or money back.

That’s crazy. No way would I pay that. I would start by paying for pralana or maybe boldin or at least post your info on bogleheads and see what reactions you get.

tbh my rule of thumb is that Roth conversions are rarely worthwhile— the benefits are generally small and uncertain.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Anyone try the services of Craig Wear —who bills himself and his team as having a niche expertise in Roth conversions (having it done it exclusively fir past 15 years) to lessen tax liabilities and use money on own teems versus forced RMDs etc. His fee of 10k (or 9900). Seems steep but he offers 100% guarantee of tax savings or money back.

That’s crazy. No way would I pay that. I would start by paying for pralana or maybe boldin or at least post your info on bogleheads and see what reactions you get.

tbh my rule of thumb is that Roth conversions are rarely worthwhile— the benefits are generally small and uncertain.

The biggest benefit is to the heirs.. they get to have the money grow tax free for 10 years post-inheritance before withdrawing tax-free.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Anyone try the services of Craig Wear —who bills himself and his team as having a niche expertise in Roth conversions (having it done it exclusively fir past 15 years) to lessen tax liabilities and use money on own teems versus forced RMDs etc. His fee of 10k (or 9900). Seems steep but he offers 100% guarantee of tax savings or money back.

That’s crazy. No way would I pay that. I would start by paying for pralana or maybe boldin or at least post your info on bogleheads and see what reactions you get.

tbh my rule of thumb is that Roth conversions are rarely worthwhile— the benefits are generally small and uncertain.

The biggest benefit is to the heirs.. they get to have the money grow tax free for 10 years post-inheritance before withdrawing tax-free.

But the pot of money growing is smaller due to taxes paid and it’s very possible they’d be better off paying taxes at their rates over 10 years than having the OP pay taxes in a year or two at OP’s rates.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Anyone try the services of Craig Wear —who bills himself and his team as having a niche expertise in Roth conversions (having it done it exclusively fir past 15 years) to lessen tax liabilities and use money on own teems versus forced RMDs etc. His fee of 10k (or 9900). Seems steep but he offers 100% guarantee of tax savings or money back.

That’s crazy. No way would I pay that. I would start by paying for pralana or maybe boldin or at least post your info on bogleheads and see what reactions you get.

tbh my rule of thumb is that Roth conversions are rarely worthwhile— the benefits are generally small and uncertain.

The biggest benefit is to the heirs.. they get to have the money grow tax free for 10 years post-inheritance before withdrawing tax-free.

But the pot of money growing is smaller due to taxes paid and it’s very possible they’d be better off paying taxes at their rates over 10 years than having the OP pay taxes in a year or two at OP’s rates.

True. However, you can mitigate this in several ways:
- convert over multiple years vs in a couple
- pay taxes on those conversions (or at least partially)
- living in a low/no-cost state
- structuring your conversions for tax optimization so you pay lower taxes overall relative to what working adults would.

We are in the 24% tax bracket now with another 5.75% for state. In retirement, we hope to be in a zero tax state and be in the 12% tax bracket. We also expect our kids to be in at least the 32% tax bracket by the time we kick the bucket, plus potentially high state taxes. The tax rate differential would be huge for them.

Realistically, most people should begin these conversions at a tax-convenient time and move as much as they can into a Roth. The money grows tax free and can be withdrawn anytime. For example, if I have a $30K tax bill on the conversion and I have $30K in a brokerage account (stock), I'd rather sell the stock, put that money towards the tax and convert the entire amount into a Roth, and rebuy that same stock inside the Roth. I can withdraw from the Roth for as long as I need to and what's left will go to my kids.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Anyone try the services of Craig Wear —who bills himself and his team as having a niche expertise in Roth conversions (having it done it exclusively fir past 15 years) to lessen tax liabilities and use money on own teems versus forced RMDs etc. His fee of 10k (or 9900). Seems steep but he offers 100% guarantee of tax savings or money back.

That’s crazy. No way would I pay that. I would start by paying for pralana or maybe boldin or at least post your info on bogleheads and see what reactions you get.

tbh my rule of thumb is that Roth conversions are rarely worthwhile— the benefits are generally small and uncertain.

The biggest benefit is to the heirs.. they get to have the money grow tax free for 10 years post-inheritance before withdrawing tax-free.

But the pot of money growing is smaller due to taxes paid and it’s very possible they’d be better off paying taxes at their rates over 10 years than having the OP pay taxes in a year or two at OP’s rates.

You can't pay tax out of pocket? Rollover 50k, entire 50K gets to ROTH, pay tax when you file tax next year, no?