Reply to DC: Hiring a financial professional to do a Roth conversion analysis

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[quote=Anonymous][quote]
Anonymous wrote:
Unless you have
Over $10m in pre tax accounts it doesn’t make sense to do a Roth conversion. Your RMDs will never push you into the highest bracket.
If you want to use Roth accounts as inheritance vehicles just convert a moderate amount each year or even a sizable amount in a low income year. Just make sure you have the money to cover the taxes.

I’d just leave the kids stocks and they can get a step up in basis when they inherit so it’s effectively tax free.[/quote]

Withdrawals from a traditional 401(k) are fully taxable and treated as ordinary income at your current income tax rate in the year you receive them. They are not subject to lower capital gains tax rates, even if the funds were invested in stocks within the account. If you have a beneficiary named on the 401(k) that person is also subject to income tax on the stocks in the account (and with no stepped up basis). This is because the stocks were bought with pretax income. The tax has to be paid when the money comes out of the 401(k) no matter how it is invested while it is there.

The OP is talking about converting to a Roth so that they can pay the tax now and either not pay it later or let it be inherited and not taxed later. [/quote]

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